06:27MoreMozi · Interview
Why I Tell Beginners to Cold Email Before Running Ads
A 6-minute Q&A where Alex Hormozi explains why cold outreach beats ads for beginners — and why the real lesson is how you sell, not which channel you use.
June 5thThe argument in one line.
When a service business fears AI disruption but hasn't adopted AI internally, the real threat is margin erosion from human-heavy operations, not customer churn from AI-empowered buyers.
Read if. Skip if.
READ IF YOU ARE…
- You run a service-based subscription business and are losing sleep over AI making your offering obsolete.
- You're at $5M–$50M ARR with EBITDA margins under 25% and a team-heavy delivery model.
- You're trying to decide between product innovation and acquisition channel investment and don't know which fire to fight first.
- You want a clear framework for when to act on a competitive threat versus when to ignore it.
SKIP IF…
- You're looking for AI product-building advice — this is about operational AI adoption, not product pivots.
- Your churn is already materially elevated — this advice assumes stable retention metrics.
The full version, fast.
A WaaS operator with $20M ARR and 29-month average LTV is anxious that AI will let customers build their own websites. The advisor's diagnosis: the fear is a narrative, not a business metric — churn isn't materially elevated, and the customers most likely to go DIY with AI never would have bought the service anyway. The real problem is an 18% EBITDA margin on a people-heavy operation. The prescription is to flip the sequence: spend six months using AI to cut internal headcount by 50% and double margins, then use that cash flow to go aggressive on paid inbound acquisition, knowing a 29-month LTV makes negative CAC quarters worthwhile.
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00:00 – 00:57
01 · Business context
Owner introduces WaaS model, $450/month per customer, $20M ARR, 100% outbound cold calling, goal of $80M in 3 years.
00:57 – 01:53
02 · The AI fear
Owner states the core anxiety: AI is decaying the industry, churn ticking up, unsure whether to innovate the product or build inbound.
01:53 – 03:02
03 · Reframe: you're solving a problem that doesn't exist
Advisor challenges the narrative — churn isn't materially elevated; AI-enthusiastic customers never bought WaaS to begin with.
03:02 – 04:20
04 · Prescription: double down on inbound
Advisor recommends inbound/paid ads, prepay-for-quarter to offset rising CAC, and benchmarks 29-month LTV as healthy.
04:20 – 05:29
05 · The real problem: margin
EBITDA of 3.6/20M flagged as lowish. Owner admits heavy headcount. Advisor: 'You're worried about them doing it — you're not even doing it.'
05:29 – 06:32
06 · The actual prescription
Spend 6 months using AI to cut headcount 50%, raise EBITDA to 7+, then go negative on acquisition knowing LTV covers it. CTA to acquisition.com/roadmap.
Lines worth screenshotting.
- Customers who are excited about AI self-service tools weren't buying your service before AI made it easier — they built their own websites anyway.
- A service business that fears AI competition but hasn't automated its own operations is solving a problem that doesn't exist while ignoring the one that does.
- 18% EBITDA on a $20M service business is a headcount problem, not a pricing or product problem.
- When LTV is 29 months, you can afford to go negative on acquisition for a full quarter — the math works if the margin is there to fund it.
- Doubling down on inbound raises CAC because you add media spend on top of sales commission; you need stronger margins before you pull that lever.
- The sequence matters: fix internal margin first, then turn on paid acquisition — not the other way around.
- Prepay-for-the-quarter billing for new customers doesn't churn existing customers — changing billing terms for existing accounts does.
- The business owner who panics about AI disruption at 1% churn increase is solving a 2027 problem in 2026 while leaving 2026 money on the table.
Fix your own operations before fearing the competitor.
WHAT TO LEARN
A business threatened by a technology it hasn't adopted is exposed on two fronts at once — and the internal front is the one it can actually control.
- Separate narrative from metric before acting on competitive fear: if churn isn't materially elevated, the threat is a story, not a business problem.
- Customers who are early AI adopters were unlikely buyers of your service regardless — the actual at-risk market is smaller than the anxiety suggests.
- A service business with sub-20% EBITDA and heavy headcount has a margin problem, not a product problem — that's the first fire to fight.
- AI-driven internal automation can cut operational headcount significantly without touching the customer-facing product, turning a cost center into a funding source for growth.
- When LTV is long (25–35 months), you can accept a negative acquisition quarter — but only if your margins are strong enough to absorb the cash flow dip.
- Single-channel acquisition risk is real, but the answer is adding a channel with funded CAC, not switching channels — switching before you can fund the new channel just creates a different single-channel dependency.
Terms worth knowing.
- WaaS (Website as a Service)
- A subscription model where a vendor builds and maintains a business's website for a recurring monthly fee, rather than selling a one-time build.
- LTV (Lifetime Value)
- Total revenue expected from a single customer over the full duration of their relationship, calculated as average monthly revenue times average retention in months.
- CAC (Customer Acquisition Cost)
- The total cost to acquire one new paying customer, including media spend, sales commission, and any overhead attributable to the acquisition motion.
- EBITDA
- Earnings before interest, taxes, depreciation, and amortization — a proxy for operating profitability before non-cash and financing items.
- Inbound acquisition
- A sales channel where customers find you through content, ads, or SEO rather than through outbound cold outreach.
- Single-channel risk
- Business vulnerability created when 100% of new revenue depends on one acquisition channel, so any degradation in that channel threatens total growth.
Lines you could clip.
01:54
“You have a narrative. You have a story around AI is decaying the business. But all I hear is that you have customers and your job just got way easier.”
04:49
“It's like you're worried about them doing it. You're not even doing it.”
05:05
“Reduce head count by 50% using AI workflows... increase the margin from 3.6 to, like, seven... you'd be willing to go negative for a quarter in the acquisition knowing you're gonna get 29 on the back.”
Word for word.
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00:00We do, uh, we're WaaS, so website as a service, um, based company. So we build websites, do digital marketing services, that kind of stuff. Uh, we cater to small, medium businesses, small businesses.
00:11Uh, average revenue per customer is $450 a month. Okay.
00:15Yeah. Subscription based company. Yeah.
00:18So right price. Yeah. We're at 20,000,000 Yeah.
00:20Bucks in revenue. And Notice.
00:22Example. Right price. Really small.
00:25You price it super low, and it works. Go ahead. Go ahead.
00:27And we wanna get to $8,080,000,000
00:30bucks of revenue in about three years. Okay. So the question we're asking ourselves is we're in an industry where AI is very disruptive.
00:39Every day that goes by, you know, it's constantly degrading and decaying our our product. And at the same time, we have kind of this one channel risk that that that we're living with.
00:50All of our sales, a 100% of our growth has been done through outbound cold calling. Love it. Yeah.
00:56It's great. Um, but, again, cold calling is becoming harder and harder, the industry is decaying.
01:00So we're we're constantly we're trying to figure out industry is decaying.
01:03Yeah. What do you mean by that? Churn is going up?
01:06Churn is slightly ticking up. But
01:09at the end of the day, you know, AI is making it easier and easier for our customers to be able to build their own websites. Well, yeah, I know.
01:17With the type of customer we deal with, they're not usually super sophisticated. So it we do have time. Found out about ChatGibuta.
01:24So There go. Yeah. Exactly.
01:27So we we have time. But Some of you guys still fax, so I think you got time. Yeah.
01:31But this is the question. Right? So do we double down on on on marketing and create, like, an inbound channel and really invest hard into that, Or do we do, um, do we try to innovate on the product and figure out what else they need and, like, build a revenue engine?
01:46Uh, right now, we're kinda we're doing we're trying to do both, but it's obviously limiting. So this is this is really, really good. I love that you asked this.
01:53So
01:54I wanted this long rant the other day about this particular topic, which is solving problems that don't exist. Okay. So like, you have a narrative.
02:04You have a story around AI is decaying the business. Mhmm.
02:08But all I hear is that you have customers and your job just got way easier.
02:13That's fine.
02:15So, you know, I mean, like, if if you were like, our churn is escalating by 10% per month, I'd be like, we have a problem. We need to change something. Mhmm.
02:22But if it's not really showing up in any meaningful way in terms of the business itself, I think there's plenty of people who will just be super laggards on this and are not gonna be replet vibe coding. They never bought your shit to begin with.
02:35Yeah. Like, the person who is super into AI right now wasn't hiring WAAS anyways.
02:41They built their own website. Mhmm. Before AI made it quote easy.
02:44Right? Like because, I mean, to be fair, website building software, not that complicated. No.
02:48Right? So you said there's two paths. So one is, you know, change the product around.
02:54My opinion, I wouldn't that's probably wouldn't be where I'm focused unless I had some business metric that was way off that that I'm not seeing. I would be doubling down on the acquisition side.
03:06What's your l t what's your number of months average tech? So it's twenty nine months. Yeah.
03:11Yeah. Yeah. That's the gain.
03:12It's it's usually yeah. It's 30 to 40. It's that's the the highest I've seen was 38 Mhmm.
03:19For this type of business. So, like, you're right. You're right in the in the sweet spot there.
03:23You're a little higher priced. I think they were $2.99. It's like Yeah.
03:26It all works out in the same, you know, um, same time. So, yeah, I think you just doubled down on inbound.
03:32So paid ads? Paid ads. Yeah.
03:35Yeah. And I would just see if you get them to prepay for the quarter so you can offset CAC. Mhmm.
03:40Okay. Um, on that subject, if you don't mind, uh, in terms of prepaying for the quarter, you know, again, our customers are pretty price sensitive.
03:47Yeah. There's people that are cheaper than us, obviously, if you've seen before. My fear is the amount of churn that will generate some you know, we we bill 90% of our customers on credit cards.
03:57Yeah. And we hold on to 10% that pay us through, like, pad and through checks and that kind of shit. It's it's awful.
04:02But, you know, we're going to experience churn if we're like, hey. You need to, you know, prepay us up up front.
04:08You'd still We wouldn't churn. We just close fewer. Right?
04:12Close fewer? Absolutely. And I think customers that are with us would leave us.
04:16Why would the people who are with you leave you for how you treat new customers?
04:19Sorry?
04:22People that are with us would leave us. Think you change your billing process for existing customers. Gotcha.
04:27I'm saying if you're doubling down on inbound, what will go up is CAC because you'll have media spend in addition to the sales commission. And so to offset that from a cash flow or how cash flow positive are you right now?
04:37Uh, so we did 3.6
04:39in EBITDA last year generating about Yeah.
04:42That's lowish.
04:44It's lowish. Yeah. Yeah.
04:45Curious people. With We're heavy on people.
04:48Dude, AI. I know. I know.
04:51Big thing. I know. It's like you're worried about them doing it.
04:55You're not even doing it. Correct. Right?
04:57Right. Right. Yeah.
04:59So, like, um, okay. So this is what I would actually do. Mhmm.
05:03I would probably spend the next six months reorganizing the workflow, probably reduce head count by 50% using AI workflows in order to actually do the same thing, increase the margin from 3.6 to, like, seven, um, or more with the added cash flow.
05:19You wouldn't have to change the price on the front end. You'd be willing to go negative for a quarter in the acquisition knowing you're gonna get 29 on the back. That's how I'd actually fix it.
05:29Okay.
05:30Makes sense. It's alright. Cool.
05:33Yeah. Yeah. Thanks, man.
05:34If you're a business owner and you are not growing as fast as you'd like, I'd like to give you a free gift. So my team and I put together the $100,000,000 scaling road map, which is basically two hundred hours of us looking over all the portfolio companies we've had and what stages of growth they went through, and more importantly, where they got stuck and how they got past it.
05:52And so we broke it in these 10 stages, and we made this little kind of quiz thing where if you put in your business information, it'll tell you where you're at, and the most important part for you, what to do for each of functions of the business across product, marketing, sales, customer success, recruiting, IT, human resources, and finance.
06:06And so no matter what you're struggling with, someone else has already struggled with it and solved it. And so I'd like to give you this thing absolutely free. You go to acquisition.com/roadmap, plug in your business information.
06:16And if you want us to actually help you decontrain the business and you're trying to scale, we'd love to help you out. On the thank you page, you can just book a call with my team, and we will look at the business, see if we can help.
06:27And if we can, we'll invite you out to Vegas, and we'll do this in person live.
The Hook
The bait, then the rug-pull.
A $20M website-as-a-service founder walks up to the microphone at a live event and asks the question keeping him up at night. The answer he gets isn't about AI at all.
Named ideas worth stealing.
01:53concept
Narrative vs. Metric test
Before acting on a competitive fear, separate the story you're telling yourself from the business metric that would actually justify action. If churn isn't showing up in the numbers, the threat is narrative, not real.
Steal forany founder meeting where competitive anxiety drives premature product pivots
05:05model
Fix margin before scaling acquisition
- Cut headcount 50% with AI workflows
- Double EBITDA margin
- Fund aggressive paid inbound from new margin
- Accept negative CAC quarters against known LTV
The sequence for a people-heavy service business facing margin pressure: automate internally first, then use the freed cash flow to fund acquisition at a loss, backed by LTV math.
Steal forany subscription service business with sub-25% EBITDA and a long LTV
How they asked for the click.
VERBAL ASK
06:10link
“Go to acquisition.com/roadmap, plug in your business information.”
Delivered as a spoken offer after the Q&A wraps, with an on-screen slide reinforcing the URL. Natural transition — doesn't feel forced after the substantive exchange.
FROM THE DESCRIPTION
PRIMARY CTAWhere the creator wants you to go next.
OTHER LINKSAlso linked in the description.
Visual structure at a glance.
