Why I Don't Sell AI to Local Businesses (Despite What Gurus Claim)

I've seen a lot of people talking about how local businesses are a gold mine for AI and automation services. I really don't think that they are. I scaled my own AI automation agency to 72K a month. In this video, I just want to break down a few of the reasons why I do not recommend going after local businesses and I want to give you guys some alternatives instead. So, I titled this why I don't sell AI to local businesses despite what gurus claim. It's funny cuz a bunch of dudes are just calling me a guru earlier and uh I do resent that claim, but you know, when you get big enough, people start calling you whatever the hell they want. I guess this makes sense if you're doing NADN, if you're doing make. com, if you're selling agents, if you're selling traditional AI automations, built-in OpenAI, whatever you are selling, this is going to apply for you. Okay, basically local businesses are generally not a good client profile to go for because of three major issues. The first

is some lead genen problems, then value perception problems, then finally some financial constraints. So, I'm just going to go over all of these with you guys and then give you some alternatives that I think might be a little bit better. biggest issue with local businesses is just the limited

geographic pool that you're operating under and the difficulty and relative inaccessibility of scraping large amounts of local businesses to pitch them services. So what I mean is you have a limited geographic pool, right?

How many HVAC businesses are there in Chattanooga? If your niche is HVAC businesses in Chattanooga, you can only really, you know, shoot your shot like 200 times. If your niche is, you know, B2B creative agencies in the United States, for instance, you could shoot your shot hundreds of thousands of times. Uh, in which option do you think would teach you more? Which one do you think you get better at doing the thing? Obviously the ladder, right? As a result

of the fact that you have to scrape local. Usually you have to use like Google Maps base scrapers or you have to like scrape some sort of big directory, yellow pages or whatnot. So the cost of doing this is usually a lot higher than something like Apollo or LinkedIn. Now that's not to say just cuz the cost is high you shouldn't do this. But if you combine it in conjunction with all the other points I'm going to make, I think you'll see why. There are some exceptions where it costs a lot to get an audience list, but then you make way more money on the audience list cuz nobody else is doing it. It's kind of like a barrier to entry, but this isn't really one of those because local businesses get pitched all the freaking time. It's also difficult to scale the outreach and all this just leads to poor

ROI in your own marketing spend. So

I'll walk through a lot of this in more detail in a second and give you guys those alternatives. But yeah, that's the high level view and I just want to give people the 8020 within 5 minutes the video. The second issue is value perception problems. Local

business owners, as crappy as it is for me to say, typically have pretty low technical literacy. I mean, like if you think about it, the internet is where most of the money today is made, right? So if a business is doing it like brick and mortar, either they're super passionate about what they're doing and they're technically literate, which is very unlikely, or they're just like they kind of lack the ability to get on the internet and make a thriving and successful internet business and take advantage of like the multiples of leverage and stuff. So they're kind of operating from that lower technical literacy standpoint. Now, there are lots of opportunities in local businesses, don't get me wrong. One big move I'm seeing right now are a lot of private equity companies rolling up like 50 or 500 dental clinics or 50 or 500 other local Botox clinics or something like that. and then implementing some of our AI and automations in those. But usually you're not working with a local business. You're working with the private equity firm. You're working with a company doing the roll up. You know what I mean? Anyway, uh they have pretty low technical literacy

which means it's difficult for them to really understand everything that you're talking about honestly just from a bird's eye view. You have to do a lot of explaining and you usually have to justify, you know, the problem that they're facing that they don't even realize. The solution that you have for them, you have to explain that, too. Then you have to say why you're the right fit for it. Isn't that just a ton of work? Well, why do you have to do that every time? Right? There are so many better options out there. A lot of your sales calls just end up being

education as opposed to selling. And I've sold to I mean over a hundred local businesses probably at this point. I used to do doorto-d dooror selling marketing services and like the introductory marketing automation services way back before AI and automation as an industry was even a thing back in 2018 and 2019. Most of my business was education and now I steer clear of that. And basically the further away I've gotten from local businesses, the more money that I've made if I'm honest. Um a lot of them are

also kind of skeptical of digital solutions. A lot of them don't even know what chatbt is or don't know how to do it. So, you just get very long sales cycles with the stuff. Okay. And then the third quick bullet point to get you most of the value of this video quickly is a lot of them have financial constraints. I realized the other day um

that with the money that I'm making, I could rent out several floors of an office tower in my city, Calgary. Calgary has some of the cheapest rent in Canada to be honest for commercial space right now. So, it's not exactly a massive accomplishment, but it just kind of hit me, you know, that I, as an internet business, am so disconnected from ever having to worry about any of that stuff. It just blows my mind. you know, I don't have to pay for rent. Maybe I'll pay $300 or $400 for some local co-working space just so I can get my tea and, you know, drink their really watered down beer on Fridays and have fun with the gang. Uh, but I'm not doing that as a core requirement of my business, right? You know, if you're running a local services business, your office is a core requirement of your business. Your warehouse All this stuff is a core requirement. And so if you have to spend an additional 10% of your margin before you've even done anything else with the money, before you've delivered even a scent of value to anybody, then right off the bat, you're operating at disadvantage, right? So they typically have tight profit

margins. Kind of sucks. They also typically have high physical overhead. And then they have like no

dedicated tech budget. I mean, their

budget that I would spend on a bunch of software platforms, they have to spend on keeping the lights on, man. Heating in the winter. It's crazy to think about, honestly. So yeah, a lot of them are pretty price sensitive. It's

not to say that companies with low profit margins are bad because if you can change let's say a company with 5% profit margins to 10% what you've done is you've added objectively 5% margin but subjectively to then you have doubled their bottom line right so it's not that that's inherently bad but just to give you guys some context the physical the overhead and then the tech budget are a big issue. Okay, cool. So

let me just run you through in a little bit more detail and then maybe I'll give you guys some more examples and alternative things you can do and I'm also just going to throw a bunch of funny memes at you because I was told that that's how you maximize engagement on these videos. So, it's a lead genen nightmare. Okay, local businesses are geographically constrained like I was talking about earlier. So, the pool of potential clients shrinks dramatically when you target local businesses versus digital businesses. I gave you guys an example of HVAC in Chattanooga, but I mean like you know millions of examples, right? Dentists in Vancouver. I actually think dentists are like the best AI and automation niche out of all the possible local businesses you could work with to be honest. But like even like dentists in Vancouver, how many are you going to get, right? So a lot of the time when you're doing like a really high throughput um high volume outreach, like you need a lot of leads to test stuff. Like if you don't have leads to test stuff on, you know, the likelihood that your offer is ever going to be really good is kind of low. So you kind of do need to like burn a few of these leads. And if you only have like 200, 300 contacts per city or whatever, like you really going to make it that big? I don't think so. Also, then it costs a lot more to do that testing and burning and so on and so forth. If you do digital businesses, there's like a million in one ways to scrape leads. Like, it's not even close, right? You would just search for whatever you want on Google and then you would have a Google SER with, you know, 8 billion agency, you know, like B2B creative agency in Delaware. Even if you do a digital business using a location or something, you will get like a billion businesses. And then you could just have some sort of scraper go through all those businesses, list all those websites, have a scraper go through all those websites, get the email addresses on those websites or use something like any mailfinder or whatever. If you do the brick-andmortar sort of businesses, odds are a lot of them don't even have websites, they operate entirely off of Facebook pages. And I mean like this is just more pre-selection bias. Like if they don't even have the money to have a website or they don't even know what a website is worth to their business, then do you really want to be working with them? they don't have pre-existing systems that print money then your value as an AI automation person is quite low relatively speaking because your value is mostly you take something that works okay then you just skyrocket it you take a pre-existing system and then you skyrocket it you don't like build new systems I mean you can but it's usually a lot more difficult to do that this is the 0ero to one problem which if you could solve you just wrote it disproportionately but the much easier problem to solve is the one to 100 problem how do you 100x something that's working and that's what we do uh really easily yeah a lot of the Lead databases are outdated or incomplete. Time spent on personalization for local businesses doesn't scale. Outreach experiments that would take days with digital businesses take months with local ones easily. There are some kind of creative ways of doing local outreach. I've heard of people there are a couple services out there like swag box services or business holder placard services or whatever where you can for a very low fee actually just like have a bunch of stuff laser printed that seems customized to the person and then you can actually ship them over to their address and it might cost you $2 or $3 a lead. So if you have a really small number of people working in a city, you can't actually use that. But keep in mind that like these are very high cost outreach methods, right? So most people that are watching these videos tend to be more on the beginner side of things. And if you guys are at the beginner side of things, odds are you don't have a lot of disposable income. So yeah, maybe not until you're like super high up there and have the money to piss into the wind. Yeah. So here's just a visual representation because I want to offer both visual and text representations. Here's like an example issue where, you know, if you wanted to do local HVAC companies, you want to do NYC, 200 potential clients. Well, we have more than 200 here. I think I was probably kind of ahead of myself. Let's say that there's like, I don't know, 1500 potential clients. We send 1500 emails. Then from this, maybe we get like 10 responses or something. We get three sales calls. We get one client. After we're done with that one client, we got to go to a new city. And NYC is one of the big cities. right now. Um, you know, I'm not trying to say that out of the 1500 CL leads, you're only going to get eight responses. It just, this all depends on your math, but I'm not talking about the math right now. I'm talking about your actual approach. I'm just talking about, you know, a few example scenarios, hypotheticals to illustrate how unlikely it is that you're going to really crush it with this. Okay. Another big issue again is that value perception. So, um, this is

one of the funnier memes. You can't really understand the value of AI automation for your client. You have to teach them, right? So because they lack the technical understanding of this stuff, a lot of your sales call is going to be spent educating them. And I mean, educating is great and that is a big chunk of like a consultant's job for sure, but you don't want to be educating that much. Okay, local businesses usually don't use these tools. And so what's interesting is the perceived value of one of these tools can be um higher or lower. It's weird. Like there's like two audiences. The first audience is like, "Wow, you can do this. That's crazy. That'll completely change my business. " The other person's like, "Yeah, but why would I need that? " Obviously, the first person is easier to work with because they see a ton of value with it. But can they even do a lot with that is kind of the issue. And then when you actually want to roll out a system, like I'll give you guys an example for one of my um uh one of my like dental clients a while back. They had seminars that they did and then they sign people up at the seminars and they were doing this like really manual approach where the person at the end of the seminar would actually give all of the people pieces of paper with like sign up cards. If they wanted to sign up for some program, they could do it. So everybody had to like wait there at the end of the presentation and fill this in. So I was like, "Hey, why don't we do like a digital approach? " So me and my business partner at the time whipped up like an iPad based system with like a type form and you would log in and then you'd fill out the type form and you know submit the information and it worked great. It was awesome. But do you know how long it took to test that thing? We had to wait until the next seminar. Then once the seminar happened, we had to actually like see the respondents of the seminar happened live. And then the next time the seminar happened, we make a couple of changes and see how that went. The next time another seminar would happen, it was like every 2 3 weeks, right? And the volume of data we were getting was basically nothing. And to be honest, we weren't even working in that person's cities. it was difficult for us to actually see what was going on with the iPads and make recommendations as to where to place them along the seminar route and stuff. So, I mean like imagine if it was just a digital form, right? How much easier would it be? Um, in hindsight, there are many better ways we could do it. We could have just um gotten the uh data of uh like all the we could just gotten all the cell phone numbers, the SMS numbers and just SMS everybody a link to a form and then everybody at the exact same time would have all gotten SMS messages. They all would have whipped out their phone on the seminar and it would have been clear like, "Hey, we just sent you guys an SMS with a link to this form. If you guys are interested in this, just fill it on your phone right now. But whatever. I mean, you know, we all make mistakes, including me working with local business owners. So, yeah, you just have to constantly dumb down technical explanations. No real point. The contrast is with digital business owners who a lot of them already use Zapier, CRM, and no code tools. They immediately grasp the value proposition. And like most people on digital now, they use like chatbt. They understand how AI works. They're like inherently interested in it. So, you don't have to do any of that stuff if you're selling a digital business. So, here's like two examples of just how sales calls go. Let's say you're selling somebody that does HVAC. You might spend the first 15 minutes explaining what the CRM is, then explaining some automation concepts, then 15 minutes justifying why it's better than paper, 10 minutes on an actual solution, and then once you're done with all this, you haven't actually built up the value. You've just like basically educated them. So what happens? Well, the owner obviously only cares about the price. They don't want to pitch you, and then you got to follow-up calls, more education. It just takes a lot longer to get to the point where somebody's actually interested in your service. Well, guess what? All that education is just done for you with like digital people. Not always, but a lot of the time. So now you just discuss, okay, what's your current tool stack? Okay, what's your workflow like? Okay, how much money are you making? Okay, great. Here's what an implementation will look like. some ROI metrics that we think might look like. Okay, great. We can make that decision right now. Shorter sales cycle just means more money. Like imagine if you have a pipeline. I'm going to draw a pipeline again, guys. I'm so sorry. I know that all the time this looks like private parts, but whatever. I'm doing it. That's uh I'm going to take a drawing class at some point. Um anyway, this is your business. Okay, say you have uh I don't know, one Okay, let's say you one lead a week. So, one lead a week goes to your pipeline makes you $5,000. Okay, at the end of it, they're happy. If you could just you could do a couple things to improve the amount of money that you make, right? You could change the amount of money you charge per lead from $5,000 to $10,000. So, if you do this, you will have changed $5,000 to $10,000, right? That's great. But another thing you could do is you could actually just change the length of your sales cycle. Instead of one lead a week, okay, maybe it's two leads a week. Well, now you've just done the exact same thing. Instead of you making $5,000 per week, you're now making $10,000 per week, but you've done it without changing the price. All you've changed is you've changed the sales velocity. You've changed the throughput. So, um, variety of different ways to increase the total amount of money a company is making. But one of them is literally just like speed up how long it takes for people to make decisions and buy in. And

then finally, there's the financial reality here. Where is that money? I don't know. Guy can't see it anywhere here. You know, they just have tighter margins. They have less money to spend on growth. They have additional expenses that they need to pay for, right? So, customer acquisition cost, lifetime value ratio is poor. This is um this is really the big part of this, so I'll just list it. A lot of the time, your lifetime value is going to be substantially lower with an in-person business. And then the customer acquisition cost won't really appreciably change. So, it just doesn't really make too much sense. I would say you have to spend money on rent. a bunch of expenses and line items that you just don't with other businesses. Yeah. Honestly, like I have a funny story to

tell you guys. When I was living with my best friend Jonno, we were super into business and we were making like absolutely no money. I was making like 4,000 bucks a month or something. These are Canadian dollars, by the way, which is like a fraction of what an American dollar is even back then. It's like 1. 2 or 1. 3. So Jono was selling his speakers, which were very expensive cuz we used to do some DJing together and like they were like the top-of-the-line speakers, really, really nice. So for several thousand and there was some dude that wanted to buy it. So, the dude came up through Craigslist and then went up the elevator, knocked on the door, came in, looked at the speakers, right? But while I was listening to Jonno and this guy talk, I realized that this guy was running a business that was making over $2 million a year. Now, put yourself in my shoes, okay? I had no real business experience. I had a business that was barely covering my personal expenses. I was broke as essentially. And I hear this guy's making $2 million a year. I'm like, "Oh my god, I got to meet this guy right now. This is a big high roller. what the hell is he doing buying, you know, speakers off of Craigslist, right? So anyway, I butt in. I'm like, go, Jonah, let's case this guy, right? Let's figure out how he's running his business. And he starts telling us that he runs a local it's like a local cleaning or a window washing business, I think. And we start asking him more questions, you know, we kind of like we guy guy guy guy likes us by the end of the uh you know 10 or 15 minutes and we start talking business you know oh I run this uh this videography company. Oh, I'm doing like marketing services. Oh we're doing weddings. We're doing all this stuff and then eventually gets to the point where I'm like, "So, dude, like of the, you know, the $2 million top line, that's crazy. Like, what are you guys keeping? " And the guy confidently looks at me. Confidently. And he's like, "Oh, we're between 6 to 10%. " And I'm like, "What? 6 to 10%. Are you freaking kidding me? So, of the $2 million you guys are making, 120 grand a year profit, and he splitting us with a partner. " And it hit me in that moment that my small little dingy business, which is doing marketing services and videos that made $4,000 a month, I was making almost as much money as that guy that was making uh $170,000 a month just because I was digital and because I was doing everything from my laptop and I didn't have to worry about any of this stuff. All right. Are you going to find 6 to 10% margin local businesses everywhere? No, you won't. I think that's honestly on the lower end of the sort of business that he was running and I think he probably could have made a lot better and you know what I'm telling you guys now. But yeah, you got a lot of issues. Your AI services end up being a much higher proportion of the person's budget and so they're a lot less likely to want to work with you relative to something like a digital business, right? Which if you just work your way down this little cost waterfall can be a very small portion of the budget. All right, so hopefully I just convinced you. I don't know if I did, but hopefully I did. And if I didn't, feel free to drop a comment down below. I'm happy to debate you guys or maybe talk shop a little bit more. There are of course some exceptions to every rule. Don't take this as me forcing you guys to work with digital businesses, but you know, for most beginners, it's just a lot easier to get up and running with a digital one than it is an in-person one. To me, the inerson ones have just never really been worth it. So, yeah, if you

guys have any more questions on that, feel free to drop them down below. If you guys like this sort of stuff and want to learn how to grow your own AI automation business from nothing to something, definitely check out Maker School. We have almost 1,800 members as of the time of this recording that are literally building an AI an automation business from scratch. Many of them make 10, 15, or $20,000 in their first 60 days in the program. That could absolutely be you. I show up every day. I'm super accountable. I keep you guys accountable as well. And essentially, it's a day-by-day program that takes you from 0 to one. All right. Really appreciate all of your time. More than happy to record a video on anything that you guys want me to. Just drop a comment down below and if it's a good idea and I haven't done it yet, I will absolutely consider it. Like, subscribe, do all that fun YouTube stuff. I'll catch youall in the next video.