In this episode John interviews Kyle Hepp, founder of Boxmagic, the leading gym management software platform in Latin America. John and Kyle discuss starting a gym in Chile as an American female and then starting a software business to support gyms. They also discuss handling the business in a pandemic when gyms were forced to shut down.
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John E: Hello folks. And thanks for listening in, uh, today’s was a really fun episode. I did it remotely. I usually prefer to be in the studio, but my guest was in, uh, in Michigan. And so we met remotely via zoom. Um, she, she did a great job. I thought in the interview and her story is just really fascinating. Um, she started out as a fairly competitive CrossFit athlete, uh, decided to open a gym in Chile, even though she’s an American.
And ultimately she decided to build software to manage, uh, her gym and then decided that that was the business. She sold the gym and is now focused on. Her software product. Um, so really interesting one for me to do. I hope you enjoy this one. Um, I think she’s awesome. Kyle had just did a great job explaining her business.
I hearing about how she handled COVID and used it as a chance to reset, I think is very instructive for, uh, for a lot of founders when they’re, when they’re faced with a situation that may appear to be difficult. Sometimes that’s your biggest opportunity. And, uh, hopefully if you, if you listen to this interview, that’s one of the many, many points you’ll take away from it.
Hello folks. And thanks for listening. I’ve got a guest whose story is very interesting. Kyle hap has developed a software platform for gym owners. So definitely scratches, two of my edges, uh, fitness and software. Many of my most popular interviews have been with fitness personalities, especially women. I interviewed Lauren Maccabi, the creator of Shakti yoga.
I interviewed Gretchen Kindleberger, who’s the founder of the international functional fitness Federation and a former podium level CrossFit games athlete. And I recently interviewed Marissa and Heidi from West kept secret. So I’m really excited for this one, Kyle, thanks so much for joining me remotely today.
Thank you for
Kyle H: having me. I’m excited. I’ve listened to all of those interviews that you just mentioned, and I really appreciate that your podcast make sure to reach out and get a diverse group of interviewees. So it’s an honor to be
John E: here. We try, we don’t always do a great job with it, but, but we definitely do make an effort.
So thank you for doing that. Awesome. So, so your software platform is called box magic. Can you tell the listeners what it is and what it does.
Kyle H: Sure. Um, to give you guys a little bit of background. I used to live in Santiago, Chile. I lived there for 17 years and I own a CrossFit gym there for about five years.
So when I opened up my CrossFit gym, I thought like, okay, I’ll use waterfall or my body or any of these big, internationally well-known softwares. And I quickly realized like, okay, these don’t even come to payments in Latin America. So, you know, there you’re missing out on half of the functionalities. You still have to like manually input everyone’s payments in which defeats the purpose of paying for an expensive software.
They’re not in Spanish. They just were missing a ton of them tenacity that I would have needed, whether it was in Latin America or anywhere. Um, and so I met a developer who was a member at my gym and he was like, Oh yeah, I could probably do something like. A base platform like that, but at a few of the features that you think you’ll need.
So he started working on that. We actually, we started dating, we fell in, love, ended up having a baby. Um, and he developed the software out. We started trialing it in my gym in September of 2016. I was about eight months pregnant. So I gave birth to my daughter in October of 2016. And it really started taking off.
Like by December of that year, we had all of just the gym community in San Diego being like, what software are you using? That’s in Spanish. And that works like they were so impressed by it. And so.
John E: Were you, were you thinking all along that you might want to commercialize it or was it strictly just software that does it?
Kyle H: I really, so before running a gym, I was a wedding photographer and I was to the point in my life where I was like, okay, I’m having a baby. I need to stop like doing multiple careers. Like I can’t run a gym, be an international wedding photographer. Cause I was also traveling out of the country, you know, six or seven times a year for wedding photography.
Um, and I thought like, I just don’t want another business, but Danny, who was my boyfriend at the time, my husband now he has always worked in the startup world. And so he sort of saw the potential there. He’s not like super commercially minded, but he started developing it like in a way that would be easy to scale from a technology standpoint.
So he sort of had it in the back of his head, but we both sort of thought like if we get a couple of gyms up and running on it, it’ll be like Danny’s side job. And he’ll just keep continuing to develop out what I need as a gym owner. So that’s how it started. Um, and all of these other gyms, you know, like by the end of December of 2016, we had like probably 20 gyms already up and running on it.
And we were just like, Oh my gosh, I don’t even, what did we just do here? Um, and so we realized like, okay, we need to set up an official, an LLC in GLA, we need to hire somebody to do customer support. So Danny and I are responding via WhatsApp. Um, and when it started growing, I ended up selling the gym cause I was like, okay, well, this is obviously way more scalable.
And it, you know, for, for my skillset as a business owner, I really enjoy marketing. I enjoy creating a company. I enjoy. Setting up the operations structuring things. I’m just, I love learning. And so for me, it was like, okay, this is somewhere that’s really going to stretch me and challenge me. And I think I would like to do, to do this, the gym I’ve gotten to the point.
You know, it’s probably as big as it’s going to get, unless I want to open up a second branch, but you know, it just, when you run a gym, it feels like you have to be there at all times for it to grow. And that also just didn’t jive with the lifestyle that I wanted. So
John E: very cool. I have so many questions coming out of that.
What, uh, what time did you, or what year was it that you closed the CrossFit gym? Um,
Kyle H: so I closed the CrossFit gym in 2007. Yeah. Sold it, sold it. So it did actually end up closing, um, In 2020 because of the pandemic. So Chile, um, went through a little bit of a, well, I shouldn’t say a little bit, a lot, bit of a social uprising, not dissimilar to what’s happening here in the United States.
Um, but with a far more brutal police crackdown. So if you Google New York times video about police shooting eyes of people in Chile, in protests, the police just like they went bananas when people started protesting for the social inequality and they started shooting people in the eye. Permanently made them and just to scare them enough, they thought like, okay, we’ll be able to keep them off the streets here.
Um, and Danny and I were living in downtown San Diego. And so this was like the epicenter of the protest. They were tear gassing the park that my daughter used to plan. We couldn’t walk her to the daycare, you know, because we would have to pass through where all the protests were and the police were shooting people right outside our door.
Like it was just absolute and complete madness. So that already, that was from October, 2019, basically until COVID happened and the government, um, instated a curfew. So the curfew was from like 5:00 PM on. So all these gyms were having to close at their peak hours of like 5:00 PM, 6:00 PM, 7:00 PM, 8:00 PM.
Um, and so a lot of gyms were like barely hanging on and then coronavirus comes in, shuts everything down. So it was really, really harsh. The people who owned my gym, they sort of transitioned, they kept some of their equipment and they’re doing like personal training and they hope to reopen in the future, but they had to close down that location because it was in the center of Santiago.
And it was just like, it was too many months of that going on. Wow.
John E: Are things getting better in Chile now or
Kyle H: yes and no. Um, the government has made some very incremental change, you know, I think for activists changes never as, quite as fast as you want it and hope for it to be, but they have made some changes.
Um, I think people would still be out on the street protesting as much if coronavirus didn’t scare people that they were going to, you know, host a super spreader event. So there are still protests. There is still a curfew. Now the government says that’s because of a coronavirus and not because of the protest.
So I don’t know. Everyone’s sort of waiting to see what will happen when the restrictions lift. Um, but Chile is a country. Like one of the reasons that I really love to live there is that it’s just a place that feels like it’s in constant progress. You always feel like things are getting better. You can always like the change is almost tangible.
And so I have a lot of faith that the government is going to sort of get with it and start moving a little faster with all of these changes that need to be made. Wow.
John E: Let’s hope so. So did you speak Spanish before you moved to Chile or. So
Kyle H: I actually, um, went on study abroad to Chile when I was 13 years old.
So I was in seventh grade and my mom sent me there for three months and that’s when I learned Spanish. Um, and you know, I was there for three months by myself, had to survive. It was right as the internet was beginning. So nobody in Chile had a computer for me to be able to like write back and forth. My mom just called me with one of those hundred dollar calling cards.
Um, and so I was really forced to learn Spanish. You know, it was a sink or swim kind of a moment. And that was when I developed the base of my Spanish. And then I moved back when I was in college and after I finished up my degree again, so that was when I sort of consolidated my Spanish. And is
John E: Danny a native
Kyle H: Spanish speaker?
Yeah, he’s Chilean. Yeah. So our daughter’s bilingual. Okay.
John E: Awesome. Yeah, I, um, my, my fiance is from Nicaragua and native Spanish speaker and I’m trying to learn it, but it’s, it’s hard at this age. It’s just my old brain doesn’t work the way that I know
Kyle H: it’s really hard, but you know, if she just speaks it to you, you’ll be, you’ll start to understand because you’ll be forced to, you know, you don’t have another choice.
Don’t let her speak English to you.
John E: Yeah. We’ve talked about that because I want to learn it and I am picking things up faster than I probably would have thought that I would. Um, but we’ve talked about just cutting me off from English and it’s sink or swim. Well, if you have
Kyle H: kids, I’m sure. Then she’ll be speaking to the kids in Spanish and you’re not going to want to not understand their entire conversation.
So you’ll learn. Yeah,
John E: exactly. Exactly. So, um, your, how did you get into CrossFit to begin with? I saw on your LinkedIn stalking you, that you were a level one instructor, how’d you get? How did that come about? Um,
Kyle H: I have done sports since I was a very little girl when I was, I think I was five years old and, um, my parents were getting a divorce.
I stopped talking to they, you know, a child psychologist was like, she’ll just give it time. It’s a lot of change in her life. And she suggested maybe putting you mean a team sport to help me, you know, get acclimated to speaking to people again. Cause it was, you know, it was almost a year. I think that I was just not speaking to you.
Um, and so I played soccer from age five and on, and then when I was in college, I got into, you know, sort of like functional fitness. They didn’t really call it back then, but doing like bootcamp kind of stuff. And I coached soccer. I did cheerleading my entire life. I did cheerleading in college as well.
Um, and then when I moved to Chile, it was just hard because the sports culture there is really different than in the United States. It’s not as developed in general for men or for women. The only main sport really is soccer. And if you play anything else, there’s not funding. There’s not fields, there’s not appointment, you know?
And then for women, it was still even, you know, when I moved there 17 years ago, it was still really a rarity to see like a female jogger being out and about, or like a woman, a woman lifting weights. You would never see that. So. I did jogging, but it’s hard when you’re immersed in a culture where it’s not a big thing.
You know, I tried to stay fit on my own. Um, and I ended up divorcing my ex-husband who was Chilean. And during that divorce, uh, a friend of mine was like, Hey, there’s this new thing. I’m going to the first CrossFit gym in Santiago. You should come with me. I think you would really like it. It’ll be, it’s a really great community.
And it’ll maybe help you get through this hard time and you love sports. So why don’t you come with me?
John E: And you heard of CrossFit at that point?
Kyle H: Oh no. I had no idea what it was. I’ve heard of the games, nothing. So I started it in January. Um, and then in March they were like, there’s this thing called the open.
They explained it to me a bunch of times. I just like, I could not wrap my, I was like, hum, mine, what? I don’t, I don’t understand any of this. They made me participate in the open. I got my first pull up during the open and I was just hooked after that. So I got really into it. I competed, I got my level one and then I opened up my
John E: gym.
Oh, that’s that’s awesome. Very cool. Um, what made you decide to open, open your gen? So your, your, your. Competing. Did you decide you wanted to open the gym and then you got your level one or you got the level one and then said, Hey, I might as well open the gym or,
Kyle H: yeah. So when I started competing in CrossFit, like I mentioned before, um, you know, sports for women just aren’t as developed or as encouraged and Chile.
Things have changed so much in the last decade, I would say, but when I first started getting into it, there were just very few women, you know, you would, I would regularly go to class and being the only woman in the class. And you would never see a woman owned gym, a woman coach. Like it was just so rare.
And I started competing and because I come from a sports background and most people, most women and Chile don’t, it was pretty easy for me to start, you know, winning some of these competitions and becoming a fairly well-known athlete. Although by us standards, you know, I wouldn’t have won anything here.
I wouldn’t have gone to the games or anything like that. Um, but I met the best, the number one CrossFit athlete in Chile. And she did, she went to regionals a couple of times. Um, she was, she was amazing. Her name’s Marilyn Rojas. Um, and we became really good friends and we started to talking like, You know, why are there no gyms that sort of not even cater to women that just accept women that have, you know, female coaches that don’t have what I call like Hulk smash branding, which is like, just like green, like a logo designed in paint, neon green and black, just like, you know, the, it just the kind of branding that does not mean make a lady be like, Oh, this is a place for me.
And we would see, like, we would go to locker rooms and like, they wouldn’t have a woman’s locker room. We would just have to clear the guys out and go change in there. Or they would have like a closet that didn’t have a door and we’re like holding up a towel, trying to change back there. And so we just kind of thought like, why don’t we open up a CrossFit gym?
And we had this idea in the back of our mind, Mary always said, I just want to coach. She loves coaching. She loves programming. She’s a great athlete. She didn’t want to run the business. And I was like, I would love to run the business, but I don’t have the money. So I was dating a guy in New York at the time, and this was actually on like the second day.
And he was like, you know, if you love CrossFit so much, why don’t you open up a CrossFit gym? You have all these ideas for, you know, a gym that’s really accepting of women and Chile. Why don’t you do that? And I’m like, well, I don’t have $60,000 to get everything started. And he’s like, I’ll write you a check for that.
You know, he was this multi-millionaire finance guy and he wrote me a check for it. He was good for it. And he invested in the business and we started the gym together. So that was kind of how it all got started. Kind of an interesting story there, but it was, it ended up being really a great experience.
John E: Oh, that’s great. I love, love that story. And it’s funny because a lot of, a lot of gyms, CrossFit gyms now catered women. And in fact, the gym that I’ve belong to is owned by a couple. And there’s more women working out pretty much any time that you go there, there, they may not all be in the same class, but they figured it out that when there’s the female touch, it is just a much better experience
Kyle H: for them.
Yeah, it’s awesome. And you know, one of the other reasons why I wanted to open a gym is that I had convinced my mom to start doing CrossFit with me and she didn’t do sports her entire life. So she started doing CrossFit when she was 54 years old, I want to say, and she just fell in love with it. And I’m like, if this woman.
Who never lifted away in her life. Never jogged, never did anything went from totally sedentary to just loving CrossFit. Like why don’t more people see of all ages of all genders, you know, of all capabilities that CrossFit is this amazing thing that can change your life. So I really just wanted to bring that to more people, you know, so I, I genuinely started my gym out of a place of love and wanting to help people and reach more people in the community.
John E: Yeah, it’s interesting because I think it most CrossFit gym owners that you meet have a similar desire, um, to, to be inclusive and they unfortunate comments in 2019, I think. Unfortunately gave people a different impression than what we see on at, at the grassroots level. And I think that it’s encouraging what the new ownership is, is doing so far, because it really doesn’t reflect on, on, on the movement that the, the comments that were made.
Kyle H: Yeah. You know, it’s, it’s something that when I saw the comments, I wasn’t surprised at all, because I’ve really always like, just from the coverage of the CrossFit games. I’m always got an idea like Elizabeth and wallet. I love her. I have loved her for so long. So she was at the level one that I went to in New Jersey.
And she’s just like this radiant, wonderful human being. She’s so talented. And so I would always specifically be watching for her and they would show her like twice and then she would be like consistently in the top 10. And all the other white women are just getting all of this coverage and she’s like barely a blip on the radar.
And I, you know, I didn’t think of it from the perspective of racism, which is, you know, showing my own privilege. I just, it didn’t even cross my mind. I just wanted to see my favorite athlete. But then when the comments came out, it was like, Oh yeah. You know, now that you, now that you’re saying that I understand that there’s this whole behind the scenes, machismo racism, all of these things happening that are affecting the coverage of it.
So I almost think that it was good that this came out in the open and now they can start fixing it. You know, just sort of like what happened with Trump as well. I mean, I’m not saying Trump is good, but he brought a lot of things to the surface that a lot of people were feeling and made all of us white people wake up a little bit and be like, Oh yeah, this is still problem.
John E: Yep, absolutely. Absolutely. So I want to talk a little bit about box magic. I’m familiar. You mentioned Wodify um, and mind body. I saw one called sugar wad. Um, I know with Wodify there’s the back office side of the app, the account management billing scheduling you, you alluded to the payment processing being one of your biggest frustrations.
Um, and then the front office facing stuff, tracking results, signing up for classes, your software comparable to these platforms, or did you completely rethink it, do you think? Yeah,
Kyle H: so we, um, we’re using Wodify at my gym at the time that we developed it. And one of the things that I really like about Wodify is that they have kind of the complete.
Ecosystem, which is, you know, you can run a competition, you can run your back office, you can also track your athletes progress, et cetera. So they have all of these different components. So I wanted something that was, you know, a total ecosystem in that way as well, which box magic allows people to one competition, direct progress, et cetera, et cetera.
The back office component is our, you know, our main sticking point for gyms. Um, but our difference, I think really is. In Latin America. So in the U S when someone opens up a CrossFit gym, I would say that they’re generally of a higher level socioeconomic class. Cause it takes a lot of money to put into a CrossFit gym and they have some business knowledge.
They’ve either been an entrepreneur before, or they went to school for some kind of business or marketing, something like that, along those lines. Um, in Latin America, it’s sort of the opposite. Like when I say that the sports culture isn’t developed, I mean, not just on a level of like people doing sports and doing fitness, but also on a level of sports, the industry as a business.
So. There’s no, there, there now is, but there wasn’t a sports management degree, for example, that you could get, um, there wasn’t, you know, when I went to school, I took classes on like stadium management and equipment and team management combined with nutrition and other things, you know, but I got sort of the holistic picture of what you could go into working in sports that doesn’t exist.
So people who love sports and Chile studied to be a personal trainer, which is either a one-year or a two-year degree, depending on where you get it. And all they do is teach you about the human body and nutrition. They don’t teach you about how to run a business as well. So for me, one of the things that I really wanted to do, I mean, first, I just wanted a software for my business, but when I saw the other people wanted to use the software in Spanish, what I really thought was like, okay, A lot of these people desperately want to have a successful CrossFit gym, but they don’t know how to do that.
They don’t have even the knowledge to go set up a WordPress site. So any gym who use this box magic gets what we call like a sport page, which is basically like a Facebook fan page. But it’s, you know, a website link where their potential clients can go on and purchase a plan and see their schedule. It sort of gives them a ready-made website and just a lot of different things like that, where I realized like people don’t necessarily have the know how to run successful gym.
And we want to sort of democratize success for these fitness entrepreneurs so that not just the ones coming from money and from these high educational backgrounds can run a successful gym. We want everybody to be able to do,
John E: you’re almost doing business process management for them. It’s not just the software it’s, I’m giving you best practices on how you should be running your gym.
Kyle H: And, you know, show them like, okay, they don’t know what a KPI is. But give, well, you know, some of the higher level ones do, but give them a dashboard that shows them their KPIs, whether or not they know they shouldn’t be tracking those, we’re going to track those for them so that they can see like, Oh good, I’m making more money per customer this month.
That’s great news. You know, and I’m not trying to like be little or be condescending to any of these gym owners. It’s just, that’s the profile of,
John E: then we’re like Mary, they want to be a coach or they, you know, they, they they’re mission-driven, but they don’t necessarily have the business side. I think that applies in, in the States as well.
My good friend Stu Brower was on the podcast. Um, here’s my first interview. And, and recently I re-interviewed him to talk, uh, about COVID and he, he has a business where he just consults gym owners and teaches them the business of owning a gym because so many of them create a great product, but they end up sinking and falling behind because they, they, they.
Don’t understand, uh, the, the business cycle they don’t understand thinking about, do I really need a pull up rig and all these barbells, how do I size my classes correctly so that I can actually make money with this gym? And he’s built that business actually now is more lucrative for him than the original gym.
That that’s amazing. That’s amazing. Yeah. It’s uh, it’s it, it is you, can you see this in a lot of businesses though, where people take their passion and want to go create a business out of it, because there is more than just the artistry of whatever your, your, your, your craft is. There’s the business and running the business.
Not every Mary has a Kyle, right? Right. You
Kyle H: have to sort of find the right partner if you don’t have that skillset. Or find the right software that will hopefully guide you along in it. Yeah.
John E: Yeah. So, so I gather, you mentioned that Danny codes, the software for you, did you have any, and you mentioned your, you obviously have a visual background.
If you’re, if you’re doing wedding photography, had you looked into building applications before or ever done any WordPress programming or any kind of technical endeavors before this
Kyle H: WordPress programming? Yes. Um, when I had my photography website, I would always hire someone to build it out for me, but then I would figure out how to do the changes and things that I needed to do.
Um, and you know, I know you can Google your way into anything now, how long you want to spend, trying to figure something out and Googling it is up to you. Would you rather pay somebody $200 to move a button or would you rather figure that out on your own? It depends on whether your money, Richard time bridge, you know, so, um, I would consider myself like a fairly high tech person.
Um, you know, in, in terms of adapting quickly to technology and I, I just, I like to read about UX UI. I love graphic design and, and sort of how that relates to UX UI. And just to see like, okay, if we move this button here, if we change this color, what effect is that going to have on how people are using our app?
And, you know, we’re tracking all of those statistics now because, um, in 2021, 2022, We’re really excited to roll out a couple of products that are more end-users they’re focused. So that would be the gym goer rather than the gym owner. Um, and we have tracking now within the app that will show us, you know, exactly every time we move a button, how that affects where they’re clicking and what they’re doing.
So I’m really excited to look into some of that at this point. Now, you know, I don’t need to Google anything. I’ve got the best view. Well, my team that’ll I’ll do that for me. Thank God. Um, but no, you know, I’ve never tried pro anything and Danny is a hundred percent the tech genius behind box magic. So that’s always been, you know, another one of those cases where it’s like, okay, you want a great product.
You need somebody who has the business knowledge, the marketing knowledge and someone who has the technology.
John E: Yeah. I get asked a lot by people who have ideas or they’ve created, you know, they’ve got a concept that they want to turn into a business and that, but they’re not technical. And I tell people, you either need to know how to code.
You need to know, understand design, or you need to understand project management. And if you don’t have any of those three, you better find somebody who does. And preferably you should have people early on who cover as many of those three skill sets. If you’re going to build a technology product.
Kyle H: Right.
And it’s, it’s really hard because I think a lot of the things, at least for me being the CEO of a company, the things that I don’t know that I outsource. You know, like legal work in accounting and whatnot. I try to learn the bare minimum so that I, I know that I’m not getting screwed over. I know that things are being done properly, but those kinds of things you learn once, and then you’re, then you know it and you don’t have to relearn it.
Whereas technology is constantly evolving and constantly changing. So it’s not something that I can just, you know, watch a few videos, spend a few days studying, maybe read a book and then be like, okay, I know about technology now, you know, it’s just, it’s constantly evolving and you have to keep up or get out of the way, you know?
So I’m really, I think when, when people ask me, what advice do you have for a first-time founder? I always say like, if you’re not a tech person. Find either a tech co-founder that you can add to your co-funding group or hire somebody really, really good pay them well, and do the research well enough to know like what they’re working on, to understand where their time is going and to understand best practices so that they’re not developing you an app and the technology that’s going to be out of date in six months.
And Apple’s going to tell you to take off the app store.
John E: Wow. Yeah, that’s, that’s really, really good advice for sure. And one mistake that I do see people make in that arena is that there’s a difference between a startup technologist and an enterprise technologist. Sometimes people are good at both of them, for sure.
Um, but, but I’ve seen, um, technical co-founders that did great things at IBM or Accenture, and it’s a different environment when you’ve, when you’ve got a 300 person team and a eight and nine figure budget compared to how do I just make this button look the right way. Right,
Kyle H: exactly. And you know, that really applies to anything.
We learned that the hard way we wanted to hire somebody who would sort of set up our sales department and the idea was that he would be like head of sales, build up a team, you know, get all the sales processes, organized, start managing the sales KPIs, all of those things. And he came from a bank where he had been very successful selling the bank’s products, but he had a whole team.
So it like ended up being him. You know, writing me to be like, do this graphic design and set telling Danny, like, I need this blog post and I need this done. And he’s like sending us to do all things. We’re like, no, no, no, this is a startup. Like, you need to be a Jack of all trades. You need to be able to do all these things and set up the roles where we’ll then hire other people, those positions.
But it just, it didn’t work out. You know? And, and so we ended up actually hiring someone who didn’t have sales experience, but is heavily involved in the CrossFit industry, in the fitness industry. And Chile understands the clients and she has been fantastic. And we’re now training her to be the head of sales, you know, based on the things that she’s already done.
So I think you really have to, for all things, startup, you have to find somebody who fits the startup culture because not everybody is the right fit.
John E: Yeah, it’s interesting. Um, it’s, it’s the, the bag carrier versus the sales manager. And you really need both, but it’s not, you don’t necessarily need both at the same time, but it does, as you grow up front, you really want somebody who will carry a bag and just get deals close for you.
But then it starts to transition. Right? I read a great book called the sales acceleration formula. Um, it was written by the guy that started the sales team at HubSpot, and he never had done sales before. He was at MIT, I believe when they started HubSpot. And he said, I went in on this and he was an engineer and they were like, well, We’ve got the engineering covered, but we really need somebody who can, can, uh, build a sales team for us and being an engineer.
He just started tackling the problem like an engineer would, and he just walks you through in the book, how he went about building the team and his, his conclusion was that your, your initial sales leader should be in an entrepreneur who for whatever reason might not have succeeded, but they, they got far into the process because they’re able to really figure out everything that needs and how to kind of make these deals happen.
But then how do I put a team together? And I think that’s another one. I think that in the seat, the technical component are the two biggest hurdles that I think most, most founders end up running into. It took
Kyle H: us a while to figure out the sales one, because we didn’t have anyone with sales experience in, in our founding team.
Um, but once we got the right person in the job, it was like, This is amazing. Why didn’t we do this before? And she’s actually a friend of mine. She was a coach at my gym, and I posted on Instagram saying like, we’re looking for someone for sales, for box magic. If you know, anyone who’s interested talk to me.
And she reached out and was like, Oh, I can totally do that. And I was like, why didn’t I think of this girl before? She’s amazing. She has her own business doing CrossFit kids. So like you mentioned, she has that entrepreneurial background. She knows how to speak to coaches. And she has been so wonderful also at like being really organized, helping us set up really solid sales processes that can be replicated, you know?
And so she’s been great. I can’t say enough good things about how wonderful it is to have a good sales person on your team. You,
John E: you will never regret it. I was talking to a mentor of mine when we were just starting to scale level, we’d gotten about 4 million in annual sales and we realized like this isn’t going to scale to the size that we want to go with.
Just my co-founder and I network essentially. And I’d been just interviewing or putting out feelers to people around town. And, um, and I’d reached out to my mentor and I said, Hey, can you connect me with X, Y, Z person? Cause I don’t know them. And it wasn’t a good fit for them at the time. Uh, he did ask them, Hey, would you want to go get, go work at level?
And um, he said, nah, I can’t right now. It’s just not a good time. And, but my mentor said, John, can I make a recommendation? He’s like, when you find, if you think you got the right person, give them a meaningful chunk of equity in the company, he’s like, make them, make them, earn it, make it be over, hitting some targets or whatever, but he’s like.
And if you can’t part with real equity and in his mind, he was like five to 10%. And he’s like, if you can’t, if you won’t part with that, then it’s not the right person. You know, he’s like go in other words, go all in. Or don’t he’s like, because you’re right. The only way you’re going to scale this business as if you get somebody in here who can get it done.
Kyle H: makes a lot of sense. That’s good advice.
John E: Yeah. It’s, uh, you know, it’s always good. I sometimes forget to consult mentors and actually ask them for advice, but every, every time I do it, it always amazes me.
Kyle H: Every good mentor is very
John E: there. For sure. So, so I met you, I think it was fairly late in 2019. Is that right?
Kyle H: Yeah, actually, was it early 20, 20? I can’t quite remember,
John E: but yeah. Yeah. It would’ve, it would’ve been right, right, right. On either side. So before the
Kyle H: pandemic and everything came crashing down.
John E: Yeah. So talk to me about what your progress was at that point and where you thought 2020. It was going to take you
Kyle H: trying to find us.
We don’t have curtains in the new house yet. So
John E: I’m trying to find the light there. Let me
Kyle H: move to another room real quick. Before I answer that question, I’m just going to go into the dining room here. This house gets great light, but it’s not helpful when we don’t have curtains and we’re trying to work.
John E: I’ve been playing video games lately. And, um, it’s, I have it set up in a sunroom, which has great light for, and there’s all kinds of plants in it, but at certain times a day, I just, yeah, which is probably good. It gets me off the video game. Can you see me? Okay. Here
Kyle H: are my two. Yeah, I can. Okay. Um, so when we met box magic had around 300 clients, um, things were going really, really well.
We were growing quickly. We were scaling, we had good sales. They were mostly organic at that point. Um, we had started expanding a little bit into Mexico, um, and had gotten some inquiries in other countries as well with our main client base being Chile. And we were raising around, uh, funds at the time. And, you know, things were going great.
It was looking like the deal was going to close fairly easily. I say easily in quotation marks. It’s, it’s much easier looking back to say that now than it was at the time. Um, we had raised a round of angel funds and we were fine on runway, but we needed to close a bear round in order to really get to the point where we could start truly scaling.
Um, we needed to hire more developers and not just have Danny, you know, coding until 4:00 AM. Every single night we needed to have a real designer because our platform really looked like a platform that had been designed by a developer, which was making me as a visual person. Absolutely insane. Um, And so we were sort of in diapers at
John E: the time.
I guess the good news though, is the bar is fairly low. If you’re comparing yourself to Wodify.
Kyle H: Oh, I mean, Wodify actually looks beautiful compared to like the couple other software similar to that, that have popped up in Latin America. So you see, you know, what kind of, what level we’re talking about here.
So it’s both good and bad that people in Latin America are a little bit less into tech things and are only just now starting to use these type platforms because we have 300 people using a software that people in the United States would have just been like, Oh my God. And actually, Todd, Bulow one of our investors.
And he has a development company. He was like, I will invest on one condition if you promise me that some of the funds are going to be used to revamp the UX UI. And I was like, that is the first thing we’re on the same page. Don’t worry. That is the first thing we’re going to do with them. Um, but so we’re raising funds and at the time, you know, now it’s, it’s much easier when I look back, I can see this, but at the time.
We were just, we were growing so quickly that we were really reactive to things that were happening in our environment and to the new sales. Um, and so we didn’t have all of these really clear cut processes in place that we do now, the pandemic for us. I mean, it’s been awful and stressful. We close the round in April of 2020.
So right as the pandemic was coming, crashing down, we only lost one investor. We had wanted to close about 350. We closed at 250, so still pretty good. Um, and it’s, it’s amazing to me that the investors that we have, you know, trusted in us to say like, okay, we know this crisis is going to really affect gyms and you’re going to be affected by it, but we still believe that you’re a team that can get through this.
Um, and so we obviously started really declining in revenue and the number of clients and all of these things. But the pandemic gave us time to re-trigger that technology. So we revamped the entire platform. We made it way more intuitive and easy to use. It’s really plug and play for anybody who comes in and no matter how they run their classes.
So dance academies, for instance, are used to selling one-off classes. People don’t pay for monthly plan. We develop that out. You can just, when you come onto the platform, you can sign up and say, how do you, how do you structure your plans, click here for, to pay for one-off class or to pay for a month to class, to pay for where you can use 30, um, 30 of your classes during a month at any day that you want, you can use all 30 on the last Thursday of the month or where you can only allow people two times a week.
People just plug and play. They don’t, it’s not confusing the way Wodify was as well to try to really like configure all that and customize it. Um, So we just made it so much easier because the other thing that we realized during the pandemic is that all of these gyms who previously had resisted using a software who are very non-technological, who were paper and pencil people like not even XL on a computer paper and pencil, we’re now being forced to use a software.
And so if before that, if we had thought we needed to make things intuitive after the pandemic, we realized things needed to be just, dummy-proof completely dummy-proof for all of these people who like don’t even have a computer they’re using their cell phone to do everything, you know? Um, so we revamped the entire technology.
We really doubled down on our core, which was sort of counterintuitive. Um, And it was hard because as, as things started to go South, we did start getting some, you know, some pressure from investors saying like, well, let’s just throw $50,000 into revamping box magic into a platform for personal trainers, because that’s going to be a bigger thing during the pandemic.
Uh, let’s pivot to healthcare, you know, like they had all of these ideas, they were trying to be helpful, but in the end, I’m so glad that we really just listened to our own instinct and our own data and said, listen, that’s not what we need to be doing. We need to focus on our core and we need to extend our runway to make it through this, because if we can survive, this gyms are going to be coming back in, in spades.
So, um, we really doubled down. And one of the biggest things that I think is, is really awesome is that we’ve managed to, I want to say triple, maybe even quadruple our ARPU, our avid drive revenue per user.
John E: I love that term, by the way, I tell people that term all the time, because I’d spent a lot of time in the telecom industry and they think very heavily about ARPU.
Kyle H: It’s very important and it’s fun to say it is, but I, um, I’m really excited and really proud of that, that we have managed to raise our RQ so much. So now box magic is actually making more money with about half of the amount of clients that we used to have. So we’re currently at about 180 and the pandemic.
Also, we raised our prices in the middle of the pandemic, which again is very counter-intuitive, but we really did some hard market studies and some hard looks at our own financials and thought what’s more scalable, you know, to get a hundred clients who are paying $60 each, or to get 500 clients who are all paying like $15 a piece.
Um, and how are we going to manage support and sales and all of those things at each of those levels? So we rebranded, we refocused our marketing to try to land some of these enterprise gyms, but also some of the medium to large, the more high end boutiques, rather than the garage gyms and, you know, just the smaller, lower level ones.
So we’ve lost a lot of those smaller clients, which, you know, it still breaks my heart to this day, you know? And, and if, if some of them have come back and said, like, can I still pay the old minimum of $23? Like I’ve got a heart, the heart of a grandma. And we always say, yes, you know, I, I don’t want an, and, and we tell them like, as you grow, you know, we’ll transition you over to the new plan.
So it’s not going to be forever, but. Um, some of them have just gone out of business. And so we’ve really doubled our focus down on trying to land these more financially stable gems university gyms, who are always going to be open and always going to receive funding because, you know, they’re not paid plans.
They’re receiving government funding when they’re public universities, um, larger enterprise jams who have millions of dollars in backing and are not going to go out of business because their investors are not going to let them. We’re just trying to find these more stable clients, assuming that the pandemic it’s it’s getting better, but it could still last another year or so, you know, before things really are back to normal.
So we just really like doubled down and tried to make sure that we’re landing these, these financially stable clients in order to, for us to be financially stable and to stay in
John E: business. Yeah. I love hearing the inside stories of the conversations that were happening with the investors I recently had, um, Alex and Dan from two U laundry and other Charlotte success story before.
Okay. Yeah. So, so they were another repeat guests where I wanted to talk about what COVID did to their business, because if you think about it on the one hand people aren’t. Um, people are home, so they’re not getting dressed up nearly as much for work there. They’re working remotely or they’re not working at all.
Um, and they have way more time. And so, so it was, uh, it was a big, um, Oh shit moment for them. When they saw everything going down and their investors or their, their board challenged them and said, look, you need to draw up four different plans. Five different plans come up with everything. One scenario is we returned because they had raised a pretty large amount of money, but they hadn’t deployed it yet.
So they were sitting on a pile of cash and, um, and they said, let’s look at the option of returning capital to investors. Let’s look at the option of continue doing what we’re doing. Let’s look at. Should we switch to a franchise model? Because they had opened up a retail location that was deemed an essential business.
And they were just at that part of the business was growing while everything else was, was falling apart. And. And Alex said, he said, you know, we wanted to continue. We had just opened Raleigh and Atlanta. And, you know, we, we w the numbers had been going up. They disappeared overnight with lockdowns, but, but the numbers were going up and he said, my instinct was to do that, but I listened.
He’s like, I decided if I don’t, if I don’t do what the board says and they’re right, what, what does that look like if I do what they, what they’re suggesting and it’s right, then it worked well. And he ended up making the calculation to, to consider shifting gears. He didn’t, it wasn’t a one 80, but it was much more of let’s start franchising, uh, these stores, and, and now in reality, it was a gut check that they were forced to have, but they’re probably in a much better.
They feel like they’re in a much better place now that they had that gut check. It’s it’s, it’s always fascinating to hear these stories. In your case, you had investors who were saying, maybe I think they’re doing kind of the same thing. They’re saying, Hey, consider all these different options. And you knew in your heart that this is what I need to do.
And, uh, it’s, it’s great that it’s worked out for both of you. Yeah,
Kyle H: for us, it was a little bit less of an organized like board sitting down and saying, let’s look at these options. It was a little bit more people going into panic mode and calling me on Friday night and Sunday morning. And me just sort of like, I felt like at that time they had to be the shield for my team and not bring every single idea back to them.
Like it was up to me to sort of weed through what were good ideas and what weren’t good ideas and take the options back to the table, even to talk about with our C-level team, my co-founders and a couple other people, because. Everyone was just under an immense amount of stress at that time. And I felt like, okay, I know that all of the investors, meanwhile, they want me to consider all of the options and I will do that.
But at the same time when we’re already stretched so thin, we did let a couple of people go right at the beginning of the pandemic, we’re stretched super thin our own clients, our gym owner clients. We’re also in panic mode. So, you know, it was like, ah, we need to integrate with zoom and we need to be able to do all these other things.
We’re just like busting out development way too fast as well. Not doing it with the processes in place that we had set up. And so I was. Sort of being the shield between the investors and the rest of my team, trying to weed through make sure I figured out what was a good idea before bringing it back to them.
And in that moment, when you talk about like having a good mentor, um, angel Rutledge is our mentor and she’s our advisor. Um, and one of our investors as well. And she was just so clutch for me in, in every sense of the word, she helped us develop the strategy, but she also emotionally helped me, you know, figure out what I am responsible for, what I am not responsible for, what my responsibilities and my communications to the investors have to be like.
I mean, she was just, she was really amazing and, um, I will always be grateful for her for having her.
John E: Angel’s awesome. I’ve tried to get her on the podcast. We just haven’t been able to get the get together. Oh, she’s the best
Kyle H: you have to interview her. I would, I already know her story, but I would still love to sit down and
John E: listen to it again.
No, no. She’s, she’s amazing. So you, you’ve now named two members of the royalty and the startup scene here in Charlotte angel and Todd Bulow. What, how did you find Charlotte or how did you connect with, with those two and other folks in the Charlotte area? Cause you don’t have any ties to Charlotte yourself, do you.
Kyle H: None whatsoever. Um, so we tried to raise around in Chile or we were sort of, we were in the beginning stages of it and we went through the process. We, we basically pitched to, and by we, I mean, I, the pitching is my responsibility. So I pitched to every VC, literally in Chile. I know all of them, I know all of their names.
I know all of their background stories. I know everything about them because there’s not very many of them in Chile. And with one, we started getting into really, um, serious conversations. We signed like a pre agreement with the terms that they were going to invest with. And then they just started draining on the due diligence in drain and on and drain on.
And we had told them that we had runway until February or March ish. And at the end of January, They were going to do our whole round. And they had even pushed us to do a bigger round than what we were actually had planned on doing, but they were like, you know, we can help you. We have the support to really put that money into sales and marketing to help you grow.
Like, let’s do a $500,000 round instead of three 50. Um, and at the end of January, the contact person. So it wasn’t even the investors that I had been talking to. They just sent out like one of their low level people to call me and say, so, listen, we’re still going to invest, but we’re changing the terms.
Instead of, I think I want to say we were doing 15% with them instead of 15%, we want 40%. And I was just like, uh, no, I don’t really know how to answer this conversation. Like we have a signed piece of paper that says 15% where we agreed on the valuation of the company and all of these terms ahead of time.
Um, and you know, I was angel was my mentor at the time. Um, I had already met her in Charlotte and she was kind of like. Listen, this is the oldest, you know, move in the playbook where these old VCs, this is the way it used to be in the U S as well, where they try to get you to have your back against the wall in order for them to get the best deal, just come to Charlotte and finish raising the round here.
So I had already gone through the queen city FinTech accelerator, which was, that was just like a random stroke of luck. Someone sent it to me and I applied for everything. Cause you just, you never know what’s going to be a good opportunity. And I have all the traditional, you know, the accelerator and incubator Bader and investor questions.
I have them all in documents. So I just copy paste. Copy paste, copy paste. I applied to queen city was thinking nothing of it. I applied the day before their deadline. And their intern. Um, I can’t remember what his name was. He was somebody who
John E: Marco, was it Marco? Yeah, I think
Kyle H: it was okay. Me first and was like, okay, you can move on to the next round, but like, they need to have a call with you today because you were so on top of the deadline.
So they had a call and said, okay, you’re moving into the top. I can’t remember. I want to say it was like 20 companies that went and pitched in person and they said, you don’t have to come in person. We know you’re in Chile, you can just pitch via zoom. And this was before COVID, but I already knew I was like, I’m a great pitcher.
I think that’s one of my biggest strengths as a startup entrepreneur. So I want to go do this in person. And we just thought this will be the foot in the door. We need to go raise funds in the U S because the VC process that I just mentioned too, was taking so long. And I thought like, at least if we start talking to VCs here in the U S it’ll speed up the process in chili, I didn’t necessarily think that we were going to raise the round in Charlotte, but I thought it’ll get the ball rolling.
And I knew that the queen city FinTech accelerator, part of what they do is sort of help you prepare all of that due diligence that you’re going to eventually deliver to your potential investors. Um, So I flew in for two days from Chile and I pitched the hell out of our pitch and I did really, really good.
Um, I can’t remember. I think it was, Oh, am I forgetting her name? The woman who used to run all the operations for queen city and she’s not with them anymore. She was fantastic. Um, she’s blonde and she went to a different accelerator in Raleigh. I think.
John E: Yeah, I know who you’re talking about. I cannot remember the
Kyle H: name.
I can’t remember her name, but she was so wonderful. So I was, um, I think there were, there was only one other woman led company there. And I just, I felt, you know, really out of my element because I’m used to being the only female in the room in Latin America. But the culture there is very different and to be in a room full of suits in the United States.
And also like at the time I had been living in Chile for 17 years, I rarely spoke English. I just felt like I was like, uh, I couldn’t even speak. And she really just, she was like, you’re going to get this. They need women to come into this program. They want women to come into this program. So you just go in there with the confidence of knowing like they already want you, you just have to confirm to them.
So she gave me a little pep talk and then when I was done, she was also like, Oh, and by the way, you were the best pitch by far, I felt great. I met angel that night afterwards when they had the drinks and everything. And it was like the little networking time. And angel had asked me the hardest question out of all of the judges, like all of the other, all of the other judges were like, Oh, you’re doing so good.
This is great. This sounds really interesting. And asked me the typical investor questions. I don’t even remember what question she asked me, but it was brutal, brutal, but I was like, Oh, she’s smart. Like she gets it. She’s really, really brilliant. And so I just honed in on her and the networking part afterwards, she was also one of the only women in the room.
And so I found her and I was like, okay, I don’t know you, but I want you to mentor mentor me. I love you. I need you in my life, please. We had a really great conversation and I just felt so drawn to her from the very beginning. And so we ended up getting into queen city. She was one of my mentors. Um, Timothy Monon was also one of my other mentors.
Do you know him? He’s also okay. He’s more in like the. Mergers and acquisitions side of things in Charlotte, but he’s also big in, in, in the startup industry in Charlotte. Um, but he ended up investing as well. So him and angel were the two sort of primary investors that we had. And then they introduce us to Todd, to Frank.
Um, Frank brought on Jason and Joe who actually owns a CrossFit gym in Charlotte as well. So we have a gym owner, which is really nice to have someone who fully understands the industry. Um, so they sort of brought on all of these other people. And so, like I said, when we were trying to close that round and the BC was like, Nope, we’re not doing it.
Angel just said, you know, Frank is hosting this big event. Why don’t you come to the event? We’ll talk to him. Frank was like, come work out with me at my gym. Just so you know, like the CrossFit owner, he’s also an investor. You might be able to convince him. We started talking. We really, we had great energy, you know, between the three of us.
So it was. It was pretty no brainer to get these people on board. They all understand the industry. They all have, you know, contacts that have taken me to the top of CrossFit. You know, I’ve had phone conversations with, you know, Rory from the CrossFit games and all of these really well-known high level athletes.
We’re not quite at the stage yet where we’re ready to do a partnership or having an investor from a major cross CrossFit athlete. But. We’re getting to that stage. And when we are there, these investors that we have had the context to just go, go, go, you know, hit the ground
John E: running. So I love that whole story because it’s just, it shows the non-linearity of the journey, right?
Like you apply to queen city FinTech, probably not even realizing it’s in Charlotte. Um, cause there’s two queen cities. There’s also Cincinnati, but, uh, but you know, And then you go there and you meet angel, and then you meet Todd and you meet all these other investors. And that’s what he goes, how ecosystems are supposed to work.
You don’t know where you’re, you know what steps are going to get you where you’re going, but you know that you have to take those steps and I applaud you for applying for everything. It can be overwhelming. But you just never know which one of those is going to turn into something. And on the flip side, you think about a guy like Dan Roselli’s, uh, starting queen city FinTech.
He doesn’t know that they’re going to end up brokering an introduction to some investors who invest in this Chilean startup. It’s just, it’s odd that you’d call it serendipity, except that I think people who play this game understand that it’s a very non-linear thing and you, and you, you have to put, you have to put in.
Yeah. Put in the work to create the opportunities. Cause you never know where, and then you have to keep your head on a swivel and be open-minded to, to new opportunities.
Kyle H: Yeah. And when I applied to queen city and went and pitched, they, you know, they ask you, do you have someone from your team who was willing to move to Charlotte?
And I obviously didn’t mention that we have a kid they’re like, we would have to relocate our whole family, find a daycare, which is impossible in Charlotte. And so we were, you know, staying out in that little motel room that they’d give you, you know? And, and we were there for about a month before we were like, okay, we can’t live in a room anymore.
We couldn’t find daycare for our kids. So we’re like bringing her into the co-work. She’s just sitting there like playing with Legos while everyone’s doing their pitches and doing their things. But when you want to make it work, you find a way.
John E: Yeah. Yeah, exactly. So, um, how do you think about D do you think about the North American market or do you really want to focus on the Spanish speaking market first?
Or how, how do you, how do you go about prioritizing that.
Kyle H: It’s interesting. So the North American market, I find really fascinating because I see gaps in it. I see, you know, needs that are still not being met by some of these softwares. Like, like you said, Wodify is not an attractive platform to put it mildly, um, sugar wad is great for athlete progress, but it’s a whole separate thing.
Yeah. Mind, body is much more general. It’s not sports specific. So, and it’s, it’s almost like, I mean, it’s,
John E: it’s a generic scheduling app that found a really good use case right
Kyle H: old. And so it’s, it’s so powerful, but it’s really hard to use because it’s so powerful. So we’ve just seen that there are a lot of holes in the market.
At the same time. Um, for us, it’s been easy. It’s been relatively easy to get clients in Latin America because we’re not competing. I mean, there are other softwares on the market, but it’s not the way it is here. Where if you open a gym, you have a software. So in Latin America, I think we would be competing against some of the other softwares that are on the market.
Whereas in Latin America, we are competing against paper and pencil or an XL and people thinking that they can manage operations without actually using a software. So it’s two different things, you know. Do you want to spend your time competing or do you want to spend your time educating? And in this case we saw more potential in educating.
It is an expensive and slow process to educate, but once you get that ball rolling. The word of mouth potential. So basically, you know, the organic, the free leads is much bigger than when you’re just competing and fighting to explain to people why you’re better than the other platforms. So North America, I think eventually is going to be on our roadmap.
Um, but it’s not for this year. The next big market that we want to go into is Brazil. So we’ll translate into Portuguese.
John E: Oh, wow. Do you have any Portuguese native Portuguese speakers on the team or we
Kyle H: do actually our co-founder Pablo lives in Rio. Um, and so he speaks fluent Portuguese and his girlfriend is from Brazil.
Um, and so we’re gonna sort of use him as a way to do a really lean test in, in Brazil and kind of see like, okay, if we put out some digital ads and we have someone with a local phone number in Brazil who speaks Portuguese, calling them, let’s see how this works. And if it goes well, we can hire somebody.
And if not, we can, you know, there’s the whole rest of the continent that speaks Spanish so we can stick to. So it’s pretty, win-win.
John E: That that’s excellent. Have you looked at the technical challenge of supporting Portuguese? Is that something that, that your team has, uh, has a handle on?
Kyle H: Yeah, so we started translating the app end of last year.
That is the one tech milestone that was on our roadmap for last year that we didn’t hit because it ended up being so much more complicated than we had really thought about. Um, no one on our tech team had experienced translating an app either, and it just ended up being a lot more difficult than they thought.
Um, but the tech part right now is translated and we also are hooked up to a payment aggregator in Brazil as well. It’s called sweet pay. Um, and so we’ve connected to them so that when we get a Brazilian gym onboarded, they’ll still be able to do all the same functions that all of our gyms, you know, and Chilean and Mexico can do.
John E: So. So how big, and how quickly did your revenue drop, you know, in that March, April, may timeframe. Oh, well, I
Kyle H: think you’re on my investor update list. Aren’t you? I think it took a nose, dive it real nose drive. So, um, we were generating between about seven to 11, 12,000 some on good months. Um, our score score magic, which is our competition, and it basically can like run an open and then also run the in-person scoring and everything and take tickets and do all that.
Um, and so that in, in good months would generate, you know, an extra two or $3,000 for us, um, per month in addition to the administrative platform and the recurring revenue that we had. So we were seven to 12,000 and we dropped in March and April. The Chinese government didn’t really respond as quickly closing things down.
So it was like, We didn’t necessarily drop right away, but we weren’t seeing new clients. We were like contracting just a tiny little bit and people were sort of waiting to see what would happen. And then in may, may, June and July things just started pull limiting. Um, and it was interesting because we were getting new inquiries where we had new leads, but we were churning at such a high rate because gyms were just, they were floundering trying to see like, okay, can we still do online classes?
Uh, no, we can’t. People are not into that at all. So they would pay for a of the platform and then just be like, man, we’re just going to close down and not do anything. Or they would realize like we can’t charge as much for online classes. So our old model was where we would charge them based on how many active users that they had and the amount of active users that they had was kind of half.
So their payment to us was kind of half, um, And so it was may, June and July of things just falling, falling, falling. And then in August was when we launched our new UX UI. We launched the full rebrand that we did, that I did of the website and the social media and all of that, and started targeting these higher end clients, which take longer to close.
But when they do, man, it’s a lot more revenue. Um, and so things have been on the upswing little by little, it’s still, you know, take one step forward, two steps back and we’ll, we’ll see how things continue on, but we’ve been on a pretty good upward trend. And when you dig into the data, you can see that churn has leveled out.
We’re not turning at such a high rate and more that percentage has been going down, down, down. Our BU is going up, we’re still having good new sales. Our client retention is going up a little bit. That’s still, we used to have like a less than 1% churn rate, you know, and now that’s at 20% or so a month.
It’s it’s hard to even consider whether you call it or turn right now, the data is so dirty because it’s people who are not paying for two months and then coming back for two months and then closing and then opening. And it’s just, it’s really, it’s made it very hard to sort of track those numbers the way we normally would.
John E: W where do you see 20, 21 shaken up for you so far? Or what, what are you, what are you planning for 20, 21? Do you think it gets back to normal at some point or. I
Kyle H: honestly think that it’s going back to normal and going gyms are going to be even busier than they were before people are desperate to get out of their house.
Like, I mean, me here in Michigan, I miss CrossFit so badly. I’m, you know, doing workouts on the size of a yoga mat and there’s only so many burpees you can do in 12 months. Um, and so I think people are just really, really anxious to get back into gyms and Chile, fortunately had an amazing response to the pandemic.
So their vaccine plan they’re on track to have 70% of the population that’s moved by June, maybe even before. Um, and I really hate to say this. Um, and I don’t say it in a negative way at all. But a lot of our Latin American competition has died off or is in the process of dying off. And so it’s really sort of, you know, survival of the fittest at this moment.
And I think we are going to be one of the very few software companies for gyms that come out of this stronger with a better product product, with better operations, better sales, better customer service. We have revamped everything. We have restructured our company. We have built a foundation of solid concrete and are ready to build a beautiful house on top of it now.
And so I really think that that is just going to be huge for our growth. And like I said, we have plans to move into Brazil. And the rest of our plans are still fluid. We have a roadmap for development and roadmap for products that we’re following. But as far as sales and marketing go, we do sort of have to depend on what happens on what government reactions are and how vaccine rollouts go in different countries.
So we’ll see. But for right now, chili, the focus remains on chili and then Brazil will be the next major expansion.
John E: Awesome. No, that, um, I’m so happy for you. That’s great that, uh, that, that you’re seeing that a light at the end of the tunnel and coming out stronger than, than you were before. And I think if, if you get churn and ARPU under control, everything else just falls into place.
If there were two things I was looking, I would look at in software business, I think those are the two most important, uh, two, two most important drivers, for sure. So I talked about the fact that I’ve had some very popular guests who are female gym or studio owners. We’ve talked about that they’re underrepresented in the industry.
Um, I, I think women are even more underrepresented in software and technology, uh, companies. So did you feel like you had some challenges being a female gym owner or a female trainer and that sort of thing, um, are there challenges you face given all of these dynamics specific to being a female.
Kyle H: Yeah, for sure.
I mean, I don’t want to come across as like having a chip on my shoulder, but at the same time, there are very realistic barriers that are in front of women and people of color. And in, in Chile, um, more than racism, Chile is a very homogenous. Country. So the majority of Chileans are European white, mixed with a little bit of indigenous blood in them as well.
And there is still racism against indigenous people, but there’s just not a large population of color. So in Sheila, you’re dealing with more classism. Um, and machismo more than here in the U S and then in the U S you know, there’s more racism and sexism as well. So, um, it’s, it’s interesting the time that we find ourselves in right now, where people are suddenly waking up to these things and trying to correct the structural barriers that have been in place for women and minorities.
Um, and like I said, I mean, We are only tangentially FinTech. And we basically got into queen city because I’m a woman. Um, and I have absolutely no problem saying that. And I don’t feel any shame in saying that because I’ve also had a lot of doors closed in my face because I’m a woman. So I think that when there are, you know, accelerators like queen city who are looking to do the right thing and bring more women in it and give them those opportunities, no one who takes one of those opportunities needs to feel any kind of shame or that they’re not good enough because they got in based off of their sex.
I also have a great company, you know, but I know that they wanted to bring more ladies into the program, but it’s still interesting to me, you know, when I went and did the pitch for queen city. And like I mentioned, I was one of two women that, that pitched and the other one was a husband and wife team.
Um, and I got my hair done. I did my makeup. I painted my fingernails. I picked out a really nice outfit. Like I was very, very, and I picked out a jumpsuit. I didn’t want to wear a skirt or anything that looked too fun. I put in a lot of time analyzing the kind of makeup that I was wearing. And I put a lot of effort into these things.
And one of the other guys who actually did get into the company, he pitched to this accelerator, wearing a t-shirt that literally had a hole in it. And he had toilets, the paper sticking out of the back of his pants when he fit. And it was fine. Like he doesn’t care. He doesn’t give a shit, but it’s just funny because I think like, I could never do that because people don’t take women seriously if they don’t dress nice.
So like what I love to show up to things, not wearing, not have to put any makeup on or do my hair, like I should just shave my head. So I don’t even have to worry about that. The way that Mark Zuckerberg only wears white t-shirts because he doesn’t want to have to worry about making that decision of clothing on a database so he can focus on other things, but women don’t have that luxury.
You know, we are judged on how we look and I’m not saying men aren’t judged on how they look sometimes, but.
John E: It almost becomes a badge of honor in the same Nicholas to Lehman and Tate talked about it in a collection of essays that I read on. I can’t remember what it’s called now. Um, but he talked about it.
How it’s, it’s a badge of honor, the P the men with real money wear a t-shirt and jeans and can make it, make a show that, which is just a very different dynamic than, than women have to do.
Kyle H: That is exactly what the guy who was wearing the Holy t-shirt said, when I mentioned him, I was like, look, it I’m all dolled up and look at you.
And he was like, Oh yeah, I do this on purpose. I don’t want to look like I’m carrying too much. And I was like, are you kidding me? Go to for you. But,
John E: but so there, sorry. And I, and, and again, I think you have the exact right mindset. I recently had Bobby Robinson on my podcast. He’s a. African-American entrepreneur here in town.
We acquired his business. Um, but he talked about on the podcast, how, when he first started, he had a law firm and then he created software for the law firm and we bought the software, um, um, from him. But he talked about how, when I. He’s like I realized I could go out on my own because all of these big corporates have requirements to buy from Africa, you know, from minority owned businesses.
And he said, I don’t have a problem doing that. He said, now he said a year later he was able to sell to anybody. But he said in the very beginning, he would only sell to people who were buying from him because of his minority status. He’s like, but I knew that I was creating a great law firm. So take advantage of what’s out there.
Kyle H: if you don’t, I mean, you’d be silly not to, you know, white men have been taking advantage of what’s offered to them for centuries. So women and minorities should not feel bad for taking those same advantages now that they’re being offered to them. You know? And so I think it’s, it’s interesting because it is a good time to take advantage of these opportunities.
Now that companies are really more and more about that. And it’s not to say that, like now the problems are solved to me. One of the things that’s really frustrating to look at is like all of these different female, um, investing companies now, the VCs that want to invest in only minorities and women, they tend to manage funds that are a lot smaller than the ones that invest in majority white owned businesses.
And so it’s like, okay, on one hand we were forced to create our own separate table, but like, I don’t want my own separate table. I want a seat at the table with the money. You know, and so it’s, it’s still, there’s a long ways to go, but things are getting a lot better, you know? So it’s, it’s interesting.
It’s I think that that has to go both ways as well. Like not only are people looking to invest in women and I’m taking those opportunities, but I am also looking for female investors and for person of color to invest in our company, because I want people who are aligned with our business and understand when I say like for our hiring process, we are always going to hire a woman, or we’re always going to interview at least two women for every position, whether it’s for development or not.
That’s a rule. I force my people to look for women to interview as well. There aren’t really people of color in Chile, but if we’re in the U S I would also force them to look for people of color, because I know that there are qualified candidates out there. They just aren’t, they’re not as visible as the candidates that are, that you would normally hire.
So we hear that we’re all on board.
John E: No, that’s, that’s great advice for sure. Um, and not just because of social justice reasons, it actually, you will get, if you have a more diverse, diverse set of employees, you’re, you’re going to do better. It’s it’s proven it’s just a fact that diversity, the diversity works.
Kyle H: when I pitched at the, um, the final presentation of queen city, where I ended up closing with angel and into mine, where they said to me like, yes, we would like to invest in you. The final lines of my pitch were. And if you’re looking for a woman, women are specifically better investments. We really are.
We give more return to your dollar. If you’re looking to invest in women led company here I am.
John E: That’s awesome. So, um, what would you say to women listening about the process of building your own software and, and fitness company? Are there resources that you would like to share for, for, for women, for women that you obviously the queen city FinTech and then getting angel as a mentor, but are there more systematized resources or groups out there that, that you’ve found helpful?
Kyle H: Um, I don’t know that the resources are all necessarily aggregated in one place, but when you start, I would always recommend whatever you do, whether it’s pitching or being a CEO and, you know, leading a company to specifically Google and find books that are targeted to women. Because the fact of the matter is that people don’t respond to women the same way that they do to men, but there are tricks and tips that you can do to get them to respond to you in the same way.
So for instance, um, when you pitch there, there’s a Harvard educated woman who did her master or. Her final. I can’t remember her final presentation for her doctorate or a master’s on this whole subject. I can’t remember what it was, but she studied specifically why everyone knows that women get less funding from VCs.
Why is there such a gap in the funding that women get? And she realized that it all comes down to the language where investors tend to ask men what are considered like leading, um, like aggressive questions. So they’re, they would be growth questions where they would say to you about this, for sure. Right.
Right. And you asked me a broad question, like, what are, what are your plans for 2021? How are you going to grow your company? Whereas the investors tend to ask women these defensive kind of like shrinkage questions where they’re like, how are you going to prevent a competitor from coming in and taking up all your market share?
And so you basically, you just really have to be a politician. And spin the question to make it be a growth answer. Well, at this point, we’re so firmly established in the market that any competitor trying to come in would have a really hard time even getting a toehold on the market. And here’s how we’re continuing to grow that toehold, you know, rather than actually.
So a lot of times you don’t even answer their actual question, but you get more money if you do it that way. So,
John E: uh, that, that’s great for sure. I, uh, hear a lot from women who don’t want to get into CrossFit or weightlifting because they don’t want to get bulky. Is this a conversation you had a lot when you were a gym owner or
Kyle H: all the time, and I’m like, do you even understand how much work it would take to get bulky?
You have no idea, but I actually was interested. So I can’t remember which one of the podcasts of yours that I was listening to, but it was with a woman who had been a personal trainer and opened up a gym. Um, and she was saying like, look for a personal trainer who has, uh, the body type that you would like to have.
And I thought like, That’s crazy. I would never think about that. I’ve never,
John E: I do that with doctors too. You, you should have a doctor that looks the way you want to look.
Kyle H: Right. Like, that was still crazy to me. I’m like, what, what about doing like the kind of exercise that you enjoy doing the kindness fun, like that’s true.
And so that’s sort of what I always tried to make the focus of the gym. Like you’re not going to get bulky and big unless you want to get bulky and big. And if you do, that’s also fine too. Like. Let’s take a minute, even like let’s deconstruct why you’re even asking that question, who has told you that being bulky and big is bad, you know, like, why is that bad or why is being fat or bad?
Like, let’s think what is wrong about being fat? Who told you that? You know, and when you start to deconstruct those answers in your head, you’re like, Oh, these are all, you know, imaginary standards basically that the patriarchy has imposed upon society. And so when you start breaking it down like that, of course, I’m not like having these deep conversations with every potential client walking in my gym, but, you know, we would start off the conversation a little bit with being like, well, okay, is being bulky really that terrible, you know, like if you want to get, you can come in and do it.
And if you don’t, don’t, that’s fine. It’s up
John E: to you. Yeah. Yeah, exactly. Exactly. Um, Well, Kyle, this has been great. Um, before we go, I always like to ask my fitness-related guests. What was the last workout you did? Yeah. So
Kyle H: since you sent me that question ahead of time, I did a workout this morning, but I’m not even joking.
I actually did. Um, I am currently doing the fierce program by Shantelle Duncan. I was doing CrossFit out of my house in the beginning of lockdown, but because it’s so cold here in Michigan. The bars hurt your hands to touch when it’s zero degrees outside. Um, and so I started just working out inside my house and the fierce program sort of combined like CrossFit hit style workouts with some strength training with, um, I don’t even know how you pronounce it my, my time,
John E: I think, yeah, more tie the box, the
Kyle H: Kickbox boxing.
And she combines it with like weights where you’re like punching the weights, which is really fun. And like, I like to work out like aggressively and angrily. So that was really enjoyable for me. So I’ve been doing that program and I really like it, but I am dying to get back to CrossFit as soon as lockdown lifts and I can go back to the gym.
John E: So I live, um, in very far South in North Carolina, North Carolina, literally a mile from the border. And, um, South Carolina opened up sooner than the North Carolina and, um, the, the. I had not been in the gym. I’m lucky enough to have a really good home gym. And the climate here is such that I can work out outside very often.
Yeah. You don’t even know how lucky you are. It was amazing. And, um, but I drove by this gym in South Carolina and I was like, you know what, I’m going to, I’m going to go in and just check it out. And I forgot how much I miss. Not, not just CrossFit, but just working out with a group and that whole dynamic, I didn’t realize how much I missed
Kyle H: it.
We just moved to downtown grand Rapids. And one of the best CrossFit gyms in the entire world is here. It’s called eighth day CrossFit. And I’m not kidding you for my wedding photography job. I’ve visited 40 countries in this world and crossfitted in almost every single one of them. And this gym in my hometown, one bike ride away from me is the best gym I have ever seen.
It’s massive. And I have never seen a CrossFit gym that well-equipped. And so I am super excited, their founder. I can’t remember what his name is, but he actually won the master, one of the masters male masters, um, years. And so the gym is just like, he was like, Oh yeah, I started because I needed a place to train and I wanted all the best stuff.
And so I’m like so pumped to be able to start going to that gym once I feel comfortable being back in the gym, obviously, but hopefully we’ll be able to get vaccinated and that’ll be sooner rather than
John E: later. Yes, I hope so. Well, look, Kyle, again, I really enjoyed our conversation. Um, I love the Charlotte connection.
I really want to highlight that when, when, when we promote this. Um, but I look forward to having you on again, at some point, especially after you’ve executed on, on Brazil. I’d love to hear how that, that
Kyle H: experiment goes. Yeah. Way back when we were at like 20 million a year
John E: in revenue. Awesome. Thanks so much.
Have a good day. Thank you. Bye
Kyle H: John. Cheers.