There's a business behind your business

Hey Reader,

Someone keeps offering to save me money, and I won't take it.

A company has been pushing Kit to switch our corporate card away from Brex, which is what we run our company spending through. Their pitch is that cashback returns more than credit card points, dollar for dollar. They might be right, but I still won't switch.

Most businesses are doing exactly what they appear to be doing. But some of the most interesting ones—including creator businesses—have something else running underneath. The game you can see being played on the surface is not the game.

Points can outperform cash if you know how to use them. Airlines sell miles to credit card companies at low bulk rates. If you take those miles and book a premium seat on a long-haul flight that retails for thousands of dollars, you can come out well ahead of what the cash equivalent would have gotten you.

This only plays out in your favor if you know what to redeem for, though. For plenty of people with a lot of purchases, the cashback option would tie or win.

That brings me to the game airlines are actually playing:

Airlines appear to run a transportation business, but when you look at what drives profits, they're really running a loyalty program and a credit card partnership.

Flying people from place to place runs on very thin margins. The rewards programs are what actually keep them alive. Most airlines stay financially healthy because credit card companies will pay them for miles in bulk and resell them.

McDonald's looks like a fast food company, but it's really a real estate business. Their former CFO said as much out loud. The only reason McDonald's sells hamburgers is that they generate enough revenue for operators to pay rent.

What most people don't know is McDonald's owns the land under most of its restaurants and leases it back to the operator. About 60% of their operating income comes from leases.

Starbucks is known as a coffee company, but they actually act as a bank.

They hold over $1 billion of customers' money at any given time. This is because so many people load funds onto the app, which hands Starbucks cash before they've received anything in return. The company gets to hold that money interest-free. And a meaningful portion of those balances never gets spent at all. Starbucks just keeps it.

These examples so far have been of massive companies, but I see the same thing in creator businesses all the time.

My friend Shiv runs a podcast in the private equity space. People in the industry listen to it and enjoy it, but he's not running it to get sponsorships or ad revenue like many podcasts do. The whole point of the podcast is to get clients for his consultancy. Even if nobody listened, it would still work, because the podcast gets him in front of exactly the right people: a meaningful percentage of his podcast guests become clients.

Shiv knows exactly which game he's playing, and it shapes every decision he makes about the show.

Think about what you're building and ask yourself what is it giving me access to that I couldn't easily get otherwise?

Your business might be exactly what it looks like. But it might be doing something else too.

PODCAST

How I Went From $0 To 6 figures on Instagram (67-Minute Masterclass)

Gannon Meyer builds ManyChat funnels for creators like Colin and Samir and Ali Abdaal. In just 12 months, he went from living with his girlfriend's mom to running a business helping top creators turn Instagram attention into revenue.

In this episode, he breaks down the PSA story format that converts a single story into a sale and explains why a video with 7,000 views can outperform one with 800,000. He also walks through his free, segment, upsell funnel.

I ask him to critique my own Instagram strategy. If you want to build a system for turning Instagram followers into paying customers, this episode will give you a concrete framework.

Watch or listen to episode »