Are you spending more on traffic than you’re actually making and calling that “growth”? Business owners often chase scale, obsess over ROAS, and completely miss the bigger picture. Most of them don’t have a traffic problem but a strategy problem. And if you don’t fix it, you’re just working for Meta, Google, or whoever owns your traffic source.
Today, we revisit a conversation we had with Kasim Aslam. He breaks down a hard truth about scaling: diminishing returns are still returns, but most businesses quit too early. We explain why entrepreneurs stop at the peak of performance instead of riding the full curve, how margin obsession kills growth, and why doubling down on what’s already working beats chasing every new platform or tactic.
We get into what’s actually happening with AI, automation, and why “scalable” might be the most dangerous word in your business right now. We also unpack what really drives sustainable business growth and why the future belongs to those willing to do what doesn’t scale.
In this episode you’ll learn:
- Why customer acquisition costs (CAC) often exceed product margins
- The danger of obsessing over ROAS instead of total profit
- How to scale using the full bell curve of ad performance
- Why diminishing returns are essential for growth, not a warning sign
- The law of inverse profitability and scaling revenue vs margin
- Why doubling down on winning marketing channels beats chasing trends
- The myth of “scalable systems” in modern digital marketing strategy
- How AI and automation are commoditizing funnels, ads, and SaaS
- Why brand equity, trust, and goodwill drive long-term enterprise value
- The shift from automation to human-driven marketing advantages
- How to build incalculable value in your business
Mentioned in the Episode:
- Apply to Work With Tier 11’s Marketing Experts: https://www.tiereleven.com/apply
- Previous episodes on the law of inverse profitability: https://perpetualtraffic.com/?s=inverse+profitability
Listen to this episode on your favorite podcast channel:
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We appreciate your support!
Visit our website: https://perpetualtraffic.com/
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Connect with Kasim Aslam:
- Website: https://kasimaslam.com/
- LinkedIn: https://www.linkedin.com/in/kasimaslam
Connect with Ralph Burns:
- LinkedIn – https://www.linkedin.com/in/ralphburns
- Instagram – https://www.instagram.com/ralphhburns/
- Hire Tier 11 – https://www.tiereleven.com/apply-now
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READ THE TRANSCRIPT:
Scaling Ads Is Killing Your Profit (Here’s the Fix That Works)
00:00:00:00 – 00:00:02:07
Kasim
The word scalable should be a curse word.
00:00:02:07 – 00:00:04:03
Kasim
Do what doesn’t scale.
00:00:05:15 – 00:00:20:00
Kasim
I’m lobbing a grenade, but I actually think it’s a good one. Here’s the experience I had for it. For anybody who’s listening that doesn’t know me, I built the number one rank Google ads agency in the world. When I sold, I had $100 million and that’s been under management. I got to see thousands of business models, thousands of business models.
00:00:20:02 – 00:00:52:13
Kasim
And what I found was as often as not traffic cost more than cost of goods, cost of service, fulfillment, opex, sometimes combined, which means e-commerce is easy to pick on because it’s the most it’s the most, visible of all business models, I think, in terms of the numbers. And so for ecommerce businesses, I would watch as an e-comm business would spend more money on traffic than they would spend on the cost of the materials they were showing, the cost of fulfillment, those materials, the cost, the customer service, their operating expenses, combined traffic would cost more than all that.
00:00:52:13 – 00:00:57:11
Kasim
Traffic would almost always be more than their net profit. So you’re
00:00:57:11 – 00:01:08:23
Kasim
paying meta $20 for the thing you’re making $19 on more or less, which means you work for meta, or you work for Google, or you work for Amazon, you work for the traffic store.
00:01:08:23 – 00:01:18:23
Kasim
So my thesis in building these businesses, and I’m not telling you this is a good thesis for everybody, by the way, I’m in the luxury position of starting fresh from how am I going to capture the opportunity.
00:01:19:01 – 00:01:35:21
Kasim
But my thesis is I will not start a business if I don’t know where the traffic’s coming from first. And so I look for preexisting pools of traffic that are being underserved or not served at all. So I don’t care about the idea. Everybody, everybody in business wants the next big idea. They’re like, oh, we’ve got the next big mousetrap, the next big thing.
00:01:35:21 – 00:01:53:03
Kasim
We crack this code, I don’t care. That means you have to go create a new market. You’re not an entrepreneur. You’re an inventor. I want a pool of people being massively underserved. Yeah, and now I can show up and just look like an absolute total rock star. So that’s my business building thesis. And so far, it’s, you know, it’s.
00:01:53:03 – 00:02:18:01
Ralph
Working out pretty well. That makes a lot of sense to me, actually. And we talked about this a couple of shows back learn actually about like what we would do if we had to start all over. And I always start with the question whether it’s a business. And we used an example of a business who were sort of assisting myself in my social media marketing and email person on staff here at year 11 is taking a business from literally like maybe five figures a month in sales.
00:02:18:01 – 00:02:28:07
Ralph
I’m not exactly sure exactly where they stand. Set that aside. But it’s like the operative question is what’s working right now? And there’s usually something that’s working. If
00:02:28:07 – 00:02:37:11
Ralph
you have a business where somebody is actually buying your stuff, right, that’s proof of concept that what you actually have the world wants,
00:02:37:11 – 00:02:41:13
Ralph
maybe not the entire world, but a subset of people want it.
00:02:41:15 – 00:03:07:23
Ralph
And I find the most logical and quite honestly simple and simplistic question is what are you doing right right now? And if we can figure that out, there’s usually something. And that’s like, just do more of that. Yeah. And most business owners don’t do that and I don’t know why. And we’ve used lots of examples of how we’ve been able to do that here on the show.
00:03:08:05 – 00:03:24:04
Ralph
But your thesis is very much in alignment with like path of least resistance. Hey, if YouTube ads are working for you right now, hey, you know, you have an influencer who was doing something for you and you made 15 sales and you’re like, why are you not doing that anymore? Like, oh no, I’m over on my social media.
00:03:24:04 – 00:03:39:04
Ralph
No, because that’s important. Somebody said the tick tock was important and now I have to figure out meta ads. I’m like, wait a second, you’ve got this thing over here that actually worked. Why don’t you just go do more of that, double down on that thing? People don’t want that because they want the shiny object. They want the new thing they want.
00:03:39:04 – 00:03:56:07
Ralph
Oh my God. I heard on perpetual traffic, I is now the thing I need to bring in ChatGPT. I need to build a chat bot. But no, you have this one thing that’s working, that’s driving a modicum of business that if you leverage it, you can then turn it into a larger business, which means increased influence and hopefully scale.
00:03:56:07 – 00:03:59:12
Ralph
Same general theory or different. Yeah. What are your thoughts.
00:03:59:12 – 00:04:00:21
Kasim
So here’s what I think
00:04:00:21 – 00:04:09:01
Kasim
people just to first of all like double click on everything you just said. Absolutely agree. This is the way I visualize it is if you think of any bell curve.
00:04:09:06 – 00:04:11:18
Ralph
I miss your old expressions by the way. Period.
00:04:11:18 – 00:04:12:09
Lauren
Full second.
00:04:12:09 – 00:04:16:21
Ralph
And he started saying, as of you double click, double click.
00:04:16:23 – 00:04:19:11
Kasim
I’m bringing them all back. Man, this is nostalgia episode.
00:04:19:11 – 00:04:27:04
Ralph
I know. By the way, if you say that on Siri, it actually puts the period period, then full stop after. So it’s like it doesn’t really work on Siri, but I don’t know.
00:04:27:04 – 00:04:46:03
Kasim
That’s that’s why I can’t be replaced by I think if you think about any bell curve, here’s what people do. And again, because I spent so much of other people’s money, I saw this happen. The bell curve, the apex of the bell curve is in the center. And so what people will do is they’ll build advertising mechanisms until they reach the apex of return.
00:04:46:03 – 00:05:01:18
Kasim
So I’m building an advertising mechanism, and I put a dollar in and I get $3 out, and then I get $5 out, then I get $10 out. And let’s say that’s the apex, right? So like that’s the most the highest the that that ad campaign is going to perform. And then as I spend more and more and more and more, ten drops to nine drops to eight.
00:05:01:18 – 00:05:05:08
Kasim
And what they do is they back up because it’s like, oh, we’re losing efficiency.
00:05:05:12 – 00:05:06:15
Ralph
I want the days of ten.
00:05:06:15 – 00:05:11:05
Kasim
Yeah. So but I back up from those. You say something yesterday that was absolutely brilliant. He goes
00:05:11:05 – 00:05:30:16
Kasim
diminishing returns are still returns. So here’s what they’re doing is if you picture a bell curve in your mind, they’re they’re building the first half and then they’re stopping at the apex when there’s a whole second half, which is literally by definition, by mathematical definition, double.
00:05:31:02 – 00:05:54:11
Kasim
It’s, it’s you have the you’ve you’ve identified the ability to double your business just doing more of what you’re doing. But you’re not willing to do it because it’s a diminished return, still a return, but a diminished return. And those diminished returns are the things that, interestingly, buy you the runway and the additional cash flow in order to pad the coffers, have more money, invest, grow, iterate.
00:05:54:13 – 00:06:13:05
Kasim
So we get really romantic about things like margin. Yeah, I’m like, oh, I’m at 40% margin. If I spend this way, I’m going to drop this 30% margin. And it’s like, oh, wait a minute, you mean you’re going to spend money and make more money do that, you know what I mean? And like you’re saying rough doing all the way until you’re no longer make and then go figure out the new thing.
00:06:13:10 – 00:06:22:20
Kasim
The other thing that people do is they realize, like, oh, in meta I’m getting a 1 to 10 return. So then they go to Google and they try to get their 1 to 10 return. And it’s like, dude, they’re two different things.
00:06:22:20 – 00:06:23:16
Ralph
Slightly different thing.
00:06:23:17 – 00:06:46:14
Kasim
They’re two entirely different mechanisms. So meta may have a better return, but maybe Google has more longevity or more predictability or, you know, a easier off on lever. Who knows what. Right? So every mechanism one needs to be seen all the way through to the end of the bell curve, two needs to be treated as though it’s unique because massive surprise it is.
00:06:46:20 – 00:06:54:20
Kasim
And it’s not just unique to the mechanism. It’s unique to the business. So I you know, I have a professional services business that does really, really.
00:06:54:20 – 00:06:56:04
Ralph
Really, really well.
00:06:56:04 – 00:07:14:04
Kasim
With, paid partnerships with influencers. But then I have a call it a pseudo SAS business that looks the same from the outside looking in, but fails miserably with that same mechanism. And so just because you’re, you know, something works with one off here doesn’t mean it’s going to work with the other. Like you have to kind of go back to the drawing board each individual time.
00:07:14:09 – 00:07:31:01
Kasim
And it’s so funny to see entrepreneurs turn into automatons, dude. Yeah. And it happens with success, not failure. It’s the successful entrepreneurs that hit these ceilings because they have these weird commitments to things like arbitrary margins or the way that things have been done right.
00:07:31:03 – 00:07:50:17
Ralph
I, I completely agree. There’s an example we’ve used here before, and it’s probably apocryphal, but the point is, is that we had a customer that was making a 40% net on a million revenue like they’re making. All right. I’m getting a 40% margin, like I’m getting a ten X realizes it’s an old example, let’s say, because we were using Roas, not Mirr, which we’ll talk about here on today’s show.
00:07:50:17 – 00:08:10:23
Ralph
That’s like, all right, so let’s do the math. You’re making 400 K, you know, after everything at net net off a million, it’s like yeah that’s great. 40% like well all right let’s start to scale. And so all of a sudden 40% start going down to 3938, 373635. And he’s like wait a second. Hold on. When I got to 35, it’s like we’re at 1.5 now.
00:08:10:23 – 00:08:28:09
Ralph
He’s like about 35. It’s not 40%. I’m like, well we could scale you to 5 million at a 20% net. You have your net. And what do we have left over? We have $1 million. We’ve doubled, if not 120 million.
00:08:28:09 – 00:08:30:07
Kasim
Any more than 400,000 is.
00:08:30:07 – 00:08:31:02
Ralph
More than.
00:08:31:08 – 00:08:35:23
Lauren
400 grand. So that’s going to have a stronger exit that you’ve built into equity.
00:08:36:01 – 00:08:39:06
Kasim
That’s such a powerful point. It’s such an awful point.
00:08:39:06 – 00:08:56:01
Ralph
So I refer to this as the law of inverse profitability. And we see it everywhere. We’ve got a whole video series. I leave links in the show notes on it because this is really, really important. And this is this is part of the reason, like maybe a prelude to what will really be talking about here today is like just mindset of businesses.
00:08:56:03 – 00:09:15:10
Ralph
Double down on the stuff that’s working. First off and take a step back. That’s why going to conferences and hanging out with other people, talking to other entrepreneurs is so important. Secondly, do the math in your head because you can’t expect, like I remember the days when we were making 40% net at tier 11. Those days are gone.
00:09:15:14 – 00:09:35:02
Ralph
Sorry, they’re never coming back like my CFO thinks they will at some point, but they probably won’t in our industry. And the way that things are today, I’m okay with that. But I do want to be profitable. But $1 million business at 40% net and a $10 million business at 20% net, I have, you know, let’s do that math.
00:09:35:07 – 00:09:53:18
Ralph
That’s practically quadrupling your net profitability. And you’re still at a much lower margin. But business owners always want to long for those days of two years ago, I was getting X amount of return on my Facebook ads, and now I’m not. Well, that’s get over it. We live in today. Get over it.
00:09:53:23 – 00:10:10:05
Lauren
And the thing is, you said something about meeting people. Sorry, guys. I’m cutting out. But like when Ravi’s talking about meeting people in person at conferences and talking to the people like the people that go to the conferences are the doers. They think, what are the traps that people are falling into? Where they’re like, what you’re talking about is that apex.
00:10:10:05 – 00:10:41:10
Lauren
And then when you hit the curve, is there listening to TikTok or seeing something on YouTube of someone who’s making more money from the video than from actually doing the things and I hear all the time, well, I should switch and go to Google because this TikToker said it worked, or because this video did, and they have 60s to determine if the numbers that they provided are legit, while they’re seeing just the tip of the iceberg of the real story, because someone who can make $1 million on a launch could have spent $1.2 million behind the scenes, and they netted no money.
00:10:41:10 – 00:10:42:09
Lauren
But that doesn’t show up.
00:10:42:09 – 00:11:06:17
Kasim
Yeah, it’s well, it’s all these idiots running around saying, Hermosa, you made $105 million in a day. No, he did not. He made $105 million in seven years. Yeah. It was. He cashed in on the most potent repository of brand equity I’ve ever seen, built by any human in in the digital sphere. He gave and he gave and he gave and he gave, and he did it 50 times a day for seven years.
00:11:06:19 – 00:11:28:01
Kasim
And then seven years in seven years. He said, hey, I have this thing. And then and then people gave back. And that was the point that you were making earlier, Lauren, that I don’t think Ralph and I paid enough credence to, which is as you’re scaling up and you’re losing, let’s say, net profitability, you’re also gaining market share, customers, diversification of client base, brand authority, visibility.
00:11:28:05 – 00:12:03:05
Kasim
And these are things that are and I’m going to use a word that is often dismissed. But I’d like people to kind of just pay attention to it. They’re incalculable in their value. They’re incalculable in their value. Meaning you actually cannot calculate the value of those things. And you know that when the shit hits the fan, but you still have a really strong reputation, or you still have clients that are standing behind you and beside you in ways that aren’t necessarily even logical, or you still have referral partners sending things your way, like there are things that you can’t put on a spreadsheet that you can’t factor into your funnel, that you can’t optimize.
00:12:03:07 – 00:12:20:05
Kasim
They’re incalculable in their value, and business owners don’t do enough to really lean into those incalculable things because they’re incalculable. So we we almost treat them like they don’t exist. We treat goodwill like it doesn’t exist. Right? It’s maybe one of the most important economic drivers.
00:12:20:07 – 00:12:21:11
Lauren
But not on the best stretch.
00:12:21:11 – 00:12:45:20
Kasim
In what it’s not. How can you how can you calculate goodwill? But man, when somebody there are a couple of brands where it just does not matter to me what it costs, how long it takes, if their honor, if they make a mistake. USAA is a really good example. I’ve been a USA customer since I was my mom’s whole family’s military, so we got to we got to I didn’t surf, but I got to be in this umbrella because USAA is only for people that have been in the military.
00:12:45:22 – 00:13:07:03
Kasim
And it’s it’s the most amazing company I’ve ever been exposed to. They’re more expensive by far, incidentally, but I have them all. My insurance is under USAA, and I would kill and die to continue to stay there, regardless of costs. That’s an incalculable value to USAA, but they’ve earned that from me, and I just don’t feel like we’re I don’t know why that conversation is.
00:13:07:03 – 00:13:17:13
Kasim
It had more like there’s ways to build businesses and brands that just aren’t is sterile, you know, like and that that really create something impossible to fight against.
00:13:17:15 – 00:13:38:10
Lauren
Is possible people because we have like these legacy brands. So USAA has been around for decades. And we think of like the JPMorgan banks and like all of these like generational companies where I feel like in the last 20 years, it’s how might we build a company, flip it and sell it, like in this like flip motto? It’s just such a low commitment to the long term value of a company.
00:13:38:14 – 00:13:50:20
Lauren
And at least in the U.S., we don’t have this whole bid to pass on our companies to our children. Both of you have kids. Do either of you expect your companies to be inherited and run by the next generation of your family?
00:13:50:23 – 00:14:09:09
Kasim
I don’t expect my children to work. I don’t think my children are eight and ten. I think when my children are of working age, which let’s say is 25 ish, I think the productive endeavor will have been commoditized to a degree that makes that type of vocational emphasis and focus superfluous to the human endeavor. Navarro Robert Kohn said something to the effect.
00:14:09:09 – 00:14:32:07
Kasim
I’m going to paraphrase poorly, but I think I’ll get it, he said. If you want to be happy, find something worth doing for the sake of itself. And I think that’s what we’re all going to have to do, you know, in 20 years, let’s say, but you ask another really good point. This flip mentality we’ve gotten into, which I’m guilty of and maybe a proponent of, and maybe in a small way helped to proliferate all the things that we used to be able to do to build a business and flip it just got automated.
00:14:32:08 – 00:14:49:06
Kasim
All of this surface level bullshit, all of the, oh, I’m going to spin up a landing page automated. I’m going to spin up some ad automated, I’m going to spin up a funnel, I’m going to spin up automation, I’m going to spin up email nurture. All of that is automated. So everything that we used to do, they could provide, they could eke out a little bit of money and a little bit of EBITA.
00:14:49:07 – 00:15:06:09
Kasim
Just got automated, I did it. That’s dead. That’s the autopsy. It’s dead. All of the crap, all of the garbage, all of the worthless. I’m I won’t drop a name, but I’m one of those influencers going to sell you a weekend course and teach you how to make billions of dollars as I shoot you. Video in San Diego beach house in front of a Ferrari.
00:15:06:11 – 00:15:23:04
Kasim
That’s all dead. And it’s not dead because it’s worthless. It’s dead because it’s ubiquitous. It’s still a value to have a landing page, to have automation, to have follow up. But I can just prompt it now. My son, my ten year old son, I bought my boy’s Chromebooks and I told him, you can only use these for two reasons one, to learn AI, two to build your brand.
00:15:23:04 – 00:15:41:15
Kasim
And I come back to my ten year old son, ask ChatGPT, how do I code a video game? And within about two hours, he’d use ChatGPT and Bolt in order to create the old Oregon Trail for shooter game. It blew my mind. My son, I swear to God, my my ten year old can do that. You want to tell me he can’t build an automation, build a funnel, build a follow up?
00:15:41:19 – 00:15:50:13
Kasim
All that’s gone. Which means the quick flip business is gone. The only thing left are the things machine can’t do if you want it.
00:15:50:13 – 00:15:52:20
Kasim
The word scalable should be a curse word.
00:15:52:20 – 00:15:54:16
Kasim
Do what doesn’t scale.
00:15:54:16 – 00:16:04:14
Kasim
Do the thing that doesn’t allow AI to just take it and run with it. Find the unpaved roads like do the things. Talk to people.
00:16:04:18 – 00:16:30:06
Kasim
Answer your phones. Reach out to customers. Have customer success representatives like do the things that don’t scale. And that’s how you build a business of incalculable value. The future of AI, not just marketing the future of all business, all entrepreneurial endeavors isn’t going to be tech based. Tech became ubiquitous, not worthless. Ubiquitous AI ChatGPT is free. It’s free.
00:16:30:08 – 00:16:46:07
Kasim
Cloud is free. Like all these things are free. I can build whole business. I can, and I have. If you’ve studied vibe coding at all, I watch my business partner on create things that I swear to God would be about $200,000 for an MVP. He does it in a couple of hours. He created a matching tool for our agency.
00:16:46:11 – 00:17:02:22
Kasim
He’s he’s created these amazing lead magnets. He created a business valuation tool, and he does it in a couple of hours. It’s the death of SAS, all things that can be automated or dead. That doesn’t mean that the productive endeavor is that it means that you have to find the things that aren’t automatable, but it’s the incalculable value, right?
00:17:02:22 – 00:17:26:11
Kasim
It’s like building brand loyalty and loving on people and trying to find a way to come to customers and let them know, like, hey, am I honestly Ralph or Pandora here a little bit? Dude, I think that’s why you’ve weathered every fricking storm, every storm I’ve ever seen in the marketing space. Tier 11 has always found its way to kind of just stay above water because you do the things that are incalculably valuable.
00:17:26:13 – 00:17:42:02
Kasim
People always have a human being to talk to. You’re not going to like, try to put them behind the dashboard. You’re always actually investing in the education and necessary. You invest in the infrastructure, you train your people. I know how much money you spend on continuing education like those things. That’s incalculable the value. But it’s important. It’s critical.
00:17:42:04 – 00:17:59:00
Kasim
And so for everybody listening that has the Tim Ferriss four hour workweek dream, it’s gone. It’s gone. You know, maybe there’s a couple of years of arbitrage, but stop that. Everything from here on out. I’ll tell you what it’s going to look and smell like. It’s going to look and smell a lot, like, really hard work.
00:17:59:02 – 00:17:59:20
Ralph
Yeah,
