Welcome to The Game w/ Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition Mentioned in this episode:Get access to the free $100M Scaling Roadmap at www.acquisition.com/roadmap
Chapter 1: How can we set clear business goals?
If we can't clearly state our goal, we certainly won't hit it, right?
You're not going to hit it by accident, for sure.
So I'm wondering, like, you know, yesterday when we looked at the VAM, like, can the business model itself be a detractor? Like, I'm trying to think of how big can we grow this in the current model before we have to look at SaaS or products or people become, you know, obviously a big issue in this type of business. So how big can this go in this type of model?
Yeah, I think it can, I mean, it can't, it's very unlikely it becomes a billion dollar a year sales business. The biggest problem with it, so the two big problems of that business are revenue retention, number one, and number two, depending on the model, if you have like coaches, because coaching doesn't scale.
I mean, you can get to whatever, 20, 30 million a year, but it kind of like, it becomes very difficult typically after that because, yeah, Getting somebody to be as good as you, this is actually what I made my whole podcast on this morning.
So if we scale, let's just say a one-on-one business as a most rudimentary version of this, you can then go down to one on four, one on eight, one to infinity, right? So you scale that way, basically more and more fractionalized access to you or your knowledge, whatever. This way we have other people. other people, right? More other people.
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Chapter 2: What are the challenges in scaling a business model?
Where you still have one-on-one, but it's other people who are doing this. And so here you templatize fractional, like break apart the pieces into constituent parts, and then you train people on the smaller pieces that they can replicate in theory. In practice, I think what ends up happening is that, let's say I have a glass of milk.
If I say, hey, we're gonna go to one on four, one on eight, I pour that glass of milk into a shot glass and I say, do you still want it? Now, if the milk's amazing, they're still gonna take the shot glass. The alternative here is where I have that glass of milk and I have an equal size glass of milk, but I pour a little bit of milk in there and then I just pour a lot of water in.
And I said, you want this really diluted glass of milk, but it's the same amount as what you had before. And so I found that I think more businesses do a better shot going this way. thing going this way. Now the third path is what I think is the best version of this. And so if you think about knowledge businesses, there's tons of massive knowledge businesses.
So Ernst & Young, McKinsey, Bain, all started by people who put their name on the building, right? Accounting firms, law firms, consulting, all of those fundamentally have the same thing. There was a guy who was really smart and really good at some stuff and was able to get people to give him money. The difference is that these models, are predicated on basically a career path.
So they are supply constrained. And so the problem with most coaching businesses is that like, hey, you have a pulse and in seven days I'm gonna get you to, you know, give you a roster of clients so I can keep selling them. But the problem is that if you can teach somebody in seven days how to teach somebody else, either you didn't teach them fully what you do
or what you do is so simple that it's not valuable. More often than not, it's the first thing, which is like I taught you 10% of what I know, but I'm still gonna charge more or less the same price either way, and then that's what creates this churn factory. And so the reason all of those companies have our supply constraint is that finding really intelligent people
And then they have a career path where it will take them 10 years to get to partner or whatever managing director status. And they start as analysts, then become senior analysts, then become VPs, then become principals, and they work up the ladder. But they have huge earning potential.
So somebody who is intelligent and hardworking and could actually do a job as good or better than you doesn't want to work as a coach. So there are people like, Neil's not here for this one, like there are people who are very, like you guys are on my team, like they're very intelligent people, but they don't want to be, they're not coaches, right?
And they're very siloed experts for these particular things. And so this is actually many to one. So instead of one on one, it's many people who are experts for one customer. And so I see these as the three kind of delivery models that evolve over time, pros and cons. This one just doesn't, scales quickly, but then it stops because churn becomes too big.
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Chapter 3: What is the importance of revenue retention?
Is it really?
30.
Interesting. Then you just get a crazy amount of views. How many views do you get a month? 10 to 15 million long form. Something doesn't add up there.
The automotive gets pretty good RPMs. I'm just doing the math there.
If it's 10 million views a month, Time, so that's mil, so that's 10,000 times 30. I guess, no, that's right. It's long form. Long form. Oh, got it. Okay, that makes sense. Got it, got it, got it, got it. Okay, cool. So, super cool. That's great. So, that's the main ad revenue. What are the people on your channel selling?
What are the advertisers who advertise on your channel sell to your customers? I don't know. Okay, so literally, today, in five seconds, make a community post and say, hey, what are the ads that you see on my channel? Comment below. And you will get, because fundamentally, the people who are advertising on your channel are the ones who are getting the highest return.
They're the ones who are paying you three and a half million dollars a year, not YouTube. And so it's like, if it's worth three and a half million to them, then it's gotta be, sorry, if they're willing to pay me three and a half, they're probably making at least 10, probably 20 off of that. Now, you would be able to get even more than that because they trust you rather than just some random slice.
And so then I would look at the product mix of what things are being sold and I'd look at which of these ones is one that either you could go directly to them and say, hey, I know you're advertising on my channel. Why don't we figure a little deal out here? So...
So you've got, you can have products that you own, you can have sponsorships, or you can just run an affiliate, which is similar to these, but just kind of different in terms of the characteristics. So, oh shoot, and then partnerships.
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Chapter 4: How can coaching businesses scale effectively?
About you. Just increased the value. Just about you. Yeah, which is like, you're trying to make something scalable rather than trying to make it valuable. Make it valuable first. And the thing is, is like, when you make something really valuable, the premium price that you can attach with it gives you the resources to then make it scalable.
When you try to make something scalable before you make it valuable, you just keep running into these issues where no one wants to buy my thing. But I got it all automated. It's like, yeah, no one cares. You know what I mean? I'm not saying you, but I'm just saying in general.
I'm just saying like, you would be able to probably 5X your business if you just get on the, like once people do that 3% level, I would just have them book a call. Talk to one of our experts. If you do that, you'll make more money. That's the thing.
I have a D&D publishing business, making Dungeons & Dragons books. Cool. And I've spent a ton of time doing the theory of constraints to the product development. Sure. Where I have a background in IT DevOps, so I've been optimizing that. And I've been realizing that I've been neglecting the rest of the funnel for the whole businesses. Do you sell on Amazon? Do you sell Shopify? What do you sell?
Primarily, I do it right now through Kickstarters. So a bunch of crowdfunding campaign, people give you a bunch of money to build this product, you then build that product.
So you have a publishing business basically?
Yes. Okay, got it. Yes, and so... Do you have a pen name? Sorry, do I what? Do you have a pen name? No, it's all under mine. So you're an author? Yes. Okay, cool. Yeah, so I've made two books. I'm working on my third. I got a handful of like other supplements and stuff. Okay.
And so I've done, I don't know, maybe like 30,000 in Facebook ads, miscellaneous other advertising methods, but that's not my skill set and not where I'm good at. So I'm trying to think like, like as going through the exercises, revenue is definitely my biggest constraint at this point. Sure. It's like I've done all the other stuff too much. I've been focused on that.
So I can make a better product faster, but I need a better way to sell it. Like I need a better way to bring in customers. And so a bunch of the people have had great ideas on things to try. Dipping my toes into TikTok, doing miscellaneous things on... my email list.
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Chapter 5: What strategies can increase customer acquisition?
So setting up Amazon would be like the best revenue boost, ignoring doing any marketing pieces? Tomorrow, yeah, for sure.
Because here's what's really interesting is that, did you watch my traffic ranking video? I put it out like three videos ago. It's very recent.
Anyways, I'll just tell you.
I don't think so. So what's really interesting is that people don't think about Amazon as a traffic, like a social media or traffic source. But I think like 13% of customers that, well, let's just test this. Watch my theory just flop on this. Did anyone buy my book first? One, two, look at this. Cool, okay, that's cool for me.
Anyways, okay, so people will buy the book and then they'll find me later somewhere and they'll be like, oh, that's the guy that wrote that book that I like. And so Amazon actually gets me customers. There's this whole misnomer that you will have to have an audience in order, you have to have an audience to have a big launch.
But if you have a good product, which it sounds like you do, then when you have 10,000 five stars, I buy books. If there's any business book that's 10,000 five stars, I'll just buy it. And so number one is I would do Amazon for sure. Like for sure, it's where 90% of people buy books. It's like you're not on the biggest platform that people buy and sell books from.
Now, you can still do your launches. I still launch through Shopify, so I can still own the customer base and all that stuff. But between, by all means, like kick it up there and do it in multiple formats and multiple languages. Like right now, I think we have like, 30 or 40 SKUs from two books.
So it's like we have all four formats, and we have two books, and then we have them in five languages, and we have them on 13 platforms. So we have it on Kobo Digital, or Kobo, we have Draft2Digital, we have like, it's kind of funny about publishing, so it's fresh on my mind. Ingram, if you've heard of that, Spark. If you Google it, it'll come up.
And so all that to say, I think you just need to, the first thing I would do this quarter is maximize all distribution of the books on all platforms that people buy books on. The first thing. The second thing I would do was try and expand my audience. Like right now, let's just use all of the distribution that already exists. Let's do that first.
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Chapter 6: How can Amazon boost book sales?
I have a hair extension business. We educate stylists how to make more money and salon owners with hair extensions with the product. I want to know how gym launch was structured because I know that that's how we need to structure our offer. Um, so you can tell me a little bit about that.
Yeah. I mean, uh, I think I've talked to like three different businesses that do what you do recently, so it's very top of mind. So big picture, the model that seems to work the best is, and it is similar to Jim Mullen's Prestige Labs, which is the, we will show you how to, do the thing and then you can also sell our thing once I've taught you how to do the thing.
80.
And when I say that, so year over year, they continue to sell. Right, and so the smart cookie move is to, what are you pricing the front end at?
The education? Mm-hmm. We're kind of making a new offer, but for under six-figure stylists, it'll be $500 a month. Six-figure to salon owner, it'll be $2,000 a month. Salon owner, $4,000 a month. All right.
65.
Great. I would even care about the education. The majority of the enterprise value will come from... Is the hair side bigger than the info side?
It's 90% of our business.
Oh, is it? Okay, yeah. Well, then I, in some ways, would almost lower the barrier because... If that's the monetization, then the question to solve for is how do we get the absolute most amount of people to sell hair? And so you could think about it as offset CAC for the hair business more than its own business in its own right. And don't get me wrong, I'm all for it.
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Chapter 7: What are the best practices for marketing books?
Chapter 8: How do you optimize revenue between launches?
It's a good way of doing it. We did that with Prestige Labs. We would have them buy, it's a little bit different because it's consumable, but we would have a salon, for example, or a gym, buy supplements, a stack for each of their trainers. I'm a little high if they can turn this down a little bit. And so all the trainers at the gym would all go, you know, do a 30-day challenge or whatever.
They'd use the products, and then they would be, they would have conviction that it actually worked. And so then it made the sales on the back end so much easier. Like, hey, I just did it. Look at my before and after pictures. Like, this stuff's really good. And so in order to activate them, we had them buy something like $5,000. Ed would probably know, I think around $5,000 for the product.
And then he gave them basically the education for free. So you still have that like, you still have that buy-in. Yeah, you still have that buy-in. And you know what's crazy is that you'll probably, you'll be amazed, you'll be able to sell way more product. Well, you probably already know this. It's way easier to sell product than it is to sell info. Way easier.
Because you don't have to, like, they get it. Like everybody here who sells info, like when you start, if you ever sell like physical stuff, you're like, oh my God. Because we're so used to selling like an empty box of hair, being like, this is very valuable. But when you actually have something in your hands, it's like, oh my God, this is so much easier. Like you can see it.
And look, put it on your hair. So anyways, does that help?
Yeah, it does. Thank you so much.
Yeah. Don't like break your business tomorrow. But like I would experiment with just what allows me to spend the absolute most amount of money to get the most people selling hair. That's the problem to solve.
Hi, Alex. Yes, ma'am. My name's Julia.
Hello, Julia.
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