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Throwback- Money Making Advice You Needed to Know Yesterday | Ep 839

The Game with Alex Hormozi

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  • Body-Related Service Businesses
    • Start a service business around the human body, like a nail salon or lawn care.
    • These businesses are less susceptible to AI disruption and often involve valued human interaction. Transcript: Leila Why not? It’s a good number. Cool. You’re willing to work hard, but you have limited skills and experience. What business would you start like right now in 2023? And I have no money, right? Alex Hormozi I would probably build a boring business in services. And I would probably pick something around the body. You know, I wouldn’t just start a design firm because I think that has a high likelihood of getting disrupted or, you know, in some way by AI. If I were, you know, it’s as silly as it sounds, like a nail salon or a lawn care service, things that, I mean, especially body ones, dentist stuff, like you still have to go in and get your Teeth taken care of. And many times people value the human exchange more than something robotic. So for example, in the fitness world, like this is my, like my data point around this, uh, there was a brand called CocoFit and, um, they struggled a ton and then eventually went out of Business because they tried to automate personal training. So they created these all-in machines that would, you’d have a key fob and it would count your reps. And every time you went to the machine, it would say how to do more and what you did last time. It’s a really cool concept. The problem was their theory was that the reason that people were getting results is that they didn’t know what to do when the reality is that no one was showing up at the gym. People hire personal trainers because they want another human to talk to and to hold them accountable to showing up. Same reason like if you had a robot cutting hair, there might be a percentage of the population that do it, but a lot of women like the going to the hair salon and having that exchange. And so I would probably build a business around services in general would be my way. And then I would continue to scale that. And you could do that at a local chain level and you can make a lot of money doing that, or you could do it at a national level, which would be like professional services. (Time 0:00:29)
  • Leila’s Loyalty
    • Leila quit her job to join Alex, living in motel rooms and working on gym turnarounds.
    • Despite facing hardship and a breakup, Leila persevered, launching a successful gym in Hawaii. Transcript: Alex Hormozi Mean, especially body ones, dentist stuff, like you still have to go in and get your teeth taken care of. And many times people value the human exchange more than something robotic. So for example, in the fitness world, like this is my, like my data point around this, uh, there was a brand called CocoFit and, um, they struggled a ton and then eventually went out of Business because they tried to automate personal training. So they created these all-in machines that would, you’d have a key fob and it would count your reps. And every time you went to the machine, it would say how to do more and what you did last time. It’s a really cool concept. The problem was their theory was that the reason that people were getting results is that they didn’t know what to do when the reality is that no one was showing up at the gym. People hire personal trainers because they want another human to talk to and to hold them accountable to showing up. Same reason like if you had a robot cutting hair, there might be a percentage of the population that do it, but a lot of women like the going to the hair salon and having that exchange. And so I would probably build a business around services in general would be my way. And then I would continue to scale that. And you could do that at a local chain level and you can make a lot of money doing that, or you could do it at a national level, which would be like professional services. Leila I love the idea behind the core stuff that’s going to be here forever. Let’s say hypothetically, the great fires of Las Vegas burn everything to the ground. Okay. You lost everything. You had to start again. What would you say is the number one thing that you would have done differently to get to where you are now? And I have no reputation, right? Alex Hormozi No reputation. Yeah. It burns my reputation on the ground with it. So I actually have lost everything before. And so I know what I did and I probably would have done the same thing. So the easiest way that I did to like go make a hundred grand in a month when I had nothing was that I would go find a business that was local, that I understood, and that I could sell something Expensive for. I would front the capital to market. I would work the leads and I would sit at the front desk and sell and I would negotiate what they would be willing to do a big bulk of services at scale for. So for example, I wanted to find a chiropractor and I’d say, Hey, if I sent you a hundred customers this month, what’s the lowest rate you would do all a hundred customers for this level Of service? And then I would just negotiate that down. And then I would spend as much as I could and sell it for as much as I can so I can make the spread. And then they would service the customers. And for them, it’s a zero risk offer because they don’t have to do anything. I front everything else. And then for me, I don’t have to do anything but market and sell and I can take all of that. And so like when I lost everything, I immediately was able to make 100 grand the next month by doing that playbook. In your opinion, what are the three most powerful skills that someone should develop if they want to make a lot of money? I mean, the three core skills are you got to learn how to build, you got to learn how to sell and you got to learn how to lead. Just like that. There we go. Leila Like in terms of maybe like hard skills that someone should really focus on learning to develop that like sales, copywriting, leadership? What would you say are the most important? Well, those are the three big buckets, right? Alex Hormozi So it’s like one is that like leadership is just the internal bucket of getting people to do what you want them to do at scale, right? And then from a selling perspective, I include that in all things that are marketing, letting people know about your stuff, promotion, and actually converting people into customers. And then the third piece of building product and services is so that at scale, if the product is good enough, then you won’t lose customers. And if it’s exceptional, the product itself will get you more customers. And so most businesses taken to their natural extreme on a promotional level, typically are leaky buckets because the product actually sucks. And most businesses suck in general, because most products aren’t good. And most people want to cancel very quickly and don’t want to continue to use them, which is why very, very good companies are very rare. Most of them generally are mediocre or not good. And so I prefer to solve a business from back to front, which is like, can we find something that people actually like and want to continue to use and continue to pay for. And then the marketing is almost a commoditized skill. Like it’s very easy to let other people know about your stuff and do so louder and louder and louder provided the product is good. And then the internal has to get run with a leader that can attract the talent to continue to do this. Because quickly, the business will bottleneck based on the founder and their expertise. Or usually they have a niche, they might be product people, they might be tech people, they might be finance people, they might be whatever. And then they have to be of the character to attract the talent that will allow them to get to, you know, nine figures or whatever it is that the goal is. Leila You mentioned on a recent podcast with Tom, bill you, that you don’t have rules. So I, for example, you know, I quite often end up working up until midnight, 2am, 3am and basically fucking up my sleep schedule because I have too much freedom, right? Because I’m self-employed. So how do you kind of strike that balance between freedom and discipline? You know, if you’re driven and you want to accomplish big things? Alex Hormozi It’s kind of 80-20. Like if you know that when you stay up late, like there are times when I will gas it and go past my red line in terms of work. And I know that I’m eating into tomorrow. But if I’m like in a flow and I’m crushing it and the muse shows up and the muse wants to work, then I work. You know what I mean? But if there’s some days on the flip side where I wake up and I just feel foggy as shit and I just like for whatever reason, I ate too much Mexican last night and I just I don’t have it that day, Then I might call it earlier, like the idea of me pushing through and punishing when it comes to the type of work I do, if I were doing a more brute force work, then I would care less. You know what I mean? If it was just like, if I was just doing reach outs, I was doing cold calls, I was training personal training sessions, I was cutting hair, I’m just gonna I’m brute force my way through It, because I don’t need to have higher brain function. And that’s not an insult. I’m just saying, like, you’re not like thinking of creative things, you know what I mean? You’re just you’re working the work. But when it comes to like writing or making presentations or communication of some sort, it’s more I try and optimize around how can I maximize over a week, how much flow state I can be In so I can just get the most total quality output. So it’s not about rules. Christoph It’s more like which of these things has a highest likelihood of getting me the most. What’s up, Christoph? In one podcast, you said that your most feared decision in life was to quit your job when you were 22 or 23. My question is, what advice would you give to your younger self, if you could, in that exact situation? Alex Hormozi When you have nothing to lose, it also makes it the best time to make high risk decisions because you have a disproportionate upside, not quitting if you want to do something else, like If you have this desire to do something else is like not taking a stranger up on a free lottery ticket on the street. If they give you a free lottery ticket and you lose, you’re back to not having anything. If you … (Time 0:00:57)
  • Core Business Skills
    • Develop three core business skills: building products, selling/marketing, and leading teams.
    • Mastering these creates scalable businesses with strong products, effective outreach, and talented leadership. Transcript: Alex Hormozi Would spend as much as I could and sell it for as much as I can so I can make the spread. And then they would service the customers. And for them, it’s a zero risk offer because they don’t have to do anything. I front everything else. And then for me, I don’t have to do anything but market and sell and I can take all of that. And so like when I lost everything, I immediately was able to make 100 grand the next month by doing that playbook. In your opinion, what are the three most powerful skills that someone should develop if they want to make a lot of money? I mean, the three core skills are you got to learn how to build, you got to learn how to sell and you got to learn how to lead. Just like that. There we go. (Time 0:03:07)
  • Balancing Freedom and Discipline
    • Balance freedom and discipline by aligning work with your energy levels.
    • Work when you’re in a flow state and rest when you’re not, prioritizing quality output over rigid rules. Transcript: Alex Hormozi Whatever it is that the goal is. Leila You mentioned on a recent podcast with Tom, bill you, that you don’t have rules. So I, for example, you know, I quite often end up working up until midnight, 2am, 3am and basically fucking up my sleep schedule because I have too much freedom, right? Because I’m self-employed. So how do you kind of strike that balance between freedom and discipline? You know, if you’re driven and you want to accomplish big things? Alex Hormozi It’s kind of 80-20. Like if you know that when you stay up late, like there are times when I will gas it and go past my red line in terms of work. And I know that I’m eating into tomorrow. But if I’m like in a flow and I’m crushing it and the muse shows up and the muse wants to work, then I work. You know what I mean? But if there’s some days on the flip side where I wake up and I just feel foggy as shit and I just like for whatever reason, I ate too much Mexican last night and I just I don’t have it that day, Then I might call it earlier, like the idea of me pushing through and punishing when it comes to the type of work I do, if I were doing a more brute force work, then I would care less. You know what I mean? If it was just like, if I was just doing reach outs, I was doing cold calls, I was training personal training sessions, I was cutting hair, I’m just gonna I’m brute force my way through It, because I don’t need to have higher brain function. And that’s not an insult. I’m just saying, like, you’re not like thinking of creative things, you know what I mean? You’re just you’re working the work. But when it comes to like writing or making presentations or communication of some sort, it’s more I try and optimize around how can I maximize over a week, how much flow state I can be In so I can just get the most total quality output. (Time 0:05:17)
  • Taking Risks
    • Take risks when you have little to lose, as the potential upside is disproportionately high.
    • Quitting a job to pursue your passion is a short-term sacrifice for long-term fulfillment. Transcript: Christoph More like which of these things has a highest likelihood of getting me the most. What’s up, Christoph? In one podcast, you said that your most feared decision in life was to quit your job when you were 22 or 23. My question is, what advice would you give to your younger self, if you could, in that exact situation? Alex Hormozi When you have nothing to lose, it also makes it the best time to make high risk decisions because you have a disproportionate upside, not quitting if you want to do something else, like If you have this desire to do something else is like not taking a stranger up on a free lottery ticket on the street. If they give you a free lottery ticket and you lose, you’re back to not having anything. If you win, then your life changes forever. And so I think a lot of people place a disproportionate amount of weight on the opinions of other people who are going to judge them in the short term, because quitting your job is short Term pain for long term fulfillment, if that’s what if that’s what you want to pursue, because the short term pain comes from the judgment of others and likely a back, you know, back step In income. But long term, you’re working on a thing that you want to be working on. Now, if you like your job, and you know, I mean, that probably doesn’t apply to those people. But like, if you’re in that situation, it’s (Time 0:06:50)
  • Offers vs. Leads
    • Offers are strategic business decisions, while leads involve active implementation.
    • Many focus on crafting perfect offers, but getting leads is the main driver of business growth. Transcript: Christoph Thank you very much for sharing this. The next one is kind of a basic question, but I’m really curious about the answer. What was your biggest takeaway of writing 100 million offers and also 100 million leads? Alex Hormozi The offer is a strategic question that influences all aspects of the business and is also a mental exercise that people can feel like they’re making progress on their offer a lot faster. Leads is a lot more about activity and implementation. And so people can get ideas from like the lead magnet chapter, but then you have to start reaching out to people, posting content or running ads to start getting leads in the door, right? And so there’s a little bit bigger of a hurdle with leads than there is offers, but it’s also the main driver of business is letting people know about your stuff. And so I think that many people will mentally masturbate to the idea of making these amazing offers. But I think former people make money by actually letting people know about their stuff, which is leads. (Time 0:10:48)
  • Lowering Churn
    • Focus on lowering churn to below 3% monthly before acquiring more customers.
    • Prioritize niche selection and a wider selection for a narrower audience rather than competing with giants. Transcript: Christoph I think 15 to 20%. Alex Hormozi Monthly or yearly? Christoph Monthly. Monthly. Alex Hormozi Got it. So you have to fix that first. At the end of the day, everything’s going to be cap to LTV. So like if there was one single metric that I’m going to look at a business, it’s cap to LTV ratio. So how much it costs me to get somebody and how much do I make from them over the lifetime? Until that metric is better than the competition. So like Blinkist, right? I think that’s one that’s like that. I would have to look at their LTV and what are the things that they’re doing that like, why are people going to come to me versus them, right? So either I have to be more niche in my selection of books so that I’ll have a wider selection for a narrower audience. Like competing against Amazon is very tough. But if you niche down into a specific topic, then you can actually have a wider selection because Blinkist is just going to take the best sellers, right, for every category because that’s Going to be the most people. And they’re VC-backed and they’re funded and they can acquire customers that are lost for a long period of time, acquire market share. And unless that’s the game you’re trying to play, then you have to play it different, which is I want to be really specific about the avatar that I want to go after. And so that’s where you do a little bit of research ahead of time and say, okay, is there an underserved market that might actually, A, have a big reading preference? So like salespeople is one of the most common professions on planet earth. From a personality perspective, how many sales guys read all the time? I don’t know. I would have to look into that. And so you might be like, okay, well, sales guys aren’t the guy, but maybe HR specialists read a ton. Okay. Well, if they read a ton and there’s like Blinkist might have one book on HR, but I could put a hundred different things that are related to that or one degree separated. And then I can create the illusion of a wider selection of topics, but around a narrower, narrower avatar or concept, right? I would start there. And then over time, you can expand if you, if you want to, and just reach, you know, you go adjacent, you go to finance or you go to whatever, like this is me just spitballing again, like I did the no strip thing. From the economics perspective, you have to get LTV to the point where like your churn should be under 3% in order to make this really work. Once it’s under 3% monthly, yeah, monthly. I mean, ideally, you want to maintain 80% annually, at least if you want this thing to be a big thing, all of my attention would be only focused on that. Until you fix that, there’s no point in acquiring customers because there’s going to fall out the back end. There’s literally no point because then you’re also getting lots of people in that will then say that that thing sucks. You know what I mean? I’m not saying it sucks, but I’m just saying a friend of theirs is going to say, hey, I signed up for this thing. They’re going to be like, oh, I tried. I didn’t like it. And then they’re like, oh, okay, maybe I won’t stick on it. I want to be so quiet about what I’m building until all my metrics are right. And then I want to blow the doors off. But most people want to keep hitting these income goals rather than looking at the metrics of the business that are actually going to drive the long-term goal. Because anyone can market their way to 100,000 or a million a month, even with an app like this. If you blow enough money, enough people find out about it, you can do it. But then you can only maintain it as long as you’re spending that much money. The moment your spend drops, your income drops. And that’s not a business (Time 0:14:22)
  • Metaskills
    • Metaskills are skills that enable you to acquire more skills.
    • Learning how to learn, read, and implement information are crucial metaskills for success. Transcript: Christoph Basing this business off of that’s not right. In the Danny Miranda podcast, I think, you talked about skills versus meta skills. Could you expand this maybe? Alex Hormozi A meta skill is a skill that helps you acquire more skills. Learning how to read is a meta skill. Like learning how to learn is a meta skill. With the broadest brushstroke, all the way chunked up, learning to learn well quickly and retain information and be able to implement it is a skill. You give 100 people a course, right, that’s free. The difference between the people who are going to be successful and not successful are the ones who already have sufficient meta skills to be able to then use the information and implement It. Like at one polar extreme, you’ve got somebody who’s completely incompetent, right, who like you have to teach them how to turn on a computer. And on the other extreme, I can say, go build me a company. And the person can do it. So this person can translate a directive into each of the sub buckets and knows how to do that. And so it’s really like your success percentage basically is predetermined by how low you break down the skill requirements for someone to be successful. So the reason that I write the books at the grade level that I do isn’t so that people who are experts don’t get value from it. It’s so that it makes it even easier for experts and it makes it attainable for people who don’t know. So I can get 70% of people who read the book to get leads versus 10% of people to get leads if I just cut out some of the steps and made assumptions about their skill level. The last 10 or 20%, the people who are experts are still going to benefit from. I’m just also going to include, turn on your computer. Here’s how you do that. And from the software perspective with what you’re doing, that’s also how you get a way larger percentage of your clients to activate. Typically, we make assumptions because we assume that every customer is just like us. And so they have the same meta skills as us, and they have the same interpretation or perception of the world and the UX. And so that assumption isn’t true. Like all you have to do is, and I’m sure you’ve done this, like you look at people scrolling on your app and you see the heat maps and you’re like, why are they clicking that button? Because they have different skills and experiences that they’re bringing to the table. And so then we just continue to accommodate it, break it down to the level that you could show it to a three-year and they would immediately know how to use it. Like the fact that babies learn how to use iPods is an indication of how simple they have made it to humans to use. And that’s why they have such mass adoption. (Time 0:17:42)
  • Restructuring Education
    • Structure education around metaskills first, then fundamental skills like reading, writing, and math.
    • Focus on mastery-based learning, allowing students to progress at their own pace. Transcript: Christoph Do something. So that is why the streaks in the application and the gamification and those stuff. How would you restructure the education system if you could? Alex Hormozi Yeah, sorry for this question. No, you’re good. You’re good. I would focus almost exclusively on meta skills, teaching people how to learn step one, and then teaching people the things that are the next level underneath, which is learning how To write, learning how to read, learning how to speak, learning how to do math. Like those are the, those are the building blocks of everything else that follows. And in the school of, the school of Alex or the school of Formosi, everyone passes only when you learn. There are only 100% and you continue to do it until you learn. Like the arbitrary division of grades along age is ridiculous to me. And I think that if there were a lot more clarity around the goal, which is like, until you can read 10 pages out loud without making a mistake, you do not move on. If you can do that in a day, fantastic. If you can, if it takes you a year, okay. I don’t judge you on that. It’s just how long will it take you to learn the skill? So a good buddy of mine, Dr. Cashy taught an autistic kid how to read. He couldn’t stay still reading for more than one word at a time. And then he would like have fits or whatever. And so he came to train the child on how to read with a bag of Skittles. And so when the kid would read a word, he would give them a Skittle. When he would read more words in a row than he ever had, like a record, he would give him two Skittles. So he rewarded the behavior and then he had big bonus rewards when he would unlock a new level. And so he kept doing that. And within one afternoon, he had him reading a full page. What is the behavior that I want to reward? How can I reward more of it? Now, none of it was punishing. He didn’t smack him when he messed up. When he read less, he still gave him one to reward him for the activity. And then when he read more, he gave him extra reward. As the kid becomes less full on Skittles and he’s like, you know, sugar, he like doesn’t want any skills anymore. The Skittles (Time 0:21:23)
  • Rewards vs. Punishments
    • Rewards change behavior more sustainably than punishments.
    • Punishments are effective quickly but require increasing intensity, while rewards become intrinsic over time. Transcript: Christoph Become a proxy for approval and they work just the same. How do you know that when to punish, when to reward, or when to extinguish? We try very hard to (Time 0:23:10)
  • Branding Fundamentals
    • Brands change audience behavior through associations with known positive elements.
    • A single negative association can damage a brand, requiring deliberate positive reinforcement. Transcript: Speaker 4 Of branding that you’re just like, I wish I would have maybe known this when I started to try to learn about this two years ago? Alex Hormozi So I can riff on it, but like buckle in the audience. So if we look at the origins of what a brand is, right? Where do brands come from? Brand comes from when you brand cattle, right? That was the original use of a brand. And so why would you brand cattle? Because you want to change the behavior of people who look at the cattle. So if you have a cattle that doesn’t have a brand and the cattle that does, the people who are looking at it will behave differently. If the cow doesn’t have a brand, I might take the cow for myself or I might kill it or I might eat it. I might do whatever. But if the cow has a brand on it and I know the guy, I might return the cow to him. So it changes what I do. That’s an important point. So the point of a brand is to change or elicit a desired behavior in the widest percentage of your target audience. Now, how do you do that? You do that by making associations between something they don’t know your brand in the beginning with something that they do know that is positive and rewarding if that’s what you want. Right. And so the index, it’s a four by four box of what brand really is. You have the direction. So you’ve got away from and towards, and then you’ve got strength. So very high and very low. So, you know, if you have a really weak thing that’s away from, it’s like, I kind of don’t like this thing, you know, slow Wi-Fi, you know, like bad brand. On the flip side, you might have a political party, which depending on the audience might be super strong and away from or towards. Now, Taylor Swift, for example, would be something that I would say has a very strong brand and towards. There’s not a lot of people who really hate Taylor Swift and a lot of people who really love Taylor Swift, right? So it’s positive and it’s strong, right? Somebody like Ray Romano, if you heard that, you know, or like Tim Allen from the old sitcom days, might be someone who is positive, but weak. A lot of people know who he is. Am I going to show up to his event? Probably not. The idea is that in order to build a brand, we simply pair things that people know with things that they don’t know. The things they don’t know is our logo, our tagline, our company with things that they do know and think are positive. If you were to think about the brand as a bouquet of flowers, it’s like having many flowers in a bouquet. And so if I were to break the bouquet and spread all the flowers, there is no bouquet. But simply by gathering them together, by making associations, I create something new. And that bundle of associations is the brand. Now, if I were to break one of the flowers or make it rotten, it would affect the appearance of the entire brand. And so that’s why if you make a single mistake, a Dylan Mulvaney move for Bud Light, you can affect the entire brand. If I get a DUI or somebody you know gets accused of doing some sort of terrible, heinous act, it affects the entire brand. R. Kelly, bad brand now. Despite all the positive, the one broken rose or the one rotten flower affects the entire bouquet. We have to be very deliberate about what associations we want to make with our own brand so that we can continue to positively associate ourselves. And the point of the brand is that we get a desired action or behavior from a specific audience. The idea of growing the brand a lot of times is that you sacrifice some audience for other audiences. So like when I was starting making content, I did it in my closet, right? And there were some hardcore people in the OG Mosey Media days that were like, I appreciate you. That were like, man, I miss the closet videos, right? Now I might’ve lost some of those people when we started making a little bit more polished videos, et cetera. Some people, not all of them, right? I traded losing some audience to gain more. When you’re making a brand move, you’re basically always making a bet that you will gain more of your desired audience than you lose by making a change. And so you can approximate or slowly move a brand over time by making more associations in one direction and fewer associations in the other. And so that’s how you can move a brand over time. Bud Light made a wrong bet. They thought, and maybe this is because of corporate groupthink, that if they made an association with Dylan Mulvaney, that they were going to get more people to buy their beer. I mean, fundamentally, that’s the only reason you would do it as a company. You’d believe that long-term you’d get more people to buy your beer. The problem was that wasn’t true. Now, the interesting thing is that there probably are people who were a big fan of that move. It’s just that there were more people who weren’t. They were far away. Right. There were more people who were not a fan of that move. And so that became an away from association. And so that is what I am trying to encapsulate and put together into how to brand. Because now that I feel like I understand it a little bit, I see it as, in my opinion, it’s kind of like Neo in the Matrix when he’s talking to Morpheus and he says, so you’re telling me that I can dodge bullets. Morpheus says, well, when you’re ready, you won’t have to. And so we learn all these tactics about sales and marketing and show up rates and CRO hacks and all this shit. But if you have a brand, if you see the Matrix, everyone shows up to your calls. No one has price objections. Everyone is excited and refers their friends. It just takes longer to make associations because fundamentally, all branding is, is teaching. You are teaching someone to do something. You want them to behave a certain way. And you have this red, red card. And when you see red, it means stop. That’s all we’re doing. So green lights have strong associates, strong brands. They’re positive. Everyone loves green lights. It’s a simple thing. Just no one owns it. But green lights are a great positive association. It’s a great brand. And so that’s the idea of what I’m diving more into. And I see it as the ultimate cheat code for business. It just takes a long time to do. And most people aren’t patient. Speaker 4 You’re telling me I can dodge business problems? Alex Hormozi I’m telling you that once you have a brand, they become irrelevant. (Time 0:27:50)
  • Market Positioning
    • There are four market positions: luxury, premium, commodity, and low-cost.
    • Find the right balance between price and value and reinvest profits for better experience and products. Transcript: Speaker 4 I look at the highest price competitor in my market and I one-up them and then they one-up me potentially. Is there ever a point in which we just say, we’re priced premium enough or do we always have to go for the top? How do you make the determination of premium? Alex Hormozi There’s basically four positions in the market. You have luxury all the way at the top, which is technically a Veblen good, which means when I increase the price, demand goes up. And that’s because there’s an association with the price that makes it more valuable. So the fact that everyone knows how expensive it is affects the value that I get from it. The fact that everyone knows the Rolex is a hundred grand, the one that I’m wearing, whatever, then I actually, it makes the Rolex more valuable. So it becomes a virtuous cycle, which is why LVMH is one of the most valuable companies in the world. Then you have premium, which is basically the above average. So it’s there you have to pair utility with the premium. In luxury, the extra price tag is the value. Whereas with premium, like BMW is premium. They’re not luxury. They’re a little bit better at a lot of stuff. And so you pay a premium because it is a little bit. They use a better materials, it breaks less, whatever. Right. And so then you have your, you know, your mid to your, your run of the mill, your commoditized space, which sucks. And then you have your low cost leaders, which they make their entire business on how can I drive, uh, efficiencies in operations at all levels of the business so that I can be the lowest Priced, uh, person in the marketplace, right. And still make a profit. To route to your question of like, when is enough enough? The key indicator for me, and most of this, like the quote, higher ticket world, you’re not luxury goods. The fact that it’s expensive is not the reason that people want to buy it, right? So it’s actually technically a premium. I’m more extreme about the price to value discrepancy than anything else. And a lot of people get into trouble because they raise the price so much that it’s just in excess of the value they provide. And so then they actually create a negative experience. Like if Chipotle were $50, people would probably not like Chipotle, even though the product is really good. But at $50, I don’t know. And so the reason Chipotle is so viral, you know what I mean? It’s like the price to value discrepancy is so good that they tell their friends, right? And so that’s where this kind of marriage of how can I just short circuit people’s brains from value perspective, which is what I try to do with the books and the courses, so that it becomes Viral on its own. And then my cost to acquire customers is zero. And so then everything after that is just gravy. The four variables when you’re using this is you’ve got the price, the value at the top, which is what they get, right? The price is what they pay. You’ve got your cost of goods to deliver, and then you have your profit left over. And so it’s playing with those four variables so that you can maximize the amount of absolute profit that the company makes. Pricing high has become shorthand. And where I think people get a lot of benefit from the offers book is that when you price higher, you automatically weed out shitty customers. And I think many times that is the real reason that a lot of people’s businesses grow from that price. Now, obviously, there’s more profit. You have excess things that you can deliver on. But a lot of people don’t actually take that excess money to create a better experience. They do a gotcha, and then they never get anything from that customer again. And so that’s the wrong way to use it. But if I had to think like, okay, what are the reasons that a company might be successful that does charge premium? It’s that they actually reinvest the premium price into a superior product and they are very clear about the avatar that they go after and what the quantitative requirements are that Are black and white that they know from looking at their best customers, their top 20, top 5% of customers, and then saying we’re only going to cater to these customers in the future because The likely that we can give them a great outcome is higher. And then that can create, you know, you can merit or earn the premium that you have because you have data that supports that if you are this type of person, we can get you this type of result. What (Time 0:35:17)
  • Scaling Coaching Businesses
    • Scaling coaching businesses is tough because expertise is key and experts often leave to start their own.
    • Consider offering profit sharing or productizing your service to make it scalable. Transcript: Speaker 5 Community loves you. And that’s how we are here. And I literally got like 150 questions. I had to narrow it down to five or six. It was so hard. You mentioned something in the $100 million offer that to hit your first 100k, you don’t need a lot. You just need an offer to sell. And that’s exactly what we did. But right now we are hitting a bottleneck. And our biggest bottleneck is operations. And I want to know how exactly you got out of Jim Launch’s operation because we have a very similar business model for service providers. For what service providers? Mostly agencies and digital consultants with lead generation and sales. The way we do it is with a one-on consulting and in a group coaching format. So coaching models in general tend to be very difficult to scale because the reason people come to you is for expertise. Alex Hormozi In order to get other people to provide that expertise, then you have to create lots of experts who then eventually walk off and start the business on your behalf and take your customers With them. I would say there’s a couple different approaches. So the first is that there’s the law firm and the For what service providers? Kind of consulting model. There’s a track to become a partner in the business. And then that’s kind of the whole business structure. So there’s a way to share in the profits. They do make lots of money, but the owners of those end up having to dilute themselves out. Not that there’s anything wrong with that. You can make lots of money doing it. But that is a version of the model. The other way is to productize the, basically get narrower on the solution that you’re providing and productize it to the greatest degree possible so that anyone could do it, even if They have no knowledge of it in terms of like the implementation of the thing. (Time 0:45:07)
  • Becoming Irreplaceable
    • Clearly communicate all the small steps involved in your service to justify the price.
    • To become irreplaceable, target larger clients who are less likely to bring services in-house. Transcript: Speaker 5 Model, where you hire an agency to learn the stuff and you internalize it. And then when you have stopped learning, you replace an agency. But meeting agency models, agency businesses, how to become irreplaceable. In your perspective, how should one go there? Should we start with one business, then upsell the next and upsell the next and upsell the next offer? Alex Hormozi Creating the irresistible offer isn’t necessarily about having a zillion products. It’s more about explaining and communicating the many small things that you have to do anyways. And so rather than saying like, I’m going to generate leads for you, that’s like one outcome. But there’s many things that have to happen along the way. You have to create landing pages. You have to write copy. You have to have follow-up sequences. You have to work the leads. You have to have scheduling. You have to split test. You have to make new creative. Like there’s lots of things that have to happen in order to just get the single result. And it’s just making sure that we’re delineating those things because an unbeknownst or an ignorant business owner, I say ignorant in the technical sense, like they just don’t know, Would have no idea what you’re doing. You’re like, yeah, just go get me leads. It’s like, well, it’s much easier said than done. And if I was doing it from an outbound perspective, I’d be like, well, I have to warm up domains. I have to, you know, spin up different accounts. I have to split test different email openers. I have to split like, you have to explain all the steps and they’re like, wow, there’s a lot more work that goes into this. Now I can, I can appropriately value this price tag that you’ve ascribed to whatever the service is. So that’s piece one. In order to be irreplaceable, oftentimes you’d have to go after significantly bigger customers. If you’re an agency for fortune 1000 for fortune 500 companies, it would be so costly for them to spin up at scale the level of talent that’s required to do like programmatic media buys Across 100 different platforms in different countries. And then the likelihood that they want to leave or do this on their own is significantly lower. The idea that any service provider is going to become truly irreplaceable, like any business can do anything on their own. And I would prefer to put myself out of business and do it in a way that aligns my customers with me, then have a model that I know is basically has a timer for obsolescence. (Time 0:49:00)
  • Standing Out in a Competitive Market
    • To stand out in a competitive market, be authentic and lean into your unique interests.
    • Don’t copy others; embrace your individuality to attract a loyal audience. Transcript: Speaker 5 So you mentioned that when you started out, you started with the first five customer framework. That was awesome. And then you just grew with referrals. So this question came from a fitness consultant herself. Alex Hormozi And she said that with the competition that the fitness market is, how do you stand out? Honestly, it’s just being authentic. 99% of the fitness market just looks at what other influencers are doing and say, I’ll just, I’ll copy that and I’ll do stuff like that. But then you just do a worse version of what somebody is already doing. Zooming all the way out, fitness, like there’s no secret. Work out more, stop eating shitty. You’ll look better over a longer time horizon. Like that’s what it is, There’s going to be a subset of an audience that is like you, genuinely, and they want to get their, they could get fitness information from Alex. But if I’m a, you know, a 45-year Indian mother, I’m probably not going to be her source for fitness information, even if I see the identical stuff as another 45-year Indian mother. Now, if that 45-year Indian mother looks at my fitness content and tries to make content like mine, it’s going to seem weird. You can stick out by actually being yourself. I know it sounds trite, but the real, like this is real. There are so many unique aspects of someone’s life and the things they’re interested in compared to other people that if you just lean into those differences, those unique aspects, The things that you’re actually into that are weird, right? Rogan’s into aliens and mushrooms and comedy and fighting. Who would have told him like, you should be Joe Rogan. And you’re going to have people who like some aspects. And then the super fans will be people who overlap on two or three of the interests that you have. If you picked my brand, it’d be like dessert, working out, philosophy, business, marketing, sales. They’re people who follow me because they only like the business and money stuff. They’re people who follow me because they only like the philosophy stuff. They’re people who follow me because they just think the desserts and calves stuff is funny. Like, it just depends on what someone’s going to come in for. But if you’re just you, then you can stick with it for the long term. And that’s what’s going to build over time. And make you, quote, stand out because there is only one (Time 0:56:07)
  • Profit Sharing Over Franchises
    • Instead of complex franchise agreements, consider profit sharing to incentivize partners.
    • Focus on attracting owner-like behavior without unnecessary legal complexities. Transcript: Christoph So we have a lot of clients that want to work with us and we have a lot of closers that want to work with us. And Jovan and I, we just can’t manage everything ourselves. It’s just too many people. We had two options. Option number one is place managers to replace us, right? And then give like two to three accounts, client accounts to each manager so they can manage them obviously and we can scale that way. The problem with that was that managers only get paid so much and they only care so much about the business itself, right? But when it comes to partners, they get 50% cut. Alex Hormozi They get exactly what we are getting 50-50. The franchise thing is interesting because I feel like you would be able to achieve that simply with a profit share rather than getting investment and equity and all like the… Because if speed is the goal, then you could basically do the makeshift in terms… Because I’m assuming many of them aren’t planning on selling, right? And so the only reason the equity would be valuable is if they’re going to sell it sometime in the future. And buying, quote, more locations isn’t really a thing either. I would imagine that it’d be a lot faster to just contract, basically put legal language around getting a profit share in the structure, you know, the cut that you have, like many companies Have scaled sales orgs, you know what I mean? Like insurance brokerages are just massive sales orgs, like real estate agents are massive sales orgs. And so they don’t necessarily have equity, you know what I mean, equity deals, because those can just get litigious. And there’s lawyers and just take I’m sure you guys have already seen this, like, it just takes more time. And I feel like there might be like, you could probably remove a couple of components to get the same behavior, which is ultimately what you’re trying to do is get people who act like owners. So that’s just that’s me just shooting right off the cuff of just looking at it. (Time 0:58:21)
  • Building Trust on Sales Calls
    • Build trust on sales calls by deeply understanding your avatar and their pain points.
    • Focus on relatability and addressing their needs, rather than just promoting your product. Transcript: Leila Your method for building trust and credibility on a sales call in like the fastest way possible? Like what method, what approach do you often take for that? Alex Hormozi Well, I mean, brand matters more than anything, like right off the bat. And the, you know, the vast majority of like the hard closing tactics and hard sales tactics have to exist in lieu of not having a brand, right? It’s like we have to make up all this hard stuff. It’s kind of like in the Matrix where it’s like when you’re good enough, you won’t have to dodge bullets. Or like you’re saying, I can dodge bullets. It’s like, well, when you’re ready, you won’t have to. So like the brand is when you’re ready, you won’t have to. But if you don’t have that, which is the big thing that you should have. But if you don’t have that, then it’s the same things that you would normally do. You’re relatable. A lot of it just comes down to how well do you understand the avatar? So I think a lot of sales teams underprepare by under-understanding the avatar, the prospect, and over-educate on the product. If I understand what a 45-year woman’s suffering from, I can basically do the same sales call and at the end of the call say, I can pitch therapy, I could pitch, I could pitch weight loss, I could pitch a gym membership, I could pitch, you know, I could pick cleaning services, it doesn’t really matter. Because if I understand the avatar really well, I’ll be able to speak to her pains. Leila And what you said is true, like brand is extremely powerful. And with the clients that we take on for agency, do you recommend that we go for people of very strong brands and take that approach? Like that’s, that’s the way to be the focus, right right? Like where’s it going for the brand and from there? Alex Hormozi Yeah, strong brand, strong product, for sure. Fair question though. Yeah, relatability, common ground. What’s been the number one reason you’ve seen show up rates increase or decrease? It’s 100 golden babies, no silver bullets. (Time 1:06:59)
  • Selling Emerging Tech
    • When selling new technology, focus on the outcome, not the tech itself.
    • Sell the benefits and value proposition, not the underlying technology. Transcript: Alex Hormozi Tech. You don’t sell emerging tech. It’s selling the plane flight versus the vacation. If I could tell you that your financials would be absolutely accurate and updated in real time, would you want that? How much would you be willing to pay compared to what you currently pay? A lot more. Great. What if I said I could do it for less than what you’re currently paying? Are you interested? Great. This is what I need. The fact that I’m using AI is irrelevant. You just sell the outcome and then you’re not really… Yeah, no one cares. AI is great for YouTube clickbait, but for sales, it’s irrelevant. Leila That was like one of the main talking books you wanted to get a card. What else do you want to do for the next 16? You must be getting a ton of businesses, essentially a lot of AI businesses that are coming across your desk right now at acquisition.com. What are the things it’s making sort of jumping out at you? And what are the sort of commonalities between things that make you really go? Oh, well, that that seems to have some kind of staying power. The (Time 1:14:24)
  • Picking AI Opportunities
    • Pick AI opportunities based on industry experience or by partnering with an industry expert.
    • Find problems with high value creation and ease of implementation. Transcript: Leila Referrals are so strong, because if you do a good job, they will send you other people just like them. The question is, yes, I can pick a niche to do this AI automation. I can build AI solutions and sort of targeted one. But what is the opportunity that I should target within the niche? And that comes down to either A, as you said, industry experience that you already have, or sort of B, what we’ve said is finding some sort of partner within the industry. So we say can either try to pay them for their time as a consultant, or you can just message enough people and say, hey, look, I’m looking to bring these kind of solutions to the industry. Would you be willing and working on this with me? I need a little bit of your specific knowledge, but in exchange, I’ll create this thing and you can refer it. You can basically have first dibs on sharing it to your network and you can make some money that way. Alex Hormozi So yeah, I definitely wouldn’t do it as a consulting relationship. The thing that you’re going to be selling is the product. And so having a consultant who’s the one who’s in charge of the primary value that you’re driving is not a good idea. And so you’d want somebody who’s long-term incentivized to continually improve the product, continue to innovate the product, see the things that are coming around the corner to Keep it up to date, make it better, make it stronger, et cetera. It really just comes down to how to have a normal business partnership. So all the normal rules of business apply. And this person has some specific knowledge you don’t have. And you should ideally have specific knowledge they don’t have. They should be asking the question like, why do I partner with the people in your community if I’m an AI developer, right? If you’re trying to figure out which of the problems to solve in an industry, it’s just value created times ease of implementation. That’s the equation, which if you chunk it up, it’s number of potential customers times gross profit per customer. If I have six different problems I could potentially solve, which one has way more people who have it? Which one’s easier to do? Which one unlocks the most value? (Time 1:17:40)
  • Importance of Development Teams
    • Building a strong in-house development team is crucial for AI businesses.
    • Quality talent is essential for scaling and success in this field. Transcript: Leila One thing that we’re starting to see as us ourselves actually trying to build one of these AI automation agencies, now AI development companies as well, is that by building a development Team that is capable, what is your take and your experience with how important that development resource is? I mean, sure, with your event, you must know, working with developers can be a complete plan, but having them in-house and having a really good team to rely on as you shoot for those big Opportunities can be key. What’s your experience been like this? And how important do you think that development resource is when you’re going for those bigger plays? Very. Alex Hormozi Okay. I mean, we were thinking the same thing. So I was glad to know you agree on that. It’s the product. Like if you’re in a service business, the quality of the people that you use to provide the service is the product. And so those people usually want to be compensated well, because if they are really good, then the places that they’re coming from will want to pay more to keep them. And so you have to give them a great place to work and a financial incentive or some upside that they get exposed to that they wouldn’t otherwise like you want them to feel like owners. And the best way to do that is for them to actually be owners. If you’re trying to get on the cutting edge of technology, then actually having the people who are good at that is the business. (Time 1:19:11)