← The Game with Alex Hormozi
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- [00:02]
Alex Hormozi
You just want to find people who are absolutely unreal. And the litmus test that I have is that you feel this, like, desperation in your core when you talk to them. You're like, I have to have this person. It's not like, oh, I have this role. I guess this is the least bad of the 10 people I've talked to. I would encourage you if you're ever in that situation, this is the least bad. Just don't, just keep, keep looking. Very tactical, right? Yes. You got tactical questions. Okay, good. That was, that was the hope and the goal of how we structure it and what's interest thing is that the point that I think is most valuable because you guys are going to, you know, go home and, you know, you'll leave here and you'll probably open up a blank document or turn a blank page in your notes, whatever, whatever you do to take notes, and you'll have your pages and pages of stuff that you got from here. But the other blank document is going to be what am I actually going to do? And I just want to make sure that that page has the right three things on it. Because fundamentally you're not going to be able to do all the things that you learn here as much as you might want to. Right. And so fundamentally, the strategy of a business owner is prioritization, right? That's, that's what it means. And so we have to take limited resources, which is time, money, energy, the team that you have against unlimited opportunities or things that you could deploy it towards. And the people who move fastest in their businesses aren't the ones who necessarily do the most, the ones who get the most for the effort they do. And I think that, that, that process of thinking has helped us move faster. And what's interesting about that is there's so much leverage on knowledge. Like, there's so much leverage on knowledge. Like, if you could go back in time and help your young self out, how much faster could you get to retract? Like, it's almost laughable. And the thing is, is that you probably felt like you worked hard then and you probably feel like you work hard now, and there's a version of you that knows five years from now how much better you could be doing. And that's the value of knowing the right next move. So with that being said, I have the distinct pleasure of doing, answering questions a lot. And even within the portfolio, there's basically seven key problems that emerge consistently across businesses. And these are strategic problems. And the reason I think they're so nefarious or they keep people stuck for sometimes ever is that they are apparent conflicts, meaning they are rock and a hard place scenarios where both paths seem painful. And so then people just stay stuck because they don't know which one to choose. And so I have developed this little moniker for this as my way of remembering it. And I'll explain each of them briefly and then sir, as we come up, I'll be like, which one is it? So the first is serving too many avatars or being unclear on the person that you're selling to. So it's very common for in the early part of your career you accept, you know, you have person gets on the phone, they have credit card and pulse. Well, at least one of those things is required to complete the sale. And you say, sure, you have money and I will take it in exchange for whatever you want. At some point though, you realize that that isn't really a tenable way to run the business. And so the problem is the rock and hard place scenario is, well, I can stop saying yes to these people, but then that would mean that my short term sales would go down. But if I don't stop saying yes to these people, I will never grow this business because I have too many onesie twosies that I have to deliver on. So what do I do? Rock and hard place scenario. The next one is data, right? And so we touched on this briefly yesterday. But the speed of the business is gonna be based on the speed of the quality of the data, right? If you have higher quality data, if you literally knew what all the data in your business was at the snap of fingers, you'd be able to make a lot of decisions really quickly and you'd be able to move with a lot of certainty and conviction. And I think everyone here has probably had some decisions. You're kind of like you weren't super sure on, and because you weren't super sure on it, you kind of like slow dragged your feet. And the result of that is not only did you not execute it well, it also took forever. Whereas when you're like, oh, this is crystal clear, I know we need to do, you can get something done in a weekend. And the thing is, is that if you have that level of certainty, then that weekend can happen every two days and you can take what takes some businesses a year and do it in three or four weeks. Now the difficulty thing here is I need this data to make this decision, but it's going to cost me effort and time to get this data. And if I put that effort and time into getting this data, I'm going to lose money. The next one, this is what I call the best seller of this list is Bocus, right? It's the one that I probably talk about most often. And I think it's because it's the. It's probably, at least for me, it's been the one that I've struggled the most with. And it's also the most prevalent because the thing is that the more able you become, the more opportunities you can see. And so in the beginning, you have to. You, you struggle to say yes because you're so afraid, right? That's. Everyone starts, everyone's afraid to say yes. What if I fail? Et cetera, et cetera. You're here, so you've already gone past that. And so you got rewarded for saying yes in the beginning. And so then it just becomes this muscle that you flex more and more and more. But in the beginning you have to say lots of yeses or start saying yes because you're in kind of exploration mode. You're trying to figure it out. Once you start to get good, though, you have to flip that and it becomes exploitation mode, which is how to get as much as I possibly can of the thing that I currently have. And so to be really crude here, so I apologize to the women in the room, it only works one way, but you can understand it. You can't sleep with every woman. It's not going to happen. And it doesn't work. And so you have to choose. If you take the hypothetical extreme, you can't do it all. And so then you just work your way backwards until eventually you're like, okay, if I just did One thing for 45 years, do I think I'd win? Probably, no. But being real, like my, the guy who lives like he's my neighbor is the guy who owns Panda Express, right? Andrew Turner. And so he has sold chicken in a brick and mortar establishment for 45 years. Last year he took home 935 million in personal income. And he offset all of that against his real estate tax free. He did 3.7 billion. Top line in sales, 27% net margins in the business, owns the whole thing. 45 years. And so the thing is, is like a lot of, a lot of the conversations that we'll go over, people obsess about, am I in the right vehicle? But the thing that is by far the bigger predictor is how long you've been in the vehicle and that you've improved. And so you can't just be in the same vehicle for the whole time. Obviously, like, you could just have one restaurant for free five years too. But the idea is that you get better, right? But the focus is what allows the compounding to occur. And you never unlock the compounding when you're continuing to switch tasks and switch priorities. And I'll tell you that one of the big reasons that I think many of you are struggling with this focus is because your mission is only to make more money. Because the thing is, if making more money is the goal, you can't optimize anything against that because lots of things make money. It doesn't mean it's the right call. Over expansion. Okay, so this is the classic. And what's really interesting about an over over expansion is that it's actually shorthand for under talented. And that's a combination of you just being real and. Or your team. And so when you have your one location that's working, then you say, okay, I'm gonna open up, you know, my second location. A lot of times people get ahead of their skis. They only have one location. So good, I'm not in the business anymore. I'm on the business. But they're still working 16 hours a day, and they only have one location. So when you leave and start having to work 16 hours a day in the other location, you can't do 32 hours. So what you're doing over here, it's funny because it's like, oh, I'm not on the floor doing whatever it is that you do at your shop. And so you think, oh, because I'm not fixing cars, because I'm not cracking backs, because I'm not doing dental work. I own the business. It's like, no, you're CEO. You don't really own it yet. You still are employed by the business. And the business needs. Like, every one of these businesses needs a CEO. And if it's going to be you and both, then both are going to suffer. And so then what happens is you open the second location, and then your profit over here, which was your cash cow, goes down. And this one doesn't really get as high as the first one did because you were there for five years before you do your second one, and now you're here, and now you have twice the liability, but you're actually making the same money or less. And you're like, how the hell did this happen? But you're like, you know what the solution is? I should open a third. Because then this is clearly the model. But then you open the Third, and that is this, right? And I know that some of you are in that pool right now. And the thing is is there's nothing wrong with expanding. It's just expanding too fast relative to the IQ per square foot. Seriously, you just dilute it. So you have to increase IQ in order to increase the square footage to maintain the ratio. The next one is compensation. One of the most common mistakes that I would say business owners under 10 million a year make is that you're wildly miscompensating people all over the business. One, there's huge savings to accrue. But also sometimes you are. The thing that's limiting your expansion is that you're under talented. And you're under talented because you don't pay well enough. And so it's like if I have like another H Vac company comes to me and says I can't find technicians and I'm like, well, how much do you pay? And they're like, we pay market. And I'm like, no shit, go above the market. But that's more than we pay everybody else. And you're still profitable. But we wouldn't be profitable if we raised the raise your prices. But I can't because I'll lose customers. You just told me that you can't even take the business that you've got coming in the door pick. So compensation. Now I had a, I'll give you an example. I had a physical therapy studio that came and you know, lady said, I, I have my. We're, we're super booked, but we're not really profitable. But we're to full capacity, everyone loves us. I was like, okay, huh? She's like, Well, I give 50% of all revenue to my therapists. I was like, okay, do they like go market and sell you basically just like give them the just the area to crack backs or whatever it is that you do. She was like, oh no, we do the marketing and the sales and we do all the admin and everything. They just show up for the times that they crack backs. I was like, yeah, 50% of revenue. Now you're working on 50 just now you have rent, you've got payroll for everything else you've got marketing. It's like, yeah, no shit, you're not making any money, right? And so the issue there was that that was a structural issue. She could not out earn that. Cause even if she raised her prices, the compensation would go with it. And so compensating one, either too low or too high or incorrectly, all three of those scenarios and the reason it's a rock and hard place is that, well, what if I change my comp? I'll lose all my people, but if I don't change my comp, I'll lose my business. Rock and hard place. The next is underpriced. So that's just the classic. Actually the example I just gave, like, we're at full capacity and we're not making money. And let's assume that we weren't giving away 50% top line to, you know, something that was fixed. It's like, okay, raise the price. But if I raise my price, I'll lose my customers. But if you don't raise your price, you won't make money, which you already aren't making. Right? So being underpriced is one of them. And then finally, a single product. So I say these as, like, these are, say, some of the biggest common themes that I see. Single product being a guy who had a YouTube channel who sold how to speak English. That was his niche or whatever for Latin Americans. And he had done basically his. His sales were flat, but his margins were shrinking. And the main reason. And he was selling, I think, like 800 customers a month digitally. So between $20 and $800 of, like, language products. And he came and said, hey, I want to start a digital marketing agency because it'll be less competitive. I fought this guy for an hour. I'm not even shitting you. I fought him for an hour to try and. To try and, like, nail through his head. And he said this. And it was wild to me because I was like, what if we just, like, called those customers and sold them something else? He's like, no one's going to pay more than 800 for language services. And I was like, who here would pay more when you live in Latin America to be able to have access to the US Job market? Right? Of course you fucking would. Of course you would. And so he just had this belief that literally he was like. Instead of just like, challenging this belief, I believe this so hardcore that I'm willing to break this business that makes me a million dollars a year from my organic YouTube channel and then try and get into what I believe is less competitive and as silly as what that example sounds like. The amount of business owners that I see here who are also dealing with this, which is. It's a lot. And the reason that sounded silly is because maybe some of you have enough experience with social media marketing agencies to know that there's a dime a dozen of those. And so it's Incredibly competitive because the bar to enter is zero. It's an Internet connection and an iPhone. Right? And so anyways, I, I say all that to say when you have this idea of like, oh, I want to try this other thing. You also sound like that guy. You just don't know what you don't know yet, because no business is easy. You just don't know enough about it to know what's hard about it. And like, I would say that last year was the first year, and this is continuing to this year in my whole career where I didn't experience fomo. And I only realized it when I was like, huh, I haven't had fomo. This is weird. What's that like? And, and I remember because a buddy of mine did 50 million in personal income last quarter. It was Q4, so 2/4 ago, just trading from his laptop, trading crypto shit. And he told me, and I honestly was just like, dude, good for you, man. Look, I had zero old me would have been like, dude, how do I get on this? Like, what is he doing? I'm like, oh, turning on the computer, because this is how you turn computers on. And I was like, okay, so it's a, it's a candlestick monitor. Like, okay, so. So Ethereum is back, like, you know, like, trying to, trying to figure this. Like, I have no idea, right? That's not, that's not my hat. And to the same degree, he can't do what I do. And so it's just like, basically, the longer you play the game, the narrower you're going to get because you're going to get better at what you do. And the amount of time it took you to get where you're at now, it'll take that long to do something else. You just don't know enough about it. And that's why it looks so good. Now, if somebody were to come to you and say, hey, you're making money for everybody who is making money, if somebody came to you and said, hey, you make money doing your thing, I should do that. Many of you be like, nah, you don't want to do this. You think you want to do this. You don't want to do this, right? Because you know where all the bodies are buried. And the thing is, is that there are always bodies and they are always buried. And then they reach out of the ground and then just drag your soul with them. And you can only find out once you, you know, lie in that grave. We're really making this visual. But, yeah, with that being said, these Are the big seven. Some of you guys are experiencing one or more of these multiple weight class champions of, of growth sins. But with that, let's, let's kick off the Q and A and rock and roll. Now, I know you're doing 2.4 million. You saw outcomes to athletes. And the biggest problem that you think is stopping your growth, you'd like to get the 3 million is that you feel like you need to reposition your offer in some way. Shoot.
- [14:19]
Brian
Yeah. Nailed it, man. So we have three revenue streams inside of our health clubs, our fitness centers.
- [14:25]
Alex Hormozi
Right.
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Brian
So we run ads for group. That's our highest margin. But then if a deconditioned person walks in, we can get them into one on one, then get them back into the group setting. And then when someone does 12 months, 13 months, what square footage? Six, 8,000 square foot. We have four locations.
- [14:40]
Alex Hormozi
Okay.
- [14:41]
Brian
So then when people inevitably wanted to kind of take breaks or large group or semis. So we do large. We're in no man's land. So we're like 16 to 20. Yeah. So, yeah. So that's a book reference. So basically what's happening though is that because we have the 247 open gym, which is supposed to be just a way to keep people engaged and once they get want program again, they re engage with our coaches, our sales team is kind of using that as low as hanging fruit.
- [15:09]
Alex Hormozi
So we're down. So I mentioned yesterday, Right?
- [15:10]
Brian
Correct. And so the challenge is twofold. Right. So the first one is like, you know, how do we market in a way that we get people to understand that's an ecosystem, we're not an F45. And all those models are good.
- [15:22]
Alex Hormozi
They're never going to understand that's an ecosystem.
- [15:24]
Brian
Okay, so very good. Easy enough. And then, and then the second, how.
- [15:28]
Alex Hormozi
Do I get them to know everything about me so they can understand the nuance of how we built this business model? They're not, they're going to be like, oh, it's a six week weight loss thing. Sounds good. Yeah. And then you explain that when they come in.
- [15:37]
Brian
Did you ask me how I explain that?
- [15:39]
Alex Hormozi
No, I'm saying, I'm saying, I'm saying you market the thing they want and then when they come in, you give them the thing that they need. Don't try and explain the thing that they need before they. You give them the thing they want. Got it. Okay, very good. All right.
- [15:51]
Brian
Simple enough. And then I do have a follow up real quick too, if I can push my luck here a little bit. So when it comes to leveraging my personal story. Right. So when it comes to transformation stuff, I was indicted at 22 years old, did 63 months in federal prison. So when we talk about, like, transformation, like, I'm literally said the city that saw me at my worst is going to see me at my best. How much of that should I leverage? Because I've never really led with that. But I know now that I'm in the. I'm. I'm literally in the inspiration game. I'm literally in the legion and the sales game, and I feel like there could be some stickiness to it.
- [16:23]
Alex Hormozi
What do you want to do?
- [16:24]
Brian
I just want to.
- [16:24]
Alex Hormozi
Do you want to sell the. Do you want to sell the business? Do you want to own it long term? Like, what do you want to do? Man, that.
- [16:28]
Brian
That varies day to day. I mean, I want to sell it, man. Yeah. I mean, eventually, I want to build something that's got value, and then I exit.
- [16:33]
Alex Hormozi
Well, then, I mean, you already have a business that doesn't require a personal brand. I wouldn't tack one on. Very good.
- [16:38]
Brian
Fair enough.
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Alex Hormozi
Easy enough.
- [16:39]
Brian
Fantastic. Thank you.
- [16:40]
Piers
Hey, Alex, thanks for everything you've done. And Layla as well, obviously. My name is piers. We do 1.4 million revenue, and we'd like to be at 5 million in three years. We actually coach online golf. So it's online programs.
- [16:59]
Alex Hormozi
You sell extra golf to whom?
- [17:00]
Piers
To. To consumers. So to the average golfer.
- [17:03]
Alex Hormozi
Okay. Average people. Normal people. All right.
- [17:05]
Piers
Norma people. Normal people. So we're looking to. So what's stopping us from doing that? We had some ideas before we got here. We have some new ideas now that we are here. Data. Huge problem for us. Focus is an issue. The way that we make our money is through the online subscription, which is. Which is great. It's our passion. It's what we like doing. But we're doing a bad job of. At the moment. We also have. Which is nice.
- [17:31]
Alex Hormozi
Big.
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Piers
Because of our social media presence, though, we've got brands that are willing to spend quite a lot of money with us. So that part of the business does really well. That's kind of holding. The media side is holding up the business at the moment, for sure.
- [17:40]
Alex Hormozi
Okay.
- [17:41]
Piers
And then. But. So we can generate lots of traffic and get lots of people, but we're not very good at.
- [17:46]
Alex Hormozi
Do you have multiple personalities? Not you, but multiple faces inside the business that do.
- [17:52]
Piers
The two of us. There's two main ones.
- [17:54]
Alex Hormozi
Okay, got it.
- [17:54]
Piers
Two main coaches. Myself and Andy, who's over there.
- [17:56]
Alex Hormozi
Okay, I heard. Okay. So why don't you pick one of the businesses? So you say you're passionate about the membership thing. Yes.
- [18:05]
Piers
I think that the thing for us is what we want to be able to do is we want to be able to do this business for a long time, but then potentially set us at the end.
- [18:11]
Alex Hormozi
Okay.
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Piers
So it's kind of like this is the thing that we love doing. We love coaching, we love changing lives.
- [18:15]
Alex Hormozi
The media business is for sure more sellable than the other thing. I'll explain why. So the thing that's going to matter, like the three big things, like if I had to. Like, if I had to simplify the long list that you guys have in front of you. Well, it is a pretty simplified list, but, like, you have really good gross margins, it's growing fast, and you have revenue stick. Right. If all three of those things are true, then obviously you have key man risk and things like that that would go with the business. But like, if you had those three things, the business itself, the model is very strong. I can promise you that your media people, the people who are buying ad space for you, will be stickier than the consumers who are buying golf community stuff. And the margins on media are virtually a hundred percent. Now. The digital community is also virtually a hundred percent. So there's kind of a wash there on gross margin, and then you just have growth rate. Now. One of the beautiful things that I love the most about media business is very unique to media, which is that the way that you advertise is also the way you deliver. So you just have to do one thing which is get attention, and then you sell the attention, then you just get more attention, and then people find out about your business because you got attention, and then you get more attention. And so if you're passionate about the community thing, which is making content for golfers, right, why don't you just make more of that content and just make it free and let you get more attention? Real quick, guys, I have a special, special gift for you. For being loyal listeners of the podcast, Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you've got customer success, you've got it. You've got recruiting, hr, you've got finance. We show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to You. So it's about 30ish pages for each of the stages. Once you enter the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com forward/roadmap. R O A D map roadmap.
- [20:27]
Piers
So that's what. So that's what we do. So we have the. Obviously, for the. For all our brands that we cover, it's just literally us doing the coaching online, but then it's just the high level of coaching, I suppose, or just like higher ticket.
- [20:38]
Alex Hormozi
Yeah. And that's what's making you less money. Yeah. How?
- [20:43]
Piers
Well, we. Again, data and focus is our main things that we're looking at.
- [20:48]
Alex Hormozi
Well, how many people work for you?
- [20:49]
Piers
10.
- [20:49]
Alex Hormozi
Jesus. Seems so odd. It's like 1.4 million. Got 10 employees. It's a little bit high. Right. Are there a lot of VAs?
- [20:57]
Piers
So what happened was after Covid, like 20, 21, 22, we actually grew to 2.6.
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Alex Hormozi
Okay.
- [21:03]
Piers
But then as a result of growing the team, scaling the team and thinking that we were picking the right people and we didn't really know how to do it, I think we have struggled since.
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Alex Hormozi
So how'd you go from 2.6 to.
- [21:14]
Piers
1.4 and that's mainly big? Well, the brand revenue has gone up and the subscription revenue has dropped.
- [21:20]
Alex Hormozi
Why can't we just do more of this brand revenue? You're like, I've got this thing that I'm not trying to grow, that's growing, that's super valuable and it's high. A high gross margin. Other thing that's really hard that I haven't done really well and it's shrinking. How do I grow that one?
- [21:31]
Piers
Yeah, yeah.
- [21:32]
Alex Hormozi
I mean.
- [21:32]
Piers
Yeah, yeah. And I think this is probably like a natural. Like, we know that the best, in our mind, the best product is the membership, because that's where they really get the best of us. And we feel like that's what's going to make it take it to 50 million. Whereas the brand stuff is going to be holding us back.
- [21:48]
Alex Hormozi
Think about the amount of like, how many $50 million golf coaching businesses do you know of?
- [21:55]
Piers
No one.
- [21:56]
Alex Hormozi
Right. How many media businesses? I'll tell you more than that. Yeah, yeah. And golf is an awesome niche. Huge spenders. It's One of the few things men spend money on. Yeah. No, seriously, it's making more money. Cars, watches, below the belt, above the belt. Right. And then, and then you've got like golf and shooting and then like prepper stuff. That's guys, that's it. But we earn a disproportionate amount of money.
- [22:22]
Piers
Yeah.
- [22:22]
Alex Hormozi
And so like you are one of the outlets that men spend money on a consumer in a big way.
- [22:26]
Piers
Yeah.
- [22:27]
Alex Hormozi
Helpful. Thank you. To make you feel better, just for everybody, I'm not really talking to you, I'm talking through to everybody else. So there's this great Yiddish thing that I say all the time and I really like it, which is your nose is a ninja above your mouth, but it takes somebody else to tell your breast smells bad. And so sometimes one of the biggest benefits that we have with the portfolio companies, like all the portfolio companies, like they're good CEOs, like they're smart dudes in due debts and they're intelligent people. It's just like that's what outside eyes can do. It's just like, oh really? Growing thing that has high margins and high enterprise value thing that we're struggling with and not paying attention to that we think is more valuable and isn't and going down and has and is less scalable. Yeah. Yeah.
- [23:03]
Piers
Thank you. Yeah, thanks.
- [23:05]
Alex Hormozi
My name is Brian Hopkins. So we sell micro development housing to investors. Micro development. Okay. Yeah. So infill housing. We do 46 million in revenue, like to get to 500 million. Cool. If possible. And our bottleneck is scaling capital and our team structure. So they rely heavily on myself and my business partner to do the fundraising, not to do everything. Basically. Yes. Fundraising is what we'd like to focus on. Heard. Okay. And so, so question is, how do we get Sharon to join us as a GP in our fund? Yeah, that was good. But our question would be is how do we attract high net worth individuals without using our personal network? Just talk to me. I mean you, you have a, you have a number of paths, right? One is somebody go, go to somebody already has the, has all those people. Right. Option one, that's the affiliate model. You could run paid ads and say, hey, this is my experience, it's my background. If you're an accredited investor, check this out. Or you could be making content, which I don't know if you are doing that on a regular basis. You could be making content or you could do the outbound method. But like those are fun. Like those are the options, right? There's only, there's Only so many ways to get, like have people find out about your stuff. I mean, that's it. Like going to trade shows, I still kind of put into like you pay somebody else to gain access to their audience. Same, same, same idea. But those are the, those are the different paths. We have a really good kind of like playbook for, for. Because what you, what you're looking for is kind of like high end. It works the same as an enterprise sale. Even though it's a, it feels different or like it, it quacks different, it, it's actually still the same process. And I think that if I had to, like, if I had no money, no everything and I had to start now and I was switching places with you, I would probably hit the conference event stuff because that's where it's just super high leverage. You typically want to be face to face with investors. They, I mean, not you don't want to, but you can. And it's just like the speed to trust is so much faster. Yeah, we have a whole playbook around that. But you should. More than I can share right now in terms of time for everybody else. But I think if I had to pick one of those paths, that's probably the one I would start with. Unless you had some like, background in like media buying or some other. Yeah, that's what I would do. Yeah.
- [25:12]
Ashley Brock
My name is Ashley Brock and I sell advertising training to business owners. So all paid ads. We'll do five or six million. I'm optimistic. So we're going to go with six because it sounds better.
- [25:22]
Alex Hormozi
I like five or six. Okay.
- [25:23]
Ashley Brock
Okay.
- [25:23]
Alex Hormozi
Yeah.
- [25:24]
Ashley Brock
I would like to be at 50 million. Obviously not this year. What's stopping me is my capacity for.
- [25:30]
Alex Hormozi
Sure.
- [25:31]
Ashley Brock
And so my question is, after hearing today that you spend 80% of your time on content, I'm trying to figure out what are the only things that I should do for me and then what should I delegate? I don't have anybody that I pay more than a hundred thousand, so that's one thing I feel like I'm missing out.
- [25:46]
Alex Hormozi
What are your margins?
- [25:48]
Ashley Brock
My EBITDA.
- [25:49]
Alex Hormozi
I know, yeah, sure. 2.5 on 5. Mm, that's great. That's amazing. Yeah, it's super good.
- [25:55]
Ashley Brock
I was excited yesterday.
- [25:58]
Alex Hormozi
That was the best reaction. So here's. So the. So you're. I wanna, I wanna answer your question with a perspective shift. So you are now getting to the point where you have enough money, where you have to start thinking about return on capital. Right. Return on invested capital within a business. And so if you have two and a half million dollars, right? You can think of that as like, okay, well if I take that outta the business, which you would. Cause I'm sure it's an LLC or whatever, right? So it's like, okay, so I've got call 1.5 million after taxes that I can put in my pocket, which there's nothing wrong with that. I'm a big fan of putting money into pockets. The other way of thinking about it though is like, okay, well what if I were to take 200,000 of that and I take my taxable from 2.5 to 2.3 and then that $200,000 person, it makes me an extra million. And so that's where I think I still believe that the biggest arbitrage opportunities that exist right now in business are still in talent. And I can tell you right now, I'll tell you a story. Cause I think it'll drive it home. And I'm talking through you to everybody else. So the moment, like my, the best talent, one of my, one of my favorite people on earth. See here, Sean here, one of my favorite people on earth said, said this to me and I've always remembered it since. He said, he said, your best talent is always in the future. So right now think about the people who used to work for you like five years ago. Can you think about that team right now? Could that team run your business right now? They would die, right? And you would die too. And so the thing is that there's five years ahead of you, looking back today on your team who feels the exact same way. And so my goal is how do we shrink that gap as fast as we possibly can so that we can pay down your talent debt. Because right now that's what your debt is. So basically you're choosing to make more money, but you're paying by making more money. You're increasing your debt for humans. And so businesses can incur lots of different types of debt. And whenever you start a business, you always incur debt. The question is which type of debt you want to incur. You can do financial debt, you borrow money and then you start the business. But maybe if you borrow money, you can hire people that you otherwise couldn't hire. And so you don't incur as much talent debt or as much management debt. You might incur technical debt. Okay, I don't have a CRM, I don't have data. Some of the constraints we talked about earlier, right, like that might be some of the debt. And so there's different types of debt that you can incur. You have talent debt. And so the goal would be, especially because you're in a service based business, your business will be capped for sure by the culture that you keep, which is going to be on you and the people that proliferate. That culture is the people you attract. And so if you want to grow this business, which is all based on service, it's all based on people. And so you have to bring people that you've got to be like, if you're not paying more than $100,000 a year, it's 100% you who's making this happen. Which is kudos to you for being skilled. On the flip side, though, it doesn't have to be that way. And you would be amazed at the talent that you can get when you crack. Like, you might want to just jump to 250,000 a year and you'll be like, oh, my God, these people are so much better. And what's scary is when you pay someone 500,000 a year, you're like, oh, my God, this is a totally different level than you pay someone a million dollars a year. Like, holy shit, I didn't know people could. They made people like this. Right? And then eventually you get people, you know, like Sharon, and you're like, he's. He's just. He's just better than I am, you know, and maybe someday I'll convince Shiron. Right. And so the point is, like, you just want to find people who are absolutely unreal. And the litmus test that I have is that you feel this, like, desperation in your core when you talk to them. You're like, I have to have this person. It's not like, oh, I have this role. This person seems like a pulse and not a moron. I guess this is the least bad of the 10 people I've talked to. I would encourage you if you're ever in that situation, this is the least bad. Just don't. Just keep, keep looking. Like, we will keep. We will keep a role open for weeks or months if we do not find the person. And so we are always actively recruiting and we have a lot of flow. And so you guys got to meet the team this morning to have a little bit more context. Smart people very good at what they do. But in order to do that, like, those people do not cost $250,000 a year. They're significantly more than that.
- [29:53]
Ashley Brock
Yeah. I've told myself up until now that I'm saving money by paying less. And you're right. It's like costing so much more.
- [29:59]
Alex Hormozi
Yeah, it's. You are, you're always paying. This is what you're paying. You, you pay with the thing you care the least about, so.
- [30:05]
Ashley Brock
Good. Thank you.
- [30:06]
Alex Hormozi
Yeah, you bet, you guys.
- [30:07]
Andrew LeBaron
Andrew LeBaron. I convert motels, hotels to apartments, extended stays crosses in both states on track for 14 million revenue this year. Small EBITDA 2.1 net real estate high. OPEX would like to be at around a 30 million.
- [30:24]
Alex Hormozi
Do you have LPs or you fund it all?
- [30:25]
Andrew LeBaron
Yeah, we have a reg D560 fund. We partnered with a key man who's now kind of key man, risk, good friend of mine, Richard Wilson of Family Office Club. What I want to do next is create a hotel brand.
- [30:39]
Alex Hormozi
Okay.
- [30:40]
Andrew LeBaron
Specifically on the adaptive reuse side.
- [30:43]
Alex Hormozi
Okay.
- [30:43]
Andrew LeBaron
Because you have all these empty, garbage, crappy hotels, motels, and they don't want to pay. The pips, that Marriott Hyatt Radisson want them to pay. So I can come in and say, look, I'll take over. I'll take care of all your operations. Don't worry. I figured all that out. I'm on my umpteenth property.
- [31:01]
Alex Hormozi
Sure.
- [31:01]
Andrew LeBaron
Here's what I just need you to do. The issue with that is I'm battling a lot of other buyers and it's hard to get in. It's hard to be the first guy that sees the deal. Right. The gatekeeper of these properties or brokers, agents. So that's what's stopping me. I, I believe I know what I need to do, but I, I, I need a little bit more validation, get over my analysis paralysis. But I believe I need to be that thought leader in this space. And if I, my thought is, if I am the thought leader in this space, they'll kind of come to me. You know, before the key man was raising all the capital. Well, now I'm raising all the capital.
- [31:36]
Alex Hormozi
Okay, when you say they'll come to me. Who?
- [31:40]
Andrew LeBaron
Those who have hotels, motels that want to convert them into apartments where I can buy.
- [31:44]
Alex Hormozi
Not the investor side, but the actual.
- [31:46]
Andrew LeBaron
Yeah, I need pipeline, okay. Correct. I need a pipeline.
- [31:49]
Alex Hormozi
Okay?
- [31:50]
Andrew LeBaron
Pipeline problems all day long for me. So I feel if I have a channel or some sort of content distribution, and it's a blue ocean strategy, in fact, there's only one other guy in here that's actually doing something similar to me. I don't know where he's at, but I just spoke to him.
- [32:07]
Alex Hormozi
There he is.
- [32:08]
Andrew LeBaron
You're on his podcast. So that's what I believe. And I Kind of want that validation.
- [32:14]
Alex Hormozi
Well, I'll zoom out for a second before giving the immediate, like, cool. Which is the problem that we're solving is just deal flow. Right. And so kind of like I was saying earlier, like, thought leadership is a path. It doesn't have to be the path. If it's the path that you want, cool. But when I think about this, I think about basically what is the, the highest reward, lowest risk way of accomplishing whatever the problem is. Right. And so for you, if, or if I'm picking for anybody, it's like, what is your existing skill set and what has the highest overlap with that skill set? So that I have the highest likely that's going to work. So if you were like, you know what? I've done face to face forever, that's why it's like, oh, you know what? Let's, let's, let's do the conference strategy as a good strategy for the fundraising. If you're like, I understand media, I like social media, I want this deep inside my heart, then I'd be like, well, I'm not going to stop anyways. You're going to do that anyways. So go do the quote, thought leadership and make content. If you had a, if, you know, if Ashley was here and she was like, you know what, we're going to, I know how to run ads for you. Then if that was your background, they'd be like, well, let's just run the paid stack. So you could absolutely run an ad that just says, hey, if you're a motel owner and you're looking to sell, I'd love to talk to you. And you can just generate leads that way. It works fine. Like I was looking at, I wanted to do a deal in the payment processing space like a year and plus ago, maybe some of you guys saw this, but like, I ran ads just for like, hey, payment processors doing between 30 and 300 million a year. Like, hit me up if you're like interested or whatever. And I think we had 13 qualified companies for $6,000 in spend, like on the phone, which is absurd, right? If you think about it from a deal flow perspective. And so I only say that this is going to be worth explaining. We have our big prize and let's assume that it's money for the sake of this conversation. There's going to be this way and then there's going to be this way and then there's going to be this way. All of them get up the mountain. And so I think where the quote analysis paralysis kicks in is that you're like, which one is best? And I call it the fallacy of the perfect pick is that you think that there's a perfect pick and there just isn't one. There's trade offs on all of them. Like you're going to be in the. Where you get in trouble is where you. Well, there's two big places you get in trouble. One is here at the base of the mountain, trying to figure out which one to do. And then you spend a year there when a year on any of them. On the low side, you could have been here on a year here versus a year here. You could have been up the mountain further than you are here just because you waited. And the thing is is that the longer you the wait, at some point you would have literally got to the top of the mountain on any of them. But the waiting was the cost. The second part where you get in trouble is here or here where you're like, you know what? This other path, you know, kind of looks a little bit different than this one. And it looks like that one also goes up the mountain and that one looks less steep. So then you go over here, but you're like, shit, this one's less steep, but it's slower. Or you're on the other one that's slower and you're like, but this one's more steep. And then you get there, you're like, shit, this is way steeper. And so there's always trade offs that happen in any of these paths. But if you want to be a, you know, a thought leader, just. Just recognize that it's gonna take time. Like I would say, give yourself 18 months before you determine whether or not this is a good idea. And you have to commit to that. Like When I started YouTube, the vendor that I had, he made a video about it. The first call I had, I said, I'll do this for 10 years and if after 10 years it's not working, I'll stop. And he was like, in my entire history, I have never heard anyone say that. He's like, it's all like, how do I get leads in 90 days? And so the fact that you're in a business that is capital aggregation and you're in your, like, you probably do have a longer time horizon anyways, just on the nature of the business. But I would encourage you to, if you are going to do the quote, thought leadership thing, stick to what you know. Don't try and be the next Gary Vee or the next me or the next whatever because like, you're not going to beat me at being me, but you will beat me at being you. And so I would just like only talk about the things that you have the track record for and that will necessarily narrow the content that you talk about. But the thing is that social media, you've probably heard this, has shifted to probably interest based media now with interest graphs with the algorithm. And so if you want those types of leads, you have to make that type of content. And the thing is, the algorithms are getting so good. If you look at my Discover page, it's just metal fabricators. And I was going to say gym equipment. So it's gym equipment too. And comedy, those are like, that's what I consume. I consume gym shit, gym equipment and I consume comedy. That's, that's my whole thing. And the thing is, is that metal fabricators are notoriously bad advertisers. And so on my Discover page are like 13 like videos of metal fab guys being like, look at this cable accessory I just welded. I'm like, this is cool. It gets served to me because I'm that audience and I'm a, I'm a great lead to have for that stuff. But like, just don't be afraid if you see, you have like a hundred views. I see tons of videos have 100 views, 200 views, 500 views, and I'm exactly who they want watching. And so if that guy, that metal fab shop guy was like, you know what, you know six things about marriage. I'm like, I don't fucking care. Like, why do I care? Why am I listening to this guy, right? I, I just want to buy metal, metal stuff. So just show me the metal stuff. And so I would just say like, if you are going to do the motel thought leadership stuff, stick to that. Awesome. Thank you. Yeah.
- [37:11]
Sherry Salt Formaggio
My name is Sherry Salt Formaggio and I am the CEO for St. Charles Surgical Hospital and the center for Restorative Breast Surgery, which is the professional side of the practice. And we have a physician and hospital licensed, 39 beds. What we do is breast reconstruction for cancer patients. And we also do genetic testing and we do prophylactic. 50 to 60% of our patients come from out of state, not the country because we're the only ones in the United States that can provide every type of reconstruction there is. So we, our biggest. Her revenue right now is about 57 million where we, our goal is to grow at least 20% of new patients per month.
- [38:02]
Alex Hormozi
Okay.
- [38:03]
Sherry Salt Formaggio
Per month on first stages and then on second stages. There's two parts to the procedure. We meet the goal. We meet the goal all the time for second stage.
- [38:14]
Alex Hormozi
So you want to forex this year. I just want to make sure I understand the question here. So you're saying you're growing by 20% a month or what?
- [38:19]
Sherry Salt Formaggio
That's. Our goal is to go 20% per month on the second stages. We are on the first stages, we're basically flat. We're keeping our same number. We want 20% new patients per month.
- [38:34]
Alex Hormozi
Okay.
- [38:35]
Sherry Salt Formaggio
On first stages.
- [38:36]
Alex Hormozi
Okay, so your second stage is growing.
- [38:38]
Sherry Salt Formaggio
Second stages, we have no problem. We're growing. We're absolutely.
- [38:42]
Alex Hormozi
So can people go directly into the second stage?
- [38:44]
Sherry Salt Formaggio
They, they have the first stage procedure and then they can have the second stage within, within 12 months.
- [38:52]
Alex Hormozi
The second stage reconstruction.
- [38:54]
Sherry Salt Formaggio
The second part of the reconstruction where they do the tweaking, the liposuction and so forth.
- [39:00]
Alex Hormozi
So it's like kind of plastic synthetics a little bit.
- [39:02]
Sherry Salt Formaggio
Well, it, it, it's, it's all covered by insurance and it is, it's not something that women one, but they have. So of course we, we do the whole nine yards to make them feel good, look good as they were before.
- [39:18]
Alex Hormozi
The second stage, you have no problem.
- [39:20]
Sherry Salt Formaggio
The second stage is we're not having a problem with. We're getting those in right away.
- [39:25]
Alex Hormozi
And they go straight in from other people who did the. They did stage one.
- [39:28]
Sherry Salt Formaggio
I'll be honest, a lot of second stages to come in from people that will botch from other surgeons.
- [39:34]
Alex Hormozi
Got it. Okay. So like separate front ends of the business, right? So I'm gonna draw this because. Just wanna clarify it. So you have two front ends of the business. You've got in on stage one, and then you've got in on stage two. And then some people go from stage one to stage two, right?
- [39:51]
Sherry Salt Formaggio
They go from one to.
- [39:52]
Alex Hormozi
So this, you've got lots of people, you know, an unlimited amount of customers who are going straight to there. And then this is just flat in terms of growth. Okay. Is there a problem with this just growing like crazy and this not growing just out of your.
- [40:05]
Sherry Salt Formaggio
Well, stage two grows. We, we do accommodate everyone. We. So if we have to work on the weekends, we keep the hospital rolling. We have seven huge OR rooms. We keep them going constantly.
- [40:17]
Alex Hormozi
That's the problem that this solves. Why is this a problem?
- [40:20]
Sherry Salt Formaggio
Our problem is that we want the first stages, which is the biggest money generating for our patients. In December of last year, in two weeks, we did 122nd stages in two weeks. The thing that is stopping Us right now in the practice is that we're getting patients, we got 100, 700 and something leads in one month. We're getting the education calls. We're doing that. Where it becomes a bottleneck, is that the insurance company. We're only in network with two insurance companies. We're out of network. So that's where it becomes a problem.
- [41:05]
Alex Hormozi
So do you have a Legion issue or do you have an admin backend issue?
- [41:08]
Sherry Salt Formaggio
Well, we have a backend issue, meaning they come in, we educate. All that goes fine once they get their benefits and they realize what the out of pocket is. We try to help them, we give them grants and we do financial aid forms. But it's still with the insurance companies, it's still a lot of money coming out of their pocket. The caveat to this is that we did open up an office in the Dallas area. One of our physicians moved to Dallas.
- [41:37]
Alex Hormozi
What can I help you with?
- [41:38]
Sherry Salt Formaggio
What I need you to help me was to figure out how I can on the back end. We're looking. We think we need a closer. How do we close the deal to actually sit with all these patients that are having issues because they have no out of network benefits or the money is too much out of pocket.
- [41:58]
Alex Hormozi
So I'll one up you.
- [41:59]
Sherry Salt Formaggio
We need. And that is something that we're trying to look at. Is it something. Do we hire some a salesperson because they can sell.
- [42:07]
Alex Hormozi
I have an idea.
- [42:08]
Sherry Salt Formaggio
Or do we hire someone who is in healthcare that can also. We train to sell couple things.
- [42:17]
Alex Hormozi
So first off, I, I would. I'll one up you, which is that you're thinking about this as a who. When I think this is actually. So you've got some things that are people solutions and other things are process solutions. Right. And so you have a process solution. You need a sales motion. So it's the entire thing. Because if you have a properly designed sales motion, the front desk girl could do it. I know. Cause I designed these for businesses like you absolutely can. And so what that'll do is it'll actually make it much more scalable because you act, it'll. It'll decrease basically a sales motion. So if we think about a sales process, which we'll talk about in a second. But if you think about a sales process as there's a certain amount of information that a customer needs to understand in order to make a purchasing decision. Right. You can have somebody come in cold and then you have a superstar closer that's supposed to be a star. There we go. Who can take Them all the way cradle to grave and get the money. The less distance they have to travel, the less rare this is or the more common this is. And so could you. This is kind of like a ways up the mountain thing. Let's say this is your star closer, this is your healthcare worker, and maybe this is your sales process. All of these will get you up the hill. And so the question of like, which one should I do? All of them will probably work. The question is which one is the highest likelihood of working given your existing skill set. And so you can design a sales motion. That's option one if that's within your skill set. Option two is you can hire a closer, assuming you know how to attract them and what to look for. Number three is that you could go for the, the, the healthcare person, get them quote trained up, which then you would try and find somebody who has a kind of a hybrid. They have the personality type of somebody who's a closer, but chose a nurturing career, which doesn't always happen. Killers don't tend to be nurturers. Any of those would work. But I think that long term for the business, the sales process or sales emotion is the thing that should get fixed first because it'll decrease the need superstars to make the whole business work. And so that's how I would approach this from a strategic perspective of solving the problem for the business. And so that comes like the problem that you brought up of like basically they're getting sticker shock, right? That's the issue. You have a conversion problem. And the thing is this is so easy to solve. It's like, okay, so what information they need prior to walking in, how can we pre frame this or reframe this? And like, is there a way that I can say, hey, some people pay $20,000. If you could have your life back, would you be willing to do that? If we had financing options. Now to be clear, insurance will cover some of this, maybe it'll cover all of it. But we like to be upfront that this could be how much it is. Even just having that step in the sales process will reframe how they perceive everything else. And if you also know as people coming in the door, we work with plenty of healthcare companies is like, we can qualify those leads ahead of time before they come in for the information sessions. We'd say what, what insurance do you have? All this stuff so that when they come in, we actually already know that Cindy's got blue cross for sheet or whatever she's got, right? And so we actually already have everyone pre approved and we already know their limits. And so when they're coming in, we can say, hey, on the left side of the room, you guys are fully covered. You guys in the middle, you guys are 50, 50, y' all are fucked. And so all out of pocket, whatever. And so then you can also start catering the messaging to each of those audiences. And maybe instead of doing one information session, you do three. And one is that way you're like, okay, these are all insurance people. I can talk to these people differently. These people, we have to pre frame the down payment because they're gonna have to pay some out of pocket. But we can run that by collecting information prior to even doing the education. Again, all of this is just looking at what is required to sell somebody and then putting all of that front loaded so that you only have the people who are the highest likelihood candidates of doing the procedure that are gonna be expending that you're gonna expend resources on nurturing. Because otherwise every single person that you spend resources to educate, who does not buy, you lose money on. And so if we can, if we can triage that up front, we can save all of this extra money that we're wasting on these people. Worst case, you just say, hey, let me just refer you to five different people. And then you can basically kick up an affiliate program with some other people. I know the wording's different for healthcare, but like we'll start referring you patients. And when you refer other people patients, they tend to refer you patients too. You refer the ones that you can't take care of based on how you, how you bill and there are other places that can't. And so you can start sending them that way and then you start getting more type ones in the door from that. So again, this is a sales motion issue. Like the short term band aid is we have to find a superstar. But I almost never try and think, oh, the way to solve my business problem is find a unicorn. It's like, sure, because everybody here could solve whatever business problem you have by finding a unicorn. I don't have, like, where's my deal flow guy? Actually, we do deal both of you guys. So it's like, how do I, like how do I solve that? Oh, just find a unicorn. Done. Just find somebody who just goes and gets all those things. It's like, well, of course we can do that. But that, but then as soon as that closer walks away, you're screwed again. Right? So I'd rather build the process, build the Motion. So that I can have anybody with a pulse still walk through six questions with somebody that we can even have on an iPad that even does the decision making for them. And then it says, which way would you rather prefer to pay? Does that make sense? That's how I'd approach it.
- [47:19]
Sherry Salt Formaggio
Thank you.
- [47:20]
Lucas
Hi, Alex, My name is Lucas. I have a portfolio company in Brazil.
- [47:24]
Alex Hormozi
Portfolio company, yeah. Okay.
- [47:26]
Lucas
14 invested business.
- [47:28]
Alex Hormozi
Okay.
- [47:29]
Lucas
Last year we did 110 million in re ice, which means like divided by six. Yeah, yeah.
- [47:37]
Alex Hormozi
Way to anchor though. It's good. Yeah. And multiply by six and then divide it by six. You're good. Okay.
- [47:44]
Lucas
That's real.
- [47:45]
Alex Hormozi
That's true.
- [47:45]
Lucas
But I live in Rei.
- [47:46]
Alex Hormozi
No, you're good. Do you own. Do you own 100% of all of them?
- [47:48]
Taylor Herron
No.
- [47:49]
Alex Hormozi
Okay.
- [47:49]
Lucas
We have like a minority. That's one part of my question.
- [47:52]
Alex Hormozi
Yeah, it's going to suck. Okay, keep going.
- [47:55]
Lucas
This year we are aiming for 200 million reais and we. I always thought it was a smart move to have the minority because I have the founder alignment.
- [48:08]
Alex Hormozi
How do you feel about that now? Yeah, yeah.
- [48:13]
Lucas
It's good and bad. It's good and bad because we can grow really, really quick, but we don't have like different inside leaders for each area. Like you do like the sales, the HR and the things like that. Do you think that structure could work for smaller business? Especially when we have like 20 or.
- [48:33]
Alex Hormozi
30% of the share centralizing services for those companies?
- [48:39]
Lucas
No, not service like you do here. You have like the special team to help this.
- [48:44]
Alex Hormozi
Like, could you or should you do that? Yeah, no, it won't make sense. No.
- [48:48]
Lucas
Financially, economics.
- [48:51]
Alex Hormozi
They'Re not big enough to afford the talent that you need that you like. The talent of this team would eat up 100% or more. You'd literally be losing money. And then you have to really bank on the fact that you can exit these positions. But given the fact that those positions are small and super illiquid, that would not be a bet I would make.
- [49:06]
Lucas
Okay. And mostly of our companies are in info products, so online courses, mentorships and things like that. How would you protect this type of business? Consider AI. I think we're already seeing that the persons are not wanting to learn. They want the answer. So how would you actually protect this?
- [49:27]
Alex Hormozi
I wouldn't.
- [49:28]
Lucas
You wouldn't protect.
- [49:29]
Alex Hormozi
I would try and make as much as you can and look for a different vehicle.
- [49:36]
Lucas
Okay, thank you.
- [49:38]
Taylor Herron
So my name is Taylor Herron. I run a very high volume cold email agency. Basically, we work with a lot of B2B SaaS, companies that have TAMs over at least 10 million users or B2B service businesses that have LTVs over like 50 grand.
- [49:54]
Alex Hormozi
Right.
- [49:54]
Taylor Herron
We're good at the meeting. Pathway and also a PLG pathway with SaaS.
- [49:57]
Alex Hormozi
Okay.
- [49:57]
Taylor Herron
I currently do 2.2 million. I'm pretty sure I can take it to 10 million within the next like year or so. Primarily because. Because I think I know what to do next based off of this weekend, even before here, a lot of stuff like that. So if anything it'll be interesting to just hear you criticize. Maybe what I think I should do.
- [50:15]
Alex Hormozi
Right.
- [50:16]
Taylor Herron
So we got to 2.2 by the having like $10,000 a month retainers. What we're doing is switching to performance models at scale where it's like, hey, let me understand your ltv. We'll do a third of. We'll charge a fee roughly equal to. We'll make sure your CAC is a third. Okay, maybe that needs to be different, you know, but that's the idea. Switch it to 5K. So it's really easy to close because most people, we tell them five. It's really easy for them to hop into the funnel and just go, yep, let's try this out. And then we have performance setup on the back end. The advantage is that like systems that will break, I think private data and analytics to be able to actually know what properly to do for each client at that type of scale. Because some of our clients will sound like 10 plus emails a month written with AI. One to one.
- [51:11]
Alex Hormozi
Uh huh. 10 plus or like 10,000.
- [51:13]
Taylor Herron
10 million.
- [51:14]
Alex Hormozi
Okay. Yeah, got it.
- [51:15]
Taylor Herron
Per month. Yeah.
- [51:16]
Alex Hormozi
So this is so interesting. So like the fee sounds wildly underpriced. Like if you're sending 10 million emails and you're charging $10,000. That sounds absurdly low.
- [51:27]
Taylor Herron
Yeah, I would say we started to get them in and we'll send a hundred thousand test message market fit the second we find the multiple. That or we go cool. I know If I target SaaS founders with this message, there's 800,000 of them. If I hit that list, I'll sign up 601. We can crank it that way.
- [51:45]
Alex Hormozi
Right.
- [51:45]
Taylor Herron
So it's almost to get them in there where we have the.
- [51:47]
Alex Hormozi
Is the biggest issue. You're running out of lists?
- [51:49]
Taylor Herron
No.
- [51:50]
Alex Hormozi
Okay.
- [51:50]
Taylor Herron
No. Because basically it's like let me email your entire team every two months.
- [51:53]
Alex Hormozi
So what else, what else do you think is going to be the, the biggest problem with this model?
- [51:58]
Taylor Herron
Keeping clients honest, potentially on collecting. If it's based off of percentages or whatever it may be. Which is where I also think it's maybe like a systems problem in that I need to have proper integrations to their CRMs to keep them honest, which maybe I need to acquire or like get the right developers or something like that to be able to do that better. What stands out?
- [52:23]
Alex Hormozi
Yeah, so the, the problem that I would foresee is the one that you just brought up, which is what I was hoping to get to. Whenever you switch to performance, performance is always, always the best model on paper, not always the best model in practice. And it's strongly predicated on the quality of the prospect. So if you have enterprise customers who are basically who have obligations and have assets and have shit to lose, they tend to follow and adhere to their contracts smaller, even sometimes medium business owners, less so in a. Are you usually okay? Yeah. And US contracts mean basically nothing. And so all of these things are kind of like stacked against you. And Alan was a performance basis model. So I like very much understand this business now. We were able to do it only because I controlled the flow of payments.
- [53:12]
Taylor Herron
I got paid and then give them remitted part.
- [53:18]
Alex Hormozi
So yeah, you always want to control the money flow if you do performance or you have to have absolute transparency. So like you run the Shopify store. That's why Shopify agencies can do performance. So a lot of email marketing for Shopify, they do performance percentages, you know, using Klaviyo and whatnot. And that model works great for them because the tracking's clear. And most people, no one's going to start a second store to try and cut you out. Brick and mortar. Guy walks in, he didn't show, guy closed for 50 grand. How do you know? Unfortunately, you set up an incentive system that incentivizes them to cheat you. And if they have to cheat them or cheat you, they will cheat you. So I'm not a huge fan. I would prefer to just factor in basically scaled based on what you know. The ROI is roughly to kind of like a North Star metric, which might be, you know, for every million emails, it's this. And you might have to just do that custom up front in terms of like, okay, based on your customer, based on your avatar, on your segment, this is the rate. I'm not the biggest fan of custom pricing, but based on the model that you have, it might make sense given you probably have fewer customers that are worth more. I'm assuming. What's your churn?
- [54:32]
Taylor Herron
Probably 30% or something like that. But also I've changed my Offer? Yeah.
- [54:38]
Alex Hormozi
Okay.
- [54:38]
Taylor Herron
Yeah. Annually I've changed my offer enough to where it's kind of hard to be like what's the actual churn on the current offer? But yeah, okay.
- [54:44]
Alex Hormozi
Why do, why do people leave because you charge nothing?
- [54:47]
Taylor Herron
Well, we used to charge 10ks flat to be like, here's how many emails we'll send.
- [54:51]
Alex Hormozi
Right.
- [54:52]
Taylor Herron
Most of the time when they would leave, it wouldn't be because of performance and because their offer, when we weren't able to find a good offer message, Message market fit for them, essentially.
- [55:01]
Alex Hormozi
Right. Have you been able to separate cohort churn as in like first three months versus three months plus?
- [55:06]
Taylor Herron
No.
- [55:06]
Alex Hormozi
Okay. So I would consider deposit having a two, two part structure where you charge a one time fee that's significantly higher up front but has zero recurring to do the one thing which is we're going to find message market fit. After that you solve that problem. You say, hey, if you want you can go send 10 million emails a month with this messaging. And they'll be like, well, we don't know how to do that. And you're like, oh, that's crazy. You know, we do that if you want. And then you can say, let me introduce you out other tier of pricing. And that might be a best of both worlds model. And you will be astonished by the way at how much easier it is to sell a one time thing versus an ongoing thing.
- [55:43]
Taylor Herron
Interesting.
- [55:44]
Alex Hormozi
I wonder, like you can double or triple close rates from a $1,500 a month membership to a $5,000 one time upfront. You can triple close rates at triple the price.
- [55:54]
Taylor Herron
Yeah, for sure.
- [55:55]
Alex Hormozi
Which is a no.
- [55:56]
Taylor Herron
Does it, does it change your thought process at all when like the like monthly reoccurring we've been able to achieve with these performance models and huge tams. Like we're billing some clients like 75 or like a hundred grand a month all of a sudden.
- [56:09]
Alex Hormozi
Right. But you said you did 2 million.
- [56:11]
Taylor Herron
Yeah, because the reason I got this idea for the performance is because we got a whale. I was like, holy shit, where'd you get in a hundred bucks?
- [56:18]
Alex Hormozi
So we said some customers, there's one.
- [56:20]
Taylor Herron
Customer we just closed another upsold them into performance and we start like this month.
- [56:25]
Alex Hormozi
Okay, so you have one customer who's doing the big whale thing. Yeah, I'm not trying to, I'm trying to understand.
- [56:29]
Taylor Herron
Yeah, yeah, of course.
- [56:30]
Alex Hormozi
Okay, so.
- [56:32]
Taylor Herron
So there's one there. It looks promising.
- [56:33]
Alex Hormozi
To go back to what I said earlier. If you have enterprise customers. Cool.
- [56:38]
Taylor Herron
Yeah.
- [56:38]
Alex Hormozi
Where you feel safe about it because I'm using the data you give me. So if you say, I'm doing 2 million a year, we're charging $10,000 a month, I'm going to back back a napkin and be like, okay, they got 20ish customers and if they're paying $10,000 a month and sending 10 million emails, it doesn't make any sense. But okay, let's keep going beyond that. It's like, okay, well, if they've got 20 customers at that price point, they're probably low. They're SMBs. They're not, they're not even mid market. This whale is mid market. And if you had said, hey, we only deal with businesses that are doing over 10 million in ARR and are venture backed or whatever the criteria are that I would say I have high confidence that one, they can pay and two, that they even track, then I would have much higher confidence in saying, yeah, go forward on the performance model. But the biggest risk that you're paying down is that they don't pay you.
- [57:21]
Taylor Herron
Yeah, yeah, yeah.
- [57:22]
Alex Hormozi
That's the risk.
- [57:23]
Taylor Herron
Basically. If you have high confidence of the payment, then the performance make a lot of sense.
- [57:27]
Alex Hormozi
I mean, I would do $0 up front. I don't even care if I know that I can get paid. I'm all in. I just got to know that I can get paid.
- [57:34]
Taylor Herron
Yeah, that's totally agree.
- [57:36]
Alex Hormozi
That is the biggest hinge in this thing.
- [57:37]
Taylor Herron
That's like the biggest risk going down that path.
- [57:39]
Alex Hormozi
Yes.
- [57:40]
Taylor Herron
You're just status.
- [57:41]
Alex Hormozi
You solve that, you solve the business. Yep. That's the. That is the whole business. You solve that, you solve the business. Yeah, exactly.
- [57:47]
Taylor Herron
Own that channel.
- [57:48]
Alex Hormozi
I built a software easy to do, like. I get it.
- [57:50]
Taylor Herron
Yeah, exactly. That makes a ton of sense.
- [57:52]
Alex Hormozi
Yeah. Because I was going after small guys, so I had to. Yep. Thank you. Yeah, you bet. Rock and roll.