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How To Raise Your LTV | Ep 823

The Game with Alex Hormozi

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Published: Fri Jan 10 2025

Summary

Podcast Summary: The Game with Alex Hormozi – "How To Raise Your LTV | Ep 823"

Release Date: January 10, 2025

In Episode 823 of "The Game with Alex Hormozi," host Alex Hormozi delves into strategies for increasing Lifetime Value (LTV) of customers. Throughout the episode, Alex interacts with various entrepreneurs facing unique challenges related to customer acquisition, retention, and revenue optimization. This summary captures the essence of these discussions, highlighting key insights, actionable advice, and notable quotes from Alex, complete with timestamps for reference.

1. Introduction

Alex Hormozi sets the stage by emphasizing the critical role of LTV in scaling a business. He underscores the importance of balancing Customer Acquisition Cost (CAC) with LTV to ensure sustainable growth and profitability.

2. Caller Discussions

a. Lorianne’s Personal Finance Coaching Business

[00:00 – 05:50]

Business Overview: Lorianne runs a personal finance course and coaching business targeting women, boasting a revenue of $30 million. Her primary challenge lies in optimizing her CAC to LTV ratio, where her CAC is excessively high ($1,500), and her LTV remains low ($2,400). Additionally, her Average Order Value (AOV) on the front end is insufficient.

Key Challenges:

  • High CAC and low LTV
  • Low front-end AOV
  • Reliance on paid Meta ads directing to free webinars
  • Inefficient outsourced sales team resulting in a mere 7% upsell rate

Alex’s Advice: Alex recommends bringing the sales team in-house to exert better control and influence over the sales process. He outlines a structured sales funnel involving multiple touchpoints:

  1. Webinar Purchase: Initial engagement through a free webinar.
  2. Onboarding Call: A group session to confirm commitment.
  3. Goal Setting Call: Identifying client goals to qualify leads.
  4. Closer Call: Finalizing higher-ticket offers.

Notable Quotes:

  • "Your LTV is too low. You will probably have to bring the sales team in house if you want to really fix it." [02:21]
  • "You need to hire one person, a really good sales director, and then you hire six recruiting firms..." [04:11]
  • "If you have a cash flow issue right now... you can just spend less and improve the returns." [05:08]

Actionable Steps:

  • Integrate sales ascension into the onboarding process.
  • Implement Buy Now, Pay Later (BNPL) options on the front end.
  • Split test webinar introductions to optimize engagement.
  • Increase upsell rates from 7% to at least 25%, aiming for 50%.

b. Jacqueline’s Dental Practice Appointment No-Shows

[05:50 – 10:01]

Business Overview: Jacqueline operates a dental practice in Dallas with $3 million in revenue and a 5% profit margin. She faces a significant issue with appointment cancellations and no-shows, resulting in a loss of approximately $1 million annually.

Key Challenges:

  • Over 30% cancellation/no-show rate
  • Ineffective appointment confirmation processes

Alex’s Advice: Alex suggests refining the appointment scheduling and confirmation process to enhance commitment and reduce no-shows:

  1. Integrity Tie-Downs: Immediately ask clients if anything might prevent them from attending after booking.
  2. Manual Reminders: Supplement automated reminders with personalized manual texts:
    • 24 hours before the appointment
    • Morning of the appointment
    • 60-90 minutes prior to the appointment
  3. Incentivization: Offer personalized incentives (e.g., free items in a goody bag) to increase accountability and reduce the likelihood of cancellations.

Notable Quotes:

  • "You just need to make sure that that time is the right time for them." [06:06]
  • "Have the manual text at 24 hours... the morning of, and the third text is going to be 60 to 90 minutes prior." [08:02]
  • "You have to increase the ascension rate and that's it." [05:08]

Actionable Steps:

  • Implement integrity tie-down questions during booking.
  • Introduce manual reminder texts at strategic intervals.
  • Personalize appointment incentives to foster commitment.

c. Tyler’s Roofing Business Scaling Strategy

[10:04 – 13:10]

Business Overview: Tyler runs a roofing business specializing in insurance-related roof repairs, generating $1.8 million in revenue within 10 months. He aims to scale to $8 million in the short term and $70 million long-term. Tyler is uncertain whether to expand through franchising or multiple company-owned locations.

Key Challenges:

  • Determining the optimal scaling model (franchising vs. ownership)
  • Adapting to changing insurance landscapes and increasing deductibles

Alex’s Advice: Alex advises Tyler to first solidify his business model before considering scaling methods. He shares insights based on his experience, favoring company-owned expansions over franchising due to better control and profitability:

  • Franchising Pitfalls: High complexity, lower profit margins, and increased administrative burdens.
  • Ownership Advantages: Greater control over operations, higher returns, and streamlined management.

Alex emphasizes the importance of understanding the return on invested capital before choosing a scaling strategy and shares his own experience of transitioning from franchised to company-owned locations to eliminate administrative headaches and enhance profitability.

Notable Quotes:

  • "Franchises are the most expensive form of capital..." [11:22]
  • "I have a habit of flipping franchises back into let's own them all." [12:00]
  • "If you nail the model and then the path will become really clear." [12:05]

Actionable Steps:

  • Focus on perfecting the existing business model.
  • Consider company-owned expansion to maintain control and maximize profits.
  • Evaluate the cost and oversight requirements of franchising before proceeding.

d. Adam’s Music Lessons and Recording Studio Optimization

[13:10 – 22:44]

Business Overview: Adam operates a music lessons and recording studio in Atlanta, generating half a million dollars in revenue with aspirations to reach $2 million. He sells music lessons to neurodivergent children aged 8 to 18. Adam identifies several operational inefficiencies:

  • Underpricing services
  • Overcompensating staff
  • Underutilizing physical and time-based capacities

Key Challenges:

  • Optimizing pricing and service delivery to enhance profitability
  • Transitioning from one-on-one to semi-private lesson models
  • Managing operational stress and capacity constraints

Alex’s Advice: Alex introduces a framework centered around LTV to CAC and return on invested capital. He suggests:

  1. Pricing Strategy: Raise prices to reflect the specialized service and improve gross margins (aiming for 80-90%).
  2. Service Delivery Model: Shift from one-on-one to semi-private lessons (e.g., 1-on-4) to maximize teacher utilization and increase revenue per session.
  3. Sales and Marketing Alignment: Tailor offerings to the unique needs of neurodivergent clients, potentially allowing for premium pricing.
  4. Operational Efficiency: Focus on raising prices and optimizing client delivery ratios before expanding capacity.

Notable Quotes:

  • "For brick and mortar service businesses, I want it to be over 80%, ideally over 90% gross margins." [16:27]
  • "The nicer thing about the music business is that it's actually identical to the gym business." [14:13]
  • "The easiest solution is you just raise prices. Because if you have supply constrained, prices go up." [19:29]
  • "Those are the three steps... raise the prices, change client delivery ratio, and bring in others to delegate." [19:53]

Actionable Steps:

  • Increase pricing to achieve higher gross margins.
  • Transition to semi-private lesson models to enhance capacity and profitability.
  • Focus on creating specialized, premium offerings tailored to neurodivergent clients.
  • Implement strategic sales processes to support higher-value transactions.

3. Alex’s Closing Remarks

[22:44 – 23:53]

In his closing segment, Alex Hormozi offers a special gift to loyal listeners: a comprehensive Scaling Roadmap developed in collaboration with Layla. This roadmap breaks down scaling into 10 stages across eight business functions, providing personalized guidance to navigate common growth challenges. Listeners are encouraged to access this free resource at acquisition.com roadmap.

Notable Quotes:

  • "Look at ltv. That will make you money. But the biggest issue is that you're upselling 7%. Like you need to be at least 25 and you should shoot for 50." [03:32]
  • "The more stressed you are, the lower your IQ is... solve for capacity." [22:44]

Conclusion

Episode 823 of "The Game with Alex Hormozi" offers a wealth of practical strategies for entrepreneurs aiming to enhance their businesses' Lifetime Value. Through real-world examples and expert advice, Alex guides listeners on optimizing their sales processes, refining their business models, and scaling efficiently. The episode underscores the importance of strategic pricing, effective team management, and personalized customer engagement in driving sustainable growth.

For more insights and resources, visit acquisition.com and explore the Scaling Roadmap to tailor growth strategies to your unique business needs.

No transcript available.