← The Game with Alex Hormozi
The Game with Alex Hormozi
I Solved Three $100,000,000 Business Problems | Spotify Video Exclusive
00:09:49
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I'm going to solve three massive business problems that are going to take you from 10 to $100 million. And at the end I'm going to walk you through the framework so that you can apply this to your business, your work or your personal brand. I recently spoke an event and had a Q and A section. And there were three different business owners that presented with different problems. One was an appointment setting business and they knew how to set appointments and build outbound teams for agencies, coaches, consultants, whatever. The second business was a marketing agency for H Vac business owners. So the third was actually a very big influencer with 30 to 40 million subscribers across all platforms with the objective of making more money. So each of them had very differently phrased questions, but they were all suffering from the same constraint and it wasn't what they thought it was. So the first business that asked a question was an appointment setting business and he was saying that his problem was that he needed to get more customers, which by the way, most of the time that's not the problem. It's usually because the customers you have keep leaving. And that's the real problem. And when we look at businesses to Invest in, at acquisition.com, we operate off of a singular concept, which is the theory of constraints. A A business will grow up to its constraint and then it will grow no longer. Most entrepreneurs continue to work on the things that they enjoy rather than the things that the business needs, usually because they haven't actually identified the correct constraint. For example, if you have a three step sales process and you get 50% to go through step one, 5% to go through step two, and then 50% to go through step three, you could improve each of them by 10%. But which of them makes the biggest difference in your business going from five to 15 triples the business, whereas the other ones only incrementally improve it by 20%. He had a very low quality of customers. The vast majority of customers didn't make enough money, they didn't stay long enough, they didn't have enough skills, etc. That was what he thought he had to solve. He said, okay, of all of the companies that you've ever worked with, which of them made the most money off of the appointments that you set? Right? And he had a very specific answer of what type of avatar he did best with. And so there's two directions for that business. One is you niche down on your service delivery and say, these are the types of businesses I'm going to take because they're going to Be worth more, stay longer, refer, et cetera. That is probably the easiest next step for that business. I were going to own this business and I transplanted my brain and my experience into his body that he could own half of a 50 to $100 million business that he grows over the next five to 10 years, picking the most valuable business that he sets appointments for, what would the marketing spend be of a business that's doing $50 million a year? Realistically, probably somewhere in the neighbor of five to $10 million a year. So he could either partner with that business or spend a year or two learning how that business works so that then he owns both sides of it. If you partner, you can usually go faster, but you give up some of the upside because you slice the pie. It's up to you. Because most business owners, the reason they don't create valuable businesses is because they have to keep doing the same work over and over again and they don't get credit for it. They're basically sentenced to this terrible atlas like existence of rolling the boulder up the hill and then rolling it back down every every month. But if the team that he bu was 50 outbound guys this month and then next month he starts at 50 because it's all within the same company, and then does another 50 and then another 50 six months later he's got 300 outbound guys that are all still working for him, all generating revenue that he is owning a slice of all of it. Business number two was the H Vac agency. This is a business that markets for H Vac companies. They had 50 or so clients in that niche, and they're running campaigns across 50 different local markets. If he's able to generate leads and fill up 50 different h vac services pipelines because of his marketing prowess, he probably has the marketing skill of a $50 to $100 million H vac business. If you have a $5 million marketing agency, then it's reasonable that some of the clients that you serve are making $50 million in revenue off the services you're generating. And you're getting none of that. You're only capturing the service fee. The more steps you take towards owning the result, the more you're basically just doing the business for them. But at a certain point, you are the business, and so it makes sense for you to own the economics of the business. Either you got to learn the H Vac business, or you partner with someone who already knows it. Or you could buy one, and with your marketing prowess, you juice the hell out of it. Most People will try and buy it, but then also try and keep this agency thing going. But sometimes you got to take a half step back so you can take 20 steps forward. The fastest way to build a $10 million business is often not the fastest way to build $100 million business. If you wanted to build a building that was 10 stories tall, you would start with a very different foundation. Now imagine you built a 10 story building and then said, okay, I want to build a hundred story building using the same foundation. You wouldn't be able to. But that's exactly what most entrepreneurs do when they're trying to scale and they wonder why they're stuck is because they built it wrong to begin with, because they were in the wrong opportunity vehicle. One of the big things that took me too long to learn was it's the size of the slice of the pie that matters, not the sh. The slice of the pie. They obsess about the shape of the slice rather than having a slice that's like this of a much bigger pie. The average IPO founder, When a company IPOS owns 12.5% of the company, they found it because the more people you make money, the more money you ultimately make. The third business was the big influencer business. 30 or 40 million subscribers across all platforms. They were focusing all of their attention on how do we get more high quality videos out. And when I asked them what problem are you trying to solve? They said, we want to make more money. You're seeing your business as this box of media and trying to make more better videos, which if you want to do brand and just continue to build the brand before making an ass, that would be the right problem to solve. But they were at 97 out of 100. They're a.00001% creator. So do we really think that their constraint of their business is that they aren't good enough at marketing? No, probably not. You guys are trying to take your 97 out of 100 media company to a 99 out of 100 media company when the objective you said was to make more money. And you have no product that you sell. So all of your monetization relies on sponsorships and ad and ad revenue, which is typically the least efficient way to monetize. Because anyone who pays you for a sponsorship is making a huge arbitrage on your brand and your value. Given the amount of impressions that these guys were getting, which when they don't make videos, we're getting 100 million views a month. When they don't Post anything new. That kind of thing is a company that's 100 million plus in revenue. They have the marketing department, but what they don't have is a sales department. They don't have a product department, they don't have customer success. They have none of these other departments. There's zero out of 100 on all these. And so the constraint isn't going 97 to 99, it's going from zero to 20 on these ones. What are the choices I have here? Version one is if I've got an advertiser who consistently comes to me, I may be able to negotiate some sort of equity. Getting even 10% of a company that's worth $100 million, and then you put all of your effort behind it and make it a two or $300 million company. That's a significantly better outcome for many of them than what they're currently getting paid just video to paycheck. Right. The second option is to say, okay, is there a category of products that continue to pay me the most out of all the advertisers? Do what Amazon does, see what's already selling and then clone it and make it your own and put your name on it and make your version yours and better. If you do that, then you own the entirety of that thing. But in order to do that, you probably, if it were me, I would go knife some of the top execs at some of those companies and say, say, hey, you're currently an executive here. Would you like to own a slice of my thing? I'm happy to own 70% and get three of the best guys over, have them build their boxes behind my thing. That's the fastest and easiest way. The longer, maybe bigger money way is if you do it all yourself. But that's always the trade that you have to make. As an entrepreneur, how many new skills do I have to have in order to pursue this new opportunity versus the ones I currently have? The third opportunity for them is probably the least operational risk for accepting the fact that they just like doing media and that's what they jam on and they don't want to touch either of these other business components, ending themselves as a creative shop that knows how to make viral videos that they can transform into ads. And that's where you go from being a really good creator to being a Madison Avenue agency that makes ads that crush. Most influencers are getting paid based on the impressions, that they are getting the brand for free based on their audience. But where the real money is made is where you take that TikTok video, that YouTube short, that Instagram video that ever it is, and then they put $1 million of ad spend behind it when it's already shown as a winner. And then it goes from being shown to 5 million people in your audience to 100 million people that it converts from. Cold Adspen has no limit on reach as long as it's profitable. So they can always expand beyond your existing audience, which means that you get to capture all of the upside based on how skilled you are as an advertiser. So those would be the three paths for that particular type of business. It's not like, okay, well I'm not one of these three businesses now what I should do. But it's actually the framework that we approach the problem with, which is one, what problem are we trying to solve? In each of these businesses they wanted to make more money. The next one is over what time horizon? If you want to make more money tomorrow, the number of things you can do is very limited. If you want to make more money in 10 years, you take a very different play. The amount of time it might take to build 100 story buildings foundation might take the same time it takes to build the entirety of a 10 floor building above the surface. Somebody else building a 10 floor building might happen way faster than you because yours is just continuing to build this base before you start building up. The next question, which problem would we prefer solving? Or which problem do we feel like we're more equipped to solve? Or which problem is easier? Because if you start framing it in terms of the problem that you're going to have to solve to be successful, it actually makes it much more controllable for you. I would say, well, which of these do we feel more equipped to do now@accentition.com we are really good at recruiting, which is how we scale. All the companies we have is recruit talent. We've already been there, done that. And so we probably say, hey, we feel really confident that we could recruit somebody in and put seed capital in to get it going. Then we'd own the whole pie. So for us that would be a problem that we feel very confident in solving and gives us the most upside. You have to answer that for you, given your skill set, your resources and your experience.