Transcript
Alex Hormozi (0:00)
If we can't clearly state our goal, we certainly won't hit it. Right? You're not gonna hit it by accident for sure.
Business Owner 1 (0:06)
So I'm wondering, like, you know, yesterday when we looked at the vam, like, can the business model itself be a detractor? Like if I'm trying to think of how big can we grow this in the current model before we have to look at SaaS or products or people become, you know, obviously a big, big issue in this type of business. So how big can this go in this type of model?
Alex Hormozi (0:29)
Yeah, I think it can. I. It can't. It's very unlikely to become a billion dollar a year sales business. The biggest problem with it. So the two big problems of that business are revenue retention, number one and number two, depending on the model. If you have like coaches, because coaching doesn't scale, I mean you can get to whatever 20, 30 million a year, but it kind of like it becomes very difficult typically after that, because getting somebody to be as good as you. This is actually what I made my whole podcast on this point. So if we scale, let's just say a one on one business as a most rudimentary version of this, you can then go down to one on four, one on eight, one on one to infinity. So you scale that way basically more and more fractionalized access to you or your knowledge, whatever. This way we have other people, other people, more other people, where you still have one on one, but it's other people who are doing this. And so here you templatize fractional, like break apart the pieces into constituent parts and then you train people on the smaller pieces so they can replicate in theory, in practice, I think what ends up happening is that let's say I have a glass of milk. If I say, hey, we're going to go to 104, 108, I pour that glass of milk into a shot glass and I say, do you still want it? Now if the milk's amazing, the they're still going to take the shot glass. The alternative here is where I have that glass of milk and I have an equal sized glass of milk, but I pour a little bit of milk in there and then I just pour a lot of water in. And I said, you want this really diluted glass of milk, but it's the same amount as what you had before. And so I found that I think more businesses do a better shot going this way than going this way. Now, the third path is what I think is the best version of this. And so if you Think about knowledge businesses. There's tons of massive knowledge businesses. So Ernst and Young, McKinsey, Bain, all started by people who put their name on the building. Accounting firms, law firms, consulting, all of those fundamentally have the same thing. There was a guy who was really smart and really good at some stuff and was able to get people to give him money. The difference is that these models are predicated on basically a career path. So they are supply constrained. And so the problem with most coaching businesses is that like, hey, you have a pulse and in seven days I'm going to get you to give you a roster of clients so I can keep selling them. But the problem is that if you can teach somebody in seven days how to teach somebody else, either you didn't teach them fully what you do, or what you do is so simple that it's not valuable. More often than not, it's the first thing which is like I taught you 10% of what I know, but I'm still gonna charge more or less the same price either way. And then that's what creates this churn factory. And so the reason all of those companies have our supply constraint is that finding really intelligent people and then they have a career path where it will take them 10 years to get to a partner or whatever, managing director status. And they start as analysts and become senior analysts, then become VPs and they become principals. And they work up the ladder, but they have huge earning potential. So somebody who is intelligent and hardworking and could actually do a job as good or better than you, who doesn't want to work as a coach. So there are people like Neil's not here for this one. There are people who are very like, you guys met my team. They're very intelligent people, but they don't want to be. They're not coaches. Right. And they're very siloed experts for these particular things. And so this is actually many to one. So instead of one on one, it's many people who are experts for one customer. I see these as the three delivery models that evolve over time, pros and cons. This one just doesn't scales quickly, but then it stops because churn becomes too big. This one is much slower because it's supply constrained. But if you get really smart people, you can build a really big firm, which is evidenced by all the massive firms. This one you have models like Tony Robbins. Who? Tony Robbins. Even if you're honest, there's 10,000 other people watching, it's still valuable to zoom back into your question. I would probably be thinking Of a. Is the goal to sell.