Pricing, Focus, and the Seven Growth Sins | Ep 935

Summary

Detailed Summary of "Pricing, Focus, and the Seven Growth Sins | Ep 935"

Podcast Information:

• Title: The Game with Alex Hormozi
• Host/Author: Alex Hormozi
• Episode: Pricing, Focus, and the Seven Growth Sins | Ep 935
• Release Date: August 11, 2025

---

Introduction

In Episode 935 of The Game with Alex Hormozi, host Alex Hormozi delves deep into the critical aspects of business growth, focusing on pricing strategies, maintaining focus, and identifying common pitfalls termed as the "Seven Growth Sins." Alongside his co-host, Layla Hormozi, Alex engages with various entrepreneurs, offering tactical advice to help them scale their businesses effectively.

---

Pre-Framing in Sales

Early in the episode, Alex introduces the concept of pre-framing in the sales process, illustrating its power with a personal anecdote.

• Example: Alex mentions a simple checkbox labeled "I want a VIP ticket" during a book launch registration, which led to a 16% increase in sales despite having no actual impact on the process.

  "The pre-framing is so powerful that the questions that you ask have absolutely a huge effect on the likelihood of someone taking the purchase when they get the option."
  (00:02)

This highlights how subtle changes in presentation can significantly influence customer behavior.

---

The Seven Growth Sins

Alex introduces the Seven Growth Sins, which are common mistakes businesses make that hinder their growth. These sins represent critical decision-making dilemmas where the solutions often involve short-term pain for long-term gain.

1. Avatar Selection

   • Challenge: Balancing between high-end and low-end clients.
   • Issue: Focusing on one segment may lead to financial loss or underutilization of resources.
   • Quote:

     "If I pick one, then I'll lose money or I'll lose team, or I'll be negative or I'll be not profitable. And if I don't pick, then my business will never grow."
     (02:00)

2. Data

   • Challenge: Making informed decisions without sufficient data.
   • Issue: Limited resources to collect and analyze necessary data.
   • Advice: Either allocate resources to gather data or make educated guesses rather than indecision.

3. Focus

   • Challenge: Managing multiple business ventures simultaneously.
   • Issue: Diluted efforts leading to inefficiency and stagnation.
   • Quote:

     "She's trying to build a platform. I was like, you were trying to build a headache."
     (03:00)

4. Over Expansion (Under Talent)

   • Challenge: Expanding operations without scaling the team accordingly.
   • Issue: Spreading the existing team too thin, resulting in decreased performance and increased overhead.
   • Quote:

     "If you take your good person from location one and put them in location two, you're just over expanding."
     (04:00)

5. Compensation

   • Challenge: Balancing fair compensation with profitability.
   • Issue: Undercompensating talent can lead to recruitment and retention problems, while overcompensating can strain finances.
   • Quote:

     "Raise what you're paying people so you can get them in."
     (05:00)

6. Underpriced

   • Challenge: Setting prices too low, often resulting in undervaluation of services.
   • Issue: Difficulty in raising prices later without losing customers.
   • Quote:

     "Probably more. Maybe 50% are underpriced."
     (06:21)
     "You should be pretty much just always raising your price on a consistent basis that outpaces inflation and that'll be a good indication that you're making progress."
     (07:00)

7. Single Product

   • Challenge: Relying on a single product line for revenue.
   • Issue: Limited customer lifetime value (LTV) and revenue streams.
   • Advice: Diversify offerings to increase LTV without significantly increasing operational complexity.
   • Quote:

     "What if we sold them something else? Not to say we started Lacrosse camp to sell to our bakery customers, but with our bakery customers, instead of just selling croissants, like what if we also sold donuts?"
     (08:20)

---

Q&A Sessions: Entrepreneurial Challenges and Solutions

Throughout the episode, Alex and Layla interact with several entrepreneurs, addressing their specific business challenges and providing tailored advice.

1. Preston - China Fulfillment for E-commerce Sellers

• Business Overview:

  • Services: 3PL for e-commerce, handling fulfillment for dropshippers and brands.
  • Revenue: $130,000/month with 80% profit margins.
  • Goal: Scale to $5 million.

• Challenges:

  • Vision and Asset Ownership: Deciding whether to own assets like technology and warehouses in China.
  • Customer Base: Balancing between high-volume drop shippers and stable clients.

• Alex's Advice:

  • Focus on High-Value Clients:

    "I would probably say you're 80, 20 in terms of how do we allocate attention so we get higher returns."
    (40:12)

  • Replicate Success: Study top performers within the team and standardize their behaviors across the organization.
  • Maintain High Margins: Continue to leverage high-profit margins to sustain aggressive growth strategies.

2. Sam Jacobs - China Fulfillment for E-commerce Sellers

• Business Overview:

  • Services: 3PL services in China.
  • Revenue: $130,000/month with 80% profit margins.
  • Goal: Scale to $5 million.

• Challenges:

  • Growth Strategy: Determining whether to target existing USA-based brands or compete with Chinese-based firms.

• Alex's Advice:

  • Leverage High Margins:

    "The issue of the like race to the bottom would be concern if you didn't run 80% net margins."
    (39:05)

  • Avoid Diversifying Away from Core Strength:

    "Don't try and become a software company. You're not a software company."
    (42:19)

3. Oliver Bruce - Performance Marketing Agency

• Business Overview:

  • Services: Paid search, paid social creative.
  • Revenue: $4.5 million/year.
  • Goal: Scale to $12 million/year.

• Challenges:

  • Capacity Constraints:

    "We can't do enough of our own ads because we're doing advertise."
    (43:05)

  • Price Sensitivity: Difficulty in raising prices without alienating existing high-paying clients.

• Alex's Advice:

  • Raise Prices Strategically:

    "If you raised prices, you would free up capacity and then you could run ads."
    (44:00)

  • Reinvest Cash Flow: Utilize existing cash flow to hire additional talent to manage ad efforts.
  • Delegate Founder Roles: Gradually transition responsibilities to team members to maintain scalability.

4. Todd Weaver - Restaurant Business

• Business Overview:

  • Revenue: $25 million.
  • Operations: Six locations with five different dining concepts.
  • Goal: Scale to $100 million.

• Challenges:

  • Financial Metrics: Uncertainty in calculating LTV to CAC ratios specific to the restaurant industry.
  • Growth Constraints: Legal issues impacting brand expansion.

• Alex's Advice:

  • Focus on Product and Experience:

    "In the long run, product is the only thing that matters."
    (52:23)

  • Word of Mouth and Reviews:
    Emphasize enhancing the customer experience to drive organic growth through reviews and referrals.
  • Grand Opening Strategies:
    Plan grand openings only when the business model and customer experience are optimized to ensure sustained growth post-launch.

---

Key Insights and Strategies

1. Prioritize High-Return Opportunities:

   • With limited resources, businesses must identify and focus on opportunities that offer the highest returns, even if it means making tough decisions like narrowing focus or adjusting compensation structures.

2. Effective Data Utilization:

   • Collect and analyze relevant data to inform decision-making processes. Avoid the paralysis of indecision by either gathering necessary data or making informed assumptions.

3. Strategic Pricing Adjustments:

   • Regularly review and adjust pricing to reflect the value provided and market conditions. Underpricing services is a common growth sin that can stifle long-term profitability and scalability.

4. Diversification of Product Lines:

   • Expanding product or service offerings can enhance customer lifetime value (LTV) without significantly increasing operational complexity. This approach helps mitigate risks associated with relying on a single revenue stream.

5. Talent Acquisition and Management:

   • Invest in attracting and retaining top talent to drive business growth. Proper compensation and clear performance metrics are essential to maintaining a motivated and effective team.

6. Brand Investments:

   • Allocate resources towards building a strong brand identity. Brand plays, such as large-scale launches or unique marketing campaigns, can create lasting value and drive sustained customer engagement.

7. Operational Efficiency:

   • Streamline operations to handle increased demand without proportionally increasing overhead. This involves hiring strategically and ensuring that new team members can seamlessly integrate and enhance productivity.

---

Conclusion

Episode 935 of The Game with Alex Hormozi provides invaluable insights into navigating the complexities of scaling a business. By identifying and avoiding the "Seven Growth Sins," entrepreneurs can make strategic decisions that foster sustainable growth. Through engaging Q&A sessions, Alex offers personalized advice, reinforcing the importance of focus, strategic pricing, talent management, and brand building. The episode underscores the necessity of balancing immediate operational needs with long-term strategic investments to achieve substantial business growth.

For entrepreneurs seeking actionable strategies to overcome common growth challenges, this episode serves as a comprehensive guide to refining business practices and optimizing growth trajectories.

---

Notable Quotes:

1. "The pre-framing is so powerful that the questions that you ask have absolutely a huge effect on the likelihood of someone taking the purchase when they get the option."
   (00:02)

2. "If I pick one, then I'll lose money or I'll lose team, or I'll be negative or I'll be not profitable. And if I don't pick, then my business will never grow."
   (02:00)

3. "She's trying to build a platform. I was like, you were trying to build a headache."
   (03:00)

4. "Raise what you're paying people so you can get them in."
   (05:00)

5. "Probably more. Maybe 50% are underpriced."
   (06:21)

6. "Don't try and become a software company. You're not a software company."
   (42:19)

7. "In the long run, product is the only thing that matters."
   (52:23)

8. "The best agencies run. The best agencies grow on word of mouth."
   (45:39)

These quotes encapsulate the core principles discussed, emphasizing the importance of strategic decision-making and the impact of subtle changes on business outcomes.

Transcript

[Alex Hormozi]

And you guys registered for the book launch that's coming up. Did anyone notice a little checkbox on the opt in that said like, I want a VIP ticket or something like that? Okay, so that created an absolute 16% increase in sales. The checkbox did nothing. It's checked. There's it. It changed nothing about the process. You didn't see a different page. If you checked off a box saying you wanted a VIP ticket, you were more likely to then on the next page when we said, want to be a vip, buy the VIP thing. And so the pre framing is so powerful that the questions that you ask have absolutely a huge effect on the likelihood of someone taking the purchase when they get the option. All right, please help me welcome the.

[Unknown Host]

Author of the $100 million series, host.

[Unknown Co-host]

Of the game, Mr. Alex Hormozi.

[Layla Hormozi]

Thanks.

[Alex Hormozi]

Thanks. Good morning. Yes. Super tactical. Okay, good. Team's great, aren't they? Really good.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

As I think about you guys kind of going home or getting on the plane, getting in the car, getting the Uber, getting the hotel, wherever it is, you probably have a lot of notes from yesterday and today, right? The thing is that most of the time, there are many good ideas that will come to you now and tomorrow and weeks from now.

[Layla Hormozi]

But.

[Alex Hormozi]

But you have extremely limited resources in terms of your ability to execute those. And so that comes from limited time, money, and then also just operational capacity within the talent that you have that exists within the business. And so making sure that you select the highest return opportunity is. Will dictate how fast you move as a business owner. And I think that that has been responsible for the disproportionate speed that Layla and I have been able to grow the companies that we own. And so I'll bring this point up, but I've had the distinct pleasure of answering a lot of business owner questions over the last few years. And there are basically seven deadly growth sins that I've seen consistently recur within businesses. And I think they are, quote, deadly sins because they are decisions that have two apparent shitty outcomes. And so the result is that most people just choose not to make them, and then they stay stuck until they do. I'll outline them briefly, but as we go through the questions, I'll do one of these, like, pointing exercises. So I'll be like, which one do you think this one is? And I'll encourage you to go through the short term pain to avoid the long term pain of never growing your business. So the first is avatar selection. And so this happens when you're like, well, I have these high end clients and I've got these low end clients and I hate one of them, whichever one it is, right? I hate one of them, but I need both of them in order to continue to pay my bills. But I need to focus on one of them in order to continue to scale the business. But if I pick one, then I'll lose money or I'll lose team, or I'll be negative or I'll be not profitable. And if I don't pick, then my business will never grow. That is one quagmire. Another one is data, which is there's a certain, there's some big decision I need to make. There's data that I need in order to make it, but I don't have the resource to collect the data. It's like, okay, well what are you going to do? Well, you got to get the resources to collect the data otherwise. Or you take a shot and you just make your best bad guess. But the thing that you can't do is just not decide. The next is focus. Which is, yeah, I have a bakery. I also have a lacrosse team, but they kind of work together. Because I sell pastries to my lacrosse team. That's why I have two businesses. I'm actually trying to create an ecosystem. And all in one stop, right? For anybody who's looking to lacrosse with croissants, maybe that'll be a thing. I say this jokingly, but I literally had a yoga studio chocolate factory like two months ago. And I was like, what are we doing here? She's like, I'm trying to build a platform. I was like, you were trying to build a headache. So you will not sell me on your idea of why you are the best entrepreneur in the world who somehow can manage to do two things when no one else can. You're not Elon. If you were, you would be Elon. The next one is over expansion. And this is what it looks like, but what it really is is under talented. And that's not under talented necessarily just for you, but your company, your team. And so like a business, it's fine for a business to go from two locations to three locations, two locations, five locations, whatever, right? One product line, two product lines, that's fine. The problem is when you do that with the same team as you did when you had one. And so if you take your good person from location one and put them in location two and say, now I'm expanding, it's like, no, you're just over expanding. And then now your location one will Go. And now I have location two. That's not as good as location one. And both have come down. So now I'm actually making less money than I did with one. But I have twice the liability, twice the headache, twice the overhead, little ptsd, couple head nods, right? So of course the answer from there is to open a third. And so I say this because people say this, don't do that, right? But again, in each of these situations, you have rock and hard place. When I've got two businesses, I got to shut one of them down. That's going to hurt. But if I don't shut them down, then I'm never going to grow. I've got two locations. Do I downsize? But I just put all this money in that sunk cost fallacy. But if I don't, then I'm going to feel like a failure. But if I stay at this, I'm just gonna keep not making money. Next one is compensation. So some of you guys have. And this happens on both sides. You know, I have an H VAC company and I can't recruit technicians. And I say, okay, well what do you make on a technician? They say, a million dollars a year in gross profit. And I say, fine, what do you pay technician? They say, 100 grand. And I'm like, okay, well would you pay 200 grand to make a million dollars? And they're like, well, yeah. And I'm like, okay, well then why don't you pay 200 grand to get the technicians. Well, like, are undercompensating, right? I'm supply constrained. But you're undercompensating. That doesn't make sense. So raise what you're paying people so you can get them in. On the flip side, you have the alternative where it's like, hey, I can't grow my company because we're not profitable. We're fully staffed, we're full capacity, but we're making no money. It's like, why is that? It's like, well, I pay all my employees 50% of revenue. It's like, well, that'll do it. That'll do it. And so it's like, what do you do? Well, if I change the comp, then I'll lose my employees. If I don't change the comp, I don't make money. It's like, well, you got one of them, you're fucked forever. One year is fucked for a little bit. So the problem is that most people don't want to be. Because the thing is, is almost all of these the right decision is the one that's worse today. The next is underpriced. Sorry, that's supposed to be a. You just. It's an ugly u.

[Layla Hormozi]

There you go.

[Alex Hormozi]

Underpriced. Super common. I bet a third of you are more just underpriced in the room. Probably more. Maybe 50% are underpriced. And I was actually thinking about this this morning. For those of you follow me on X service based. Can you raise your hand if your service based business here. There we go. Well, 78% of businesses in America are. So it's, you know, loaded question leading the witness. Anyways, so if you're a service based business, there's basically only one direction that you go throughout your career. If you're doing a good job, which is your prices go up, that you can pretty much mark your progress by your price. Because if you get better at what you do, then you will get better results for customers. If you get better results for customers, your reputation will go up. If your petition goes up, you also get better at selling. If all these things happen, then you will eventually get supply constrained. If you get supply constrained, what do you do? You raise price. And so if that isn't happening, then one of those other three wheels isn't spinning. So we have to fix that. But basically you should be pretty much just always raising your price on a consistent basis that outpaces inflation and that'll be a good indication that you're making progress. The only exception to that is if your entire strategy is to be a low cost leader, which some of you guys are like, I have an outsourced agency that's all VAs and AI and we do what normal people do for $1,500 a month and we can do for 500. Okay, fine, that's the strategy. But unless that's the strategy, the price should probably be going up. And then finally I added this one after a long time also because it made my ad focus easier to remember, which is single product. And I don't necessarily have an issue with a single product. But if you have LTV as the primary bottleneck in the business and you're like, hey, I've got all these customers, they're not worth enough and they buy this one thing. It's like, what if we sold them something else? Not to say we started Lacrosse camp to sell to our bakery customers, but with our bakery customers, instead of just selling croissants, like what if we also sold donuts? Stuff that's not going to be operationally complex, that can still Dramatically increase ltv, which then could offset the amount that it costs us to get customers so that we can then debottle net growth in the business. So with that being said, creative agency doing $5 million a year that wants to be at 8, that is stuck because of. I didn't hear what you said.

[Unknown Audience Member 1]

How you going? Well, I'm going to say quickly, we've flown 14 hours from Sydney to be here. Four of us mates been following for years, and all my bloody questions have been answered by your team.

[Layla Hormozi]

Oh.

[Unknown Audience Member 1]

Without you having been bloody in the room, is anyone else the same? Can we just give everyone a big clap for that? Thank you, man. No, I really mean it.

[Alex Hormozi]

It means a lot to be here. Let me pause you then real quick. For everybody, the biggest gift I can probably give you in terms of breaking a belief is what you can see or demonstrate more than what I can say.

[Layla Hormozi]

And.

[Alex Hormozi]

And maybe some of you guys met the team and was like, I understand why they make a lot more money than my team does.

[Layla Hormozi]

Right.

[Alex Hormozi]

And so it's like, oh, well, if I had this team, I could scale my business. It's like, yeah, that's the point. It just took me a really long time to realize it too. And so I promise you that the best talent you have is in the future, not in the past.

[Layla Hormozi]

Go ahead.

[Unknown Audience Member 1]

Yeah. So to your framework there, we're being severely underpriced. But my question for you, actually is. Cause I've got so much to execute from your team is actually here in here.

[Layla Hormozi]

Right.

[Unknown Audience Member 1]

It's like, the more ambitious I've got, the more success will become, the more numb I've become.

[Layla Hormozi]

Sure.

[Unknown Audience Member 1]

You know, with that. So if you had a KPI for your soul.

[Layla Hormozi]

Yeah.

[Unknown Audience Member 1]

What would they be and how you're tracking?

[Alex Hormozi]

I would. Knowing me, because you probably consumed enough of my content to know that I would probably not be like, this is how I define my soul. I would say that when I look back on the days that I remember and enjoyed the most, I had three things that occurred, which is that I worked out with people I liked, I ate with people I liked, and I wrote something down. And if I do those three things, I tend to have good days. And so for me, my goal is a lot simpler, which is how do I maximize the number of days in a row that I have that have those three things occur? And so I think soul can be incredibly amorphous and really tough. And that's when, like, manifestation and synchronicities and. And vibrations and energy and all these words that people Throw around that no one can define. Well, I mean, they try to define them. They just fail anyways. I just try to define things by the observable universe because everyone can agree on those things. And so for me, I know the days that I can say, this day was a good day. I can rate this above average fine subjectively. And from there, what are the things that occurred with the highest frequency on days that are subjectively rated good? How do I maximize the likelihood that those things occur? How do I do that on a consistent basis? And then what happens is if you define creativity as mistakes that happen while copying, which is how it happens in nature, that's how creativity and innovation often occur. Like, you keep iterating, keep trying to copy something, and then you fuck up your own copy, and then it ends up better, and you're like, holy shit, I cut the potato a little bit too thin, and then it crisped up, and I have potato chips. This is awesome. If you do 100 days in a row of your best day, you will then also add nuance to that, because it used to be just work out, eat healthy food, and write something down. But then I had other days, so I was like, well, these days, I didn't just eat healthy food. I ate with people I liked. And so it starts adding to that little framework for yourself. And I think for me, that has maximized my enjoyment. And I'll give you a quote from Sharon, who's now our president, which is pretty cool. He said in his 20s, he cared all about the destination. In his 30s, he cared about the journey. And his 40s, he cares about the company. And so I think that that has been a really good framework also, because, like, for anybody here, and I won't judge you for saying this, like, fine, I'll hedge it a little bit. Are there days where you hate your business? Okay. Most of the heads nodded. I think that you decrease the likelihood that those days occur if you surround yourself with people you really like. And so even though you might hate what happens in the business, you might love the people you do it with. And I think that takes a lot of the. Of the shittiness out of it.

[Layla Hormozi]

Awesome.

[Alex Hormozi]

Thanks, man. That was an easy one. That's how we go from 5 to 8 million. Done.

[Layla Hormozi]

Thank you.

[Unknown Co-host]

How's it going?

[Preston]

Good.

[Unknown Co-host]

First of all, I want to second that your team is badass. And it's really inspiring, because now I'm like, this is. This is. Someone said, you know, you have to have a goal, at least just have a goal. And that's my goal, just to build a team like this. Obviously, there's a stepping stones. You didn't just start that. Day one. My name's Preston. I sell restaurant operations consulting to restaurants, to restaurant owners. We do about. We're on track to about 3.2 million this year. We. I want to hit 10 by the end of the year. What stopped me is my. I'm on track. Give me some hope here, please. And what's stopping us is a sales process all the way from messaging.

[Alex Hormozi]

Do you have demand?

[Unknown Co-host]

Yes.

[Alex Hormozi]

Do you have more demand than you can handle?

[Unknown Co-host]

We have more demand than we can unlock.

[Layla Hormozi]

Okay.

[Alex Hormozi]

Do you have $10 million of demand you can unlock?

[Unknown Co-host]

I absolutely think so. 100%. But, yeah, the problem is unlocking it. Like I tell my team all the time, like, we have the demand, we have the attention, the shares, the. The saves, the comments, all that stuff is all there. But it's the messaging, I think is a problem in, in. In the marketing. And then the sales process, like, that's, That's a problem. The price point, you know, you guys gave me a lot of hope because you're saying, hey, restaurant or gym? Gym owners make like 32,000 a year on our pro product, is this much. But we have this, this, this tactic. We have the same problem.

[Layla Hormozi]

Right?

[Unknown Co-host]

Restaurant owners, small cash quickly. Yeah, yeah. So that's what's stopping us.

[Alex Hormozi]

Okay, Those four things. So. So you said your messaging is off.

[Unknown Co-host]

Yes.

[Alex Hormozi]

How do you. How do you know that?

[Unknown Co-host]

Because you guys wanna hear a really.

[Alex Hormozi]

Good framework for solving problems. So I've also done a lot of this. And so what does that mean? How do you know that? Why should I care? Logic, evidence, utility. So you said something like, our messaging is off. What does messaging mean? This is why I define terms.

[Unknown Co-host]

So people don't know what I'm selling. Right.

[Alex Hormozi]

Okay.

[Unknown Co-host]

They want something from me. So they're booking a call, but they have no idea what I'm offering or how I can execute it.

[Alex Hormozi]

Okay. So when I would say, so that's what it means. I would then say, how do you know that? So the way that you would answer that question would be some sort of quantitative measure, which would be like, 80% of our calls are unqualified. That would be a way to answer that question. And then I would ask the question, why do I care? Now you might say, well, I think if we could sell the other 80%, then we'd make more money. I would then ask like, well, is it a sales constraint? Can we just kick all those people off the calendar and fill it up with the 20% for the rest of it. Then we kind of have the discussion. Okay, so you're saying messaging is off. So are people who are coming on the call unqualified?

[Unknown Co-host]

No, they're qualified for the most part, but they don't know what we offer. So the sales process becomes much more challenging because they're coming in thinking, like, do you come into my restaurants?

[Preston]

How does this work?

[Unknown Co-host]

Right.

[Alex Hormozi]

Yeah.

[Unknown Co-host]

So we have to, like, bridge that gap.

[Alex Hormozi]

Are you working with us after this?

[Unknown Co-host]

I'm trying to.

[Alex Hormozi]

You should. You should. Like, this is a sales motion. Like, we do this in our fucking sleep. So it will not make any difference in my life, I promise, but make.

[Unknown Co-host]

A difference in my life.

[Alex Hormozi]

There you go. So, so fundamentally, you've got your demand that's coming in.

[Layla Hormozi]

Right?

[Alex Hormozi]

This is an eyeball. It's really ugly. But basically what we have to do is take them through an indoctrination process, prior to which you'll probably create some sort of video sales letter here. We can help you with that in terms of the scripting. And then the questions themselves should reverse engineer the sale. So I'll give you guys a little tidbit. Any of you guys register for the book launch that's coming up.

[Layla Hormozi]

Thank you.

[Alex Hormozi]

Did anyone notice a little checkbox on the opt in that said like, I want a VIP ticket or something like that? Okay, so that created an absolute 16% increase in sales. The checkbox did nothing. It changed nothing about the process. You didn't see a different page. It just. If you checked off a box saying you wanted a VIP ticket, you were more likely to. Then on the next page, when we said, want to be a vip? Buy the VIP thing. And so the pre framing is so powerful that the questions that you ask have absolutely a huge effect on the likelihood of someone taking the purchase when they get the option. Same thing with the vsl. For a lot of you guys having some sort of video sales letter or information. Like, if you're getting too much traffic, which it sounds like you are, because I'm guessing your organic is your primary way.

[Unknown Co-host]

Yes.

[Layla Hormozi]

Right.

[Alex Hormozi]

So you have all this traffic that's coming in. You need a filtering function that qualifies in a good way because there's bad friction, which is like, I could put a wall up and no one can get through. Or like, my page is really slow. That just gets everybody turned off. Good friction gets bad people away and good people in.

[Layla Hormozi]

Right.

[Alex Hormozi]

And so having qualifications, which I'll give you guys a rule of Thumb that has yet to be proven wrong in my history. The more good friction you add, the more money you make and the more expensive the contacts. Meaning if you run ads, for example, to get sales calls, if I say this thing costs $10,000 and you have to have cured cancer in order to get it, my cost per call will go up, but my roas will go up even more. So I might double my cost per call from 200 to 500, but my return might go from 3x to 6x, even though I more than double my cost per call. But with the secret sneaky one is that your sales efficiency will double or triple. And so that means that you can close way more deals with a small team, which creates more, less operational drag and allows you to scale easier. So to answer your question, you had four issues. One you said was messaging. One is going to be the sales motion itself, which is then going to ladder into pricing.

[Layla Hormozi]

Right?

[Alex Hormozi]

What was the fourth one? Or is that just that the fourth.

[Unknown Co-host]

One was, you know, you guys had like with the gym owners, right? It was like, here's how we get.

[Alex Hormozi]

Yeah, you need a fast cash play.

[Layla Hormozi]

Yeah, yeah.

[Alex Hormozi]

So fundamentally, most fast cash plays operate off of existing resources. So most business owners have dead context, old customers, some sort of list, or even just an existing social media profile that has some level of followers. And so basically a lot of business owners don't allocate resources where they could get the highest return. This is fundamentally why they don't grow. Like if somebody else were taking over a business and then all of a sudden the business grows, it's because the guy who was running it isn't allocating attention and resources well. And so that means that they have resources that are untapped or underutilized, but that you can help them appropriately utilize quickly so that they can make the cash to pay you. And so that would be just a campaign that you would probably test out really early with a handful of beta users, and then you would include that as basically the first part of the onboarding. And so by doing that, it's like you can make the sale and then immediately pay for yourself within the first 30 days, which is like always my goal. So that I always want to operate off of like found money. Like, I never want someone to pay me money I haven't already made you. And I've pretty much operated that way my whole life.

[Preston]

I'm just curious.

[Unknown Co-host]

So the problem we have is that we give them the blueprint, we build it out for them one on one calls in the first Month. We really try to do that.

[Layla Hormozi]

Right.

[Unknown Co-host]

And that doesn't do the results. So they get bleep, they get bought in and all that good stuff, but they don't take action. And that's the biggest problem we have.

[Alex Hormozi]

That's going to be an incentive thing. Carrot and stick in terms of how you incentivize that. Like you can give bonuses or discounts that they unlock if they take quite the action. You can make guarantees contingent on three actions. There's a bunch of things you can do to structure that initial offer that again will factor into the application, the sale sales motion. And then ultimately you take as the first kind of activation point within the business.

[Unknown Co-host]

So take the fast cash and then tie it to.

[Alex Hormozi]

Yes.

[Unknown Co-host]

You have to do these things.

[Layla Hormozi]

Yes.

[Alex Hormozi]

And all of that gets reversed all the way to the front.

[Unknown Co-host]

And just out of curiosity, do you actually enforce that as a way to enforce it or you just kind of 100%. Okay.

[Layla Hormozi]

Yeah.

[Unknown Co-host]

Because that's the hard part we're seeing.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

Okay. I mean, state the facts and tell the truth. Be upfront.

[Unknown Co-host]

Okay, cool.

[Alex Hormozi]

No, 100%.

[Layla Hormozi]

Thank you.

[Alex Hormozi]

I know that affected more than just his business. I usually say this upfront, but I, I try to answer the question so that it's not just, you know, one person answering because I know that the problems are usually shared by more than one person. Yes, sir.

[Mike Frusciano]

Hey, Alex. My name is Mike Frusciano. I sell corporate training to B2B. B2C. We do right under about 2 million revenue per year. Like to be at 10 million with about.

[Alex Hormozi]

You said B2B and B2C. You mean companies. So you sell corporate training.

[Mike Frusciano]

Yeah, to businesses.

[Alex Hormozi]

Oh, B2B then.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

Okay, got it. Okay. So B2B. Okay, got it.

[Mike Frusciano]

And then B2C. Consumers. Just individuals.

[Layla Hormozi]

Oh.

[Mike Frusciano]

So we do both. We do corporate training for companies and then we do open enrollments across the country that individuals can sign up.

[Alex Hormozi]

Interesting. Okay, got it.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

And the corporate training is around what? Communication, speaking, presentations, how to employee.

[Layla Hormozi]

Yeah, Heard.

[Alex Hormozi]

Okay.

[Mike Frusciano]

We'd like to be at 10 million here about two and a half years. And what's stopping me is our really our sales process.

[Layla Hormozi]

Okay.

[Mike Frusciano]

And my question is, as a growing company with limited upfront cash.

[Layla Hormozi]

Yeah.

[Mike Frusciano]

How do you hire top a talent to attract and bring somebody on that can drive sales and. But expecting, you know, a good, good revenue. I want somebody to make a lot of money. But how do you do that with. With really a limited cash flow? What in models or things that you've seen work?

[Alex Hormozi]

I can Give you the answer you want or the answer that's true. The answer that's true is if you hear like John Paul Dejoria, you hear Elon Musk, you hear Bezos talk about the early days. I mean, the reason that founders get disproportionately compensated is because we have to do more jobs better than most people for an extended period of time to make up for the debt that the business has to incur. So basically, every business always incurs debt, period. The question is just what type of debt you want to incur. And so you can incur financial debt in the beginning, which would be that you take on capital and then you go and find the all Stars. And then by doing that, you don't incur the operational debt, the talent debt, the data debt, the tech debt that you have to do, that you have to make up later. And so fundamentally, you want to take on the debt that you can most easily pay back if you're bootstrapped. Then you're choosing not to take on financial debt, but you do actively take on talent debt, you take on infrastructure debt, you take on tech debt, because you can't do it all as a founder. And the alternative to that is that you can give away equity in the business to attract a better player without the necessary cash comp. And then part of that's still going to be levered on your skill set because they're going to be betting on you to a large degree of like, I would rather have 10% of this guy's thing than 100% of my own thing, because I think this could go places. And so the long story short of what's margins right now? 20% ish. Okay, so you have 400,000 in free cash flow, which is basically enough to hire like one good person, right? That's a stud. And so you're like, okay, so I can just risk all of my paycheck to have one good person and they might not work out. I mean, and this again, is why we get disproportionately compensated for when we win, is that we make bigger bets and we take bigger risks. And so the choice is you take the bet on the person who you sell using your skillset, who can help you grow the business, or you work third shift, you increase the revenue and the cash flow so that now you go to 2.5 and you can pay 300 to get somebody who can actually drive growth. And then you basically work overtime to afford the guy so that he can then work more. And then all Of a sudden you get lift off. But the cash flow is kind of like the oxygen for the business. And to be fair, this is actually what the whole money models book is about, which is like, is there a way that we can recombine the money making variables in the business so we can accelerate cash flow, get customers for cheaper, get them to pay faster, get them to pay more, so that we can deconstrain the business from a cash flow perspective so that we can whether that means scaling ads or a scaling team or talent or infrastructure, if it's physical, obviously, like manufacturing locations, et cetera. So the long story answer, you're like, I'm still waiting for an answer. What should I do? I will ask a different question, which is how do you get business?

[Mike Frusciano]

Right now, mainly it's SEO people calling us from some of the stuff we've done on our website and customers re just re upping.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

So right now it's word of mouth and SEO.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

And you should probably be a little bit concerned because of chatgpta. That's eating away the SEO pretty rapidly. So right now I think the real thing that you're lacking is a reliable acquisition channel. And so for me, if I were to switch places with you, my first and primary function would be how do I get a reliable acquisition channel? Once I have that, then you can put all of your eggs. You can basically drive all of your own inputs through that channel, then get disproportionate, return with the additional cash flow, hire the people to backfill yourself. And then it's like, okay, well then what am I currently doing that I need to give up in order to get the attention in order to do that? And so it might be less expensive. Instead of saying, how do I hire that guy who's going to grow my business, which I'm still waiting for that guy, how do I hire the person to do what I'm already doing so that I can go grow the business is probably the better question. And that guy will probably be less expensive than the guy who can grow it, because rainmakers ain't cheap. Because if they actually can grow shit, they don't need you. Like, that's the real. Like the people who are absolutely the best at growing shit can do things on their own. And so you have to make the vision for the business so much bigger and so much more compelling that they're willing to come. So I think backfill what you're currently doing, take all the existing resources that you have in terms of time and money, put them towards getting the next channel going for a corporate sales motion. I'll bet also that you probably just focus on B2B. I don't know yet. I'd have to look under the hood, but that's going to be my bet. And that would probably the nice thing for that business is I'll bet you have a much higher ticket for the corporate gigs than you do for the individuals. And so as soon as you get a channel there, all of a sudden you can start selling 10, 20 engagements a week or whatever. And you're like, holy shit. Because there's no reason why if you can sell 10 B2C people a week, there's no operational constraint on selling 10 businesses a week. It's just the function is the same, but you just add zeros. And so you just got a lot more operating leverage. That was my long, short answer. Cool. Very good. Okay, good chat. Yeah, that would be a way to answer that question. And then I would ask the question, why do I care? The rumors are true. I'm launching my $100 million money models book. It's finally coming out. Six years in the making. My God, this took forever. But I've got something for you. I want to invite you to the entrepreneur event of the season, which is the launch of the book. Just to give you some context, last time I launched the book, I spent over a million bucks on the launch itself. This time I'm spending way, way more. And I've got a secret project that I've been working on for four years that I've been saving that every single person who shows up Live Saturday 16th is going to get absolutely free. Now, if you're like, well, what is it? Well, I can't tell you what it is yet, twice a secret. But it's better than an NFT and it's less than a bitcoin and every single person who shows up live gets one absolutely free. And so if that sounds at all interesting and you want to be at the book launch and you want the free thing and the event itself is going to be bananas. Click the link register and I'll see you there. Hey, Alex.

[Layla Hormozi]

Where?

[Arjun]

I'm one of the Sydney boys as well, from Australia.

[Layla Hormozi]

Welcome.

[Alex Hormozi]

Australia.

[Arjun]

Australia, yeah. My name's Arjun.

[Alex Hormozi]

I'm going to. I'm going to do a shoey at my. Yeah, done at my. At my launch for you guys.

[Oliver Bruce]

Awesome.

[Alex Hormozi]

Awesome.

[Arjun]

My name's Arjun and we sell buyer's advisory services, essentially helping property investors purchase more properties. And we're helping mums and dads or small business owners. We did 15 million in revenue, 27% profit margin last financial year. This year we're on track for about 22 million.

[Alex Hormozi]

How do you do that? Acquisition fees or what's your fee structure?

[Arjun]

We charge a flat fee for service at $22,000, half upfront, half upon success.

[Alex Hormozi]

Independent of deal size.

[Arjun]

Yeah, it could be a 800k deal size or a $1.5 million house purchase.

[Alex Hormozi]

Is that usually your range is kind.

[Arjun]

Of like usually 600k to 1 million. Price point for a purchase of a property is our range. And then we have a secondary service which represents about 10% of our revenue so far. That's percentage based and that's a commercial property. That'll usually be two, three, four million dollars deals at a much higher service fee.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

Okay.

[Arjun]

So we're on Track to do 20%.

[Alex Hormozi]

Pretty high percentage though. It's 4 or 5% on those deals.

[Layla Hormozi]

So that's pretty good.

[Arjun]

Yeah, we're on Track to do 22 million for this new financial year and we want to be doing. Based on the valuation metrics, I learned about 54 million with all those scorecard points ticked off at an ebitda of about 27%, giving us a valuation of 125 million using an eight times multiple. And what's stopping me right now is two things. One is a reduction of CAC that's needed. And then the second thing is best people duplication. If we had our top two people in each of our divisions, the same standard as the rest of the team, we would overnight get to about 45 million in revenue. So two part question that's on the best people and the CAC reduction is that our LTV is about 22 and a half thousand.

[Layla Hormozi]

Okay.

[Arjun]

And our.

[Alex Hormozi]

It's big. It's a big chunk of your.

[Arjun]

Yeah. And right now we have CAC at about 6700. And the biggest problem we're finding, wait.

[Alex Hormozi]

CAC was 22 or CAC was 6.

[Arjun]

CAC is 6600 with LTV at 22 and a half.

[Alex Hormozi]

Okay, got it hurt. Okay.

[Arjun]

And the CAC part, what we're finding is we'll put about 15% of ad spend of target revenue is how we've mapped out ad spending. And then with that 15%, it's thrown all over the place. Agency fees, PR, organic content, some Facebook, some YouTube. And so we've just done a whole bunch of channels. Fingers crossed. We get some customers and we look at our data. It's like, oh, they came through metaphor, origination but they converted from five other things. They did 10 things along the way. Yeah. We're like, how do we. What do we scale? Because it feels like everything's working because they're all touching every touch point. So we try and do everything more. We don't know which one. So those are the two things. If we best practice duplicate, we double our business literally in a year. And if we get our CAC down, we increase profitability substantially.

[Alex Hormozi]

So I'll ask a different question. If you double everything you're doing, what stops you from doing that? Independent of the attribution, which right now is lacking. But let's just say you just doubled what you're doing from. From a. From an acquisition perspective, what stops you from doing that?

[Arjun]

Well, we got four months of OpEx, so we should be able to have the cash to do it. So nothing would physically stop us. We just wouldn't have a clue if it works or not. We just hope it works.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

Well, I will bet that if you do twice of everything that you're currently doing, it will work. The data piece will come into play if you want to just get more efficient on it. And so, realistically, how long is your deal cycle?

[Arjun]

We usually have someone sign up, and then that's the first half payment. And they'll usually sign up within a month of the appointment latest.

[Alex Hormozi]

And then what about from when they become a lead? Do you have any idea? What's that? Sorry. From when they, like, opt into anything. Do you know how long it takes?

[Arjun]

No, because we've got some people who watched us for podcasts for three years and they're like, yeah, I'm ready to go. And then some. They watched a VSL and they're like, oh, I'm not so sure. Okay, sure, I'll sign up and give you a go. But in terms of sign up to actual full cash received the 22k, it's usually four months.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

So I basically double down on the branding efforts that get you the like. Because if you like one layer before attribution, that would be kind of like forensic attribution, where you'd really know would just be kind of directional attribution, which is closer to the sale. And it would be qualitative, which is just like, where did you hear about me first? And that will at least give you some indication of where people are coming from initially. Because what happens is the deeper you get into attribution, the more nuanced it is because you're like, okay, well, let's say that someone opts in a year ago and then they see a short and then they watch along and then they opt in and then buy a year later. Did they come from the first thing a year ago or did they get converted from the thing that's more recent in the last 30 days? I would argue it's the last 30 days, it starts to get a little bit more muddied. So there's something called scientific attribution, which is like last touch is the closest to conversion events, but will skew everything towards direct response. And then you'll split test until eventually become a porn business. And so it's a great saying by George Mack. He said if you split test enough, everything just becomes porn. Which I just think is really funny and partially true. But on the other hand, scientific kind of blends those because you go first touch, which then it's like, well, maybe everything is going to be my email list or whatever. If you go last touch, it's whatever the right hook is. And so scientific is if it's within 30 days, then it's last touch. If it's more than 30 days, then it's first touch. And that kind of blends both. The qualitative will at least give you direction. So I'll just ask you guys here, so who. This will be a fun exercise. Who here first thing you ever heard was just from someone telling you about my stuff. Can I get hands? Okay, cool. Okay, so separate set of hands. Who here discovered my stuff from the book on Amazon first? Interesting.

[Layla Hormozi]

Wow.

[Alex Hormozi]

Okay, cool. So by that logic, it might be like I should never write books, right? So who here found me on YouTube? First is the first. Okay, so there's some. And then what about Instagram as the first? Okay, so between those three sources, you kind of got. So if I were to power rank this, it'd be like make really good shit on YouTube because 2/3 of the room said YouTube and then another third told people from YouTube and then somebody found me on Instagram and everything else almost became irrelevant. But that's top.

[Layla Hormozi]

Right?

[Alex Hormozi]

You still have all the other kind of touch points that happen in between, like the book, for example. And so for you, like that wasn't that hard to do. But I think you can mimic what I just modeled for you with your existing customers. And then where they tell you the vast majority of first touch then can inform where you do your reinvestment. So you get a disproportionate return on dollars in or effort in.

[Layla Hormozi]

Got it.

[Alex Hormozi]

And so the back of napkin way would be qualitatively do that allocate resources to more than double the one point of greatest leverage in terms of bringing people in. But I would still continue the other quote brand touches, at least as it currently stands, because they're probably doing some sort of nudging function or conversion function that's getting people to buy because you have, you know, you have more complex, higher touch services. So it's expected for people to take longer to convert.

[Arjun]

Got it, Owens. The second part was the best person duplication. So I've got the fulfillment team.

[Alex Hormozi]

So it's going to come down to you actually studying the top two guys and being a better student of exactly what they're doing and breaking it down into behaviors so that everyone can do it. Because everything is teachable. Everything is teachable. There is no magic. It's just a question of how teachable is it. And most sales skills are exceptionally teachable within like a couple weeks. And so fundamentally, they're doing or saying different things than the rest of the team is. And so once you identify what things they're doing differently, you can then make that the standard for the rest of the team and you can see if the rest of the team goes up. If they don't adhere to those standards, then you might have other skills which is like adherence, work ethic, things like that, which are absolutely skills but probably not worth training.

[Arjun]

Thank you. Cheers.

[Preston]

How's it going? Good. My name is Sam Jacobs and we do China Fulfillment for e commerce sellers.

[Alex Hormozi]

China Fulfillment?

[Preston]

Yeah, like three PL services. China, yeah. China, the Wuhan.

[Layla Hormozi]

Yeah.

[Preston]

A little scared with the tariffs, but we're back.

[Alex Hormozi]

You're good.

[Preston]

So, yeah, we service e commerce sellers. 7% of our sellers are actually dropshippers. 30% are brands that just like the international fulfillment. So we do about 100 this month. 130,000. And then 90%, 80% profit. And then we want to be at 5 million here. And really I think what's stopping us is just continuing what we're doing. Keep doubling down on the leads, but we're kind of like figuring out our vision with it because we're working with many teams in China. We don't really have assets. Right.

[Alex Hormozi]

So when you say assets, what do you mean?

[Preston]

Technology, warehouses. We don't really own anything.

[Alex Hormozi]

Okay. Not a bad thing.

[Preston]

Yeah, I guess it's simple. So we kind of want to figure out our vision and create more valuation with the company so we can exit one day.

[Alex Hormozi]

So there's nothing inherently not valuable about your business if you run 80% net margins. And I mean the issue right now is growth. So you have to grow. What are you growing year over year?

[Preston]

Over 100%.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

You're on the smaller side right now. So like we would need to see that sustain, but that's fine. So you are growing. You've got good margins. I'm guessing it's sticky because once they get the deal, they have to continue to buy through you because you keep it masked.

[Preston]

Yeah, I mean they're using our. We're sourcing and fulfillment. So we get them product, ship the product.

[Alex Hormozi]

Yeah, I'm using Churn's low.

[Preston]

Yeah. But they also. Sometimes they're drop shippers. So their products dies out.

[Layla Hormozi]

Sure.

[Preston]

So we kind of like we're trying to figure out where's the longevity in it.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

So what you have to. So this is part of this is actually how you color the revenue that you have in the business is a little bit of finance thing. But basically I'll give you an example. So Allen, which is a software company that we owned and then sold. So Allen sold to agency owners. Now the issue with agency owners is that they would get small businesses and they would do lead gen for them. The problem is that chiropractor 1, 2, 3 would say, I don't want to buy leads from you anymore every three or four months. And so they had tremendously high churn at the SMB level, but the churn at the agency level was super, super sticky. It was very low. So I could rely on an agency to sell 10 more clients per month onto the platform and churn out 10 clients per month. But they would maintain a client base of 50 clients, which would do X amount of revenue. And so I think if you chunk up how you're thinking about Churn, which is if these drop shippers, you might find out that. And this is where you do an activation metrics, we can help you with that stuff. But it's like, okay, if we look at all the data of the customers that we have to date, what do the people who have stuck with us for over a year have in common? It might be. This is me guessing from the hip. From working a lot of businesses, I would bet you that they have at least three SKUs that they work through you and they might have at least two acquisition channels, whatever, and they might be doing over X a month for at least six months. So if we just say, okay, well, somebody who goes from 10,000amonth to 100,000amonth in 20 days on TikTok shop might not be a super stable business even Though there's big money there, they might just get shut off tomorrow or whatever.

[Layla Hormozi]

Right.

[Alex Hormozi]

Whereas if somebody comes and they have at least two SKUs, they've been doing it for six months and they're on multiple channels, then the likelihood that both SKUs and both channels die is much lower. And so I think you would chunk up to the seller, not the sku and then I would be looking at how do we cross sell multiple SKUs to recreate activation of the most valuable customers.

[Layla Hormozi]

Right.

[Preston]

So here's the issue though. To bring on these type of sellers like we have two options. Either take USA based brands and then bring them to China so they can unlock 65 plus countries. That's kind of like our offer there. Or we just go to people who are already shipping from China and then we just beat their rates. That's kind of how we're getting a lot of our clients is beating their current rates which is kind of like a race to the bottom. But it's how we got most of our clients. 50% of our clients currently come from word of mouth, I would say 30% from affiliates like E Com coaches for their, you know, for their audience. And then we have like events which is big. We go straight to like the E. Comm guys like hey, who are you using? Let's beat your rates, let's bring you on. That's how we're getting it. So we're just kind of like figure out it's going to be very hard. We talked to a lot of the team members, they've been incredible to bring USA based brands over to China. It's like a really hard ask for them and they're like we're doing all the revenue here and it's like bringing you there. It's kind of like a big ass. So like we're trying to figure out again what type of customer should we be going after? Should we just keep going after these like quick 20 year old.

[Alex Hormozi]

Yeah. So the issue of the like race to the bottom would be concern if you didn't run 80% net margins.

[Layla Hormozi]

Right.

[Alex Hormozi]

And so you're saying there's this component about my business which is actually exceptional but I don't like it because I was told that that means something bad and therefore I want to get people to do something they don't want to do in order to grow my business. I think that would be a. I would rather bet on the thing that everyone's already doing that's making you a lot of money.

[Preston]

Yeah, I mean we make money on every Single order, right? Yeah. Which is pretty cool. We kind of launch and essentially it's like if someone has massive, if someone has massive volume week most money like we had a 20 year old kid like he processed a hundred thousand orders.

[Layla Hormozi]

Right.

[Preston]

Over 100 grand profit. Like pretty cool, right? So we have a lot of our leads coming in that are beginners.

[Layla Hormozi]

Yeah.

[Preston]

So we're like hey, let's just launch a $30 a month thing to get access to our team. That's kind of running on the backbone.

[Layla Hormozi]

Okay.

[Preston]

For beginners because we don't make money if they're doing zero orders. They just waste their time. So $30 a month and then 10% of our actual profit recurring is coming from those beginners.

[Alex Hormozi]

But that's not so. Okay. I just need to re recolor your brain around this. You having how many people actively sell stuff on your using your service?

[Preston]

About a thousand.

[Alex Hormozi]

Okay. You have reoccurring business, you don't have recurring. Reoccurring is still fine. Coca Cola is not recurring. It's still a super valuable business. You just have to demonstrate that people who buy once continue to buy. That's it. And so I think again it's the chunking up which is what percentage of the thousand people continue to stick with you. And maybe you have the thousand but there's really only like 200 that are hardcore that are the real guys who drive all the volume.

[Layla Hormozi]

Great.

[Alex Hormozi]

So you build the business for them. And so a lot of this other activity is wasted effort. Unless you had a very clear path of these $30 become these people. Now you might have a couple case studies but it doesn't mean it's reliable or that it's right. Everybody has one sad story that everyone's really happy about. But realistically most of the time it's just going to be people who are already players, who are already doing volume who understand the game and you just bring them in. And so I would probably say you're 80, 20 in terms of how do we allocate attention so we get higher returns is I would probably ignore everything that's not the 200 and then reverse engineer what those 200 all have in common. And then I would make that my primary objective on the acquisition side. And then you reverse that avatar through the acquisition channels. Meaning now some of them came over word of mouth. We're not going to operationalize that. You can try and encourage referrals. We can help you with that too. But big picture, it's maybe they all came from the coaches. Sounds like Probably a lot of beginners come from there. Probably more from the events. And so you should probably go through an event sales motion. And then basically how do we go from two events a year or whatever it is that you're doing to like two a week?

[Layla Hormozi]

Yep.

[Preston]

It's funny you said the same exact words. One of your guys.

[Alex Hormozi]

Good.

[Preston]

Yeah. And then we had a crazy idea. The 8020 rule. Focus on the top clients. What do they have in common? Do we start building out some sort of technology to help those people?

[Alex Hormozi]

Just.

[Preston]

That's a distraction format. Okay, cool. So the way that we're going right now, we can, we can take this a 5 to 10 million. You see that as a vehicle or do you think it's the wrong vehicle?

[Alex Hormozi]

You can totally take it. There's obviously going to be other issues on the way in terms of scaling the services, scaling the team, upscaling your connections abroad. Probably there's a massive data project that has to get done, but Besides that. Yeah, 100% like the business model. There's nothing flawed with the model.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

Don't try and become a software company. You're not a software company. Just be a U company that does 80% net margins. That's sticky.

[Preston]

Should we look to own anything in China or keep it the way we have it? Simple.

[Layla Hormozi]

Yeah. Love it.

[Preston]

Thank you so much. Alex.

[Alex Hormozi]

Yeah. Please don't try to become a software company so that you think that your company be more valuable. Just side note, please don't do that.

[Layla Hormozi]

Thanks.

[Oliver Bruce]

Brilliant.

[Alex Hormozi]

If you were a software company, you would know you were a software company.

[Oliver Bruce]

Hey, Alex. Amazing, amazing. Flew over from England for this, so really appreciate it. My name is Oliver Bruce. Run an agency called Pinpoint Media. We sell performance marketing. So paid search, paid social creative. We do four and a half million roughly a year. I want to be at a million a month if we can get there. What's stopping us, I think is cobbler's shoes. So we can't do enough of our own ads because we're doing advertise. How do we fix that?

[Alex Hormozi]

How do you fix that? Well, I mean, so right now you're supply constrained.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

Right. So I'll ask you, I'm a business owner. I've got all these, you know, customers. I have more demand than I can handle and I want to increase cash flow in my business so that I can both hire people and grow. What do I do?

[Oliver Bruce]

Well, make sure it compounds correctly and make sure you cut the abats. Make sure you're making sure you ask me again.

[Layla Hormozi]

Sorry.

[Alex Hormozi]

So I was pretending to be, not you, somebody totally different. Okay. And so I've got. So I've got. I'm fully staffed. Yeah, everyone's at full capacity. I want to grow. I need to increase cash flow. I have more demand than I can handle. What do I do? Sell more, do more, Raise prices.

[Oliver Bruce]

You see, this is the issue, I promise you. This is what the guys are telling us to raise prices, etc. And we are mid to high ticket already in the uk and for us to raise prices. Got a client sat here, actually, maybe.

[Alex Hormozi]

I should raise prices.

[Oliver Bruce]

But for us to raise prices is really difficult because a lot of the clients are kind of. We're already quite pricey in that sense.

[Alex Hormozi]

You're performance based.

[Oliver Bruce]

We are performance based in that sense. And 75% of it is retained as well. So it compounds nicely over the course of the year. But for us to raise prices, we'd then almost out price ourselves and then go to somebody else potentially. I know we deliver a good, you know.

[Alex Hormozi]

Well, if that happened, you would free up capacity and then you could run ads.

[Oliver Bruce]

Absolutely. But then we've got to go back to the beginning and it's kind of, what's the point in winning new clients?

[Alex Hormozi]

Well, I'm saying your downside is. Basically your downside is you're fine. Your upside is you make more money and you get cash flow and you get growth.

[Layla Hormozi]

Yeah, I get that.

[Oliver Bruce]

What about just hiring more people to be able to do the.

[Alex Hormozi]

You can do that. I don't know. What are your margins? 20ish?

[Oliver Bruce]

18%.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

So you got what, 7,700ish cash flow?

[Layla Hormozi]

Yeah, yeah.

[Alex Hormozi]

I mean, you could immediately just hire off of that cash flow. All of this is just, it's really a question of risk and how much margin you want. So like, if you need, I guess I'll ask the simple question, why haven't you hired somebody already?

[Oliver Bruce]

We have a performance team that we literally started six months ago with this in house. So the reason we haven't hired someone to do it for us is because it's not immediately revenue generating. It's not a billable service to our clients. I know it is hypothetically in the.

[Alex Hormozi]

Future, but you doing performance for yourself is not revenue generating. No, no.

[Oliver Bruce]

My point is we can't bill it out to the clients straight away. So it is revenue generating in time, but it's that sort of front load in the cost to be able to then generate the revenue. And because it's organically funded and such, it's super hard to front Load it.

[Alex Hormozi]

We've got 700 in cash flow. You can go hire the person and have 500 or 400 left if they're a savage and still be fine.

[Layla Hormozi]

Yeah. Okay.

[Oliver Bruce]

And what would you say the best hooks are in terms of agency creative.

[Alex Hormozi]

For getting good, you know, getting customers?

[Oliver Bruce]

Yeah.

[Alex Hormozi]

It's still always going to be results and brands.

[Oliver Bruce]

We sell a lot through case studies and lead magnets, but.

[Alex Hormozi]

The best agencies run. The best agencies grow on word of mouth.

[Layla Hormozi]

Yeah, yeah.

[Alex Hormozi]

Because they're actually really, really good. And so like if you have, you know, some portion that's word of mouth, you just continuing to reinvest in the team. Agencies are traditionally lower will both lower margin and also typically lower multiple from a valuation perspective because it's so people heavy. And that's okay. It's just a different business model. But they're also like, I mean, every business in the world wants more customers, so it's really easy to sell. That's why so many agencies exist. So like, you know, every, every upside is a downside. Just said differently, you know what I mean? But the simple, simple low risk because you're not going to raise your prices. I can feel it. Yeah. So just hire the next person. This is the reinvestment part. And said differently, do you think you're going to get more than 8% more business for the year by hiring somebody who can get you more customers?

[Layla Hormozi]

Yeah, 100%. Right.

[Alex Hormozi]

So then it's an investment that you'll get a way higher return on than putting it somewhere else. So that's a pretty good allocation of capital in my world.

[Oliver Bruce]

And what point do you dial? Because I do a lot of the ads myself in terms of the ad sets, the creative, the running around with the phone and all that kind of stuff, just simply because I don't want to take up the dude's time in the businesses or in the business. So at what point do I dial myself out of that and put another excellent member of staff on camera sort of thing? Like how does the transition work?

[Alex Hormozi]

I think it's whenever you want. I mean, you could do that at a million dollars a year. It just. The thing is you're going to have founder magic and it's always going to work disproportionately better for you than it does for anybody else. And so I will, I will expect a 30% decrease in performance in a function if someone takes it over for me.

[Layla Hormozi]

Yeah. Okay.

[Alex Hormozi]

And as long as that's baked into the financial model, that's fine because then I get like one of the sayings we have is scale zero, which is like, how do I get me to zero? And once I'm at zero, we can just scale all the way to the moon. If there's any percentage that requires me, then it doesn't scale.

[Layla Hormozi]

Yeah.

[Oliver Bruce]

And that's what I'm trying to do.

[Layla Hormozi]

Okay.

[Oliver Bruce]

To hire someone, do more. Try and dial myself out if I can.

[Alex Hormozi]

Appreciate it.

[Oliver Bruce]

Thanks, Alex.

[Layla Hormozi]

No, you bet.

[Alex Hormozi]

And as a side note for everybody, when you're in a low capex business, which is kind of like the performance marketing agency, if you have a consulting firm, if you're an accounting firm, if you're legal, you know what you are. If you're low capex, any kind of services for the most part tend to be low capex. When you have the profit at the end of the year, the benefit of those businesses is that generally spit off more cash flow than other businesses. So like a physical products business, you have to buy more inventory. If you're a brick and mortar, you have to buy more locations. If you're manufacturing, you got to buy another machine. For more widgets or construction, you got to buy equipment, whatever it is. Some businesses require more capital to grow. Service businesses do too, but just not the way you think. There's two primary investments that will get you the disproportionately higher returns for service based businesses, which is now 80% of the room. Number one is talent. When you see your profit at the end of the year, the thing that you take is you look at that profit, let's say it's a million bucks in profit, and you're like, okay, well for me to keep going, I can try to keep squeezing my team more, but at a certain point there's just not more they can do. And so I have to unlock more operational capacity by bringing more a players on. And so I have to look at that and say, well, what percentage am I going to reinvest in the business? To me, reinvesting in the business from a service perspective is again, one of two things. One is that you bring talent in and the other is that you do brand plays, which is like, what are the big aspirational associations that I can go for that will permanently cement me in a different tier than my competition. Why does Red Bull waste the money to do a parachute jump from space? Because it's a brand play and because people talk about it like me right now.

[Layla Hormozi]

Right.

[Alex Hormozi]

And you probably haven't thought about Red Bull, but now you're more likely to drink one for the Rest of the day, right? And so why am I doing a book launch? None of you even found me off my damn book, right? Why am I doing this? Because I think that if we do an enormous launch that gives a tremendous amount of value to entrepreneurs, it'll introduce a lot of people who are kind of like much, much more on the top of my world, who are just barely at the edges. They'll take them one long step in, they'll get three or four hours of tremendous value from me. Hopefully they'll buy a book and get another 6, 7, 8, 10, 20 hours of value from that. And then over the next few years they'll work their way into my ecosystem. It's a multi year play and I'm putting, I don't know, six, seven million dollars into this launch. So I'm putting a decent amount of capital into this with basically no real return that I'm aware of.

[Layla Hormozi]

Right.

[Alex Hormozi]

And so like those are the bets that we have to make on brand that will get you out of the direct response doom loop that you may feel like you're in, which is hitting the national companies disproportionately to the local businesses. So like if you're local, you have a little bit longer. You can get away with basically just running Google Ads or meta ads and just generating leads and selling shit, which is fine. But everybody who's national or sells international brand, like you can't just like five years ago, eight years ago, you could just run a cold ad to a video sales letter, get on the phone and sell something for ten grand. You could do it with basically no reputation. Those days are more or less gone. And so now it's like you have to make these big brand investments. Now part of that might be content that you can reinvest. So you're like thinking because you're a performance marketer, you probably think more in ads. But the biggest brands that really make money with performance performance is only 30% of their budget. 70% goes to associations, narrative, founder, story, all of the things that they want everyone to talk about and associate them with. Which then long term creates higher ROAS than direct response does. Direct response creates higher ROAS in 30 days. Branding creates 5, 10, 20 times moreas over 12 months. And that's the part that everyone fucks up. Me too. I stayed stuck at between 30 and 40 million for three years until I figured that out. Hopefully that helps.

[Preston]

This is our last question.

[Alex Hormozi]

Yes, sir. Hopefully. It's got to be like amazing.

[Unknown Host]

It's probably not going to be, I'm going to try really hard. My name is Todd Weaver. We're B2C. I'm in the restaurant business.

[Alex Hormozi]

So restaurant business.

[Unknown Host]

Restaurant business.

[Alex Hormozi]

Oh, there we go.

[Unknown Host]

We do about 25 plus million in revenue. We're trying to get to 100.

[Alex Hormozi]

Amazing how many locations we have six. What's the. What type of dining?

[Unknown Host]

Actually there are five different concepts. Two to the American Pub Fair.

[Alex Hormozi]

At least you're focused. That's good. Well, there was all restaurants.

[Unknown Host]

There was a lawsuit that got in the way of growing brands. So what's stopping us is probably to be truthful is me and my business partner, which I dragged here.

[Alex Hormozi]

I'm business partner.

[Unknown Host]

Business partner over here. Yeah, I'm more the front facing marketing person. He's the implementer finding pretty face.

[Layla Hormozi]

Right Heard.

[Unknown Host]

So I thought I'd bring him to listen to the spiel. Right. So if I'm looking at the business worksheet that we filled out from the beginning, the problem is the LTV to cac. How do I. I don't have those numbers.

[Layla Hormozi]

Right. Yeah.

[Unknown Host]

So in a restaurant I have, let's say, yeah, I have information from our. What do we say?

[Layla Hormozi]

Our.

[Unknown Host]

I'm trying to think.

[Alex Hormozi]

I'll just. Programs.

[Layla Hormozi]

Yeah.

[Alex Hormozi]

So restaurants is such a unique business. The thing is, is like more than anything, and this may sound ironic, it's like on the polar ends of business you have restaurants on one side and then on the other side you've got super high tech and they both converge on the same, which is that in the long run, product is the only thing that matters. And so at the end of the day, you can do all the marketing things you want in the world. If the food sucks, the food sucks. And also that's obviously tailored with the experience, the service, the environment, all of those other things. But if the experience overall is not noteworthy enough, then you get a lot of like, yeah, it was all right. And then they never come back. And then someone's like, oh, I guess we won't try there then.

[Layla Hormozi]

Right.

[Alex Hormozi]

It's that those tiny little. Because most people do find restaurants through word of mouth and reviews. It's like 90% those two sources. I mean not many people are scrolling Instagram and are like, oh, I will respond to the buy one, get one. Now, the one exception to that is when you have a grand opening, which you should have, I'm sure you do have. Hopefully you have a grand opening strategy for your locations. That for sure is hardcore marketing that you're doing. But the idea is that you never do grand openings. Until you know that the model that you have, the experience that you deliver, the food that you make when someone comes in, you know that off of the grand opening, you can get that location to full capacity within six months. Just off of the word of mouth of basically the initial push, which, by the way, is how all brick and mortar should work with restaurants. It's just more exacerbated because data collection's harder and gross margins are smaller.

[Layla Hormozi]

Right.

[Alex Hormozi]

And so basically, if you're like, how do I aggressively grow the business? It's going to be mostly the food and the experience, which is the sad and also amazing.

[Unknown Host]

How do I get the finance guy to spend money in marketing? Because if I'm looking for that number, that CAC number, I don't know how to get that number.

[Alex Hormozi]

So right now, let's say hypothetically, you spend $0 on marketing, just for shits and giggles. So it's like, well, what's our marketing expense right now? Well, it's zero. You could just reframe that question, which is like, what do we pay in premium across our systems, our service and our ingredients that increase the virality or word of mouth from the business? That alpha, that spread is basically the marketing. You're just doing it in the form of product. But to get that finance guy to open, like, you need to have a grand opening playbook that needs to include what overstaff we do. I mean, what overstaff we do and how much money we're going to spend on ads across all channels, and what are the kind of promotional giveaways that we're going to do? In the beginning, unless it's super premium. But even then, the giveaways still happen. They're just different. Giveaways are still the way as, like grand opening strategies. It's just going to be exclusive and invite only and things like that, but it still works the same way. Okay, thank you. Appreciate it. Oh, that was it. Quick question. So who here's read my previous last two books? Can you raise your hand? All right, on a scale of 1 to 10, using your fingers, how valuable were these for scaling your business? Can I get. Oh, those look like lots of fingers. Those are at least, I would say it's a 9.7 thumbs out of 10. All right, well, the rumors are true. Let me grab the third book here that's coming out. About $100 million. Money models. It's finally coming out. Who's stoked? All right, we already have 200,000 people registered. I've spent so much money in the launch itself. Literally multiple millions of dollars. Way too much. And the reason I've done it is because I actually want to blow you guys away. But the best part of the event is that the tickets are absolutely free. And there's also a secret project I'm giving away as well. You guys don't know about it, but it's sweet. It's also free, but the only way you get it is if you click and you show up there live at the launch. So click, register, and I'll see you there.