The Game with Alex Hormozi: "The Mathematics of Business, Explained" | Ep 990

Date: January 13, 2026
Host: Alex Hormozi

Episode Overview

In this episode, Alex Hormozi presents 12 essential "rules of thumb"—mathematical ratios, benchmarks, and heuristics—designed to help entrepreneurs analyze, benchmark, and scale their businesses more effectively. Drawing from 14 years in business and real-world lessons learned building Acquisition.com to $250M+/year, Alex breaks down the numbers and relationships at the heart of business growth, pricing, customer acquisition, and profitability. This episode is rich with practical formulas, memorable examples, and foundational math every business owner should master.

Key Discussion Points & Insights

1. Pricing & Close Rate Ladder

(00:30–08:30)

• Close Rate as Pricing Indicator:
  • If your close rate is above 80%, you're "typically underpriced by 3-4x."

    “If you are closing at 80% or more... you are typically underpriced by 3-4x.” —Alex (01:12)

  • 60-80% close rate: underpriced by 2-3x.
  • 50-60%: underpriced by 1.5-2x.
  • 40-50%: underpriced by 1.25-1.5x.
  • 30-40%: properly priced, if you have a robust sales education/pipeline in place.
  • Below 30%: likely a targeting or process problem, not a price problem.
• Exception: Only SaaS businesses (approx. 5% of businesses) should meticulously balance price for scale; service businesses almost always should raise prices as they improve.

2. LTV:CAC Ratio by Business Model

(08:30–24:00)

• Definitions:
  • LTV (Lifetime Value): Total gross profit from a customer over time.
  • CAC (Customer Acquisition Cost): How much you spend to get a customer.
• Benchmarks by Automation/Human Involvement:
  • SaaS/Automated (0 humans): 3:1 (LTV:CAC)
  • 1 human (e.g., human in delivery or sales): 6:1
  • 2 humans (in sales & delivery): 9:1
  • 3 humans (acquisition, conversion, delivery): 12:1
  • Example:

    “The first year of gym launch, my LTV CAC was 100 to 1. I spent a hundred grand and made 10 million.” —Alex (21:23)

• Biggest business wins come from these big arbitrage windows.
  • Two winning strategies: drive CAC to near zero (build a brand/go viral) or make LTV approach infinity (extreme customer value).

3. The Rule of 100: Relentless Volume for Growth

(24:00–33:45)

• Take 100 actions/day for 100 days (outreach, content, ads, whatever your channel).

  • “I have never seen a business not grow when they implement the rule of 100 when they’re starting out.” —Alex (24:05)

• Key for smashing "feast or famine" cycles—volatility is usually due to insufficient, inconsistent volume.
• Applies to both small and large businesses (do it on new channels as you grow).
• Diminishing returns are still returns; volume trumps obsession with optimization.

4. Lead Response Time: Under 60 Seconds

(33:45–38:28)

• The #1 way to maximize CAC efficiency: Call leads ASAP (within 60 seconds).

  • “Would you prefer to pay four times more per customer than you currently are?... please call your leads within 60 seconds.” —Alex (34:14)

• Waiting destroys your conversion rates and gross margins.

5. Sales Team Calendar Utilization (70–75%)

(38:30–45:30)

• Sweet spot: 70–75% of calendar booked.
  • Fully booked = lower conversion, worse follow-up, poor show rates.
  • Too empty = low morale, commission anxiety.

  • “I try not to let it get above 85 and I try not to let it drop below 60... I would say 70, 75 is right around the sweet spot for this.” —Alex (41:16)

• More salespeople = more revenue; don’t hesitate to staff up.

6. Payback Period: 30 Days or Less

(45:30–51:15)

• Goal: Recover your CAC within 30 days of acquiring the customer.

  • “If I can take a hundred dollars of credit card money which I don’t have to pay anything for until the end of the month and I can take that $100 and go get me a customer and at the end of the month, make that $100 back... that is the power of this.” —Alex (47:00)

• 30-day payback allows limitless growth, especially if bootstrapped.

7. Gross Margin Targets

(51:15–01:04:20)

• Service businesses: Target 80%+ gross margins as a bare minimum.
  • Undercharging is rampant; don’t sell from your own wallet.
  • Illustrative math:
    • $100 cost at 80% gross margin requires $500 price.
    • $100 cost at 70% margin requires $333 price.
    • $100 cost at 90% margin requires just over $1,000 price.

  • “If you want to run a high margin business, then you have to run exceptionally high gross margins for whatever it is that you sell.” —Alex (01:03:30)

8. 30 Day Cash Collected (COGS + CAC)

(01:04:20–01:07:40)

• What should you collect in the first 30 days?
  At least your cost to deliver (COGS) + your CAC.
• This enables “infinite” customer acquisition with no outside capital.

9. Churn & Retention Benchmarks

(01:07:40–01:13:10)

• Annual retention targets (B2B): 80%+
  • Retain at least 80 out of 100 customers after a year.
• Small improvements in retention = massive lifetime value gains.

  • “You don’t want to be in the sales business. You want to be in the reselling business.” —John Paul DeJoria (quoted by Alex) (01:10:25)

10. Prepay Incentives & Financing

(01:13:10–01:20:43)

• Encourage prepayment: Minimum 10% discount for annual pay-in-full.

  • Buy 10, get 2 free = 15–20% take rate.
  • Sweeten the deal with speed, lower risk, and easier process.
  • Stack more benefits to hit 30–40% prepay rates.

• Third-party financing: Can boost sales by 35% (according to Affirm).

  • “Not only does that money come forward if you have good financing, you could also increase sales overall.” —Alex (01:15:16)

• Payment Plan Tactic (“Layaway”):

  • Customers pay over time, only get delivery once paid in full.

  • “They just said, oh, okay, we’ll do half now and half in a month and we’ll be out next month. That’s why I’m such a big fan of layaway as a payment option.” —Alex (01:18:40)

11. Conversion Benchmarks by Channel

(01:20:43–01:25:15)

• Meta leads/in-person service: 10% of leads should close.
• Cold webinar leads: 2–3% conversion is typical; up to 5% if niche.
• Salesperson (in-person): Should close at least 1 out of 3 (35%+).
• Web pages: 1–2% conversion rate is standard; top trust platforms (e.g. Amazon) can be much higher (up to 25%).

  • “My Amazon page for my books... we convert roughly a quarter of the traffic that hits that page.” —Alex (01:23:40)

12. Reject Industry Averages — ‘Play to Win’

(01:25:15–end)

• Don’t settle for industry norms:
  • “Industry averages are dumb… Why would I want that to be my bar?” —Alex (01:26:53)
  • Instead, seek what’s possible, not what is “average.”
• Ultimate lesson:
  • “The winner of every category is not the industry average. And I can almost promise you that they don’t look at the industry average… There are only physics.” —Alex (01:29:11)
• Memorable Example:
  • Friend makes custom machines with $400K price and $17K cost, yielding far above-average margins.

Notable Quotes & Memorable Moments

• On Raising Prices:

  “Raising prices is almost always the direction that businesses go in, with one clear exception, which is if you have a business that has unlimited scale.” (05:08)

• The 100:1 Launch:

  “The first year of gym launch, my LTV CAC was 100 to 1. I spent a hundred grand and made 10 million.” (21:23)

• On Chasing Diminishing Returns:

  “Diminishing returns are still returns. If I do a thousand times more than you, but I get a hundred times the outcome... it’s still worth it.” (30:45)

• On Lead Response Speed:

  “For the love of God, please call your leads within 60 seconds… Do you hate helping people?” (34:14)

• On Layaway Payments:

  “They said, can we split into payments? ... I said, as many as you want... We’ll just sit your onboarding for a year from now.” (01:18:25)

• On Industry Averages:

  “If the average American is in debt, divorced twice, overweight and just mid as fuck, why would I want that to be my bar?” (01:26:53)

• On Winning in Business:

  “I’m not going to operate within your frame of reality. Like, why would I operate within the frame of beliefs that what the average person has achieved is what I will achieve?” (01:28:16)

Timestamps for Key Segments

| Time | Segment / Rule of Thumb | |--------------|-----------------------------------------------------------------------| | 00:30 | Close Rates vs. Pricing Reality Ladder | | 08:30 | LTV:CAC Ratio Framework for Scaling | | 24:00 | Rule of 100: Relentless Volume, Not Just Optimization | | 33:45 | Lead Response Time: Under 60 Seconds | | 38:30 | Sales Team Calendar Utilization (70–75%) | | 45:30 | Payback Period: Recover CAC in 30 Days | | 51:15 | Gross Margin Targets (80%+ in Services) | | 01:04:20 | 30 Day Cash Collected (COGS + CAC) | | 01:07:40 | Churn & Retention Benchmarks | | 01:13:10 | Prepay Incentives & Payment Tactics | | 01:20:43 | Conversion Benchmarks by Channel | | 01:25:15 | Reject Industry Averages - Play to Win |

Final Takeaways

Alex’s 12 mathematical rules of thumb challenge listeners to measure what matters, set far higher than average targets, and relentlessly optimize for scalable growth and profitability. Whether it’s price, close rates, customer value, retention, or operational efficiency, these are the lighthouses to guide every entrepreneur’s journey.

“Those are my 12 rules of thumb that I’ve learned in business… these are the lighthouses that guide my path, and I hope they serve you as much as they’ve served me.” —Alex (end)

Useful for: Business owners, entrepreneurs, SaaS or service founders, or anyone responsible for P&L and eager for a toolkit to measure, benchmark, and radically improve their business.

Listen to the full episode for more detailed stories and examples.