Podcast Summary: The Game with Alex Hormozi | Episode 853: Transitioning From Dying Business Models

Introduction

In Episode 853 of The Game with Alex Hormozi, host Alex Hormozi delves into the challenges businesses face when existing models become unsustainable. Drawing from his extensive experience in scaling companies from $100M to $1B in net worth, Alex addresses real-world issues presented by a diverse group of entrepreneurs. This episode provides actionable insights on customer acquisition, profit maximization, and strategic pivots to ensure business longevity and growth.

1. Transitioning Out of Out-of-Network Insurance Models

Guest: Zach Levine
Business: Integrated Pain Management Services
Revenue: $4.2M
Goal: Scale to $20M

Discussion:

Zach Levine of Integrated Pain discusses the declining reimbursements from out-of-network insurance, coupled with rising inflation costs, squeezing his business margins. Facing zero profit, Zach contemplates shifting to a cash-based model but is apprehensive about the operational changes required.

Notable Quotes:

• "Reimbursements from payers are declining each year, whereas inflation costs are going up." [01:10]
• "You have to think about this as starting a business over, but with resources already." [03:27]

Alex’s Advice:

Alex advises Zach to treat the transition as launching a new business, emphasizing the importance of redefining customer acquisition channels. He recommends focusing on a few high-converting offers, leveraging paid ads within a local radius, and implementing a streamlined sales process to enhance cash flow and profitability.

2. Scaling an Education Business in the Hispanic Market

Guest: Henry
Business: Education Services for Fix and Flip
Revenue: $1.3M
Goal: Scale to $3M

Discussion:

Henry seeks guidance on expanding his education-based business, which predominantly caters to the Hispanic community. With high conversion rates during events but low retention post-purchase, Henry wonders whether to increase the frequency of events or develop continuous offerings.

Notable Quotes:

• "I just want to make more money." [13:06]
• "The easiest thing to do is just double the amount of events you're doing." [11:26]

Alex’s Advice:

Alex recommends doubling event frequency to maximize revenue without adding operational complexity. He also suggests creating follow-up offerings to retain high-ticket clients, thereby establishing a recurring revenue stream. This strategy aligns with the inherent continuity of education businesses, where graduates progressively engage in advanced learning modules.

3. Targeting High-Value Clients in Custom Branch Railings

Guest: James
Business: Custom Branch Railings
Revenue: $420K
Goal: Scale to $4.2M

Discussion:

James aims to shift his focus from acquiring numerous small clients to securing high-value "whale" clients. His strategy involves building a referral network with architects and contractors to land sizeable projects.

Notable Quotes:

• "What's in it for them to refer you business?" [16:25]
• "Make your offer stupid to say no." [20:28]

Alex’s Advice:

Alex emphasizes the importance of creating irresistible offers for affiliates, ensuring mutual benefit. He suggests offering architectural firms the ability to sell James's products at a markup, thereby incentivizing referrals without diluting his profit margins. Additionally, he advises enhancing direct advertising efforts to complement the B2B referral strategy.

4. Optimizing Offers in a Multi-Brand Roofing Business

Guest: Cody
Business: Roofing Services
Revenue: $140M
Goal: Scale to $250M

Discussion:

After selling his roofing business to a PE firm, Cody navigates the complexities of integrating multiple brands while maintaining profitability. He grapples with creating compelling offers amidst high hard costs and low net margins.

Notable Quotes:

• "An offer that's worked really well in home services is instead of being a money-back guarantee, I position it as a profit guarantee." [25:49]
• "Think about your biggest fears and crush those with the guarantee." [33:43]

Alex’s Advice:

Alex advises Cody to centralize sales operations first to achieve cost efficiencies and better sales utilization. He recommends restructuring guarantees to focus on delivering value without eroding profit margins, such as offering profit guarantees instead of money-back options. This approach ensures customer confidence while maintaining financial stability.

5. Scaling a Creator Tools Platform to $100M

Guest: Manafate
Business: Al Fan (Tools for Creators)
Revenue: $4.3M
Goal: Scale to $100M

Discussion:

Manafate seeks to pivot his business model from taking a percentage of creators' earnings to a subscription-based SaaS model. With 40,000 creators and only 1,000 generating revenue, he questions the scalability and profitability of his current approach.

Notable Quotes:

• "The best marketplaces do run as SaaS." [36:08]
• "You're in a prosumer audience, so you have to lower the barrier as much as possible." [38:13]

Alex’s Advice:

Alex supports the shift to a SaaS model, highlighting its scalability benefits. He suggests implementing a freemium tier to attract more creators while monetizing through subscription fees for premium features. Additionally, maintaining revenue through brand collaborations can sustain growth, ensuring a diversified income stream.

6. Focusing Multiple Businesses for a Music Attorney

Guest: Alex Rodriguez
Business: Three Businesses (Law Firm, Education, Contract Automation Software)
Revenue:

• Law Firm: $100K (growing 20% YoY)
• Education: $200K (stagnant)
• Software: $100K
  Goal: Optimize focus for growth

Discussion:

Alex Rodriguez juggles three businesses and struggles with resource allocation and revenue retention, particularly for his contract automation software targeting major music companies.

Notable Quotes:

• "If you solve the retention, the thing will just keep growing." [44:35]
• "Focus all profit towards improving M12 retention." [45:41]

Alex’s Advice:

Alex recommends concentrating efforts on the software business, given its higher growth potential. He advises improving month-12 retention rates by enhancing product features and customer support. By prioritizing a single revenue stream and optimizing retention, Rodriguez can streamline operations and scale more effectively.

7. Scaling Cellular Therapy Home Services

Guest: DJ Kristofferson
Business: Mobile Healthcare (Cellular Therapy)
Revenue: $1M
Goal: Scale to $25M

Discussion:

DJ Kristofferson faces challenges in transitioning from B2B referrals to scaling B2C operations. With strong margins but limited referral success, he seeks strategies to enhance lead generation and customer acquisition.

Notable Quotes:

• "You have to have the training system to reliably get them to self-generate." [50:07]
• "Centralize all sales for cost efficiency and higher sales utilization." [54:37]

Alex’s Advice:

Alex emphasizes the importance of managerially supporting affiliates to maintain consistent referrals. He suggests systematizing the referral process by actively following up with referring physicians and ensuring high-quality customer experiences. Additionally, expanding B2C marketing efforts can complement B2B strategies, enhancing overall lead generation and revenue growth.

8. Restarting a Virtual Staffing Company with Personal Focus

Guest: J
Business: Virtual Staffing Company
Status: Zero Revenue
Goal: Launch Successfully

Discussion:

J is in the nascent stages of reviving his virtual staffing company and seeks personal advice on maintaining focus amidst personal relationships.

Notable Quotes:

• "Be you. If the way you want to live maximizes your goals, then find someone who loves that." [62:54]
• "Your goals are a reflection of yourself." [63:08]

Alex’s Advice:

Alex underscores the importance of authenticity in personal relationships, especially when entrepreneurial pursuits may demand a significant time commitment. He advises experiencing firsthand how business-focused lifestyles impact relationships before making long-term commitments, ensuring mutual compatibility and support.

Conclusion

Episode 853 of The Game with Alex Hormozi offers a wealth of strategies for entrepreneurs navigating the perilous transition from outdated business models to more profitable and scalable systems. From refining customer acquisition channels to enhancing offer structures and focusing business efforts, Alex provides tailored advice that addresses the unique challenges faced by each guest. This episode serves as a valuable resource for business leaders aiming to optimize their operations and achieve substantial growth.

Notable Resources Mentioned:

• Scaling Roadmap: A comprehensive guide breaking down scaling into 10 stages across eight business functions. Available for personalization at acquisition.com/roadmap.

Timestamp Highlights:

• [00:00] Introduction to the episode and overview.
• [01:03] Zach Levine discusses transitioning business models.
• [11:24] Henry seeks scaling advice for his education business.
• [15:42] James explores strategies for high-value client acquisition.
• [25:49] Cody examines optimizing offers post-acquisition.
• [35:04] Manafate considers pivoting to a SaaS model.
• [44:27] Alex Rodriguez focuses on business prioritization.
• [52:05] DJ Kristofferson discusses scaling mobile healthcare services.
• [62:15] J addresses personal relationship advice amidst business reinvigoration.

For more detailed insights and personalized strategies, listeners are encouraged to access the Scaling Roadmap available through the podcast’s recommended resources.