The Game with Alex Hormozi
How To Get So Rich You Realize Money Isn't The Point | Ep 822
Thu, 09 Jan 2025
Welcome to The Game w/ Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition Mentioned in this episode:Get access to the free $100M Scaling Roadmap at www.acquisition.com/roadmap
Chapter 1: How did Alex Hormozi become wealthy?
When I was 27, I had just over a million dollars in my bank account in cash. By the time I was 29, I had over 20. By the time I was 31, it was more than that. Here's how to get so rich you realize money was never the point. But first, you have to get rich. There's three strategies, and the first one is building a brand.
Chapter 2: What are the three strategies to get rich?
So I remember this point when I had launched this new product called ALN at the time, which is supposed to be automated lead nurture. We had a big distribution base of gyms that use our model.
And one of the big pain points they had was that they wouldn't work their leads or it was very time consuming and costly to, you know, continue to follow up and call and set appointments and remind people to show up for their gym workouts and their sales appointments. And so we put together this like Zapier Frankenstein product basically that
automated the texts based on responses and it was this massive decision tree that took like six months to build. And when I did the release of this product, some people weren't able to be live for the release because they had classes, they had sessions, they had whatever. And one of the most interesting things that had never happened to me before,
is people started calling into our support team and saying, hey, here's my credit card. I know that Alex launched something, just like bill me for it, I'm in. It was the first time in my life where I had people just say like, I will buy whatever he has based on his reputation, not based on anything else. In a word, Steve Jobs describes brand as trust.
And I define trust as predictive power based on past experiences. Just as much as you can trust someone to do a bad job, you can trust someone to do a good job. And so the idea here is obviously to build trust that we will deliver on our promises. And so fundamentally, you build that by making promises and keeping or over delivering on the promises you have. But brand is a big amorphous topic.
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Chapter 3: How does building a brand lead to trust?
And so how do you measure this in dollars and cents? And so there's basically three things that brand translates to in terms of economics for a business. And so the first is conversion rate. Now, what does that mean? So conversion rate is the percentage of people who, when presented with your offer, choose to buy it. And so let's say that you have a bad brand or no brand at all.
So that would mean that a bad brand would be that you have a past history. People trust you to do bad stuff, right? So you have lower than neutral. If you have no brand, then they would act as though you are some, basically, it would be based on their experience with other businesses that look like yours.
and so this is also why quote good branding even if you don't have a history of reinforcement can still be important because if you walk talk and quack like somebody who is a scam artist you will have people treat you like one it's not just your experience, but their experience with people like you. Fundamentally, this is what racism is about.
But people prejudge people because that's how we go through life. If we had to start at zero for every single person we met, we would use up all of the cognitive load that we have, and consumers, like all humans, try to use shorthand. We want to learn based on the things, put a label on it, put it in a bucket, and not think about it as fast as possible.
Chapter 4: What is the importance of conversion rate in branding?
And so from a conversion rate perspective, a good brand means that, let's say, neutral, would be, let's say you close 20% of people who you get on the phone with at a specific price point. At negative, which actually, I'll just put a zero here, negative one, and then positive, right, maybe, and the thing here is that this could go as high as you want.
Like, if you have an unbelievable reputation, like plus, plus, plus, maybe you close 80%. And what's interesting about this is if you look, and maybe here it's 0%, because everyone hates you, and you basically have to rely on people who don't know who you are.
So basically you just have to keep finding more, you have to advertise wider and wider to find people who have yet to meet you, which is a terrible way to live. Brand gives you an increased percentage of people who will buy when presented with your offer, just like the guy who didn't even need to get presented with the offer, just knowing that I had an offer, he was willing to buy it.
And the reason I use Apple as a great litmus test for this is that I think Steve Jobs is one of the best brand builders of all time. I mean, people lining up to buy whatever his next product was because of his past history of keeping his promises and over delivering on it. And so number one is conversion rate. And this is like, if you had nothing else, this would be worth it.
If you could 4X the amount of people that bought your stuff at a specific price, that would give you a material advantage over everyone else. But branding doesn't stop there in terms of its business benefits. The second is CTR. Now it's like, okay, how does click-through rate, what does that really mean? So it's actually conversion rate again, but just earlier on in the funnel.
Let's say, again, you have eyeballs, you've got people who see your promotions in whatever way you advertise. So that could be making content, that could be outreach attempts, responding to emails, but it's basically the number of engaged leads. Having a higher click-through rate means people take the first action, they then convert on a landing page or a Shopify page or whatever.
they're either buying a product or they're scheduling a call, and then on the call they have a higher conversion rate as well. And so basically you can think about this as conversion rate throughout the entire process, from the beginning to the money, and then obviously if you continue to do a good job, on resales, repurchases, et cetera.
So let's say that generically at negative one and then zero and then plus, right, here you might have a .5% click through rate. And then here maybe you have a 1% click through rate. And then maybe here you have something like a 3% click through rate. And this is super standard, like this happens all the time, especially if you're going after markets that already know who you are.
When I launched my leads book, We had never run ads before, and so this was all novel. And there was a past history of the first book. So the first book has, I think, like 26,000 five stars at the point of making this video. There was a lot of anticipation for the second book. And so the CTRs were like 6% for our ads.
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Chapter 5: How does click-through rate affect business success?
There's one more point that makes brand make you even more money. And it just took me way too long to realize this because I... got really good at marketing and sales early, and I came at it from the perspective of like, I just need to go find more people.
When it's so much more profitable to find the existing people that you have, that you already have done business with, and they want to continue doing business with you. And so I solve now for, how do I get people to always want to do business with me again, rather than how do I find more people? The fourth piece is,
repurchases and so just like apple like i was mentioning earlier they have such an amazing system of getting people into their ecosystem and then buying again and again and again and it would take a tremendous amount of effort to get someone to disconnect all of the products they own their phone their computer their their music whatever their app stores from their existing ecosystem of digital products of digital hardware
The fourth benefit is that not only do you get more people to respond, more people to convert at higher prices so you can make more profit, that profit then gets multiplied. So if we have our neutral example, I'm gonna have to put the other one over here. Now we already have a higher price point. So we're already making more money than this guy.
But not only that, the next year, some of these people might buy again. What do you know? Now our cost basis is gonna go up because obviously they're buying something else, right? But so is our absolute profit. In those four ways, building the brand makes you so much money that you will have the first step taken towards
realizing it wasn't the point to begin with and so from the conversion rate perspective if you think about those guys who bought at the aln launch who weren't even presented the offer they just found out that i had something to sell those are people who otherwise in a neutral or negative business certainly wouldn't have purchased they would have either need to be convinced if they were neutral or they just would have not wanted to buy to begin with if they were at the negative side of the spectrum and so that's how you can just demonstrate visually what the experience of having a higher conversion rate looks like more people buy when they're presented with the offer
And I'll give you another really tactical example. So my offers book on Amazon, the actual page itself converts at 30%. So basically a little bit less than one out of three people who visits the page buys the book. Now I think there's a variety of reasons for that.
One of them is that many people who go there got referred via word of mouth, which we'll get to one of the big compounding things from that later. But the second thing is that even if you don't have word of mouth, when you have a 4.9 rating and you've got 26,000 people who rated at that, then you have high confidence that it's going to deliver at least a decent product.
And so you convert at a higher percentage. And so the first and baseline way of understanding how brand makes you more money is the boost in conversion rate. And so let me give you four visual examples of how branding even came to be. And so back in the day, you'd have bulls and those bulls would originally be unmarked.
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Chapter 6: What role does price point play in branding?
If we have that experience, then we're going to treat the cow differently than if it were unbranded. Now, let's say that there's a brand that we don't recognize. We would then treat this bull like all other branded bulls in that it's a category that we just know that it belongs to someone else. The third scenario might be, let's say that it belongs to somebody that you hate.
We have branding that you recognize and like. Well, then you'd be nice to the cow and take it home. Branding that you recognize and hate. You might capture the cow, kill the cow and eat it for yourself or steal it.
branding of somebody you don't recognize but know that in general it belongs to someone which would then change your behavior and then finally a cow that was unbranded in general and you would treat it like you treat all cows that have no owner the reason this is important is that fundamentally the point of branding is to change behavior of the person who sees it and all of this is an indication of past experience it's saying hey treat me like you would
Treat me like you'd want to be treated. Treat that cow like you would want to be treated, which is exactly the point. No, but the owner is communicating something to anybody else who sees the cow. That's the point.
We want to brand our products so that they treat it ideally like something that people like and love, which might mean that they buy it quickly at higher prices and over and over again and tell their friends versus not buy it, tell people terrible things, dissuade their friends from buying it.
Versus, I don't know, maybe I'll take a risk on this thing and then it's gonna be the quality of the creative that's gonna have to communicate. And this is again why, if you had a really fancy brand and it looked high end, then they're just going to extrapolate what they know about high end brands in general to the purchase.
Okay, this looks like a premium brand, I understand why they're doing these things, but I don't have history. Now, if you make the purchase and they have history, then it would shift into one of these two categories. I want to talk about something that I think a lot of people misunderstand.
So there's a concept of the give to ask ratio, and I talk about it here in my Leads book in the content chapter. And the reason that this is such an important metric is basically this is a history of reinforcement, is how many times have you reinforced positively before you ask for something? But this is the part that people miss. is that, and it's because most people's products aren't that good.
Their ask in their mind is perceived as a negative and the give is obviously perceived as a positive. And so you make this media, you give out this free stuff, that gives you more and more pluses. Some people like to think about it like a bank account. You add more deposits and then you can withdraw. But when listening to jobs talk about this,
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Chapter 7: How can businesses improve their inputs for better outcomes?
And so it's like you're not even involved and these losses are occurring on a regular basis. Sometimes people call it time theft. I don't think the intention's there, but I do think that the end result is still the same, which is that Hey guys, real quick, this podcast only grows from word of mouth, quite literally. There's no other way to grow a podcast than word of mouth.
If there's some element of this that you think somebody else should hear or would be relevant to them, it would mean the world to me if you shared this via text, via Instagram, via DM, via whatever way you like to share stuff with the people you love. Thank you. The business becomes less efficient and bears more cost to deliver the same product.
The third big hole that I see a lot of times is people who spend an inordinate amount of time on data that doesn't change what they do. So I'll give you an example. I could track what the temperature is of every room that I walk into. I could track the amount of words that I say on a meeting. I could track, I mean, you could track anything, right?
Some people, especially small business owners, and sometimes even on your team, will just love to show you all these Excel sheets of all this data that they've tracked. It takes a huge amount of time, and they get all these percentages and all these ratios, and then you just have to ask the question, why should I care about this? How does this change what we do?
And I ask this question over and over and over again because so many people love to be like, oh no, we're data-driven. It's like, are you data-driven or are you data-distracted? Basically, and this is the limits test. This is the very easy limits test. If this number goes up, does it change what we do? If this number goes down, does it change what we do?
If this number changing doesn't change what we do, we don't need to track it. When you ask that question over and over again, because people are like, well, we want to keep an eye on that. I'm like, why? Let's take it to the natural extreme. Why?
The world is increasingly quantified and being able to, with automation and software and wearables, like there's so much technology out there that wants to quantify everything because they know that people have an obsession with data. But not all data is useful. And so most businesses, you can figure out the metrics on the back of a napkin and figure out if you like it or not.
That back of napkin way of running a business, in my opinion, is an exercise in thought discipline of the entrepreneur. If you know the clear inputs that drive the business, which for you might just be I have to script, record, and edit content. It could be I have to script, record, and edit ads.
It could be I have to do a certain amount of outreach attempts or manage a team to hold them accountable to doing these outreach attempts. There are a certain number of things that actually drive the business. If the data that you collect does not change what you do with your inputs, then you don't need to track it.
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Chapter 8: What are the major pitfalls to avoid in business operations?
How can we just make this even higher likelihood that people who already have a low threshold because they like the product, we just lower the activation they need even lower so that more people can hop over and bring business our way. I told you at the beginning that I would give you three ways to get so rich that you'd realize that making money was never the point.
And so the first way is that you build a brand. And the translation of that into making money is that you get more people to click on whatever you do for your advertisements, you get more of them to buy, you get them to buy at higher prices, you get them to buy more times.
all of those compound into lower cost per customer and more lifetime value per customer the two primary ways of growing a business the second way is that you track your inputs and outputs so that you do more of the things that actually generate more customers and get your team to do more of those things that actually generate more customers or get them to be worth more and basically remove everything else and avoid all the mistakes that that and pitfalls that people get time sucked into that don't actually move the needle
The third is getting a higher leveraged way to get customers, which is getting lead getters so that they can get customers on your behalf. And basically every Mondo business you've ever seen has this. And if you're like, man, Alex, that's hard. Welcome to becoming super rich. There's a reason that not many people have it. And so you have to find ways to get leverage.
And the strongest way is to build an exceptional product. The second strongest way is to have an amazing incentive. And then the third best way is that when you have a great product or a great incentive that you reinvest in the thing that's making it work.
when you do all three you will make the amount of money because you have this amazing brand you know the inputs that generate those types of returns and you will continue to reinvest in higher and higher leverage ways of getting customers to get you more customers so that eventually it's decentralized that it grows on its own without you it becomes a monster that you have to feed rather than dog that you have to pull by the neck to grow
They say this in Y Combinator and I just love it, which is in the beginning, a startup feels like pushing a boulder up a hill. And then as soon as you get product market fit, which is where the customers tell other customers about the product, you start getting referrals and that wheel starts spinning. It feels like you're chasing the boulder down the other side of the hill, running after it.
And so I love that visual because that's where you want to get. And to be clear, it's painful on both sides. It's just most people would prefer the pain on the other side of the hill. I remember when I was in college, the Powerball lottery had gotten over a billion dollars. And so I went and I bought a ticket with my girlfriend at the time. And it was more just because it was like fun.
It wasn't because I thought I was going to win. But when the drawing actually happened, I remember having this moment of sheer dread where I was like, what if I win? And the dread was that if I won, no one would ever, I would never have had a shot to prove that I was good enough. and that the only reason I was successful was because of luck.
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