Wanna scale your business? Click here.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.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition
Chapter 1: What do the top 1% of business owners do differently?
The top 1% of business owners aren't smarter than you. They do things differently. And that's what I'm explaining in this video. I'm Alex Ramosi, I own Acquisition.com. It's a portfolio of companies that generate hundreds of millions of dollars per year in revenue. And so I've seen a lot of different patterns across businesses that we both invested and scaled in, or some that we turned down.
If you feel stuck, it's because what got you from zero to $100,000 or $100,000 to a million or a million to 10 million or 10 million to 30 million isn't going to be the thing that gets you to the next level. And you're probably working on something that was once very important but is no longer.
So to make this real, I'm going to give you three examples of my own business experience of what I thought the business I was in versus the one I was actually in. So in the very beginning, I was into fitness. I got into it thinking that my life was gonna be about what workouts we were gonna be and how I was gonna structure the weights and the intensity.
And then as soon as I actually got into the business, I realized that the biggest issue is most people don't even show up to the gym. All of my attention was like, oh my God, I have to get people first in the door and how do I get them to stay? And how do I run this profitably when I've got rent, I've got trainers, I've got equipment that breaks.
And all of a sudden I was like, oh my God, I thought I was gonna be in the scientific business fitness business when in reality, I was in the sales and marketing business. One of the easiest ways to identify what business you're really in is to zoom all the way out to the people who are already 100 steps ahead of you. Not just one or two steps, but like 100 steps.
And the reason for that is because if I said, if you just look at someone who's one or two steps ahead of you, you should do what they do. The thing is that they're one or two steps ahead of you and they're probably gonna get lost too. But if you look at the people who are all the way at the top, typically it's because they figured out something that you haven't figured out.
If you look at the biggest fitness businesses that are gyms, most of them are basically in the sales and marketing business. They have absolutely mechanized the ability of getting people in the door. Their general managers for each location are just people who have membership quotas who are driving sales day in and day out. And so for me, I'd never even sold a pour. I didn't know what a lead was.
I didn't know what email marketing was. I didn't know any of this stuff. And the thing is, is I signed a lease and 30 days later, I had to come up with $5,000. And I'm like, how am I going to do that? When I was begging people to buy my gym memberships, that was a form of sales, not good sales, but it was a form of sales nonetheless.
All of a sudden through repetition, I was like, oh, okay, so I have to have these consistent conversations that get people to buy. And if I do that more effectively, then all of a sudden I make more money. Okay, cool. So this is really important in this business because believe it or not, people don't wake up someday and say, you know what? I'm going to sign up for a gym membership.
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Chapter 2: Why do you feel stuck in your business growth?
The ugly secret of the supplement business, at least in the United States, is that if something actually works, it's most of the time illegal. Because if something works a little bit, then typically if you put a lot of it in, it works a lot of it.
Now, I think supplements are good for filling up holes, nutritional holes in people's diets so that they can get some of these other minerals or whatever. But the thing is, is that if you're a customer, when you have two different proteins that have the exact same calories and macros, what gets you to buy? the brand.
And so because every single supplement supplier has access to the same ingredients more or less as everyone else, and the research studies that are out there, anyone who says that they know the research, the customers certainly don't know what the research is, nor do they really care. What they really care about is how good does it taste, and do I feel cool when I drink it or eat it?
And I was like, oh my God, this is not at all what I spent my entire time building this business to be. Then I had to learn all this stuff about brand. Now, I didn't know anything about brand at that time. And so that business kind of got to what I would consider like a direct sales model. But what I really missed was the cool factor. I didn't understand how to make my products cool.
And if somebody's gonna buy a creatine for me versus a creatine that's 14 bucks and mine's 60, why are they gonna buy it? I didn't have a good answer to that question. And not only that, I didn't have distribution that was convenient. In the beginning, for a business like this, you can sell online to consumers, they cover the shipping and stuff.
But a lot of times people still like buying supplements in person because it's very easy. You don't have to pay the extra shipping. The business that I thought I was in was a combination of sales and making a great product. But the business I was really in was a brand and distribution business.
And you may be like, okay, so that business was maybe different, but the third time he'll definitely get it right. You would hope that, but I didn't. The next business that I had that I wasn't good at was my first software company. At this point when I got into it, I was like, okay, listen, I can market and sell this thing. That's all that's going to matter.
Because I had, you know, again, I learned, I hit everything with the marketing and sales hammer because that was what I was good at. But when I got in the software business, I realized that You could sell software really, really easily because most software solves a problem that's pretty easy to describe and the technology is supposed to remove a lot of pain.
The problem is that as soon as someone logs in and it doesn't solve that problem or it solves that problem by introducing even more pain into their lives, which is very common, they then immediately hate it and you by default. I thought I was in the marketing and sales business, yet again, when in reality, I was in the product business and I didn't know anything about product.
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Chapter 3: What business are you really in?
Now, the longer you work with an outsourced development shop, the harder it is to leave them because they have all these developers who are dedicated to your account and they're all read up on the code. You're like, well, I can't switch now because they already have five or 10 or 20 developers that are allocated to me. And here's the even worse part.
Let's say that you're still really good at marketing and sales. Guess what happens next? They see how much money you're making. They own the damn software, right? So they can see that you're making money. And you know what's crazy? Is that I noticed as we kept making more money, my fees just kept going up. Wild, almost so much that I was like, wait, where's my profit?
At the end of the day, the dev shop was more or less taking advantage of us. And because I had no technical proficiency, nor did I have a co-founder who was really technical, because you can't absolutely have a business like this. Somebody's got to know how to code, right? Somebody's got to understand technology. And I didn't know it, and I didn't have anybody else.
And specifically, I didn't have anybody else who was incentivized to help. Because in the software business, you can make the promise of good, fast, cheap, and people are going to buy. But you have to fulfill that promise. And that's fundamentally what makes that business so hard, but also so lucrative when you get it right. And so I learned that lesson too late.
I ended up selling that company to somebody who did have a full in-house dev team. And I had built, because of my sales and marketing ability, still a pretty decent sized distribution base that he could then leverage with his software and continue to expand the business. So that worked out okay. So I'll give you another example of what business you really have.
So I talked to a guy recently who is in the M&A world, so mergers and acquisitions, and he was buying up plumbing businesses. And so he bought up a plumbing business, and I was like, okay, well, what's limiting the business? And he said, I can't find good plumbers. So I was like, well, what's your system for getting plumbers? And honestly, he didn't have one.
And so I was like, okay, dude, if we think about what the product of this business is, when you're in a service business, the product is the service, meaning the people who deliver the service are the thing you sell. And the margin of the business is the difference between what you have to pay them and what you have to charge for their work.
Our acquisition process to scale the business doesn't have to be customer facing because you've got phones ringing off the hook. There's already tons of demand. There's insufficient supply. And so the question is, what are you doing to out market your competition for talent?
I introduced to him a concept that I love to talk about, which is the cost of acquiring talent relative to the lifetime gross profit Per employee, all right? It's a lot of letters. Basically, this is how much it costs you to get people. This is how much you make from them. And so I said, well, how much do you make from a plumber per year in gross profit?
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Chapter 4: How do gyms effectively market themselves?
They learn a business model around it that they wrap a business around it. OK, let's say that's that's level two. Well, they get to level one and then they say, you know what? I just saw this thing over here that looks easier to scale up. So I'm going to I'm going to race through level one and level two here. And they do. And here's the crazy part.
This next business, they do this in one third of the time. And they're like, oh, yeah, this was a great idea. I just boom. Look how fast I'm going. Sure. They crash in the same level again. They're still stuck at level two because they never learned it. The big hairy problem is typically the problem that you need to solve to get to the next level.
And it typically requires an entirely different skill set. Most people can't confront that level of uncertainty or that level of dissatisfaction with themselves. And so they just start something else. This is, and I will probably keep repeating this because it needs repeating, is that the woman in the red dress, right? She is the distraction.
And if you don't know what I'm talking about, in the Matrix, there's a moment where Morpheus is training Neo. They're walking through a busy city. Then all of a sudden, a woman in red dress walks by. Morpheus is talking. Neo looks back and then Morpheus says, were you listening to me or were you looking at the woman in the red dress? And he looks back at him and he says, look again.
He looks again, there's a gun pointed at him. And he says, freeze. And he said, this whole point, this training is to teach you one thing, which is that if you're not one of us, you're one of them. The one of us is if it's not the core business,
It is a distraction from the core business because every one of these other things, every one of these other people in the street, every one of these other opportunities can look attractive because you don't know the shit on the other side. It's the grass is greener because it's on the other side of the fence.
And if you got close to it, you'd see the manure that you had to sit in in order to get it to grow. The craziest part about all this is that you can beat just about everyone if you can stick with something for a few years.
And real quick, if you're not sure what level of business you're at right now, I spent 200 hours this year just making this one project for you, which is the $100 million scaling roadmap. And I broke up the stages of business into 10 stages. And you can identify where you're at by simply just putting in your business information.
You go to acquisition.com forward slash roadmap, and it'll spit out this custom report that tells you what the constraints are at that current level and what you need to do. to graduate and get to the next level. This is our gift to you, absolutely free.
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