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
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just do what you do and do it well and do it for a long time and it always takes longer costs more and is harder than you expect it to be but it's the expectation that was the problem not your plan Welcome back to the game. Two out of three businesses fail. Sad face. And since 2016, every business that I have founded continues to make money to this day.
And so there's a process of building an unfuckable business that you might not expect. And the first of those three steps is stop selling small customers. Let me explain. So many businesses stay small because they only serve small customers. Let me tell you a story to explain this. So there was a small gym CRM back in the day that approached me about investing.
And I asked them what their churn was. So what percentage of customers were leaving between last month and this month? And their answer surprised me. It was a much higher percentage than I expected because I thought CRM, they're processing their payments through here. They have all their memberships in there like this should be a very sticky product. And I said, so where is the churn coming from?
And they said, oh, well, about a third of the gyms go out of business every year. And I was like, wow, wait a second. So this has nothing to do with how good your product or service was. These businesses in and of themselves just stopped being in business. And so the formal language for that is called structural churn. It means it's baked into the structure of the market that you serve.
Now the question is, Is that your choice to pursue that market? And the answer is yes. And so if you're thinking about your own business, there are many business models that simply aren't fit for smaller customers. And so I'll give you a different example.
In the agency world, where you do some sort of advertising for any type of business, if you look at some of the biggest ad agencies in the world, you'll notice a common theme. They all serve the biggest customers in the world. Whereas if it were true that agencies would be best served serving small customers, then some of the biggest agencies would serve some of the smallest customers.
But that's not reality. And so in looking at this, it means that just like the CRM business, and that's arguably one of the stickiest businesses you could possibly imagine, the agencies could not keep churn down with small business owners because small business owners in and of themselves are volatile.
And so what happens is that there's many businesses like small agencies that do lead generation for small customers and continue to wonder, what do I need to do in order to make my business sticky? And they kill themselves trying to figure it out when the problem is inherent to who they serve, is that they are volatile. And as a result, your business will be volatile too. It reflects onto you.
Now, to give you an absolute hypothetical extreme here, to give you an example, Shopify is what most would consider world class or best in class for customer retention. But they serve, by and large, prosumers, meaning consumers who want to start a business. And let me give you a stat that might blow you away. 60% of their customers stay every year, but 40% leave. And that's the best in the world.
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