In this Q&A episode of The Game, Alex (@AlexHormozi) answers real questions from real business owners, offering blunt, tactical advice on pricing, positioning, retention, hiring, scaling, and staying focused on what actually drives growth.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: What strategies can help me scale my education business?
RN drives out, gives you an IV infusion in your home.
Okay, got it.
We'd like to get to $25 million. We're built to be bought. We want to exit, so we think we're on the cutting edge of this. What's stopping us is my team is awesome.
All right.
Great. And from the NFL, it's a lot of good. We have great business to doctor B2B sales experience. Zero B2C experience. And that playbook we're learning is wildly different. We have no idea what we're doing.
Yeah. So what stops you from just doing way more of the doctor stuff?
It doesn't quite pay as well. Meaning we have people that knock on doors to orthopedic surgeons who are looking for patients with alternatives to surgery, PT, chiropractors. It's a lot of effort. And there's some that are going to refer to you and some that just will not. So that's our constraint in a one market. We're in the Twin Cities. It's a one market play.
We know there are more people looking for this solution. So we want to understand what the B2C is. If we go to then Dallas, Philly, LA, as we try to scale it, we're convinced it needs to be a better ROI than maybe what we're doing right now.
What do you do? So you're banking 50% margins, right? So what's the cost to acquire a physician?
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Chapter 2: How can I retain customers for high-ticket offers?
And whether it be brick and mortar or combo of online...
I think it depends on your strengths. So Layla has a really good frame for these types of decisions, which is what problem would you rather have? Because you're going to have a problem in either of them, right? The problem that you described with the first one is basically the affiliate problem, which is how do I attract them? How do I keep them motivated? How do I train them?
How do I keep quality high? How do I make sure that they're representing the brand the right way? That is the problem with affiliates. But the nice thing is that if you solve that problem, you get paid like 50 or a hundred million dollars. And so like, I feel like there's an appropriate price tag ascribed to solving it.
And that's what gets me through honestly harder times when you guys, because sometimes you're like, man, I just can't figure out how to get these conferences to work. It's like, yeah. And then as soon as you do, you make $10 million. So yeah, solve it. Like, that's how it works.
When it comes to the direct to consumer side, if you feel like you're more skilled with call it, you know, map, basically. the business, like what business you're really in. So if you get into the direct to consumer business, you're competing against like snow teeth whitening. And like, if you look at the business model there, it's all media, it's all, you know, advertising driven type business.
This is with glasses. likely very transactional. So it's a super direct response heavy business, you'd probably be recruiting affiliates for brand associations and be able to whitelist for them to be wearing your you know, your your glasses and whatnot. And that's the business that you're in.
So it's going to be the problems that you're solving, or I have to be creating shit loads and shit loads of ads all the time. I have to be up to date on the best media buying stuff and have a really good at CRO, so conversion optimization. And I should probably over time develop a strong influencer affiliate strategy so that I can actually build a brand rather than just a ROAS arbitrage business.
That's that path. The other path is the brick and mortar affiliate path where you still are centralized. You're just using doctors as your distribution base. If I had to pick which one I would rather have, I would rather do that one. That's me personally. And you're also a physician, which I think gives you a little bit of leg up or at least foot in the door, figuratively and literally.
I think that that one actually, if you want to sell a business in the future, would probably be more likely to be sellable.
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Chapter 3: What are the key challenges in transitioning to B2C?
Like micro level, it's LTV to CAC, return on invested capital is what it is at the macro level. When you're like opening more and more locations and saying, it costs me 500,000 to open a location, the location makes me $500,000 within the first six months. Okay, cool, I've got a two to one return on capital within a year, which is awesome, right? So let's tackle for you.
So the nice thing about the music business is that it's actually identical to the gym business, so I know a lot about it. And so the models that I've seen works unbelievably well have been semi-private models, number one, or... The 30 minute, multiple times a week, much higher ticket. People stay three, four, five years with music lessons with their person.
I prefer semi-private because I think you get more loyalty to the brand and it's less about the music teacher who can then leave and then take all of those students to go private. And so I like semi-private in general. Also, I'm sure you could sell around the idea that they get a little bit more socialized and it's probably good for them and all that jazz.
And in terms of pricing, I want my gross margins to be at least 80%. ideally 90. And so now you can do that when you're one-on-six, harder one-on-one. And so if let's say you have six kids, right in a class or four, I mean, you can you can you can, you know, level into it. But let's say it's one on four, keep it math simple.
And you charge $200, sorry, $50 per session times four kids is 200, you make $200 per session, right? Well, for you to pay for an hour of music teachers time, what does that cost?
Right now, that would be $40 to $50. Okay.
So that's 80% right there. So 240. So 80% gross margins right there. Now, if you charge 60 bucks a session, you'd be at 240. So then you'd be at like 84, whatever, in terms of gross margins. So you're above that. But that's my rule of thumb for brick and mortar service businesses is I want it to be over 80. Ideally over 90, but I will not do a business if it has lower than 80% gross margins.
Some people do. I just don't like to. Cause you don't have enough cash to do anything. Right. And so then the question is, okay, how do we, how do we create the sales process and the positioning so that now you already are working with a special class of customers. And so I would imagine that you would be able to probably even more easily than a traditional music academy sell at a premium price.
Because if I'm a parent who had a neurodivergent kid, I would be willing to pay for a specialist. And so specialist prices are premium. So I think that would work. And in terms of the model, you can, I mean, it's just headcount divided by teachers, basically. But you have to get the core gross profit right in the business, and then everything else kind of flows from there.
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