24. Section D. Expanded Employees Chapter. | $100M Lost Chapters Audiobook

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

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Hormozi?

  Section D, Expanded Employees Chapter. If you want to go fast, go alone. If you want to go far, go together. African proverb. Lost Chapter Author Note. Obviously, there's an employee chapter in my $100 million leads book. I ended up cutting over half of it because I thought the chapter got too long and it started creeping to operations. But enjoy the frameworks inside. They've been useful for me to transfer skills to teammates, which is what you need to ultimately do to scale.

• 0:29Alex Hormozi?

  June 2021. The new sales director piped up. "I know we came in under our goal again, but I don't think we need to change anything. We'll hit it this quarter." I darted around the room and looked in every direction but mine. The silence was long enough for the executive assistant to mark the topic covered and move on. "No wonder we missed our cold outreach call for the second quarter in a row. Nobody challenged the failure." "What, so now we think third time's the charm?" "Wait," I said. Now everyone looked in my direction. "I'd like to know why we didn't hit this two quarters in a row. I know we can sell, so if we want to make more sales with cold outreach, then we need to do more cold outreach. What's the issue?" "We lose rep every four weeks," the sales director said. "Aha. Okay, why is our churn so high?"

• 1:12Alex Hormozi?

  I was wondering the same thing, "But HR says we're actually below industry average for the position," he continued. "But by the time we hire and onboard another one, another one churns out." I saw the HR director nodding in agreement, getting warmer. "Okay, so the issue's hiring," I said. "So what's the hiring situation like?" "We hire one out of every four candidates that HR pushes to us." "So if they churn out as fast as we hire them, and you only hire one out of every four, that means you get like one candidate a week." "Yeah, about that." "Almost there." "Gotcha," now I looked at the HR director. "What's the screening situation look like?" "We get one qualified candidate per 10 screening interviews," give or take, she said.

• 1:53Alex Hormozi?

  So it takes 40 interviews to get a single low skilled frontline worker? I guess so, she said. Bingo. All right, we need to change things up. I said. We're bottlenecked at one-on-one screening. Start interviewing in groups and look for crazies. Just look for them there. Push everyone else with good work ethic and basic social skills over to sales. We can teach the rest. Agreed? The team nodded. Within six weeks, hiring outpaced churn. Our cold outreach sales increased in lockstep. By the end of the quarter, cold outreach sales had doubled and made up more than half our total sales. The issue wasn't our cold outreach methods, skills, or offer overall. We shouldn't have enough people doing cold outreach.

• 2:35Alex Hormozi?

  If you use the methods described in $100 million leads, you'll see more engaged leads flow into your business. More engaged leads means more customers, but as you grow, so does your workload. In due time, it will take more work than any single person can handle. And you can solve the problem of too much work for one person by having more people work. In short, to advertise more, you need more workers. And this chapter will show you how employees work, why they make you wealthy, how to get them, and the method I use to turn them into lead getters.

• 3:02Alex Hormozi?

  How employees work. Lead-getting employees are people working in your business that you train to get you leads. They get you leads the exact same way you got your own leads in the beginning. They can run ads, they can make posts, they can do outreach, they can do any advertising you train them to do. So more lead-getting employees means more engaged leads for your business. It also means less work for you to do to get the leads. More leads and less work. Sign me up, right? Not so fast. Don't get me wrong, employees take work. They just take less time and work than doing everything on your own. In my experience, if you trade 40 hours for doing four hours of managing, you work 36 less hours. Brilliant. And the best part is, you make that trade over and over. You can swap 200 hours of work per week for 20 hours of management. Then you trade the 20 hours of managing for a manager who costs you four hours a week to lead.

• 3:46Alex Hormozi?

  What remains is four hours of work for 200 hours of lead-getting. Boom. Bottom line. Employees make a fully functioning enterprise that grows without you.

• 3:55Alex Hormozi?

  Why employees make you wealthy?

• 3:58Alex Hormozi?

  For your business to run without you, other people need to run it. Scenario number one, imagine you have a business that makes $5 million per year in revenue and $2 million per year in profit. And to make that profit, you have to work around the clock. In this situation, you basically have a high-paying job. But let's say you're okay with working all the hours and knowing your business would burn down if you took a vacation. Vacations for losers anyways, kidding, sort of. We still have another important thing to look at. Sure, you make a bit of money, but your business isn't worth much. If the business only makes money with you in it, then it's a bad investment for anyone else. That may not sound like a big deal right now, but let's consider the alternative. Scenario two, your business makes the same $5 million in revenue and $2 million in profit. But there's one big difference, the business runs without you. This does two very cool things. One, it turns what used to be a risky job into a valuable asset.

• 4:43Alex Hormozi?

  And two, it makes you much wealthier. Here's how. First, you get your time back, so you can use that time to invest in your business, buy other businesses, or take your stinking vacations. Second, you become much wealthier because your business is now worth something to someone else. You turned a liability that relied on you into an asset you can rely on. If you have an asset that makes millions of dollars without you, then that means that somebody else could use it to make millions of dollars without them. In other words, your business is now a good investment. Then investors looking for these assets, like acquisition.com for instance, would buy some or all of it from you. And your $2 million in profit per year, especially if it's climbing, could easily be worth 10 million plus right now. So your business went from having almost zero dollars of value to having $10 million of value.

• 5:27Alex Hormozi?

  You get rich from what you make, you become wealthy from what you own, and it took me years to realize this because not that long ago... ...dot, dot, dot. Everything I thought I knew about employees is wrong. Have you ever heard, "If you want it done right, you gotta do it yourself"? Or, "No one can do it like me"? Or, "Nobody can replace me"? I have, I've said all that stuff. I've lived all that stuff, for years, every time I hired somebody. I would compare what they could do to what I could do. In my head, I felt it was like me against them. To somehow prove I was more able than they are. With my own team. And this belief, this way of, quote, "leading people", never made me more money. For business, nobody can do it me. And if you want something done right, you gotta do it yourself. Aren't facts, they're false. Somebody did similar stuff before you were around, and somebody will continue doing some version of it after you're gone.

• 6:12Alex Hormozi?

  In one way or another, everyone is replaceable. It might be by multiple people, technology, or later in time, but everyone can be replaced. My suggestion: replace yourself as soon as you can, then make yourself useful somewhere else. Many other people figured this out, and so can you. In the early days, whenever I started my business, I could do stuff better than the people I hired. My entire workforce always ended up looking like a ragtag group of misfits who could kind of do one of the many things I could do. This got me up and running first, but I fell into the trap of believing I was better than everyone else. I would go back and forth between gloating, because I was better than them, and complaining because they weren't as good as me. And for whatever reason, it never occurred to me that I was the one who hired and trained them. So who was I kidding? The reality was twofold. First, I didn't have the skills to train or lead a team properly.

• 6:57Alex Hormozi?

  Second, I was too poor, and then, when I had too little money, too cheap to hire anyone better. In other words, it was my fault they sucked. Oops. The more I tried to outcompete my employees, the more distracted I became and the worse my business got. Sure, maybe I could do anything better than any of my employees, but I couldn't do everything better than all of my employees. And when I finally realized this, I started adopting better beliefs about talent. If you want it done right, get someone to spend all their time doing it. If I can do it, someone else can do it better. Everyone is replaceable, especially me. These new beliefs about talent not only made me a much healthier culture in my business, but also came with very profitable side effects. Trusting my employees to succeed made my time and my attention far more valuable. If someone else can do it, why would I? If somebody else could train them, why would I?

• 7:41Alex Hormozi?

  If I could learn other stuff to grow the business while my team held the fort down, it made way more sense to do that. So let's do that. How Getting Employees Works. The Five Lead Stages. There are five stages a lead goes through before becoming a customer. Each lead stage is a reaction to something that your business does. This means the way you run your business turns leads into customers or not, and this is good. Better yours than someone else's. The lead stages are somewhat self-explanatory. Uncontacted, leads to contacted, leads to engaged, leads to qualified, leads to sold. And so, let's walk through each. Number one. Leads start out uncontacted. You have done nothing that they can react to yet. Your action that you take is you advertise to them.

• 8:26Alex Hormozi?

  Number two, leads go from uncontacted to contacted when you get their attention. So the next action is you incentivize them to engage with your lead magnet or offer. Number three, leads go from contacted to engaged when they show interest in your lead magnet or offer. Next action is you qualify them by learning about their problems and their money situation. Number four, leads go from engaged to qualified if they have a problem you solve or the money to solve it. Next action, you sell them by making an offer you'll fulfill in exchange for money. Number five, leads go from qualified to sold when they give you money in exchange for what you offer. If you're wondering why I bring the lead stages up now, this far in, it's because they have the most value now, this far in. Again, for years, I struggled to build good teams for my businesses.

• 9:09Alex Hormozi?

  I would either hire anybody I could find and throw them to the wolves, or I would just cross my fingers hoping one of my best customers would work for me. Sure, this got me and will get you off the ground, but it's a far cry from what it takes to build a hundred million dollar leads machine. And when that finally sunk in, I realized something. Getting new employees was the same as getting new customers. We should describe it with different words. This blew my mind when I first stumbled on it. And once I looked at it this way, my hiring problems pretty much just solved themselves. So let's break it down together.

• 9:40Alex Hormozi?

  What we want to do is line up the actions to get employees with the actions to get customers, and they fit like a glove. So, the internal lead stages. You go from stranger to employee. You've got action and you've got the reaction for them. Here we go from uncontacted to contacted, contacted to engaged, engaged to interviewed, interviewed to hired. Instead of giving a for-profit offer, we're giving a job offer. And instead of closing the sale, they accept the role.

• 10:09Alex Hormozi?

  So think about it this way. You have two types of customers, the customers who pay you and the customers you pay, your employees. And the reason is this, humans are humans. The process of getting attention is the same. The process of helping people make decisions is the same. I just use different words to describe the exact same thing. How to get them, the internal core four. Remember the core four, warm outreach, cold outreach, paid ads, posting content from $100 million leads? Well, they work for getting employees too. Imagine that. By changing the frame from letting potential customers know about your stuff, to letting potential employees know about your stuff, it immediately turns into something that you already know how to do. But some people also have the opposite problem. They already know how to get employees just fine, but struggle to get customers. They are just people you let know about your stuff. You do the same thing.

• 10:54Alex Hormozi?

  So externally, you have the core four, warm outreach, cold outreach, post content, run paid ads. So let's compare the customer version versus the employee version. Instead of warm outreach, you ask your network. Instead of cold outreach, you do recruiting. Instead of posting content, you post job opening. Instead of running paid ads, you promote job postings. A customer referral is like an employer referral. An affiliate for a customer is the same as an association, a guild, or a listserv for an employee. Agencies become staffing firms. Employees are, well, employees say the same thing. The ways you get employee leads and their lead getters have equivalents to the ways you get customers and their lead getters.

• 11:37Alex Hormozi?

  So when you need to get new talent, you just advertise to get it. And when you need more, you do more. And like creating a reliable process to get customers, you can also create a reliable process of getting employees. How to get employees to get you leads?

• 11:51Alex Hormozi?

  Now you hire someone who costs you money every month. Great. Let's make sure you make it back. And so. Note, some people looking for work will already know how to get leads. Those people are awesome. You can also count on them to cost more. If you're starting out, you may not be able to afford them. So your next best option is to train them. Thankfully, you have an entire lead-getting book at your fingertips, $100 million leads. So the next step is training your employees on how you do those lead-getting activities. I think about an actually approach training with the 3Ds mental model. Document, demonstrate, duplicate. Here's how it works. Step one, document. You make a checklist. You already know how to do the thing. Now you just need to write down the steps exactly as you do it. You can also have other people who are trusted observers watch you and document what you do.

• 12:34Alex Hormozi?

  Bonus points if you record yourself doing the thing multiple ways and in multiple shifts. This way, you can watch yourself as an observer, then breaking down your flow by pausing and taking notes while you go. Once you've got everything put into a checklist, bust it out on your next work block and only follow those steps. Can you do an A-plus job only following your directions exactly? If you can, you have your first draft of your checklist for the job. Step two, demonstrate. You do it in front of them. Just like the agency owner taught me how to run Facebook ads, you sit down and walk through the checklist step by step. This may take a while, depending on how many steps it takes to complete the thing. If they stop you or you slow down to understand something, adjust the checklist for that. Now you have a second draft ready for them to try. Step three, duplicate. They do it in front of you. Now it's their turn.

• 13:18Alex Hormozi?

  They follow the same checklist you followed, except this time they're the one doing and you're the one observing. We just want them to duplicate what we did. So if the checklist is right, the outcome will be the same. And if the checklist is off, you'll find out fast. Fix your checklist until it's right, then have them follow it until they get it right. And once they nail it, you now have a bona fide lead getter on your payroll. Congratulations. After you train your first few employees this way, you'll have worked out the kinks for the job. It's pretty smooth sailing from there. At least the training part anyways. Think about it like this. If you vanish tomorrow, could a stranger get results if they followed your checklist only? That's the level of clarity to shoot for. Some helpful notes on training. A helpful way to look at this training style is, if they get it wrong or get confused, then we got it wrong or made it confusing. If we have to explain repeatedly what a step means and the step is too complicated,

• 14:03Alex Hormozi?

  or more likely, we try to put it in multiple steps into one. If they only appear to get it after a long-ish explanation or multiple demonstrations, then again, we've got some work to do. Business owners that ignore this run into chronic training problems. And word to the wise, you can probably force an inferior checklist to work, but this turns into a nightmare of when somebody else takes over training for you. There's a difference between competence and performance. In other words, they can know exactly what to do and not be good at it yet. If that's the case, then your instructions are fine. They just need to practice. Using an analogy from the fitness world, think slow, then smooth, then fast.

• 14:35Alex Hormozi?

  Focus on your employees' ability to follow directions more than whether they get the right result. This is super important because if you train your employees to follow directions, then they will follow directions. And if they follow directions and get the wrong result, then you know it's the directions. That's good. You have a lot of control over that. Every time they do a successful step, let them know they did it right. And if they respond to praise, praise them. And if they goof, that's okay too. That's what training is for. Don't take over for them when they mess up. Simply pause, take a step back, and let them try again. Fast feedback loops get people to learn faster. If they follow your directions exactly and get the wrong result, still praise them for following the directions. Praise them, then make the corrections to your checklist on the spot. Avoid punishment or penalties of any type for doing stuff wrong during the training.

• 15:16Alex Hormozi?

  As a rule of thumb, reward the good stuff you want them to do more of, and they'll do more of it. Learning a new skill is punishing enough. We don't need to add to it. If they mess up multiple steps, only focus on fixing one step at a time. Give one piece of feedback at a time and remind them and give them feedback on it until they actually get it right. Then move on to the next step. It's very hard to change multiple things at the same time when you've never done something before.

• 15:41Alex Hormozi?

  Keeping your employees getting you leads, the performance diamond. They do it on their own with frequent check-ins. Now that they know how to do it, we have to keep them doing it. Here's how. Depending on the business, I or my managers meet with each lead-getting employee six to 11 times per week. I know it sounds ridiculous, but it's really not. I schedule one 30 to 45-minute meeting per week for coaching, feedback, and praising success. The other times are short group meetings that only last a few minutes. We call them daily huddles, and all my lead-getting employees have them. We have one at the beginning of each shift to discuss expectations and goals. Then we have one at the end of each shift so they can report on them. I get an opportunity to praise and reward their efforts daily. This creates faster feedback loops for building skills and morale.

• 16:24Alex Hormozi?

  If necessary, we take an extra few minutes to troubleshoot and answer questions that came up during the shift. If these problems or questions keep coming up, I add those to my training checklist for the next person I hire. Over time, you can have a team leader or manager take over the huddles and eventually the 101s. Provided their performance stays the same or improves, you successfully integrated the skill. You made it so they can feed their family for the rest of their lives. I know a few, if any, more noble callings. Troubleshooting. What to do if they stop doing a good job? In my experience, there are four reasons employees' performance drops. Here's how we solve for them. Number one, communications. Employees don't know that we want them to do it. If an employee didn't know we wanted them to do something, then we didn't communicate that we wanted it done properly. Even if we think we did, their performance shows otherwise.

• 17:07Alex Hormozi?

  Keep in mind, once we learn a skill, we need to be reminded more than we need to be taught. Remember, you were the chief accountability officer in the beginning and always. After all, it's your business, you are always accountable. So really, the only thing that changes is who you remind to do what. Even if it means you remind someone to do the reminding. Here's what it sounds like when you have a communication problem. I didn't know you wanted me to do that. I didn't know you wanted me to do that first. I've got too much work on my plate right now. Don't blow this off. It's so easy to point the finger and say, how can you not know your own job? But my business improved a lot when I actually believed them and started pointing my finger at myself. So if I ever have this problem, I have to help them summarize the where, the when, and how much they're supposed to do to perform their tasks. In essence, I have them describe their job and priorities back to me.

• 17:50Alex Hormozi?

  If we think of different stuff, then I know I need to do a better job of making things clear. And you may be surprised, they may still be working on that top priority thing that you asked them to do a few hours earlier. Ha. Number two, training. Employees don't know how to do it. Assuming employees know that you want them to do it, they forgot how or were never taught. We account for this with strong initial training, so onboarding, and regular practice of the basics to maintain and improve competence, daily huddles. Here's what training problems sound like. I don't know how to do that. I didn't know you wanted me to do that that way. Similar to number one, don't blow this off. Again, it's easier to point the finger and say, I already taught you how to do this. Seriously? But really, did we? How do we really know that?

• 18:32Alex Hormozi?

  Often, we think we taught somebody something if we ask, do you understand this? And then they say yes. But often, they are just conditioned to say yes out of fear of saying no when someone asks that question. So instead of asking if they understand it, and then holding it against them later, just have them show you. Let them demonstrate the checklist like they did in training, and treat them as you would anyone else learning for the first time with patience, understanding, and a fast, useful feedback loop. Number three, motivation. The employees don't want to do it. Assuming they know that you want them to do it, and they know how to do it, they might not want to do it. And people don't want to do things for three main reasons. Reward comes at the wrong time, the wrong frequency, or wrong intensity, or from the wrong source. They have an aversion to the work itself,

• 19:16Alex Hormozi?

  the environment, leadership, coworkers, or consumers. They have events or other lifestyle stuff outside of work killing their performance. Positive of an example, newborn baby or wedding. Negative of an example, death in the family, breakup or divorce. Lifestyle examples, not sleeping enough, too much alcohol, getting sick, or other medical conditions. Solving it comes from asking questions with these three levers in mind. Are you not rewarding them correctly? If so, increase frequency, intensity, or change who is doing the rewarding. Is there something about the workplace that makes it demotivating? This can give us insights to more systemic issues. Or often, is there something we can only discover by asking them what's eating their attention outside of work? So, we ask open-ended questions to see what they'll share. Beyond having a genuine heart to help,

• 20:01Alex Hormozi?

  sometimes you just gotta let people figure out their own stuff on their own dime rather than yours. Pro tip: the best diamond hard feedback question. If an employee's performance has been dropping for a little while, a week or two, here's a line I stole from Leila. Like most of my good ideas, use it on your next one-on-one. "Over the last X period of time, your X performance has changed from the norm. What do you think has gotten in the way? And how can I help?" This question sets the stage for a collaborative problem-solving conversation rather than a character-blaming one. Swipe it if you feel like it. Number four: circumstances. Something is stopping them. I feel like I need to give you rapid examples of this. Unfortunately, this is more common than you think. In short, business owners, me included, tend to expect employees to solve problems we should have prevented to begin with. Go grill the burgers.

• 20:46Alex Hormozi?

  Response: I can't, we're out of beef. Go edit videos. I can't, my internet is too slow to download the file. Go make calls. I can't, the phone broke. Understand the difference between them making excuses and making their life legitimately difficult. Assuming good communication training and motivation, all three of the above, something else is stopping them. These are some of the easiest to fix, but you have to ask to find out. And as silly as what they're gonna say may sound, don't shoot the messenger. This is the performance diamond I use for diagnosing performance problems. If I approach performance with that perspective, it goes a long way to figuring out whether it's truly the employee's problem or, more often, something I messed up along the way. I say this because most times,

• 21:30Alex Hormozi?

  both you and them want them to succeed. So, once you figure out what the problem is, fix it, and improved performance will likely follow. Now that we know how to get them and keep them advertising, the question that remains is, how well are we doing? How to calculate returns from lead-getting employees? Excluding the cost of running paid ads, the cost of advertising, outreach, content, etc., with employees is almost entirely based on the amount of money you pay them to do it. We simplify this by just comparing how much money we spend on payroll to how much money the engaged leads they get bring in. So, total payroll divided by total engaged leads equal cost per engaged leads. For example, $100,000 divided by 1,000 leads equals $100 per engaged lead.

• 22:12Alex Hormozi?

  If one out of 10 of the engaged leads becomes a customer, then our CAC is $1,000, which is $100 per engaged leads, times 10 engaged leads per customer, equals $1,000 CAC. If each customer has an LTGP, lifetime gross profit, of $4,000, then you have an LTGP to CAC ratio of 4 to 1. So, $4,000 of LTGP to $1,000 of CAC, 4 to 1. For example, at the time of this writing, I get about 30,000 engaged leads per month at acquisition.com. I run no paid ads and do no outreach. But the team responsible for creating the content that generates this interest is about $100,000 a month. This means it costs me roughly $3.33 per engaged lead in payroll to generate them. We make much more than $3.33 per lead, so we're profitable.

• 22:55Alex Hormozi?

  You can apply the same math to whatever advertising method you use. How to know which employees to focus on to maximize returns? Like we said in the Run Paid Ads Part 2 chapter of $100 million Leads, if your cost to get a customer is within 3X industry average, then you're doing good enough. From there, focus on bumping your LTGP. If your CAC is more than 3X industry average, then you have a sales problem or an advertising problem. We diagnose this with a single question. Do my engaged leads have the problem I solve and the money to spend? If no, they're not qualified. That's an advertising problem. If yes, they're qualified and they're buying, but you don't have enough of them, an advertising problem. They're qualified but not buying, a sales problem. Don't fire your sales guy if you've got an advertising problem. And equally, don't fire your advertising employees if you've got a sales problem.

• 23:40Alex Hormozi?

  That little question can help you identify which employees to focus on. But fundamentally, you just need to figure out all your costs of getting customer put together. And as long as they're at least one-third of the profit you make over the lifetime, you're in okay shape. Conclusion: The goal of this chapter was to shift your perspective. It's your job to advertise and sell the vision of your company. You advertise it publicly and privately to employees and customers alike. That's the job. And once you get good at it, you become unstoppable. I say this because I believe anyone can be taught to do ground-level jobs for any business, advertising or otherwise. So who you pick is not as important as how you train the ones you do. Like I've said throughout the book, and will say again here, it doesn't take a genius to advertise. I'd say it even hurts it. We've got plenty more iron wills than brainiacs anyways. Remember, this isn't about brains, it's about guts.

• 24:24Alex Hormozi?

  And although some people might be born geniuses, nobody is born with an iron will. After all, we all come out crybabies. All this to say, having guts is a skill. And that means anyone can have the guts if they learn how. So if you have an iron will, and as an entrepreneur you probably do, it won't take long for you to figure out that you got it from your life experience. You can pass those experiences on as lessons to anyone who cares enough to listen. Then they can stand on your shoulders and have a better chance at succeeding in life. And you can't really know anything until you train them well and give them a fighting chance to succeed out in the field. Plus, for low-level jobs, you'll never have a shortage of labor. Get picky when you have to make massive investments in hyper-specific, multi-six-figure, C-suite employees, AKA fancy employees.

• 25:09Alex Hormozi?

  I find at this current stage, it's actually better use of time to hire and train anyone willing. Then, when you find winners, and with this method you will, treat them well, don't burn them out, and give them what they deserve. In the land of overflowing leads, you'll need allies. Employees are among the most powerful of these allies. We talked about how they make you wealthy, how they work, how getting them works, how to get them, how to get them getting you leads, and how to keep them getting you leads, and how to know you're doing a good job. And once you've built a system for getting people who get you leads, doing the core four on your behalf, you just need to do more.