Transitioning From Dying Business Models | Ep 829

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

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

• 0:00Alex Hormozi?

  A number of businesses just lined up over two days to ask me questions. They range from $200,000 a year to $140 million a year. And the crazy thing is, is the questions between businesses are so similar that they apply to all of them. And we pulled out the best moments that we think will give you the highest ROI. Enjoy.

• 0:17Speaker 01

  Hey, Alex, thanks.

• 0:18Alex Hormozi?

  Yeah, you bet.

• 0:18Speaker 01

  So my name's Zach Levine. We sell pain management services to New Yorkers.

• 0:23Alex Hormozi?

  Okay.

• 0:24Speaker 01

  Integrated pain, so chiropractor PT.

• 0:27Alex Hormozi?

  Like old people, young people, women, men?

• 0:29Speaker 01

  We have a bunch of avatars right now, which is potentially a problem.

• 0:32Alex Hormozi?

  Brick and mortar?

• 0:33Speaker 01

  Brick and mortar. We're out of network insurance, which is a dying, which we'll get to.

• 0:38Alex Hormozi?

  Sure.

• 0:38Speaker 01

  We do 4.2 in revenue.

• 0:40Alex Hormozi?

  Okay, so you're mostly insurance? Or you're mostly cash?

• 0:42Speaker 01

  Mostly insurance.

• 0:43Alex Hormozi?

  Oh, mostly insurance, out of network, got it.

• 0:45Speaker 01

  Yeah, 4.2, want to get to 20.

• 0:46Alex Hormozi?

  Okay, got it.

• 0:48Speaker 01

  We have three offices and don't know exactly how to transition out of the dying business model. Obviously, our industry is growing.

• 0:55Alex Hormozi?

  Yeah. So what business model are you thinking about switching to?

• 0:59Speaker 01

  Cash.

• 1:01Alex Hormozi?

  I have a bunch of friends who are in network and murdering it.

• 1:03Speaker 01

  In network, yeah.

• 1:04Alex Hormozi?

  Why don't you get in network?

• 1:05Speaker 01

  We've just heard it's a grind, you know, it's commoditized down to the bottom, race to the bottom, yeah.

• 1:11Alex Hormozi?

  Why do you feel like the way that you have right now is dying from out of network?

• 1:14Speaker 01

  Because reimbursements from payers are declining each year, whereas inflation is going up. And because the amount of people who have out of network benefits is dwindling as well. It's mostly just corporate, and that's even declining. Yeah, they're just getting smarter and they want to push everyone in network. So we're getting squeezed. Administrative burden's through the roof with prior loss, all this crazy shit.

• 1:38Alex Hormozi?

  So this is a therapy provider who bills insurance. He's dealing with an issue that a lot of out of network are dealing with, which is that reimbursements, AKA what insurance companies pay providers is going down, but inflation and costs are going up, and so that's squeezing their margins. And for this individual, he was making zero profit. And so he felt like he needed to change his model quickly. And so basically, he had two options. He could go in-network, which is you have guaranteed customers, but you're getting, in a lot of ways, like lower quality customers that, you know, the government and things like that are paying for, mass market insurance is paying for. Or you can go cash, cash pay, right? Like you can, people can just pay privately for whatever you want. And so he felt more aligned with the cash payment.

• 2:19Alex Hormozi?

  And so either way, though, I think understanding what strategy is required to win within each of those paths was kind of the real decision, which is like, what problem do you want to solve? Do you want to solve the problem of learning how to market and sell customers? Because that's what it's like when you are in kind of the cash business, right? And if they've never done that before, then that's a real, that's a real beast to get over. On the other hand, if you want to be in-network, then it's going to be a business all about operational efficiency. It's about returns on capital and basically how efficiently you can staff up and how low you can keep costs across the business because you have no pricing power, right? So it has to all be off of efficiency. And so those are basically the two paths that he had. And so I wanted to walk him through the, kind of the questions to figure out which of those he felt more aligned with.

• 3:02Alex Hormozi?

  And it sounded like he definitely wanted to go more the premium cash pay version. And so that was kind of the direction that I let him in. So you basically see it as like, I could either go in-network and then make your entire business model around operational efficiency.

• 3:13Speaker 01

  Yeah.

• 3:14Alex Hormozi?

  Which is, which is, I mean, I've got somebody who murder it doing that. So I don't think there's anything wrong with that. Or alternatively, you just go premium, be the best and be, be private, right? Be cash pay. So the question is, how do you transition it?

• 3:27Speaker 01

  Yeah, yeah, I think we've decided as a team collectively, we just don't want to be in-network.

• 3:31Alex Hormozi?

  Sure.

• 3:31Speaker 01

  Because of the lifestyle.

• 3:32Alex Hormozi?

  No, I get it. And who you deal with.

• 3:34Speaker 01

  Yeah.

• 3:35Alex Hormozi?

  Yeah, a pain, literally for you, or really, I guess for them. So fundamentally, I think you just have to think about this as basically starting a business over, but with resources already. You don't really have to think about the service. You probably have to think about the packaging itself. Like what's the, what's the grand sum offer for this?

• 3:52Speaker 01

  Yeah.

• 3:53Alex Hormozi?

  And you'll, you'll have a number of, like, you're, you're just going to become a normal business, which is just like, you will run advertisements and you will make offers to people and they will come in and then they will take their credit card out and they will buy stuff from you. And so it's probably more that it conceptually feels complex more than it actually is. And so it's probably a ripping the Band-Aid off thing, which is that I would just out, like, so one is, what channel of acquisitions are you going to use? I'm guessing right now. Now, is it mostly word of mouth?

• 4:22Speaker 01

  Yeah, it's referrals.

• 4:23Alex Hormozi?

  Okay, yeah.

• 4:24Speaker 01

  Been in business for a long time.

• 4:25Alex Hormozi?

  Yeah, so one is you can start up selling existing customers. So like, obviously, they have what's covered in from insurance, but then, you know, up selling other packages. That'll get your team a little bit used to being like, it's okay to pay us. That's from like a really tactical level. From an acquisition perspective, you've got content, you've got outreach, and then you've got you've got paid ads, right? And alternatively, you could have affiliates. So we have to pick, so of those four things, which ones do you feel like you are better suited? So from affiliates, it's like, go to, shoot, injury attorneys or like, you want to find the the person that they're going to see prior to hitting you up.

• 4:57Speaker 01

  We've tried a bunch of that, and the issue there is that they want to send in network. Or if you're injury attorneys, to workers comp cases, which don't pay very well.

• 5:06Alex Hormozi?

  Okay, so you don't want to go from that perspective. So you don't want to do affiliates. Content, probably, in my opinion, probably isn't the the best way. So then you have outreach and you've got paid ads. I'm going to bet paid ads is going to be your better bet, since it's local, it's pretty straightforward. Operationally, it's not complex. Like, running paid ads in a local area is like, pretty easy. You drop a pin, you do a radius.

• 5:26Speaker 01

  Would you say we need more, like, so obviously, we have a bunch of different types of avatars. So like, really now, like, how would you say going about?

• 5:31Alex Hormozi?

  You're probably going to end up finding that you have one to three offers that actually convert. And then the remainder of your business will be up selling and cross selling when they walk in the door. So instead of thinking about your business as having like, you know, we have 15 services, we advertise all 15. You're going to have one to three that convert really profitably on the front end. And then the remainder of your business is cross selling and up selling. So it's like, you're going to have the most efficient door into your business. And then you'll end up just cross selling and up selling people and retaining people from from there. And so like, in terms of next steps, it's, you need to record an actual ad for an offer and then put it on Meta. And then drop a pin on the map and do a 10-mile radius. Hopefully, all three are close together. And you'll run the ad, that'll then go to either a CRM, or if you're low tech, you can just go to a Google Sheets.

• 6:17Alex Hormozi?

  And then you can have your front desk call them within 60 seconds. And then if they don't pick up, call them again and get them booked. Because your time is valuable, you'll probably want to consider running some sort of highly discounted assessment on the front end. So that'd be like a $200. Yeah, x-ray or something like that, that they can get for 19 or 20. You don't care about that, you just want a credit card on file so that when they walk in the door, you have two things. One is that. When they walk in the door, well, one, you want them to walk in the door because they paid. Two, you can charge a no-show fee if you want to. But typically, if you're getting even a low-ticket amount, you'll be in the 70 to 80% sure rate. So you won't waste practitioner time.

• 6:54Speaker 01

  So having them pay upfront, actually pulling out their credit card?

• 6:56Alex Hormozi?

  Yeah.

• 6:57Speaker 01

  Yeah.

• 6:57Alex Hormozi?

  And just for the discount offer, now when they come in the door, you'll do the assessment. And then after the assessment, you don't treat them. You'll do the sale appointment then. You sell at point of greatest need, not point of greatest satisfaction. So at that point is when you'll make the offer. And then you'll be like, hey, awesome, do you want to use the card we have on file? Because you already have it on file, because you got it earlier. And make so much smoother sale. So the issue he's dealing with, he's at optimized stage. He's 20 to 49 in terms of his headcount. And the issue, number one that he has, is that he can't hire higher-level talent because they expect full compensation and he basically has very little cash to bring in the talent that he needs. So that's the number one issue that he's dealing with. He's spending money to grow, but he's not growing. Money's missing. And so that's an issue that he's dealing with in finance.

• 7:42Alex Hormozi?

  Because he has so many kind of products and services, the improvement between those things has gone down. And ads aren't converted, basically, he doesn't have any real ads or a real way of getting customers in. And so costs are going up, right? And so these are the issues he's dealing with, which is really common at this stage. Now, let's look at what he has to probably do in order to improve it. And so he has to create customer segmentation by cohort and activation process, and then install sales training for his team so that he can start segmenting people and upselling them down a customer journey path. Instead of marketing all of these different products, he basically needs to make one or two or three entrance points in the business, then a cross-sell and up-sell, all of these additional services that might not convert as well on the front end,

• 8:26Alex Hormozi?

  but work very well for continuity or for upsells and downsells, or even high-ticket upsells on the backend. And so he basically has to shift his perspective from somebody who builds insurance, that's just like whatever they take off the menu. You know, because insurance encourages people to be like, here's all the different services, and this is what we pay you for them. And so people just try and offer lots of stuff. Once you have a cash business, it's all about efficiency of acquisition. You're trying to acquire customers as profitably as possible and then ascend them to the highest LTV. And so this is basically what he has to build, is the sales system, the ad-assembly process to increase the volume of people coming in, segment the customers, and then learn to headhunt higher-level roles once he increases the cash flow.

• 9:03Speaker 01

  Got it.

• 9:03Alex Hormozi?

  Does that help?

• 9:04Speaker 01

  Yeah, definitely.

• 9:05Alex Hormozi?

  But that's what you have to do. Like, you have to learn how to acquire customers that are cash-based. And so that means that you have to run ads and you have to sell shit.

• 9:11Speaker 01

  What would you do, like, if you were saying from a strategy standpoint, like, we have the current business that's doing 4.2 million in revenue?

• 9:17Alex Hormozi?

  You're gonna keep that business. But you're, all of your discretionary resources are gonna go towards this if you wanna build a bridge to tomorrow.

• 9:24Speaker 01

  Yeah. Should we do any of the more on the things that are still working within out-of-network? Like, it's really just a, you know, we have limited resources. How much should we spend on each?

• 9:35Alex Hormozi?

  What's profit?

• 9:36Speaker 01

  We're basically at zero.

• 9:37Alex Hormozi?

  Oh, shit.

• 9:38Speaker 01

  Yeah. It's part of the problem.

• 9:43Speaker 01

  We waited, yeah.

• 9:43Alex Hormozi?

  Yeah, no, you're good. Yeah, I understand. Because you can't control how you're reimbursed.

• 9:48Speaker 01

  No, but we can remove the lowest reimbursement. We're reimbursing patients, which is like, remove Medicare, then we can lower our cost structure. We could go that route.

• 9:55Alex Hormozi?

  I think that would probably be the first thing that I would do.

• 9:58Speaker 01

  And then use the discretionary resources.

• 10:00Alex Hormozi?

  So, yeah, you use this resources in terms of time and money to build the bridge. Makes sense?

• 10:05Speaker 01

  Yeah, thanks a lot, Alex.

• 10:06Alex Hormozi?

  Yeah, you bet. So, all of these things are on the graduate list at this stage. And that's because businesses behave in patterns. By the way, as a free gift for you, if you like the Scaling Roadmap and would like to know where you're at, you can go to acquisition.com/roadmap and plug in information and it'll spit it out for you exactly where you're at. Don't worry, it's absolutely free, so go enjoy it. If you want my team's actual help, on the thank you page, you can schedule a call and we'll see if we can help you out.

• 10:30Speaker 02

  Hey, Alex, my name is Henry. I sell education. I teach people how to fix and flip, mainly the Hispanic market. So, it's only in Spanish. We did 1.3 mil last year, second year in business, and we wanna do 3 million this year. So, with the more, better, new, right? Right now, we only do two events a year. Big events, 600 people. And we upsell to a high ticket, 12,000, right? And we convert 20% of the room, more or less. So, that 80% that went to that room never sees me again. I never sell them anything again. And, well, that 20%, they bought my high ticket. The mentorship is a year.

• 11:10Alex Hormozi?

  Sure.

• 11:10Speaker 02

  And after that... I don't sell them anything ever again.

• 11:13Alex Hormozi?

  Okay.

• 11:14Speaker 02

  So, uh, more better. Do I just do more of these events and like never ending looking for new customers for the rest of my life, or should I focus?

• 11:25Alex Hormozi?

  No, you're good. You're in education.

• 11:26Speaker 02

  Yeah.

• 11:27Alex Hormozi?

  And education graduates people.

• 11:29Speaker 02

  Yeah.

• 11:30Alex Hormozi?

  That's how education works. So if you look at the education system overall, the way to create continuity in education is just always have something else to learn or to teach. Right? Like first year, now you're an undergrad. Now you're a graduate student. Now you have a masters. Then there's a PhD and you get a second PhD. Right? Like you just, you just keep, you know, people just become endless students. And so, do you want to sell the business eventually, or do you just want to make money?

• 11:49Speaker 02

  Uh, make money. I mean, we're not.

• 11:50Alex Hormozi?

  No, it's fine. No, I prefer the truth. Uh, yeah, I mean, the easiest thing to do is just double the amount of events you're doing. Either just do, you can either go one a quarter, or you can do two at twelve hundred.

• 12:01Speaker 02

  And would you travel or just stay in where I'm at in Miami?

• 12:05Alex Hormozi?

  Is that where you run them now?

• 12:06Speaker 02

  In Miami?

• 12:07Alex Hormozi?

  Yeah, I do east coast, west coast. Yeah.

• 12:08Speaker 02

  Yeah, maybe Texas or something.

• 12:10Alex Hormozi?

  Yeah.

• 12:11Speaker 02

  Okay.

• 12:11Alex Hormozi?

  So Henry is at the product size stage and the issue that he's dealing with is that customers have nothing else to buy and churn. Literally right there, first line, and he says it himself. All right. And so in order to graduate, he has to connect his customer success to product and then make something new to sell them, which is the backend. So I recommended he follow exactly that advice and create either a higher level thing, or if he wants to build out a continuity that actually sticks, maybe consider down selling something that's maybe a cheaper annual fee for continued access to some of his services and events. But the big picture though was what does he want to do? Now, if he just said, I want to sell this company, then we have to create some sort of revenue retention so that it becomes valuable.

• 12:52Alex Hormozi?

  But for him, he was like, I just want to make more money. And so then the obvious answer is like, cool, then just do way more. And so instead of just having the two events on one side of the US, put two events on the other side. And just like that, you can double the business with really no operational risk whatsoever. I mean, you have a really simple solution. Like just run the same playbook more times.

• 13:12Alex Hormozi?

  If you were like, I want to build a more viable business, then I would say, take the year to figure out revenue retention, which is, how do I get these people who pay me $12,000 to pay me another $12,000 or pay me $30,000 next year? Or even down-sell them to something that's $5,000 a year, but they stay.

• 13:26Speaker 02

  Right. And focus on retaining that top tier that paid me the high ticket?

• 13:31Alex Hormozi?

  Yeah, but I think considering for the model that you have, down-selling the up-sell, I actually like a lot.

• 13:36Speaker 02

  Okay.

• 13:37Alex Hormozi?

  So if they paid you 12, maybe they'll stay for three a year, three to five, just to have access to the network and some of your vendors and the stuff that you kind of like provide. And I think that's something that people would be far more likely to stick with. And so then you can basically think about your business as, from a zooming all the way out perspective, is that the $12,000 is actually like offset CAC, which is like, you could break even on the $12,000 if you know that someone gets into a $3,000 a year membership that's pretty much all margin that doesn't leave. So it's like, that allows you to spend way more than your competition, because they need to make money on the 12, you can break even on the 12, and then you just have this stack of $3,000 bills that just keep stacking up. That's like low effort to maintain.

• 14:19Speaker 02

  Got it.

• 14:20Alex Hormozi?

  Makes sense?

• 14:21Speaker 02

  Yeah, it's good.

• 14:22Alex Hormozi?

  But yeah, the nice thing is that you're honest about just wanting to make more money. It makes this a lot easier.

• 14:25Speaker 02

  Yeah.

• 14:26Alex Hormozi?

  Yeah, yeah. Don't say, I want to make an impact. So, big picture, he's in education business, and education businesses graduate customers because they teach you. I mean, if you do a good job, you graduate. That's kind of how school works, right? And so the real continuity in education is just more education, right? Look at college, then you have a master's, then you have a PhD, then you have a double PhD, and then you're just crazy. Who knows? All right, and so, the point here, though, is that he could try and build a recurring revenue stream from this business, but in all likelihood, his goal was just to make more money, and so why add complexity if that's not his goal? So I was like, cool, just run more events and do them in different areas so you attract different customers.

• 15:01Speaker 03

  Hey, Alex, thanks for everything that you've done.

• 15:03Alex Hormozi?

  You bet.

• 15:04Speaker 03

  I'm James, I sell custom branch railings to homeowners.

• 15:07Alex Hormozi?

  Okay.

• 15:08Speaker 03

  We did 420 or so last year. I was, I've read 10x is greater than 2x.

• 15:14Alex Hormozi?

  Yeah.

• 15:15Speaker 03

  And so last night it was coming to me again, like, do I really just want to double or do I want to try to 10x?

• 15:18Alex Hormozi?

  Sure.

• 15:19Speaker 03

  And so what I want to try to do is to develop a network of product specifiers, architects, designers, contractors, that can act kind of like a referral network. I want to shift away from the minnows and to focus more on whales. We had one client last year, about $50,000 worth of handrails. And if I could get ten of those in a year, then I would double revenue just with ten clients. So kind of what are my best strategies to go about achieving that?

• 15:42Alex Hormozi?

  So where did you source the single whale this year?

• 15:46Speaker 03

  He found me. It's all inbound. It's all through search.

• 15:49Alex Hormozi?

  Okay, so SEO or PPC?

• 15:50Speaker 03

  SEO.

• 15:51Alex Hormozi?

  Okay.

• 15:51Speaker 03

  I just started Facebook ads about three or four weeks ago. They're going pretty good. Qualified about half of the leads so far.

• 15:59Alex Hormozi?

  So I would, so if you want to go whale hunting, then I think your your initial thought strategy of finding the architectural firms and engineering firms and whatnot is a good one. I would probably try the outreach method as my primary way because you can be hyper-targeted in terms of who you're reaching out to. And the the key to making it work though is like what's in it for them to refer you business?

• 16:25Speaker 03

  Are you asking me that? That's an excellent question.

• 16:27Alex Hormozi?

  Okay.

• 16:28Speaker 03

  So architects will typically in a plans, like if they make a set of plans, they'll specify what kind of tiles to use and what kind of windows to use, et cetera. So I've I've, we've gotten plans in the past where it's like it's got the pictures from the website with the CAD drawings and everything on the plans. And so it's like how to persuade them to do that kind of in absentia. And I should also note that we ship nationwide. So this is not like, you know, a hyper local market.

• 16:53Alex Hormozi?

  Are you shipping or are you, are you doing installs or no?

• 16:54Speaker 03

  No, we haven't done a.

• 16:55Alex Hormozi?

  Are you just, you just?

• 16:56Speaker 03

  We just ship product.

• 16:58Alex Hormozi?

  Interesting. Got it. Then who are the decision makers? Well, right now it's been primarily residential is what it sounds like.

• 17:06Speaker 03

  Right. It's primarily homeowners. We've done some commercial work, you know, but it's primarily homeowners who are, you know, looking for something different. And so it's very, what I call intentional inbound search. It's like they're looking for something. They're deliberately searching it out. They find it. You know, we have a lead magnet kind of which is like two hundred fifty.

• 17:24Alex Hormozi?

  SEO.

• 17:25Speaker 03

  It's SEO and I, you know, yeah.

• 17:27Alex Hormozi?

  Well, this is a fundamental change in business strategy. So you're aware of that. So with that comes risk. Because the highest risk adjusted return move or lowest risk, I guess, is probably adding, like if I were like tomorrow, what would I do? I'd probably just add PPC in right now because you already have something that's working on SEO. I would probably see how can I get way more articles written so that my SEO traffic can go up? Can I tackle more, you know, more keywords? That's like the for sure will work and make you more money play. The going after whales for sure can make more money because why not add zeros to things? It'll just be a completely different sale and you'll have two levels of sales. So sale number one is going to be for the affiliates and then figuring out what's going to make it worth it for them.

• 18:11Alex Hormozi?

  And then the second level is what's the actual sale to the whale customer. So what James has is he's using affiliates to get customers, which is this is inside of the leads book. All right, and so affiliates are businesses that have your customers that market and sell your stuff to them. All right, and so fundamentally, I walked James through the three different ways that I have found that work best for affiliates. So who's the decision maker with the whales?

• 18:40Speaker 03

  Like the final decision maker? It's going to be the homeowner, whoever's doing the project.

• 18:45Alex Hormozi?

  So you just want bigger homeowners?

• 18:47Speaker 03

  The architects have the ability to specify it and to put it in front of the client. So like we also did another one, which was about 60,000 for a guy that was doing a development of Airbnbs in Virginia. He put up like six yurt kind of things. And you know, so I had two very big.

• 19:05Alex Hormozi?

  So both of them were architects that sent you these?

• 19:08Speaker 03

  The one was an architect and the other was a construction company.

• 19:10Alex Hormozi?

  Okay, yeah, so you're going to have to go B2B outreach is the prime, basically when you look at core four. That's going to be your, what you're going to do and then they're going to be your affiliates. And so the million dollar question is what's in it for them? So my proposition would be, so there's three ways you can do affiliates, at least in the world of Alex. So you have they sell your shit for you and they get a commission. That's option one. That's typically my least favorite option, but it is an option. Option two is that you give them some morsel of something that you sell that they can sell for 100% markup. They could keep all the money, but you get the introduction. This is my favorite way of doing it.

• 19:52Alex Hormozi?

  The third way is that you allow them to just bundle in your free thing with their services. Now with architecture firms, it's not like they're going to bundle in a railing for their service, but just for everybody else. Like those are the three things. So it's like they bundle your, basically your lead magnet in for free with their thing they sell. So it enhances the value of their overall package. You give them the things that they can upsell your lead magnet for an amount of money that they can keep 100% of. Or they just sell your stuff and they get a kickback. Is there a version for this where they can just upcharge? Like you can do a small portion of this that they get 100% of?

• 20:28Speaker 03

  100%? Like, I don't think so. Like, maybe some kind of contractors or architect discount?

• 20:33Alex Hormozi?

  We wanted them to be stupid to say no.

• 20:39Alex Hormozi?

  Yeah, because like the generic like you get 20% kickback is just like everyone does it. Like, who here does 20% kickbacks for anybody who refers you business? You can raise your hand. I'm not gonna be upset. Okay. And so the point is, is that, and you probably, no one here has referred anyone else's business. And it's because no one cares. That's, that's kind of the point. And so it has to be an irresistible offer. And so if we give away the lead magnet or something, think about it as like my CAC for a $50,000 customer is the cost of the lead magnet. And if I close one out of three introductions, then it's 3X the cost of lead magnet. It is my cost to acquire a customer, which is usually pretty darn good. So what I outlined with James is right here on page 237 is that there's three ways you can integrate your product into their offer.

• 21:23Alex Hormozi?

  Basically, getting an affiliate to sell your stuff. And so I order these from easiest to hardest. So first, you can give away your lead magnet with every purchase. So they just give away your stuff for free in order to get, to get leads, right? So they'll sell their product with your lead magnet, or they'll just give your lead magnet away. But either way, you're not making anything from it. They're just gonna give it away. Second is that you can get them to sell your lead magnet separately to their audience, which is my preference, right? You give away something that has hard cost or real cost, and you let them sell it for whatever, and then the cost to you is just the cost of delivering the thing, right? And so if I had a marker business, right, I might say, "I will let you sell one of my markers," and let's say my marker cost me 50 cents, "for whatever you want to charge for it." And they're like, "I can sell this marker for $5." I'd be like, "Cool. You sell it for $5,

• 22:08Alex Hormozi?

  but I now have a contact of somebody who bought these markers." And I might call them up and say, "Hey, you've got blue. Do you want red? And do you want green? And do you want black? And all of these are $5." Now, my hard cost is just the 50 cents it cost me to deliver the marker. And so the question is, what percentage of customers do buy a blue marker by the other three? And so if I found out one out of two customers who buy a marker at 50 cents end up buying these, then my cost to acquire a customer through affiliates is 50 cents times two. So the cost of delivering my lead magnet... Is the actual cost and here's the crazy part. If they go make zillions of dollars selling your thing. Great, it means that you're gonna make even more money up selling your stuff.

• 22:50Alex Hormozi?

  And so a lot of people get very greedy about what other people are making off of their stuff. Just focus on the money you're making whether the deal makes sense for you. That's one of the piece of advice that Leila actually taught me. She said, never count the other guy's money. And it's a really good piece of advice and I'll pass it on to you. But it sounds like an irresistible offer to the architecture firm because they're like. We can just sell this and keep 100%. You're like, yup, just make the introduction and I'll deliver that. And then when you talk to the customer, you're like, yeah, I'll deliver that. Here's one rail. But you need 10 more. And then you make the sale. Does that make sense?

• 23:19Speaker 03

  I'm not entirely sure, like people would order the entire project. So it's not like you can just, like, I can't just ship you a sample and be like, hey, look, here's a.

• 23:27Alex Hormozi?

  Yeah, then you're gonna have to do the commission based structure, which is not my favorite, but. That's probably the way you're gonna have to do it. So either you can do the discount, I mean, I would say, guys, I have 20% that I can play with here. So you can take all 20 and give them no discount. You can take a 10% discount and then they get, and then you get 10% kickback. Like, this is what I got. I'll make it work whatever way you want, but this is my bare bottom price. And I think that's what, like, that's the outbound strategy.

• 23:52Speaker 03

  So should I then in turn raise prices for direct to consumer?

• 23:56Alex Hormozi?

  Yeah, I love that.

• 23:57Speaker 03

  Okay. Thank you.

• 24:01Alex Hormozi?

  Love that for you. The reason I like that second offer because I think it's very compelling. Now, obviously, the third way you can do it is just get them to sell your offer and then have some sort of kickback. Obviously, many companies do this. It has to be very compelling because almost every business I know is like, yeah, I give 20%. At least in services, every business I know gives 20%. You know, kickbacks for anybody who refers business their way. It's like, yeah, but no one does anything with that. And so it has to be enough that would really change someone's behavior. And so think about it like this, is that the offer has to be good enough that it changes what they do with their business. If it doesn't change what they do, the offer wasn't compelling enough. Or you made it too hard, right? So it's either make the thing better or make it easier for them.

• 24:40Speaker 04

  My name's Cody, I sell roofs to people. We did 140 million last year. Trying to do 250 million this year. Trying to figure out how to follow the principle of giving away more. Guarantees and bonuses when I have such high hard cost. And such a high ticket item.

• 24:56Alex Hormozi?

  Yeah, well, what are gross margins right now?

• 24:58Speaker 04

  40%.

• 24:59Alex Hormozi?

  Gross, what's net?

• 25:01Speaker 04

  Ten to fifteen.

• 25:02Alex Hormozi?

  Okay, got it. Um, do you want to sell it or do you just want to keep it forever?

• 25:06Speaker 04

  Well, I actually just sold my roofing business and now we're part of a PE firm that that now I'm directing that that entire.

• 25:13Alex Hormozi?

  So are you the platform?

• 25:15Speaker 04

  Yes.

• 25:15Alex Hormozi?

  Okay, so you're the platform and how many tuck-ins have they done?

• 25:17Speaker 04

  Eight.

• 25:18Alex Hormozi?

  Got it. How long has it been since they started?

• 25:20Speaker 04

  Uh, about three, four years. Um, I I just got acquired thirty day or we just closed thirty days ago and now they're trying to roll everything into my brand and I'm.

• 25:29Alex Hormozi?

  Chaos.

• 25:30Speaker 04

  Yeah.

• 25:30Alex Hormozi?

  Yeah, got it. Okay, so sorry, go back to the original question. Can I have like better context on this?

• 25:35Speaker 04

  So how do I give a, you know, follow the principle of of give away more value, make the, you know, offer so good it's it's.

• 25:40Alex Hormozi?

  Yeah.

• 25:41Speaker 04

  You gotta feel dumb saying no when I have such high hard costs, I, you know, I can't really do a money back guarantee. I can't really give away more than a, you know, a roof.

• 25:50Alex Hormozi?

  Well, the question is, is that the constraint? Like, is that the thing that's limiting the growth of the business?

• 25:54Speaker 04

  In in my theory, yes, because if I create a good enough offer, then um I could roll that offer out to the other eight eight other brands and that would be the biggest amount of leverage I could deliver, you know, in the shortest amount of time.

• 26:04Alex Hormozi?

  And is everyone insurance based?

• 26:06Speaker 04

  Well, that's why they acquired us because we're retail.

• 26:08Alex Hormozi?

  And so you're so you're the only guy selling just new roofs. Everyone else is doing storm chasing and damage repair and shit like that?

• 26:13Speaker 04

  Correct. And what they want us to do is bring the retail model to the other brands um and add another layer is we sell everything a hundred percent virtually, so no in-home appointments. It's it's all, you know, digital. And so that's what they that's the vision is is taking that, you know, nationwide.

• 26:26Alex Hormozi?

  Centralized sales, virtually.

• 26:29Speaker 04

  Correct.

• 26:29Alex Hormozi?

  So you want an irresistible roof offer. The greater the change, the greater the risk that the change doesn't yield the outcome that you want in the business. And so fundamentally, you're always making a bet that you're going to get a higher return off of incurring the cost of change than it costs you to do the change, right? And so in this instance, he is now, you know, thirty days in or sixty days post-acquisition of his roofing company getting bought with seven other roofing companies and for them to try and combine them. And he's the one who's supposed to like lead the effort of combining all this stuff. And so the idea of like, let's change the offer. The offer is one of the highest leverage things you can change, but it also affects every department. It changes how you bill, it changes how you sell, changes how you advertise, it changes everything, right? Which is why it can change a business overnight, but it can also destroy. Destroy a business overnight.

• 27:12Alex Hormozi?

  And so when I see a business that in aggregate between those eight has $140 million in revenue and $30-ish million in EBITDA, you're talking about a business that's got probably $300 to $400 million enterprise value. I would be very hesitant to immediately change something that's obviously working. And so there's lesser degrees of change that have higher likelihoods of working that could still materially impact the business in terms of increasing the likelihood that it exits. Right? And fundamentally, I'm guessing that's what he wants to get a slice from. Centralizing the sales would allow them to decrease costs because they could not have guys on the road. It's just cheaper to do it. It's also easier to hire salespeople who are remote. All of these kind of downstream cost savings. The other benefit is that when you hire remotely, you have access to a bigger pool. So you can get better salespeople at lower prices who close more deals

• 27:56Alex Hormozi?

  and they could cut down all the, the real big cost for this business is salespeople who are unproductive. All right. So people who are, they're losing leads on people who can't close. And so by reducing costs, increasing talent and increasing sales utilization, all three of those things reduce costs and increase revenue, which could disproportionately drive EBITDA, which is what that company is being valued on. And so when I look at that, I'm like, this is a change that you have to do in order to sell the company and will result in revenue and EBITDA growth. And so let's do this massive change first before risking the biscuit. Right? Because we might just found out that just from doing that, we get a 25% increase in EBITDA and that might be enough. Just bringing everything together, plus adding the 25%.

• 28:40Alex Hormozi?

  You're like, you might be right as rain. And at that point, why risk it? I feel like if I were in your position, the first thing that I would do would be centralize everything first without trying to change. Basically, I wouldn't, I would take the model that I already know works is what was your revenue before you did the, before you were acquired? Okay, you're doing 20. So I would like, in terms of introducing levels of change, so this is actually pretty good for everybody. Like I, I would typically not try and change like five things at once. And so you centralizing all sales is going to get cost efficiency improvements and you're going to be able to have a higher sales utilization. So you probably cut off the bottom third of the sales force that's low performing. That alone might give you a 25% lift in general because the best sales guys will take more of the sales

• 29:22Alex Hormozi?

  and you'll have centralized all the costs, like we have centralized all the costs, right? And so you'll have an increase in revenue and a decrease in cost that's paired. That would probably be my first step. That was part of the acquisition deal. That's the only way I did the acquisition is if they were going to give me full control and centralize all the sales. So but like, I wouldn't, I mean, I know the question is about roofing, but like that's what I would do first and that will probably take you six months or more, realistically. In terms of, in terms of the offer to roofs, an offer that's worked really well in home services is, instead of being a money-back guarantee, I position it as a profit guarantee. So it's like, listen, you want your thing to be on time and on budget, probably, and

• 30:04Alex Hormozi?

  so I guarantee that I will deliver it on time and on budget, or I'll give you my profit, which is 20%, whatever. And that way, it's like, you're not underwater and you still have 40% gross margin, so you're not really losing on the deal. But then people are like, okay, so he's got skin in the game. And so that's a way of closing significantly more deals, because the two biggest obstacles that, well, you would know this, but in most home services, it's on time, on budget, and probably for roofs, it's like, and how much am I going to be displaced? How much is going to interrupt my life? And so I would put my guarantee around those items, and then just have a marginal amount that's back. But it's really just because all, they don't, so the big thing, which is right with guarantees, is that people don't want their money back, they want the roof. And so they just want to know that you care enough to make sure the roof gets delivered.

• 30:48Alex Hormozi?

  And so that's really the solve for the guarantee, is it just pays down risk of them not getting what they want. And so as long as that gets accomplished, you don't have to do it with money back, you can just do it with some money back that gets them to say yes. Does that help?

• 31:00Speaker 04

  Yes, thank you.

• 31:01Alex Hormozi?

  Perfect. So he wanted a better offer, despite all of those improvements, and I was like, okay, I think I can, I could think of something for you. So if you, if you look inside the offer's book, page 125, I talk about guarantees. And so this is the guarantee formula. So whenever you're thinking about adding a guarantee, like, this is what I think through. So if you don't X, in Y time, we will Z. Like, that is fundamentally what a guarantee is. And most people, I would see a lot of times, people just say, I guarantee it. But that doesn't mean anything. You have to say what the terms of the guarantee are on a timeline. What do I get if you don't perform? Right? And so with this business, and some people, he was like, well, I can't give a money-back guarantee, because I would just lose too much money. Understandable. Now, if you have hard costs, like he does, then what we can do is, we can just give something else. We can either a lesser portion of money, we can give something else for free.

• 31:46Alex Hormozi?

  And so the guarantee is a consideration. It's what are we going to do? To show you that we're just as invested as you in the outcome being positive. Right? And so we basically increase, we shift some of the risk from the customer on to us. And this is, this is all you're doing as a business when you do a guarantee is they take some risk of buying. And you're saying, no, I'm going to take some of that risk. And so sure, you can take a hundred percent, but in this, in this situation, you'd be taking like 200% of the risk. Basically, you'd be losing money, right? And so the idea is, again, you can add stuff. So hey, if you don't get what you want, I can add things, which is like, hey, if you don't hit your goal, I'll add more time, which does work as a sales tool. Sometimes though, in the actual, in the real world, if someone's not getting a result, they're like, I don't want any more from you. I hate you. Right?

• 32:29Alex Hormozi?

  And so it does still work as a sale, but it's one of those like mid, right? Now alternatively, you can go the reverse direction, which is take away negative, which is a discount, right? So hey, I can't give you all your money back, but I can give you back my gross profit. Or I can give it back 20%, or I give you back 10%. Right? These are all things that you can choose to give back. And the thing is, is it just shows that you have skin in the game. And all we have to think about, and this is the point of a guarantee, so I want to make sure I'm very clear here. The point of a guarantee is not to have the craziest guarantee. The point of a guarantee is to maximize net conversions. All right, so we just need to increase sales more than we increase refunds. So proportionally, we net more sales. And if you can just do 10% back, then that's enough to change behavior. And that's the point.

• 33:11Alex Hormozi?

  Like if there's no difference between giving 25% back and giving a hundred percent back in terms of the actual performance of the sale, then give 25. And so you can move what you're guaranteeing in order to find the sweet spot and figure out what's actually compelling to your, to your customer. And most times, the, the things that you want to guarantee around are their biggest fears. In home services stuff, it's usually around time and around budget, right? Are they getting it done on time, are they getting their own budget? If it's other services, it might be different than that. And so you'll know your services better, but you want to, you want to list out what their biggest fears are, and then crush those with the guarantee.

• 33:43Speaker 05

  Hey Alex.

• 33:44Alex Hormozi?

  Hello.

• 33:44Speaker 05

  Thank you for the kind of you create.

• 33:46Alex Hormozi?

  Good.

• 33:46Speaker 05

  My name is Manu Fatale, I'm the founder of Alfan.

• 33:48Alex Hormozi?

  Okay.

• 33:49Speaker 05

  So basically, we sell tools to creators to help them make more money. And we also simplify how brands collaborate with creators.

• 33:54Alex Hormozi?

  Okay, you say tools like software?

• 33:56Speaker 05

  So software and service agency tools. So we have a music label, a creator agency for big creators, and then a platform as well.

• 34:04Alex Hormozi?

  Alright.

• 34:04Speaker 05

  So I'm coming to that just in a bit, I know the focus topic. Uh, we made around 4.3 million last year. Uh, and basically, my goal is to try to get to 100 million.

• 34:13Alex Hormozi?

  Alright.

• 34:13Speaker 05

  Now, the issue here is-

• 34:14Alex Hormozi?

  What's the split between the three in terms of revenue?

• 34:16Speaker 05

  Uh, 1 million for the creator agency.

• 34:20Alex Hormozi?

  Okay.

• 34:20Speaker 05

  1.3 million for, uh, the music label. Uh, and then the rest is on the brand side.

• 34:26Alex Hormozi?

  Okay.

• 34:27Speaker 05

  My issue here is, I got 40,000 creators, but only 1,000 are making money.

• 34:31Alex Hormozi?

  Mm-hmm.

• 34:31Speaker 05

  Right? And I've been kind of struggling between going on a SaaS model to be able to scale, because when I do any social marketing, we get a creator that comes on board, but they don't make money right away.

• 34:41Alex Hormozi?

  Uh-huh.

• 34:41Speaker 05

  So it's not like you, you know, and the longer it takes you to recoup your ad spend is not usually a good metric for scalability. So I'm kind of pivoting, should I go into a SaaS model? Where, right, whatever I make from the creator, I'll just be like, hey, like, just pay me that price and I take 0% from you? And then I just charge the brands the commission to collaborate with those creators. This way I can scale the business in a much faster, uh-

• 35:04Alex Hormozi?

  Say the, say the last part again.

• 35:06Speaker 05

  So instead of me making percentages from creators-

• 35:08Alex Hormozi?

  Yeah.

• 35:09Speaker 05

  I provide them the same tools that a lot of them make, make money-

• 35:11Alex Hormozi?

  Uh-huh.

• 35:12Speaker 05

  And I keep 0%.

• 35:13Alex Hormozi?

  Okay.

• 35:14Speaker 05

  But then, let's say they have to pay you like 20 bucks a month.

• 35:16Alex Hormozi?

  Sure.

• 35:17Speaker 05

  But then I still make my money on the upside on the brand side, by connecting them with these creators.

• 35:21Alex Hormozi?

  Okay, so switch to a subscription.

• 35:23Speaker 05

  Switch to a subscription, yeah.

• 35:24Alex Hormozi?

  Okay, um-

• 35:27Speaker 05

  Cause right now, like, I have 40,000 creators who signed up, but I'm really making money off 1,000.

• 35:31Alex Hormozi?

  Right, and it's free to sign up, and you only get paid if they get paid. Yeah. So, um, you're in a prosumer audience. So, if you look at like Shopify, for example, um, it's super, it's- If you look at the amount of people who've tried to build marketplaces, almost all of them fail. And it's my opinion that the best marketplaces do run a SaaS, and then once they get to scale, they can, they can kind of push more marketplaces, like Shopify, for example. Like, it's 29 bucks a month or whatever it is, because they know that the vast majority, like- They make more money charging $29 a month than getting 4% on zero for the vast majority of stores, but people continue to pay for the hope that someday they will make money.

• 36:13Alex Hormozi?

  And so I think the idea of switching to SaaS is not a bad one. I am concerned about the four businesses that you have. So, because in order to win at SaaS, you have to be like all in on software. And so the alternative to that would be instead of letting creators come on for free, you would charge them to come on, which you could do, has like a one-time setup fee, and then maybe increase the likelihood that they win. Either path would work, but if the ultimate goal is that you want to build a network of creators, then you want to have the lowest barrier possible on the creator side.

• 36:52Speaker 05

  So I'm still thinking of a free tier and a paid tier with some minor benefits, but then if you really want to make money, you gotta end up paying a subscription.

• 37:00Alex Hormozi?

  Yeah. Yeah, you'll have to play with the feature set because that's always a bitch.

• 37:05Speaker 05

  It's just the path of least resistance to getting to 100 mil.

• 37:09Alex Hormozi?

  Yeah, so I think, I think adding the subscription for the base and then still maintaining the revenue that you get from the sponsors makes sense. I would maybe push back slightly on the hypothesis that they can't convert anything because it dramatically decreases the value of the network from the sponsor side.

• 37:26Speaker 05

  What do you mean by that?

• 37:29Alex Hormozi?

  Because some people will pay for impressions.

• 37:31Speaker 05

  Yeah.

• 37:32Alex Hormozi?

  And so those guys can for sure deliver those. And so maybe there's like two tiers that you can sell. You have another product on the ad side or the media side. It's just something to consider.

• 37:42Speaker 05

  Perfect. Thank you. You just validated my thoughts.

• 37:45Alex Hormozi?

  Oh, good.

• 37:46Speaker 05

  I just wanted to make sure I'm thinking the right way.

• 37:48Alex Hormozi?

  No, I think it makes sense. Yeah, either have to, basically you have, you have to position as higher ticket and do premium awake level onboarding and then select only for the really good creators. And that would be like you charge five or $10,000 and you really get them set up. Or you basically flip the other way, go freemium. And then it's all based on like basically media arbitrage where you're just running tons and tons of ads to get people onto the platform and you just know what your average revenue per platform user is.

• 38:11Speaker 05

  Perfect. Thank you.

• 38:13Alex Hormozi?

  So this guy obviously has multiple businesses and is sinning. He's doing the cardinal sin of chasing multiple rabbits or more particularly many women in the red dress. That being said, I still wanted to help. And so he wants to build a software company. If that's really what he wants to build, then he's got to go all in. Because if SaaS is one of the most, if not the most competitive space that's out there. I guess now there's AI, but SaaS is still competitive. Everybody you're competing against is typically very well-funded and also very smart. And so they're going to have significant advantage. And so if you think that you can split your attention and still beat them, it's a tall order, right? And so for him, my whole goal was that at least he had clarity on what he needs to do. So that hopefully he can get that business up and running as fast as possible. So that he could basically shut off the other things and go all in.

• 38:55Speaker 06

  Hi, Alex.

• 38:56Alex Hormozi?

  Hello.

• 38:56Speaker 06

  Alex Yomar, you can call me Alex Rodriguez.

• 38:59Alex Hormozi?

  From Puerto Rico?

• 39:00Speaker 06

  Sí, from Puerto Rico. So I'm a music attorney.

• 39:03Alex Hormozi?

  Abogado.

• 39:04Speaker 06

  Abogado correcto en la música y el entretenimiento.

• 39:07Alex Hormozi?

  Yeah.

• 39:07Speaker 06

  So what we do is we, my concern is focus.

• 39:11Alex Hormozi?

  Yeah, you think? Okay.

• 39:15Alex Hormozi?

  At least you said it. Yeah.

• 39:16Speaker 06

  So we have.

• 39:17Alex Hormozi?

  Three businesses.

• 39:18Speaker 06

  A law firm.

• 39:19Alex Hormozi?

  Yeah.

• 39:19Speaker 06

  So basically it's three businesses.

• 39:21Alex Hormozi?

  Yeah.

• 39:21Speaker 06

  But today, thanks to Ed and Sammy, we got much, much more clear on what we should do. But I would like to know, how would you think about this? Because the law firm side, it's growing 20% year over year without me actually doing anything. Just redirecting people that comes to me through my law firm. And right now it's about 100K. And then we have the educational side and that is making 200K. And it's been stuck like that in the last two years.

• 39:54Alex Hormozi?

  Sure.

• 39:55Speaker 06

  And we're building.

• 39:55Alex Hormozi?

  And you get customers from organic?

• 39:57Speaker 06

  Yeah, both are organic.

• 39:58Alex Hormozi?

  Okay.

• 39:58Speaker 06

  So if you don't have money to pay us as a lawyer, you go to the educational platform. And we are developing a contract automation software for big companies like major labels or publishing companies. So right now, the product, our software, our goal with the software is to sell. We are seeing that other, that big music companies are buying tech.

• 40:22Alex Hormozi?

  Yeah.

• 40:23Speaker 06

  So specific for them.

• 40:25Alex Hormozi?

  Sure.

• 40:25Speaker 06

  So they're doing everything manually. We want to sell that, but we have a cash flow problem because we're selling to, you know, people without a lot of money and the service size does make money. So. Our, our, our problem is where should we focus?

• 40:40Alex Hormozi?

  Yeah, but you're, what's, what's monthly churn right now?

• 40:43Speaker 06

  On the, it's.

• 40:45Alex Hormozi?

  On the software?

• 40:46Speaker 06

  We got a hundred people and we only have forty active right now.

• 40:49Alex Hormozi?

  And how long have you been doing it? In the first year, so you've retained forty percent. Are they actually active though? So they're paying?

• 40:55Speaker 06

  The people that are active are paying three thousand dollars per year. And there are only like four.

• 41:01Alex Hormozi?

  Four?

• 41:02Speaker 06

  Four that are paying three thousand.

• 41:04Alex Hormozi?

  And then what are the other thirty-six paying?

• 41:05Speaker 06

  Are paying six hundred per year.

• 41:07Alex Hormozi?

  Okay, got it. He has a very classic problem, which is that you're good at doing something and you have two very different avatars. And if you continue down either direction, you ostracize the other. So he's actually at the productized stage, so he's ten to, you know, twenty employees between the three companies, the three companies that he has. And so the issue that he has to have is he's got to niche down. Qualified leads are too expensive and they cap his ability to advertise. That's fundamentally his big issue, right? And so he's getting, he's got too many different customers. So we have to niche down his, his advertising and basically message the new offer, which for him was going to be the education and the software. And so the million dollar question for him, which is what forced me to say, I think that it made sense was, and this isn't, this is rare for me, was for him to go down market, which means to go for the smaller customer that's more numerous.

• 41:49Alex Hormozi?

  Most of the time you want to go out market and that's because those customers can afford to pay you, like sell to the rich, you know, rich people pay better, solve their problems, that type of stuff. I'm always, always in that direction. But because he said that forty percent of his customers, basically right off the onset, were still paying him a year later, to me, that's fairly compelling that he's found some sort of product market fit. And so in hearing that, I thought, okay, well, best in class is like sixty plus percent annual retention for a consumer, prosumer type product, which is where he was at, which is musicians who like want to make it in business, but aren't that big yet. So to me, that'd be a prosumer, somebody who's a little bit of above a consumer, kind of business-y oriented, side gig-ish, right? And so the good news is there's lots of them. The other good news is that there's new ones that get minted every day and it's a growing market.

• 42:34Alex Hormozi?

  So all those things are in his favor, which is again, these are some of the reasons I like that. The other piece is that some of the old businesses he was going after, I think, though they are big, I think they're going to have trouble over the next years with the AI stuff. Like I think they'll have a hard time pivoting. And so I would be at least, I would second guess going all in there. Not to say you can't, I would just really consider it. Now, the other piece of why I like this is that if he can move his revenue retention up at the 12-month mark, then he has something that will just keep growing year over year over year, because getting those customers is not hard. Keeping them is hard. But if he can keep them, then he can probably blow the doors off this thing, especially if the education can offset his CAC or cost to a car customer. Okay, so I think we we we chatted about this last night.

• 43:14Alex Hormozi?

  So you have a, there is no right answer, but there is a path that you have to pick. And so either you're going to be enterprise company and you're going to build only for that. And I would say like you probably will just transact on the education side in order to fund this. I, in general, don't like this plan, but you could do this, because you'll be split attention. And this is fundamentally why people raise money in software, so they can just focus on one customer the whole time, build the product, and then actually get it to work. Okay, that's that. Because you said that you're retaining 40% in basically a prosumer-ish market, which is where you're at, I would be inclined to say that you probably are pretty close to a decent product.

• 43:58Alex Hormozi?

  So you probably have nailed something there, because keeping 40% of people one year later on, you know, whatever it is for musicians that you guys have for contracts and whatnot, you could absolutely go all in on that and get that to like 50 or 60%. And then you just need to have a different acquisition system. So you probably just need to go spend money acquiring customers. And that already cash flows because of the education side. And are the people who are still paying you on the software also education customers or no?

• 44:28Speaker 06

  They usually come from the education or from my legal services as well. So I have some clients that be 80% of the job.

• 44:35Alex Hormozi?

  Here's the million-dollar question. The million-dollar question is, if they stop the education, do they keep paying for the software?

• 44:42Speaker 06

  Yes, because it's a one-time.

• 44:43Alex Hormozi?

  Well, then that's, what, you mean the software's one-time fee?

• 44:45Speaker 06

  No, the education.

• 44:46Alex Hormozi?

  Oh, well, then, okay.

• 44:47Speaker 06

  So sometimes they just pay and they're gonna use the software.

• 44:50Alex Hormozi?

  As long as they, so the only thing that we're solving for is revenue retention on the software. And so like enterprise in and of itself is not more valuable than lower market. It's just that it tends to be stickier, which is what makes it more valuable. But if you can get a Larger marketplace, easier to acquire customer to stick as well as a large enterprise customer. You've got a goldmine if that's true. And so if you want to go spend money, acquire customers with the education or media as your liquidation. And then get, you know, 100% like, but the goal that you guys should have is like, we don't care at all about the education. All of your focus, all the profit goes into just fixing one number, which is that you need to look at M12, so month 12 retention. And just say like, okay, we're at 40, how do we get to 60? And then how do we get to 70? And that's all you're solving for.

• 45:34Alex Hormozi?

  Because if you solve that, then the thing will just keep growing. And that's the beauty, I mean, that's fundamentally the beauty of software. Once you get it right is that it just keeps growing.

• 45:41Speaker 07

  Thank you.

• 45:42Alex Hormozi?

  Yeah.

• 45:44Alex Hormozi?

  And so for me, that was, I thought, the higher likelihood path. And also because you already knew how to get those customers. Whereas getting Sony and some of these large brands could be significantly more difficult. And so for me, I saw that and was like, I think that's the direction that has a higher likelihood of succeeding, given their goals. Infinite Banking.

• 46:02Speaker 07

  Yes.

• 46:02Alex Hormozi?

  Insurance.

• 46:03Speaker 07

  Yes.

• 46:03Alex Hormozi?

  You have 29 agents.

• 46:04Speaker 07

  Yes.

• 46:05Alex Hormozi?

  And you're needing to decide whether you need to be the face and get customers to feed your agents. Or you should go all in on getting more agents and teaching them how to do lead gen.

• 46:19Speaker 07

  Yes.

• 46:20Alex Hormozi?

  Cool.

• 46:22Alex Hormozi?

  Yeah. So.

• 46:25Alex Hormozi?

  Do the second one.

• 46:26Speaker 07

  Do the second.

• 46:27Alex Hormozi?

  Yeah. Yeah, it's significantly higher leverage.

• 46:30Speaker 07

  Cool.

• 46:30Alex Hormozi?

  So basically, so think about this is what problem do you want to solve? So either you say, I want to become a, like, you want to keep growing your brand top of funnel. So that you just have more and more people are interested in infinite banking. And then you have all these agents that you pass it off to so that they can, you know, basically transact and own the relationship. So that's like option one. That is, I would say, the lower risk path because you're already doing that today. And so how many, how many, is it on Instagram that you do your stuff?

• 46:57Speaker 07

  Yeah, all on Meta and YouTube.

• 46:59Alex Hormozi?

  Okay.

• 46:59Speaker 07

  And or get in person.

• 47:01Alex Hormozi?

  What's your followership from that?

• 47:04Speaker 07

  15,000 subscribers on YouTube and 12,000 followers on Instagram and 6,000 on Facebook.

• 47:11Alex Hormozi?

  Yeah. And what percentage of the leads come from that stuff versus whatever you do in person?

• 47:17Speaker 07

  Fifteen percent come from online and.

• 47:21Alex Hormozi?

  Okay, where's the rest come from?

• 47:22Speaker 07

  The rest of it comes from referrals and networking and.

• 47:25Alex Hormozi?

  Dude, get agents. I don't even know what we're talking about. For sure, get agents.

• 47:28Speaker 07

  Go get agents.

• 47:29Alex Hormozi?

  Yeah, I thought, I thought it was like you're sixty, seventy percent of the business is coming from, from your organic.

• 47:35Speaker 07

  No, most of it's coming from.

• 47:36Alex Hormozi?

  For sure.

• 47:37Speaker 07

  That. And then the challenge with the agents, that we originally it was all of me teaching people how to do that. How to go, go out there and get business, go network, go join BNI, Chamber of Commerce, whatever. That's what worked for me. And then we would get good people that were like, hey, I don't have any network. So I said, all right, and they asked where leads were. And I said, all right, so let me go create leads. And we started calling business owners, because that's who I was selling to. But they were not showing up and they weren't really busy, whatever we were offering wasn't, whatever. Then I reread Hundred Million Dollar Offers and Hundred Million Dollar Leads. And I looked at the value equation. I said, the best value I can give is to real estate investors. So let me go get real estate investor leads. And then we're calling them all day long. And the people that I'm hiring don't know how to communicate with them properly.

• 48:21Speaker 07

  So the only, they end up just setting appointments and then they hand them back off to me.

• 48:25Alex Hormozi?

  Okay.

• 48:25Speaker 07

  And they're good, but I think it comes down to recruiting. People want leads. The first question, where do we get your leads?

• 48:31Alex Hormozi?

  Yeah.

• 48:32Speaker 07

  If you say you have to go generate your leads, they might go look at somewhere where they give them leads. So we started giving people leads. So we make an offer to recruits. That's good.

• 48:42Alex Hormozi?

  Well, I think that one is, you could probably just take the existing brand that you have and just be more deliberate about the call to actions that you make. And basically, because like if you talk about high level insurance stuff, that's going to attract both people who want to learn more about insurance, but many of those people will be agents.

• 48:58Speaker 07

  Yes.

• 48:59Alex Hormozi?

  And so I think if you basically alternate the CTAs, you, you'll be able to basically, I don't want to say chase two, but, you know, both, but in some ways, you kind of can double dip here, because as long as the content strategy fundamentally doesn't really change, you're just changing really the calls to action, then you can kind of get a little bit of the best of both. But I do think that the big thing that you need to crack is teaching them to generate their own leads. Like that is a hundred, like. That's the limiter of your business.

• 49:23Speaker 07

  Heard.

• 49:23Alex Hormozi?

  So you need to bring them on and you need to have the training system to reliably get them to self generate. Like that's it. Like that's what you have to do. If you do that, the sky's the limit.

• 49:32Speaker 07

  And the 20 people that we have at a 29 that are just simply coming in and cold calling real estate investors all day.

• 49:38Alex Hormozi?

  Yeah.

• 49:39Speaker 07

  Right now that are setting up an insane amount. I think our offer is not great, so I'm going to the drawing board with that. But all those people, now I gotta go teach them. I'm just teaching them how to cold call.

• 49:49Alex Hormozi?

  Well, they already are cold calling, right?

• 49:50Speaker 07

  Huh?

• 49:50Alex Hormozi?

  They already are cold calling.

• 49:51Speaker 07

  They are cold calling now. Well, they're coming in, I'm teaching them to cold call.

• 49:54Alex Hormozi?

  That's fine.

• 49:54Speaker 07

  Rather than coming in, teaching them to go shake hands and kiss babies.

• 49:59Alex Hormozi?

  You want to teach them the highest efficiency strategy for getting customers. So whatever that is. So you can just like whatever your method is that you think the highest percentage of people will succeed with, that's what you teach.

• 50:07Speaker 07

  Cool.

• 50:08Alex Hormozi?

  So whether it's shake hands, kiss babies, or it's cold calling, whatever.

• 50:11Speaker 07

  Or a combo of both?

• 50:12Alex Hormozi?

  Yeah, or a combo of both. Either way is fine. But like fundamentally, like look at the biggest insurance companies in the entire world. They are that big for a reason and almost all of them, they are recruiting machines.

• 50:23Speaker 07

  Right.

• 50:24Alex Hormozi?

  Like that's where fundamentally, because like they're not a supply constrained business. Like you can sell as much insurance as you want.

• 50:28Speaker 07

  Right.

• 50:29Alex Hormozi?

  Like you're not supply constrained.

• 50:30Speaker 07

  Yes.

• 50:30Alex Hormozi?

  Right? Like you're just demand constrained. And so you just gotta get guys and then put the system in place so that they learn how to sell. And then that's the business.

• 50:37Speaker 07

  Heard. Heard. Thank you. Appreciate you.

• 50:40Alex Hormozi?

  Yeah. This is why there's higher leverage of him getting lead getters than him getting leads. So this is the leads book 175. So right now, he's in scenario one, which is that he is getting leads, right? He's getting customers and he's sending those leads to his agents to close, right? Look at a much higher leverage move. Let's go to scenario three, where he spends the same amount of time advertising, but every time he's getting lead getters. And so every month, he's getting more agents into the business and each of those agents are now getting money. Now, it's the same level of effort for him. Look, his line is still the same. He's still working the same amount every day, same amount every day. But here, he's got these new nodes that are generating business for him.

• 51:21Alex Hormozi?

  And so if you add up all of this, these are all the extra customers that he's gotten just from this level of effort. And so this has far higher leverage than this does, which is why I recommended that he start making CTAs in his content to both continue to generate, because I don't want to kill the business. Continue to generate his normal leads, but also make it clear for agents if they want to join him and gain access to some of the leads that he has, that he can come in, he can train them, and he can show them how to get the leads on their own, which he can benefit from.

• 51:49Speaker 08

  My name is Mike Nathan. I sell cellular therapy in home to the old affluent, injured probably, and athletic. We're new, but we've got a million dollars in revenue, half an EBITDA. We would like to get to 25 million.

• 52:06Alex Hormozi?

  In home?

• 52:06Speaker 08

  In home.

• 52:08Alex Hormozi?

  Okay, got it.

• 52:08Speaker 08

  So we consider mobile healthcare.

• 52:10Alex Hormozi?

  Okay, is it like guy drives out, or is it you sending machines?

• 52:13Speaker 08

  RN drives out, gives you an IV infusion in your home.

• 52:17Alex Hormozi?

  Okay, got it.

• 52:17Speaker 08

  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.

• 52:26Alex Hormozi?

  Okay.

• 52:27Speaker 08

  Great, from the NFL to a lot of great, but we have great business to doctor, B2B sales experience. Zero B2C experience in that playbook. We're learning, is wildly different. We have no idea what we're doing.

• 52:42Alex Hormozi?

  Yeah. So what stops you from just doing way more of the doctor stuff?

• 52:46Speaker 08

  It doesn't, 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.

• 53:04Alex Hormozi?

  Yeah.

• 53:05Speaker 08

  So that's our constraint in a one marver 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.

• 53:26Alex Hormozi?

  What do you do? So you're big in 50% margins, right? So what's the cost to acquire a physician?

• 53:31Speaker 08

  Cost to acquire a physician?

• 53:34Alex Hormozi?

  Who refers you business? Cost of acquiring affiliate?

• 53:37Speaker 08

  It's oftentimes, it can be a physician, so we don't track it that way, but it's $500.

• 53:43Alex Hormozi?

  Okay, so it costs you 500, and then what does the average physician refer to you in a year?

• 53:48Speaker 08

  Six thousand.

• 53:50Alex Hormozi?

  Okay. So I mean, you're getting twelve to one there and you already know how that works. So like what stops you from doing ten times more of that?

• 53:57Speaker 08

  Uh, we.

• 53:58Alex Hormozi?

  You're saying they don't pay well, but that's the part I'm not sure.

• 54:00Speaker 08

  Well, we'll see.

• 54:01Alex Hormozi?

  Cause you're getting fifty percent margins.

• 54:02Speaker 08

  We went through the woods and hit all the people that are gonna refer us. The number's not amazing, or at least I just know there's more there. I assume there's more, there's gotta be more than the, you know, the two hundred people we've hit in the.

• 54:13Alex Hormozi?

  Like, you mean, you've only really talked to two hundred in terms of like reach outs and, and. Or you have two hundred who signed up as affiliates, kinda thing?

• 54:19Speaker 08

  I don't know the number off the top of my head, but it's in, it's in the hundreds, less than a thousand of B to B, uh, P T chiropractors, orthopedic surgeons. We've done that.

• 54:30Alex Hormozi?

  In the Twin Cities.

• 54:31Speaker 08

  And the super small people that have given us has been, some give four, five and six, some give zero.

• 54:37Alex Hormozi?

  Yeah. Do you have an active affiliate manager who's like regularly reminding them? Yeah, so with, so the, the way that I think about affiliates is, um, it's basically a second tier of customer. And so you need to have somebody who's regularly kinda like stoking the affiliate fire to keep them activated and continue to get them to, continue to refer business. So I'll give you an example. So there was a roofing company, for example, it was a restoration company.

• 55:01Alex Hormozi?

  They had one star, star salesman and all he did was he'd go around to other tradesmen and get them to refer them business. And so they would get a thousand bucks to refer the restoration business, business. But the sales guy got five hundred for every time they referred. And so that guy, all day long, was knocking on doors, walking to the front door with donuts, asking them how they're doing, bringing coffee to the guys, and then reminding them that they existed. And that's all he did. And so I think you were getting, you're getting, you're, you're doing the hardest part, which is getting them to, uh, refer. You just didn't have the, the consistent referrals, because if you had two hundred active affiliates who were consistently referring you business, and most of these physicians, you know, especially like GPs, things like that, like.

• 55:45Alex Hormozi?

  I mean, they see thousands of patients. And many of them could probably benefit from the services you have. And so the activation is both getting them to refer consistently, but also a percentage of customers that they see that they refer to you. So it's kind of both sides of it. And so I think that the missing link with what you were already doing was just that you didn't have, basically, the continuous affiliate marketing strategy to get them to keep sending you business. So that's probably like, right now, today, I would fix that first. Because you already have the acquisition system. You already have the network. And so for me, like, reactivating that affiliate base would be the first thing that I did. So this gentleman is using B2B outreach to get physicians and therapists to refer him business. Now, part of what he was missing is if you go to 240 in the Leads book, which is the affiliates chapter,

• 56:30Alex Hormozi?

  I talk about the launch and integrate model. And so basically, right now, he actually was missing both of those. So launch is like, you want to do some sort of big promotion with them so that you get to all their customers. Now, they were giving him like a trial customer, and he was basically not getting any customers beyond that. And so if he's acquired 200 affiliates, and each of one of them is sending one customer, it's because he's basically not following up with the tests that they're making. Like, imagine if you have a business and you have customers, and someone says, hey, can you refer me business? You might be like, I'll send you one, and I'll see what they say, right? But it's a trial. And so basically, you have to think about getting these affiliates on board is like a trial, but to convert the affiliate into an activated affiliate, right? And so a launch is step one, which is that, okay, maybe you succeed with the trial, and then you propose,

• 57:14Alex Hormozi?

  hey, let's do some big campaign to send a lot of your customers over. And then you can make money. We can make money. Everybody's happy. But the long-term goal is full integration, right? Which is, at what point in your process can we integrate our business so that what you sell is merged with what we sell? So that we don't have to do any extra work or remind you. You just do it on your own. The second thing, maybe, because you might just reactivate the base, and all of a sudden, you're like, I got 200 guys who are referring me business. Holy shit, we're at 10 million. But the second thing I would consider, probably, I would still probably focus most of my time on the B2B because you already have it. But for this business, I think that it lends itself for... What's the price point?

• 57:51Speaker 08

  $6,000 a treatment.

• 57:53Alex Hormozi?

  Per treatment, okay. Wait, so the average doctor will send you one $6,000 patient per year? When you said it costs you 500, they'll send you one patient?

• 58:02Alex Hormozi?

  Interesting. So do you have a process for once the patient gets the thing calling the physician up?

• 58:07Speaker 08

  S- sorry, say that.

• 58:08Alex Hormozi?

  So like, I'm Dr. Smith, I send you Sandy, Sandy goes and gets the, well, you come to Sandy and Sandy gets the treatment. Is there a cycle where you call back, me, Dr. Smith, and say, hey, we just dealt with Sandy, here's some of her stuff?

• 58:21Speaker 08

  Uh, not in a medical term, like, we're not putting notes back in, because it is private.

• 58:25Alex Hormozi?

  For sure, yeah, yeah.

• 58:25Speaker 08

  But, but we do, we ask for more referrals, or just circle back that way. There's not a, a, a patient loop back.

• 58:33Alex Hormozi?

  Okay.

• 58:34Speaker 08

  That's not true. Sometimes that does happen, excuse me, it does.

• 58:36Alex Hormozi?

  Yeah.

• 58:36Speaker 08

  That's not systematized, though.

• 58:38Alex Hormozi?

  Yeah, I would systematize the hell out of that. Because it's like, hey, you just sent me this person, like, let me close that loop for you. She's awesome, we did this thing, she loved it. By the way, and then we have the, you know, the opening to the, to the other, like, what customers, or customers, sorry, what patients did you see this week? Uh, who you think would be a good fit? Right? And rather than saying, do you have any, it's which ones would be?

• 58:58Speaker 08

  Yeah.

• 58:58Alex Hormozi?

  Is the question. Small training stuff, but it matters.

• 59:02Alex Hormozi?

  So I feel like there's so much on the B to B side that honestly, that's probably where I'd be ripping apart.

• 59:06Speaker 08

  So you would not go after a B to C approach, like advertising online, going, uh, pushing in on a strategy on that?

• 59:11Alex Hormozi?

  It's not that I wouldn't, it's that when I think about, so this is the difference in like theoretical and actual, like, I would, given, given the fact that you, like, you're already running good margins on this thing, basically doing it, and take this the way I mean it, completely unoptimized, like, right now, right? And I, again, I'm not, this is not a slight. Then I'm like, there's so much juice left in this thing, I don't want to now start something new, it's like, I barely got this one going. I want to, like, crush this. And when I, when I'm like, no, we've, like, we follow up with every single person, I've got a full-time affiliate manager who steps by, our affiliates, I'm, I'm calling them affiliates, but doc, you know, drops by the docks once a week, just to remind us, say nice things, hey, by the way,

• 59:52Alex Hormozi?

  like, that is happening all the time, and we've already covered, like, literally every single physician in the Twin Cities. And I'm like, okay, let's go B to C. But if we haven't completely squeezed the hell out of this thing, and it's already working at the level it is right now, with like, zero, like, you're only getting one patient per doc, it's like, so.

• 1:00:09Speaker 08

  It's low, yeah.

• 1:00:09Alex Hormozi?

  Yeah, so you getting B to B customers is the same as getting one B to C customer, I understand why you'd be frustrated, because you'd be like, well, fuck it, I'll just fuck. I could sell one customer on my own without having to deal with the doc. But the whole point is that, like, I want them to be sending twenty, fifty a month. And they can because they have the volume. And I think that first one has to be like a beautifully choreographed experience. Because that first patient's the test run for them, for you, right? They'll refer you one and they'll see what happens. Right, and so, one, it's like Sandy's got to be blown away. Right, she's got to come back and be like, oh my god, that place was amazing. And then you also have to go back to the doc and be like, we blew Sandy away, by the way. And so I think you have to tackle it from both sides. That's what I would do. Getting into the ad side, you absolutely could do it.

• 1:00:52Alex Hormozi?

  I could walk through some, you know, whole strategy there, but I, I, if, if we swap places, that's where I would be focusing.

• 1:00:59Speaker 08

  If you were gonna try to expand into other major metros in the next 18 months, would you, would you have the B2C sorted out before you went to the next market?

• 1:01:08Alex Hormozi?

  Honestly, no. If I crush my B2B play, then I just run my B2B playbook in the, B2B playbook in the new market. Like, once I find something that works, I just want to just...

• 1:01:17Speaker 08

  Do more.

• 1:01:18Alex Hormozi?

  Yeah, pillage.

• 1:01:19Speaker 08

  Right on, thank you.

• 1:01:20Alex Hormozi?

  Yeah, no, you bet. Now, if you, if there's no way to do that integration, which there always is, but if for some reason you have limited beliefs about the world. What you can do is basically you have to pay affiliate managers to consistently, kind of, they're kind of like account reps. And so they manage the relationship with affiliates to remind them that you exist and remind them to promote your stuff. And so if you have a handful of good affiliates that can be worth their weight in gold, because each of these business owners is, is advertising on your behalf. And so if he has 200 businesses, which is what he said, imagine harnessing the horsepower of 200 businesses of advertising and forcing it through one. Well, if you have that, he's easily going to hit his $25 million in sales. He just needs to activate and better use the resources that he has at his disposal right now. And on top of that, he's already really profitable.

• 1:02:03Alex Hormozi?

  We said the model works, we just have to do more of it.

• 1:02:06Speaker 09

  I'm a father, single father, I got two boys here, and, um, my name is DJ Kristofferson, there we go. I sell people to people, I'm restarting my virtual staffing company.

• 1:02:15Alex Hormozi?

  Cool.

• 1:02:15Speaker 09

  And we're currently at zero revenue. It's just a matter of getting started.

• 1:02:18Alex Hormozi?

  Okay.

• 1:02:19Speaker 09

  And so we're really confident in that. My question is on a more of a personal one, so I'm a single father, in a serious relationship, and she's not a business person at all, very sweet and supporting, but what would you say would be some things to prepare her for when it comes to...

• 1:02:36Alex Hormozi?

  So your spouse or not spouse, your partner is stopping?

• 1:02:38Speaker 09

  My, my partner, I mean, she doesn't live at the house yet, she's, it's long distance, but it's coming together, but it's getting really serious.

• 1:02:44Alex Hormozi?

  Okay.

• 1:02:44Speaker 09

  Preparing her for being married to a, um...

• 1:02:50Speaker 09

  A type A.

• 1:02:50Alex Hormozi?

  I think you should give her a try before you buy.

• 1:02:52Speaker 09

  Yeah.

• 1:02:53Alex Hormozi?

  Seriously.

• 1:02:54Speaker 09

  How do you mean?

• 1:02:55Alex Hormozi?

  So fly out, spend two weeks with me, I'm not gonna cater to you, I'm gonna live my life.

• 1:02:59Speaker 09

  Yeah.

• 1:03:00Alex Hormozi?

  If the way that I live my life, the way this works, this is how it's going to be, if you like that, let's rock and roll. If you don't, I don't wanna change.

• 1:03:06Speaker 09

  Yeah. That's true. That's perfect. No? I love it. That's, that's great, thanks.

• 1:03:17Alex Hormozi?

  Crushed it. I see the most important relationship that you have as you with your goals, because your goals are really just a reflection of yourself. And so I don't want to, especially if I were single, I wouldn't wanna sacrifice my relationship with myself essentially for someone else. The recommendation that I gave was what I would give myself, which is be you. And if the way that you wanna live to maximize the likely that you do what you wanna do with your life is this way, then rather than try and compromise where both people don't get what they want, try and see if there's somebody who actually just like really loves the way you live. That felt like the easiest first step is like just have her come out and just don't accommodate. Like, live the way you'd wanna live, and if she's thrilled about living that way,

• 1:03:58Alex Hormozi?

  then you have a very high, high chance of this thing working out because you have little effort. You're not pretending to be someone you're not, you're not putting on a show, you're just being you. And if being you is enough that she's stoked, then you probably have a good life ahead of you. Now, if she comes out and it's not the case, then at least you didn't have to wait two years to find out after you both stopped acting that this is how you really are. And so I see the goal as how do I get as far forward in the relationship as possible? Of what would it look like if neither of us acted? And then let's just behave that way, and if it still works, that feels pretty good.