Answering Your Top Business Questions for 1 Hour | Ep 828

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?

  I'm Alex Mosi and I'm an investor and I own acquisition.com. It's a big portfolio companies makes me more money than I'll ever need rest of my life. I had 100 business owners who flew out to our headquarters to scale their companies. And so they asked me questions for an hour. I tried to do my very best to make the solutions as tactical as humanly possible. So that you can, watching from home, immediately use them in your business.

• 0:18Speaker 01

  First off, I have to say thank you for taking me out for dinner last time. That conversation that we had literally changed my life and changed my business. So yeah, appreciate that.

• 0:29Alex Hormozi?

  Can I tell the story of what happened?

• 0:31Speaker 01

  For sure.

• 0:31Alex Hormozi?

  We had an event that was scheduled, had to get moved. The memo got passed down and everyone found out except for one sales guy. And he sold six people into an event that didn't exist. On like a random Monday, we had six people showing up, came from Israel. And he was like, hey, I'm here for the workshop. And I was like, this looks awesome for us. I'm really happy, I'm really happy that we're in this situation. We've always tried to come from the perspective of like, when you, when you have something that gets messed up, like you can't just like refund somebody because they're still net negative, right? Like he still flew from Israel. If I'd said, hey, my bad, here's the money back, he'd still be like, screw this guy. Right? And so we had the team spend the day with the six and then we took them out to dinner.

• 1:14Alex Hormozi?

  And I bring that up just because it was a great like example of like something that took me too long to learn. Was that like, you can't just make it right. You have to make it more than right in order to actually make it right. You know, that was obviously a super unfortunate situation. And you know, every business, if you have humans, you make mistakes, right? And so that was a mistake that we had made. I remember hearing the stat from Disney, which is that it takes 37 magical moments to overcome one tragic moment. And so the moral of that statistic is not let's do 37 magic moments. It's avoid the tragic moments if at all possible. But if you do find yourself in a tragic situation, here's an interesting thing that Leila taught me,

• 1:53Alex Hormozi?

  which is that, believe it or not, the people that you wrong and then super compensate to make it super right, become your biggest ambassadors. He flew back out and he gave such a heartfelt, you know, you know, story that like, It took somebody who was negative and I think, you know, from at least what it sounded like, he was super positive towards us. And I think that that's in some ways, as terrible as it is, when you do have one of those tragic moments, just see it as an opportunity to flip someone from a hater into an ambassador. Rather than being like, "Oh, we gotta give these people refunds." It's like, no, like, we actually get to build our reputation and decide what kind of company we want to be.

• 2:32Speaker 01

  Where we're stuck at right now, so we're selling the backend offer $195 a month.

• 2:37Alex Hormozi?

  Yeah.

• 2:38Speaker 01

  For semi-private.

• 2:39Alex Hormozi?

  Okay.

• 2:40Speaker 01

  Or four months for $595. Our churn for both of those is 50%, so weighted, it's 30% churn. And the reason why we've got such terrible churn is nobody shows up. Like, 7% of our student body actually shows up to the calls and actually gets the value from the thing they purchase.

• 3:00Alex Hormozi?

  What's the onboarding look like?

• 3:02Speaker 01

  So, we have the closer get them to see the calendar of, we have eight sessions a week that they can join. So, they show them the calendar, they say, "Okay, which one of these do you think you can come to?" And then they get them to say, "Okay, this one." And then the closer says, "Okay, I'm gonna tell Jenny who's the coach on that call, she's gonna be expecting you."

• 3:21Alex Hormozi?

  There's two, there's two kind of like, different angles to attack this. One is the kind of like logistics side, which I'm gonna cover first, because it's easy and just process stuff. And the other is kind of like the bigger, more amorphous stuff, which is like, how do I make our thing easier? Easier and more enjoyable for people to kind of experience. On the logistics side, I'm sure that you're on my email list. If we had dinner, you'd better be on my email list. By the way, if you got, anyone here read the Mosey Minute? Anyone? I think it's the best, like, I think it's some of the best stuff I've put out, anyways. It's really good, I think it's really good, I spend like, my Sundays on it. Anyways, so BAMFAM is a way of life, so book a meeting from a meeting, right? And so, the sales guy should obviously book to the onboarding call, right? Or the, whatever.

• 4:02Alex Hormozi?

  I do think that you probably need to add one onboarding call that's specific to the person, not just have them drop in. How much do you want this to work?

• 4:09Speaker 01

  Really bad.

• 4:09Alex Hormozi?

  Okay, so this is what I would recommend doing. You'll probably want to do something in the neighborhood of four to six sessions that are one-on-one. I'm just being like, now, if you need to adjust price in order to do it, fine. But it's four to six sessions of one-on-one before they kind of qualify to go into the kind of the group setting. And so, it's like, you will personally onboard them so that they have this way better buy-in, they're way, like, they don't feel like they're just like in no man's land and just getting tossed into the middle of a conversation. But you kind of like on-ramp them. After you have the onboarding, which should be, and you can, you can cut that. I mean, at the very beginning, just do two, you know what I mean? Just to start, and then you can kind of see how it goes. From there, you basically want to keep bamfamming per session.

• 4:51Alex Hormozi?

  So, all the people are showing up, the last five minutes, I would say, "Okay, everybody, let's pull up the calendars, when are you guys showing up again?" Great, and I would book it with everybody, so that I'm keeping people forward. And you have to back that up with probably the reminder sequence that they're going to get, because it's actually a scheduled session. So they should get automated reminders, and they should probably get a manual reach out from the person who's running the session, of the people who are supposed to attend. At the very least, do the automated one, and that would probably get a huge amount of, like, that will probably do a lot. And so this is actually, believe it or not, this is an onboarding process for a gym. So if you have large group training, if you take people and just toss them into the group, it's much harder than having kind of a more dedicated onboarding experience. The ideal is you do like six one-on-one sessions with someone, they feel more comfortable in the gym, they understand people, they understand how the vibe, the culture is, and

• 5:36Alex Hormozi?

  then they kind of graduate into the group sessions. And so what happens also is that the group sessions are now on a pedestal, it's like, you're not, you're not ready for that yet, right? It's like, you gotta earn that. And all of a sudden, it becomes the prize that they earned, and now they got on board. Does that make sense? Can you see how that would work?

• 5:50Speaker 01

  For sure.

• 5:51Alex Hormozi?

  Yeah. So this would probably be the-

• 5:52Speaker 01

  You set that up as like a big head, long tail sort of pricing system?

• 5:56Alex Hormozi?

  Yeah. And the question that you'd ask, if you want to give an A/B close for this, is you would say, "Would you rather train, you know, start your, start your thing in a group, or one-on-one with me?" Now, that's if you're selling. If it's somebody else, or one-on-one with John. And there, a lot of times, they're gonna be like, "Well, I'd rather do it with John." And you're like, "Great." So this is the price for that. And then you just go for that sale. If it sounds like, "No worries, we can just start you here, not a big deal." And then if you want, if normally you sell six, you can say, "You know what? I'm still gonna give you one." If you do that, because it's gonna be way better of an experience for you. So then it feels like a gift, and doesn't feel like they're like, "Well, nah, well, now I don't want the group thing." Right? So just give them one or two, if you, if you sell a six, for example. Does that make sense?

• 6:38Alex Hormozi?

  So he presented, obviously, with a low consumption issue, which then probably translated into low renewal and probably low, high churn. And so the issue that typically precedes that is low consumption. Right? And so in order to first get consumption figured out, I like to get attribution in place. And so I don't know what kind of tracking he had, but I think he said like 7% or something like that. And so he had some level of tracking, which allowed him to even take action on the problem. But most times, when I ask more questions, I'd say nine times out of 10, the entrepreneur has a problem, but doesn't collect any data that precedes the problem. And so then the first step is to just go collect the data. And once you have the data, typically, the solutions become obvious.

• 7:20Alex Hormozi?

  And so a lot of time is wasted in this space of like trying to ideate and figure out this hypothetical solution without any data. And you're like, I don't know, is it this or this or this that we could do? It's like, well, you have no data, so you have no idea. And so you just keep circling. And so when you don't know what to do, get data first, and then it makes the path easy.

• 7:38Speaker 01

  I sell career coaching services to corporate executives. So basically, we help these people find their next role. So we did 7.2 million in revenue last year.

• 7:46Alex Hormozi?

  Congrats.

• 7:47Speaker 01

  About 2 million in profit.

• 7:48Alex Hormozi?

  Amazing.

• 7:49Speaker 01

  And we know how to grow B2C. We know that we can do that. But we're really wanting to get B2B going.

• 7:54Alex Hormozi?

  Okay.

• 7:54Speaker 01

  So these enterprise-level deals are a little bit more, they're a different ballgame.

• 7:57Alex Hormozi?

  Okay.

• 7:58Speaker 01

  So we're struggling to get our first B2B deal because they have to be big enough to have the budget.

• 8:02Alex Hormozi?

  Why do you want to do B2B? So this entrepreneur is obviously doing well. You know, he's doing multiple millions of dollars a year, and he's got something that says decent margins. And he said, in order to scale, he should do B2B. But he was in a consumer-based market, and consumer markets are huge. There's way more consumers than there are businesses. So he had a proven product with a proven acquisition channel and was profitable and was growing. And he was spending, you know, $3,000 or $5,000 a day. I was like, this is nothing in terms of the amount of scale that's available for the product that he had. And so when he said he wanted to do this other new thing, I had an inkling that it was for no actual reason, besides he probably encountered some sort of difficulty that he assumed the new path wouldn't have. And so this is just a classic woman in the red dress. Why can't you just do more of what you're currently doing?

• 8:47Speaker 01

  We can. I mean, we hit like 90 in October and like that.

• 8:51Speaker 02

  Like a million a month, like that was the milestone where it's like, okay, let's start doing different stuff.

• 8:56Alex Hormozi?

  I'll tell you what my initial reaction is, which you're already probably guessing, which is like, I will exhaust more before I look at anything new. And so someone would have to make a very strong argument for me why I can't do more of what I'm already doing. So if I were to like buy your company tomorrow, I'd be like, yeah, don't worry about that. Just what are you, what are you currently doing to get, to get customers?

• 9:13Speaker 02

  It's Facebook ads.

• 9:14Alex Hormozi?

  Okay, so what are you spending a day?

• 9:17Speaker 02

  Anywhere from three thousand to five thousand.

• 9:18Alex Hormozi?

  Right. I'd be like, okay, so how do we get to a hundred thousand a day and spend?

• 9:23Speaker 02

  A day?

• 9:23Alex Hormozi?

  Yeah. Like what stops us from getting to a hundred thousand a day?

• 9:26Speaker 02

  Okay.

• 9:27Alex Hormozi?

  And the answer to that question is the constraint. So what stops you from getting, so let's say 10,000 a day. So it's a triple. So like, what stops you from doing that?

• 9:35Speaker 02

  We were there in October, right around 10,000 a day. And then we had like sales efficiency issues and stuff like that. Obviously Q4 is not like the best time to have that type of service. And so really just like making sure that our backend or our frontend like sales call to close rate, all that good stuff is like able to

• 9:50Alex Hormozi?

  Yeah.

• 9:51Speaker 02

  profitable. And we have a lot of like services, like one-on-ones that we pair coaches really well. We have a writing team in-house that we pay. So there's, there's costs.

• 9:58Alex Hormozi?

  So what would, but that, those costs are fixed because you'd have that cost of the B to B.

• 10:01Speaker 02

  Right.

• 10:02Alex Hormozi?

  Okay. So what stops us?

• 10:05Alex Hormozi?

  The problems that exist in the B to C scenario also exist in the B to B scenario. And so he's like, hey, I've got, I've encountered this problem. I don't know how to solve. And so my way of solving it is to not solve it and start something else that will create even more problems in my business. And so when you say it like that, it sounds ridiculous, but this is a decision-making process that are rather a mistake-making process that a lot of people follow. Fundamentally, you want to ask, why can't we do more? And the answer to that question is the constraint. And the only, in my opinion, proper constraint for deciding to go after a new avatar is that you've run out of the existing avatar. So think about this, just have you ever done B to B, like enterprise? Okay. So the thing is, is that they are higher leverage, but you're also going to have like 10, 15 touchpoints.

• 10:47Alex Hormozi?

  And so the number of deals per guy is going to go down a lot. There's also going to be multiple stakeholders that you have to get involved on their side and multiple stakeholders that you're going to intrude on your side. So just in general for B to B, like enterprise level sales, you increase conversion rate and stick of a customer by increasing the number of people that are involved in the transaction on both sides. So basically, you want to show, you want to show, have as many of these ties as you can to do enterprise sales. The lowest risk-adjusted return move in any business is to do more of what's already working. And answer the question, why, why can't we do more? And so if you have a sales efficiency issue, then like, solve the sales efficiency issue because it's holding you back from tripling. The things that you brought up are all fixed problems. As in, they're, they're problems on both paths.

• 11:32Alex Hormozi?

  So to, to, to forego the path you're currently on, for a new path that's completely unproven, with, with the same problems that you know already exist, is a much higher risk move than just saying, yeah, why don't we just get to 30 million?

• 11:45Speaker 02

  Okay, so just focus on maxing out B to C?

• 11:48Alex Hormozi?

  Yeah.

• 11:48Speaker 02

  We're about B to B till we're like fully confident in B to C.

• 11:50Alex Hormozi?

  Yes.

• 11:50Speaker 02

  We're doing everything.

• 11:51Alex Hormozi?

  Well, not even that you're doing everything. That you have exhausted the market of Cs.

• 11:56Speaker 02

  Okay.

• 11:57Alex Hormozi?

  Right, like it's, so if you want diversity, then I'd still, I would rather you go diversity of channel rather than changing customers. The riskiest thing you can do is a new business, basically. You're gonna have, you have to have a new offering, have new acquisition, like, everything's new. And so I would rather, if you, if you have the itch for new, just get a second channel. But I don't think you're even close to that. You're at 3, 5,000 a day. I think you can totally spend 50, 100,000 a day, for sure, just on that. What will likely be the next thing that gets in your way is that your ROAS is gonna drop. And so typically, that's gonna be, you're gonna need to have, option one, better lead magnet. Option two, better creative. Option three, superior CRO, conversion rate optimization, just on the, the pages.

• 12:41Alex Hormozi?

  Option four, improved sales efficiency. Option five, all four. And then that allows you to scale. And like fundamentally, the difference between companies that can spend 100,000 a day and 5,000 a day profitably is how good they are. It's literally just making all of these pieces better. And that takes time because you're only changing one of those at a time. And this is why business takes time to grow.

• 12:58Speaker 03

  I sell bleacher rentals to festivals and fairs. So we do around four and a half million in revenue and about a million in profit. You bet that.

• 13:09Alex Hormozi?

  Congrats.

• 13:10Speaker 03

  What's stopping me is having my leadership team delegate fully some of their responsibilities. And I think it has to do with creating processes that are followed by all. If we need to hire key people and we don't have the processes, then we can't delegate properly.

• 13:27Alex Hormozi?

  So how do you train leaders? So this is a good question, then I'm gonna chunk up one level, because I think it'll be valuable in general. Which is that fundamentally, when we're hiring anyone, we look for the smallest skilled efficiency possible. Fundamentally, you've got traits, as people call them, and then you've got skills.

• 13:48Alex Hormozi?

  Now, based on Alex's worldview, this is not a thing. It's just that. A trait is just a series of skills. Right. And so when you hire a CFO, for example, you're gonna try and hire for the smallest skilled efficiency. And so if the CFO is a dick, for example, but they're exceptional in all these other things, then you're like, maybe I can teach them to be kind in these ways. Now, that'd be a big, you know, it's a lot of skills to just have some like, go from not kind to kind, right? A lot of sub-skills underneath of that. And so if it's two days to train sales and two months to train kindness, take this person who's kind and then train them on sales. Later on, sometimes you have people who you're like, okay, this person's a little different than our vibe.

• 14:31Alex Hormozi?

  They're not gonna be, you know, oil and water, but they have this massive skill set that we can use. And this tiny deficiency that is around this stuff that we can be transparent with them upfront that they need to fix. I've seen this happen like again and again and again, where a manager or a leader talks to somebody else and says, hey, and then uses amorphous terminology that's very hard to pin down, to basically say, change your behavior. And they're like, but how? And they're like, change it. And you're like, okay, I don't know what that means. And so the reason I'm so obsessive about operationalizing terms, like what is patience? What is courage? What is, you know, what is humility? Like, what are these, what do these terms actually mean in terms of behaviors? Like, patience is figuring out something. Do in the meantime, like if you do figure out something to do in the meantime, you're by default being patient, right? And so it's telling someone what they actually have to do, not who they have to be.

• 15:16Alex Hormozi?

  Stop being lazy is very hard for someone to solve. It's like I keep telling her to not be lazy and she keeps being lazy. But you have to break the term down into what behaviors you describe as lazy. Cause when you talk to, you know, your, your partner, you talk to somebody else, you say, hey, Sarah's kind of lazy. Have you noticed that? There are things that she did that you observed that you ascribe the label lazy to. And so you have to think more deeply, like, what did they do to deserve the title? And it might be like they don't respond quickly to Slack messages. These are things that if you said, hey, Susan, instead of insulting her and saying, hey, you're lazy. Instead, we'd say, hey, you don't respond to Slack messages quickly enough. You aren't responding, you know, after hours and our hours keep going until nine PM and you're not responding until after, you know, after five.

• 16:00Alex Hormozi?

  And so for this week, I want you to focus just on responding to Slack messages. So let's turn on notifications, let's turn it on both of your phones and, and turn it on your computer so that you can see it. Is there anything else that's going to get in the way of you responding quickly? Now, when we ask that question, we might find out that Sarah's overwhelmed because she's doing somebody else's job we laid off. And we haven't backfilled. It's like, okay, well now we have context, but until we get to there, we can't appropriately measure Sarah's inherent value or traits, rather behaviors to give her a label. So to your question, how do you train leaders? I think that attracting good leaders, so one of its recruiting, right? So Chick-fil-A's head of people said this, she said, a lot of people are trying to fix process when they really

• 16:45Alex Hormozi?

  lost the championship in the draft. And so a lot of people are trying to, to figure out what playbook they should be using with a team that's never going to win. So the big framework that we use for training in general is document, demonstrate, duplicate.

• 17:01Alex Hormozi?

  And so first, you figure out exactly what the checklist is. And I like checklist more than quote SOPs. That's a personal preference. And so it's like, and you want to be able to break it down into behaviors. And I think this is where a lot of training goes wrong. I think most companies aren't very good at training. They're just, they basically hire a bunch of people, see who's got the skill and then fire the rest. But if you do get good at training, it's like, how do you train kindness? Well, you say, okay, well, people who are kind, when they come on a phone, they smile, right? And they nod their head when people are listening. And they repeat back what someone says and they, you know, raise their voice when, uh, when they walk into a room. Right? And so if you boil it down to some of the behaviors, then the onus is on us as leaders to be more specific with what we tell our subordinates to do.

• 17:43Alex Hormozi?

  And I think a lot of times, if you're struggling to train some of these key traits with leaders, it's because you're not being specific enough about what you want them to change. And so it's like, you're just not getting it. It's like, well, no one can do anything with that. And so it's like, you have to, and this is where the work comes in from the top down. We're like, okay, when you do this, and so the easiest way to bucket this.

• 18:10Alex Hormozi?

  That's a P. There you go. Is Sarah, I need you to stop doing this. I need you to start doing this and I need you to keep doing this. And so just being more granular about what behavior you want them to stop or what behavior they're not doing that they need to begin, or a combination. And so giving someone the feedback of, I need you to do this instead of this, has been some of the most effective way that I've been able to change people's behavior. And it's about around the specificity. And so if your leaders aren't doing what you want them to do, document, demonstrate, duplicate. This is the step process. Let me show you how I do it. Now you do it in front of me. And this is what we're going to have you stop doing. You're going to now do this instead and keep doing the other stuff that's good.

• 18:48Speaker 04

  I sell professional book publishing services to entrepreneurs and executives. We do a million dollars in revenue. I'd like to be at 3.2 million in revenue.

• 18:56Alex Hormozi?

  Very precise.

• 18:58Speaker 04

  I just turned 32.

• 18:59Alex Hormozi?

  Yeah.

• 19:01Alex Hormozi?

  This is the best explanation for a revenue goal I've ever had. That's great.

• 19:05Speaker 04

  What's stopping me is I'm at the stage where I need to make more money before thinking about other things. And the challenge I'm facing is a lot of things have worked for us up to this point, but I need to know what to, I need clarity around what to do more of.

• 19:19Alex Hormozi?

  So what's the input? So what's the thing that drives the business?

• 19:23Speaker 04

  The biggest thing that drives the business right now is referrals.

• 19:26Alex Hormozi?

  Okay.

• 19:26Speaker 04

  The second biggest thing is related to organic in the form of speaking, social media, and guest coaching. And then we have a split between cold email outbound and Facebook ads.

• 19:37Alex Hormozi?

  You're doing all the acquisition channels?

• 19:39Speaker 04

  All of them, and we didn't even mean to do all of them. We tried them all and they all seemed to work enough.

• 19:44Alex Hormozi?

  What's the greatest percentage of your customers? What channel do they come from?

• 19:46Speaker 04

  The greatest percentage of the customers after referrals would be organic.

• 19:49Alex Hormozi?

  Okay. And that's, now you put that both in organic content, but also like speaking and things like that. Okay. How many speaking things are you doing on like a monthly basis?

• 19:59Speaker 04

  It's about one per year last year.

• 20:01Alex Hormozi?

  Okay. So I have an idea.

• 20:06Alex Hormozi?

  So I would, I would ask the question like, like, I think I might have told this in a short, but a really close friend of mine, he took over Reel, which is a publicly traded real estate brokerage. Their primary way of getting more agents is him speaking at real estate events. And so in Q4, he did 66 speeches. And in 24 months, he took from 200 million to 1.2 billion in revenue. And so he's doing, you know, 270 plus events per year in person. We were having dinner and he was like, no one gets it. He was like, no one understands how much more we do than them. And I'm, I'm, I'm only telling the story not to make, hopefully it comes across the right way.

• 20:47Alex Hormozi?

  Because I think you just, like, if, if, and I'm guessing if that event generated business for you?

• 20:52Speaker 04

  Yeah, I mean, every time I speak, we make a significant amount.

• 20:56Alex Hormozi?

  Well, yeah. So I'd be like, let's, like, how do we go from, you know, one a year to one a week? And start there, just like target 50 next year. And so he rightly identified that he simply needed to do more. The next natural question I was going to be asking is like, what are all the ways to get customers? Which he obviously answered. And so then it was like, okay, the next follow up question I'm thinking is where do we have the most leverage? So either that's going to be which thing is taking you the least amount of time that makes you most amount of money? Uh, or which one's the thing that costs you the least amount of money that makes you most amount of money? So it's either time leverage or it's money leverage or both. Now, the fact that he said, I always make a bunch of money after I speak. I was like, okay, that's a positive indicator. And as soon as he said, I only do one speaking event a year, I was like, I don't need to know anymore. Like if you're getting, if that's a significant amount of revenue and it's one day, once a year.

• 21:40Alex Hormozi?

  Like I see that and think, okay, well, we could 50x the business if we just did 50 of those. And so then the constraint then becomes, okay, how do I get booked on these stages? But then that's you follow the same core four, you do the outreach, you post content. And then you reach out to people to find out. And sometimes you have to pay to be on the stages. Sometimes you get a booth and then they'll give you a speaking slot. There's always ways to get on if you need to.

• 22:00Speaker 05

  We have quite companies in the UK and Dubai. Current revenue across the portfolio is about 35 million. The metric isn't so much want to get to a revenue metric. I want to try and create a minimum of around 50 million enterprise value.

• 22:14Alex Hormozi?

  Do you own all of them outright?

• 22:16Speaker 05

  No, so it's varied. I think the problem is do we focus on building out the double down on the companies we already have? Growth EBITDA that way? Or do we keep acquiring and build the EBITDA through acquisition?

• 22:28Alex Hormozi?

  How many do you have?

• 22:30Speaker 05

  14.

• 22:30Alex Hormozi?

  14? Are they similar?

• 22:33Speaker 05

  No, that's the thing. So if we used to grow through acquisition, we'd have to try and create synergy down the line.

• 22:38Alex Hormozi?

  Yeah, so you're, you're in a very classic kind of PE no man's land. So you have more companies than most funds would ever have.

• 22:49Alex Hormozi?

  And you didn't pursue a synergistic strategy in order to accommodate volume. And so on one extreme, you have like Constellation, which you're probably familiar with in Canada. It's like they only buy vertically integrated SaaS and they go sub 3 million and they just do 100 deals a year. Right? And they just know their playbook. On the other side, you have traditional PE that would have a variety of different businesses. They buy, you know, detail. Shop and then a supplement company and then a whatever. But they only have sixty eight companies in a fund. And they have a decent, you know, decent holdco team to to to add value to the company. And so if I were in your position, first thing I would do is probably ask myself, who do I want to be when I grow up? In terms of what you want the actual day to day of the business to be, because you can hit fifty on either of those paths, right?

• 23:32Alex Hormozi?

  And so it's which of these do I feel more like more me? Like, do I feel like I do have a couple of these businesses that you're like, I really understand these ones? And if you don't feel that way, then I would probably look at these and go eighty twenty and say, okay, what's the twenty percent that's driving eighty percent of the of the enterprise value? And trim. Honestly, I would just like go completely passive on those ones or just return equity or do some sort of deal so I could get my attention back. And then double down on the ones that you are good at. So this gentleman who had a had a P firm suffered from a classic issue that I cover in the offers book. Which is that he had not committed to the niche. So this is page thirty eight of the book.

• 24:11Alex Hormozi?

  And I tell a story where I try not to niche slap people, which is that they need to pick one niche ideally. Now, this gentleman had basically two paths that he could follow. He could follow a more concentrated path of just a few companies that could be disparate or different in nature. But because of a team of fiveish people, he could probably preside over those, call it six companies that are the the better ones of the portfolio. Double down on those, inject capital, bring, you know, recruit higher higher level talent, maybe improve the strategy and then grow the companies. The alternative path was that he just gets really vertical, meaning he tries to get as many companies that are of the same type.

• 24:56Alex Hormozi?

  So that he can see, trying to use fancy words, but synergies between the companies. So that they all together, kind of the sum of the parts is greater than the whole. Because you can centralize some costs, which adds profit to all of them. You can have cross business learning. So if you have ten HVAC companies started by ten different founders, all of them are going to have a few things they do well. So you take the best practices from each of them individually and then Implement them across all of them. And so you get this cost savings off the bottom line by centralizing costs. And then you distribute out best practices. And so that is a typical kind of private equity play, which is a roll up play. Where you can buy 10 things for a million dollars and sell all 10 together for 50 million. And so he was obviously shooting for a 50 million dollar exit.

• 25:39Alex Hormozi?

  And the crazy thing is, and this is true of entrepreneurship, is there's a lot of ways up the mountain. The bigger the goal is, the fewer the ways up the mountain there are. So you want to get to a trillion dollar company? Well, there's you have to you're gonna have to do some crazy new technology that probably doesn't exist. In order for you to get there. If you want to have a 50 million dollar exit. You can do that with just about any business. By just getting it to a decent amount of size. And yes, that includes chains of brick and mortar. That includes online business like you can you can absolutely do it in any niche, no matter how small it is.

• 26:10Speaker 06

  I sell health and wellness, so basically physical therapy. Personal training, 35 to 45 year old athletes.

• 26:17Alex Hormozi?

  Okay.

• 26:17Speaker 06

  Our is the avatar. And we do about a little over 3 million. The biggest thing that's stopping me, you have a huge shortage in practitioners. To give context, there's about 16,000 open positions.

• 26:30Alex Hormozi?

  Your supply constraint.

• 26:31Speaker 06

  Yes. So I need more producers to produce. So I decided to kind of pivot and say, well, if I can't find the people, I'm going to increase price.

• 26:44Alex Hormozi?

  Well, I'm glad you did that as as the thing you decided to do. So that's fine. Like I started another business on e-commerce. Yeah. Yeah, so to start teaching people to, yeah.

• 26:55Speaker 06

  So that went well to the tune of we didn't lose revenue.

• 27:00Alex Hormozi?

  Okay.

• 27:01Speaker 06

  But I'm at that point where now do I go all in? On continuing to increase price and move more into almost like a concierge membership model? Or do I go all in and just try to crush and find the people and do what nobody else is possibly doing?

• 27:17Alex Hormozi?

  Do you have any issues on getting customers?

• 27:20Speaker 06

  No, we have.

• 27:21Alex Hormozi?

  More demand than, okay. Yeah. So.

• 27:26Alex Hormozi?

  Have you heard my story about a buddy of mine who's in the cleaning business? I'm not sure. Alright, I'll tell you. So, former gym owner, crushed it with gym launch and then decided, he started making enough money that he started investing in real estate, as all entrepreneurs do. And then, after he was crushing in real estate, he was like, "You know, I should probably start a cleaning company," because he started doing Airbnbs out of his real estate. He's like, "This is costing me a ton of money, I should vertically integrate." And so he started the cleaning company to clean his Airbnbs. And he's like, "Well, now that I have the cleaning company, I might as well start selling other customers." Don't want to leave money on the table, right? And so you can see how this spindles, right? The moral of the story, though, is that I called him up, and he was telling me, he's like, "Dude, it's crazy. He's selling cleaning customers. He's like, "CAC is like 25 bucks. It's insane. It's so easy to get customers."

• 28:11Alex Hormozi?

  And I was like, "Oh, you should scale this to the moon." And he's like, "Yeah, you know, it's kinda hard to get English-speaking maids who don't take stuff from people and do a good job and show up on time and are willing to work for $15 an hour." And I was like, "Okay, so the nice thing that you have is you have a supply-constrained business." So he was used to fitness, which is typically demand-constrained. So it's just, it's hard to get people to want to show up to the gym, right? Not hard to get people to say they want somebody else to clean their house. And so, basically, the reframe that I gave him is what I'll give you, which is, you're not actually in the physical therapy business, you're in the recruiting physical therapists' business. The whole paradigm that I would have around this is, what does the career path look like

• 28:54Alex Hormozi?

  for the physical therapist, so that I can make this really enticing? On top of that, I have to still think through the same, you still have the same core four, right? You've got warm outreach, you've got cold outreach, you've got paid ads, and then you've got, I should know these, I wrote the book, okay, organic content, right? So, these are the four things that you can do, right? And then you've got headhunters, right, which is basically recruiters, and you have word-of-mouth from your existing, oops, word-of-mouth from your existing staff. And so, these are the ways that you can get physical therapists. And so, we have to approach this the same way we approach getting customers. They are just now the customer. And so, maybe running Indeed ads is probably not the way that you're gonna get them. But I'll bet you that...

• 29:40Alex Hormozi?

  Outreach will work exceptionally well to get therapists. And I would probably bet that if you had a really good referral incentive, over time, that would compound. Now, small, not as much. You'll probably need to do this to start. As you get bigger, though, there's going to be enough of a base where a few percentage every month of referrals is material. And so let me just put this in math for you so that you can, so this will motivate you to do it. How much do you make in gross profit off of a physical therapist per year on average?

• 30:09Speaker 06

  About 350.

• 30:10Alex Hormozi?

  Okay. So if I told you that I could add $350,000 in gross profit per year to your business, how much would you be willing to pay for that in the first year?

• 30:22Speaker 06

  Quite a lot.

• 30:23Alex Hormozi?

  Right. And so giving someone $500 for a referral, not that motivating. If you said, "I'll give you 20 grand for a referral," I'll bet you'll get them to move. Most businesses are either supply constrained or demand constrained. Now, if you have a business that's both, then it's like you don't have customers, you don't have employees. Like, that's a tough place to be. Most of the time, it's one or the other. And what's interesting is that entrepreneurs will often try and solve, basically like not solve the real problem. And this was kind of exactly what she was presenting with. She was like, "Should I do this other thing? Or should I, like, should I change my model altogether?" But the crazy thing is, is like, her model was doing great. She was making good margins. She had, she's doing good revenue out of two locations. It's like, why are we going to break the model?

• 31:07Alex Hormozi?

  Like, the constraint of the business is that you just don't know how to recruit. So let's just solve that problem. Because her other path of like just raising prices, which, to be fair, I'm all in favor of. At some point, it's like you can't raise the prices anymore. Like, you're becoming like a luxury business, and it's just like you're changing all the dynamics of the business. But her business worked already. And so for me, the lowest risk thing to do is not change the business model, but just figure out the problem of the business and solve it. And for her, the biggest problem was, I can't get people. But I don't think she had quantified how much she should be willing to invest in getting more talent. And I think this is wildly underrated. It's like, think about it from a return on profit. I only did it on gross profit, right? It was $350,000 per employee. So I'm like...

• 31:49Alex Hormozi?

  Why would you not pay, I mean like just being real, why would you not pay $50,000? Or $100,000, right? If you know that if I, people are happy to put, you know, $100,000 in the stock market and get 10% back and make 10,000. But in their businesses, they're hesitant to give a commission of $10,000 for a $300,000 thing, right? And so if you're like, well, what if that doesn't work out? Then push it out where there's a contingency that you're happy to do it. And if you want, keep raising the price until you get people to prefer. Like with enough incentive, you can move the world. And so, speaking of this physical therapy brick and mortar business, I did a brick and mortar breakdown of five locations, a chiropractor that had done through M&A, on how to accelerate the growth of the business. And it's super tactical and it works whether you have a single location or you're even virtual. A lot of the tactical will carry over to any business to help it grow. Enjoy.