The Game with Alex Hormozi - $0-$100M Broken Down | Ep 288

Episode Date: April 1, 2021

We need to be better people in order to attract better people. Today, Alex (@AlexHormozi) talks about the big chapters in the growth of a business, and how to get from $0 to a million dollars a year using a very simple framework involving your product line and the channels you use to distribute.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 on his path from $100M to $1B in net worth.Timestamps:(0:47) - Getting from $0 to $1 million: learn to sell one product on one channel(2:24) - Value ladder & increasing LTV through cross-sells, upsells, etc.(5:14) - Hierarchy within company & entrepreneur vs. entrepreneur dilemma(9:02) - Finding growth-driven entrepreneurs who innovate and take initiatives(14:29) - Entrepreneur's biggest problem: finding good people; hardest problem everFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

What's going on, everyone? Super excited. It's breakdown what we're going to talk about today, which is the kind of four big chapters in the growth of a business. So zero to a million dollars a year, one to $10 million a year, $10 to $30 million a year, and then $30 to $200 plus. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer,

and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. This is doubt taking me a long time to figure out painstakingly. So hopefully this will be a value to you. It's kind of interesting though because when I learn more about this, it's hard to even learn things without having the context and a framework to apply them on. Unless you have a business, it's hard to understand all the bottlenecks because none of it's real for you. So this will probably be more for the people who have businesses. But if you don't have a business, then, you know, please enjoy.

That being said, zero to a million. Really, really simple. It's just one product on one channel. Very simple. All right. That means you learn how to figure out how to sell one thing on one channel. A channel would be like cold email, Facebook ads, Instagram ads, YouTube ads, referral partners, you know what I mean, all off of organic, you know what I mean, earned media. So all of these are different channels that you can use to acquire our customers.

And the reason people get stuck in like 100, 300-ish range is usually because they still haven't really nailed this. It's still haphazard. They get clients from here and there, but they don't have a reliable system for acquiring customers. Literally that's it. At zero to a million, it's a reliable system of acquiring customers and doing it. And most people also get stuck here because they have personal problems. Like they're super angry and they hate themselves and they're not good with people. That's that type of thing.

A lot of times they have the right system, they execute it and then they crash themselves because they're sleeping with their customers or sleeping with their employees. It's just crazy interpersonal drama is in this range. But from the business standpoint, it's very simple. It's just one product on one channel and then just make the math work. So it's not a thousand dollar thing. got to sell 100 a month that's it's all it is at this point though right million ish two million is a year now mind you these are rough you know sometimes it might be one to three is just the

range here but once you're in that kind of one to three range getting to 10 is an entirely different thing all right getting to 10 is multi-products right now an important note here is that you're not starting multiple businesses right it's going to be cross-sells and upsells all right So that's in another way is creating a value ladder. It's creating a back end, right? It's what's the next level of service that we can provide these people? What's the next thing they're naturally gonna want

to need or want and need after buying our initial product, right? And so thinking through this, like, it's, and most people who are in this million dollar range are like, man, what else should I sell them? Like, you're asking the right question, exactly the right question. That's what you need to do to get from one to 10, all right? Now, from 10 to 30, and mind you,

it's multiple products, and, And depending, sometimes it's multiple channels, all right? You can kind of do it either way, either single product on more channels, or you can do multiple products on single channel or you can do multiple, like that's a little bit wiggle-y, but I would say the easiest for most people is just focusing on their backend, which is the cross-cells and up-cells. What are the things that this person is actually going to need next,

which is going to increase our LTV. So basically what happens is you're selling the same number of units as before, like I was saying, let's say you sold 100 people at that 1K LTV, but then you you 4x your LTV and all of a sudden, or 5X your LTV, right? This is how it happens. You 5X your LTV and it becomes 5K over the lifespan and now you're at 500,000 a month. And then because you're at 500,000 a month, you can start going to another channel because you can afford to do it because your LTV is higher. So basically what ends up happening is you learn how to cheaply acquire customers on one channel that you're very well suited for, right? Then you extend and expand the LTV

of that customer by introducing a back end. And then once you have that backcountry, you it now opens up other traffic platforms or channels that you wouldn't otherwise be able to afford, but now that you have a superior backend, you can now go broader, right? That's kind of how it works from a business day to day standpoint. All right. So zero to a million, one to ten million. All right. Next line here is 10 to 30 million. This is another one where people, you know, massively screw up, which is professionalizing the business. All right. And this is honestly really painful and it's hard to do. And I'm thankful that I had mentors early on that were like, this is what you need to do now because I probably wouldn't have said this is the next thing.

But what ends up happening, which are at like 10 million, million a month type, you know, ranges, then like the thing that made you special, your special sauce here, which may have been a lot of you as the founder, is it starts to get diluted out, right? And then you have customer complaint and customer support issues. And then, you know, it's just like you're basically still a really big small business at that 10 million. Like you don't have the systems, the infrastructure to build more on top of because it's still like Google Sheets and, you know, Trello boards. You know what I mean?

It's just like, it's just craziness to try and manage this. And so this is where you have to hire some more corporate people. And this is, you know,

what every entrepreneur fears more than anything, right, is that we fear bringing in these corporate suits, you know, who's just gonna suck the life out of you. You're like, I started this business

to not have to do that. But you know what? Every massive business in the world was started by a founder, right? Who probably didn't like that. And the reason big businesses run like big businesses

is because it's the only way to run big businesses. Like, you have to have corporate structure you have to have structure you have to have hierarchy you have to have you have to have HR you have to have these things in place so that employees feel more comfortable but also so that you're you're protected from a liability standpoint right because honestly once you get into this range you become a target right this is where

lawsuits start coming in this is where lawyers and contracts are mattering and all of this stuff right and so professionalizing the business especially from HR legal and accounting standpoint comes here and then the IT systems all right so this This is really like really strengthening the opposite of the business, the operational infrastructure. Because what this does is that it makes all of these things that we learned how to upsell before, it really makes them methodical, right?

People get the same product every time, same product every time. And so then client happiness goes back up and things are good. Now the problem is the people who come in at this $30 million year, you know, are getting from 10 to 30, is that they're not innovative at all. If anything, they stifle innovation because they don't want things to go through

this certain way and then they just, You know, you want to choke them to death. But you have to do it, all right? But the thing is, is that if you go, these are all like pendulums, right? If you go too far in that direction, then you lose the creative energy and the drive of the business because you kind of have these suits that are trying to control everything, all right? And so this is the gap that I have struggled to make is going from $30 million plus to $100 million a year. And so I'll share what the mentors that have shared this with me.

Hopefully it'll be useful for you. But yeah, I mean, we've been, we did 28, 37, 32, I think the last three years. So we've just really been stuck at this level. And it's because of this last piece, right? Because the thing that made us, right, was frankly, was me and the entrepreneurial drive. And I'm not saying I'm the sole responsibility. Obviously, our team's amazing. And they're the reason this works.

But it's saying like, what's the soul, right? And so what ends up having to happen is that at this level, you actually have to have more souls. You have to have more people with the juju, right? more people who can drive growth, who can take initiative, and seize opportunities, right? And so this is kind of the entrepreneur versus the entrepreneur dilemma, and I'll break this down for you. So an entrepreneur is somebody who wants, has entrepreneurial tendencies within a corporate structure, right? An entrepreneur wants to own their own thing. And I have made horrible mistakes so many times hiring entrepreneurs and treating them like entrepreneurs, when in reality I should have just

never hired them, right? Because they're going to tell you, no, I, you know what, I had a business before. I don't have any interest in doing that. And so you really have two, kind of two outcomes that happen here. Hey, guys, real quick, if you're new to the podcast, I have a book on Amazon called $100 million offers that over 8,000 five-star reviews and it has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over a thousand hours into writing that book. And it's my biggest gift to our community. So it's my very shameless way of trying to get you to like me more and ultimately make more dollars so that later on in your business career I can potentially partner with you. So that's my give. Go check it out. Amazon and back to the

show. You either have the entrepreneur who comes into your business lost their juju, right, and now just sits on your business and continue complaints about how they're not getting paid as much as they could make on their own, but they can't make it on their own, which is why they're with your business, right? Or the person is right and can make more on their own. And so they come into your business, basically regain their confidence, start doing well, and then take as much of that business with you as they possibly can. And so either way, the outcome's poor. And so I had to learn that one the hard way multiple times in our business, which is don't hire entrepreneurs. All right. What you want to do is find intrapreneurs. These are people who really prefer, they love

the entrepreneurial drive of like driving growth, driving change, taking initiatives, building out new things, innovating, right? But they don't have the same appetite for. for risk, right? And so because of that, they like having this kind of safe place to go experiment and do all this stuff, but they still know they're gonna get a paycheck every month. Now that paycheck's variable, but even if they, you know, suck, they're still gonna get paid or paid well, right?

And so this is what I have, I've been trying to, you know, imbue into our business right now, and it is working, is putting entrepreneurs in places where they can drive change, because if you really think about it, what ends up happening is that your business becomes a conglomeration of small, all our sub-businesses, right?

If you listen to Jeff Bezos talk about his director, she actually calls him CEOs. Because he's like, oh, that's CEO of that business, that's CEO of that business. But they're all within Amazon, right? But they're kind of sub-CEOs. And this is the thing, is like, you need, you can only provide so much willpower and spirit to a business once it gets to the size because there's just so many people that you just get diluted. Like your spirit, your care, your drive, your vision, just get diluted throughout

an organization and so you need you need heads that can kind of reinvigorate the business and drive new innovations and so what ends up happening is the way the the structure looks like and the way it shifts to i'll show you real quick is it shifts to something like this all right so you've got your your core here right which is the the operational infrastructure that we put in place from 10 to 30 million so this is your um this is your your HR right legal IT, finance, right? That's your core, all right? That's the core opposite of the business.

That has to happen or everyone goes to jail, right? People need to get paid. You need to pay taxes. Contracts need to be signed. You know, CRMs, IT, all that kind of stuff, right? And then what ends up happening is that off of that spoke, right? You have profit centers, right? And inside of a profit center, you're going to have product,

and you're going to have acquisition, all right? So acquisition's marketing sales and then product, right? And so inside of these, these are all identical, right? Product acquisition, right? Product acquisition, you get the idea, right? And so each of these become profit centers, right, for the business. And so these things can all roll into you while this all rolls into someone else, right, from an operational standpoint.

But this is really how the business would function, right? And so this is where you might have, you know, product line, you know, number one, right? product line number two product line number three right and each of these are going to satisfy needs for the customer ideally when you're enumerating these product lines is you want to use the existing resources that you have and capital and infrastructure to create products that are similar but different right so um for example if i were if i were like because obviously we have a coaching business uh for gyms so if i were you know expanding like services then what's one of the things that we've added in so we we added in um what do you call it

it, a boiler room. So this is something like a lot of our gyms we're asking for more help with sales. And so we're like, well, how about we just train you guys like we train our team. Like our team drills every morning and we do boiler room. That's how, that's how all of our guys start our day. So why don't all of you just, if you want this additional service, because not everyone wants it, you can pay a little extra for it. And then you can bring all your sales team and we can drill your sales team. And so they get pumped up. And the nice thing is something like that just shows such clear ROI to a business that it's like, oh my God, I would never stop paying for this. So it's really sticky, right? And it's, and it's,

it's high margin. So it literally works for everyone. And so it's like we have our core like let's fix your business service. And with the existing resources we have, which is these are the skill sets and the individuals that we have that work for us, we know that we could create this product line, and I'm calling a product, but service line, with little investment, right? We don't have to do a ton of stuff there. Whereas when I started the supplement company, that was a huge undertaking that probably wasn't the wisest decision. I was fortunate that we were able to maneuver it and now it's a very, very healthy business. But it took, I mean, but it was very hard and I probably shouldn't have done it in that order.

Right. I should have thought like, okay, well, they also want someone to run their ads for them. So that's going to be our done-for-you agency side. So we're going to add that in, right? And again, each of these, like this, hopefully this makes sense to you delineating these things. It's like, these are all types of services that a customer who comes in would naturally also want in addition. And these can be upsells that will increase the LTV of the customer while also making

your own service stickier and helping them basically. you want to envelope the customer with all the things that they want. That being said, you have to have the operational know how to do this. And this is where people get screwed up, all right? Is that when they create these product lines, they start trying to manage both. And then they start trying to manage all three. And then they start another business and then it gets even crazy. Right.

And so this is where people massively screw up. And so until you have a true leader, and I'm saying a true leader, this person has to be as smart as you are. All right. Running a new product division, I would not recommend doing it. which is why business growth is slow because it's all about the people. Like that's the hard part. Every entrepreneur's biggest problem is they can't find good people.

It's the hardest problem in the world. And it's also because we need to be better people to attract better people and also manage better people. Because if you think about it, if I were an omnipotent being, if I were God, right, I could probably perfectly manage everyone to become an A player. So that's a belief that I try and use. It's like if I were a perfect leader

and a perfect manager, I could get everyone to search forward and be the best, right? But I'm an imperfect leader, and I'm an imperfect manager, and so I have to find people that have a little bit of battery included to get the result that we're looking for. So hopefully this makes sense in terms of how you structure the business and how it scales.

You know, at this point, this would be like your zero to zero to a million would be here. You go zero to 10 million, maybe with product line one or product line two, added in, right, which then allows you to scale your acquisition. So acquisition goes up on each of these things because the total LTV is higher. And so this is ultimately how the business scales. All right. So, quick creak for everyone. If you're zero to a million, you don't need to worry about anything.

You got to sell one product or one channel. That's it. You got to get good enough at it that you can do it repeatedly in your sleep. Once you have that, then you're like, okay, we got this on lock. Now we can sell multiple products these people. So I need to find somebody who's good, put them in charge of this, help them build out a product line that is an entrepreneur, not an entrepreneur, and then we'll cross sell them into this additional service or product line

that doesn't require a ton of capital investment. What else could we provide these people that they have been asking for? From 10 to 30 million, it's like, all right, now we need IT, we need legal, we need HR, we need compliance, we need all of this other crap because you become a target, straight up, you become a target in the business. All right. And so you professionalize the business, but you can't lose the entrepreneurial spirit. To not lose the entrepreneurial spirit is when you hire entrepreneurs and then you put them in charge of product lines all put around the central spoke of the infrastructure for operations. So hopefully that makes sense. Hopefully that's valuable.

If you were in the zero to one million dollar range, then just don't get distracted with shiny objects. Focus on one product, on one channel. It's all you need to do. Keep big gossip. Oh, could you guys soon? Bye.