The Game with Alex Hormozi - 3 Ways To 10x Your Income Next Year | Ep 783

Episode Date: December 10, 2024

Welcome to The Game w/ Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

When I was 17, I was making just over $6 an hour working at a smoothie king. At 21, I got to $30 an hour working at a consulting firm. At 23, I was able to get to $250 an hour when I started my own business, my first gym. At 26, I got to $2,500 an hour, so another 10x. And then at 28, I got to $18,000 an hour, and I've continued to grow from there. I want to walk you through three different ways that you can 10x your income for real. The first way to 10x your income is through something called arbitrage. An arbitrage is simply buying and selling assets between two different markets and making

the difference. And that's how you make a profit. And so arbitrage is just a fancy word that means buying and selling between two different markets and capitalizing on the difference in price for the same asset. Now there's a lot of ways that you can arbitrage. So this applies for both businesses and employees. Now, if you've been in import-export businesses, a lot of them function off of arbitrage. The entire financial sector is almost built on arbitrage, which is, can I buy a stock

for a certain price and then sell it later? And that's where you have options trading and all these other types of things that banks and financial institutions will make hundreds of billions of dollars a year on. And so at the most basic level, all business actually comes down to some sort of arbitrage. Because even if you have a skill difference from someone else, you have an individual. information advantage. And so the arbitrage you have is that it caught you know how to do something for less than it costs someone else to do it. And so they pay you to do that thing and the arbitrage between what it costs you and what you charge them is how you make a profit. And so arbitrage is absolutely at the core of everything economic where basically profit is created. The best part about arbitrage is that you can employ it at all levels of personal income. So even if you're just working a job versus you make a ton of money in your business, there are levels of it and I would encourage you to start when you have nothing because you basically arbitrage is a way of thinking. It's like how will I live my life in a way that I always have

this this differential between what something costs me and what I can sell it for in the future. So number one on a personal level you can buy cheap locally wherever you're at and then sell whatever you have like your services even to a more expensive market which is why the number one money making skill in 2024 is English. And so that's, And so if you live in a foreign country and you live in Thailand, you live in Malaysia, you live in Vietnam, whatever, you have something where it's very cheap to live, and then you can sell your services globally at the most expensive market rate, which would be probably Europe and the US, then you could in a real way have this big arbitrage between

what you make and what you spend. And so for example, in Thailand, the median income is about $2,700 per year. If you can sell your services even at the US median income, which is closer to like $50,000 or $60,000, you're looking at more than a 10x increase between what you make and what you spend. And wealth, which a lot of people don't understand, wealth is a ratio, it's not a number. It's how much you spend relative to how much you make. So you can make $50,000 a month or $500,000 a month.

If you spend more than that, you're going to feel poor. Now if you make $5,000 a month and you spend $500, you're going to feel rich because you always have more than enough. And the key about wealth is having more than you need. And so you can either make more or need less. And so this arbitrage is based on pushing more towards needing less, doing more with what you have. Now on a business setting, you can also think about this where let's say you want to still live

in the US or you want to live in a more developed area, which of course I do, you can then still pay for the hard cost of your services remotely or in different markets. Now you can do this on a micro level like you rent something in a cheaper side of town, but you can do business further away in a more expensive part. of town. But on a macro level, you can sell services, let's say, in the US, but then you source your labor overseas. Now, an easy arbitrage here is like even if you just look at Canada, there's like a 30% arbitrage that you can get for skill because of the exchange rate, but the cost of living and the way that people live there is about the same in terms

of Canadian dollars versus US dollars. So it's an easy win. Now, that's not a 10x, but you can absolutely get a 10x differential in talent where you would normally spend $5,000 a month US to get a certain level of talent, where you can sometimes spend $4,000. $500 a month in the Philippines or Thailand, et cetera, to get the same level of individual in terms of education. So personally, right, you have a couple options. So one is your income stays the same, but you decrease your expenses by moving geographies. So you change where you live. The other way is that you can live somewhere that's normal. It depends on where you're starting, right? And then sell to a different geography overall. Now, again, there's an interesting story

that I'll tell you. When I had my really nice mansion in Austin, this is years ago, I noticed that when people came to my house to bid services, I was like, I feel like this is way more expensive than a comparable service that I've paid for in the past. And then I started to talk to my neighbors about it, and they're like, oh, that's just called the zip coat tax. And I was like, what does that mean? They're like, you have a nice house. People will just raise the prices because they know you can afford it. And I was like, oh, well, that sucks. Now, I'll tell you a real example of a company that I actually invested in. I live in a high-rise building now, and there was a guy who met me in the elevator. And he literally elevator pitched me for his business idea.

I thought the business idea was actually really interesting, and he had a prototype. He pulled it up on his phone. I mean, I live high up, so there's a decent amount of time in the elevator. I ended up going to dinner with him, and I ended up investing in the business. And it's actually one of our portfolio companies. I asked him, though, because I knew what the revenue of the business was. I was like, how can you afford to live here? And he said, I can't afford not to live here because I get to meet people like you.

And so he was way living above his means, but the arbitrage that he was basically getting into his network arbitrage is that he was basically overpaying to have access to the best, you know, the people who had the most money in that specific market. I still am not the biggest fan of that because it's so risky, but he ended up funding his entire growth of the software company based on people that he met in our building. And so I find that kind of interesting. And he ended up proving it out and the company's actually really successful. So it's definitely one of those like I wouldn't do it this way, but people have done it, and it obviously worked. And so these personal income things, I still think completely apply to business because the only way you can go aggressive in business is being able to reinvest capital as you grow. And if you're just making income, the amount of capital that you have to get aggressive with is proportional to what you make versus what you spend. And so it's like if you don't know how to make more, just spend way less.

Like when I started my first gym, I was first living on the floor. But even before that, when I made the transition, when I wasn't sure where I was going to have the gym, I lived in a spare bed of $400 a month. And so, like, I bring this up because it's not like I was bawling out. And mind you, I had money saved up. I had $50,000 saved up. And I was making at the time about $4,000 a month from training people online before I made my transition to my gym. I strongly encourage you to employ some level of arbitrage within your life. either in your business or personally or both and you can do that geographically you can do it via

network or you can just do it by massively decreasing your spend by spreading your spending your expenses between more people which is how I just just shared a bedroom with somebody and only bought food from Costco and that was the only food that I ate so the second way that you can 10x your income is through increasing the number of people who know who you are now the way to do that is to give away amazing stuff for free. All right. And so giveaways is one of the strongest, I mean, they're so strong that they're literally regulated by the government. All right. So like you can't just do giveaways in any old fashioned and like that's a really good telltale sign that something works is that the government steps in because it's so powerful that people abuse it. And so the two

most powerful words in marketing are free and new. And so when you have a new giveaway, you want to have it be something free. Now I have been able to 10x my income multiple. times in my life, like I said earlier, and I have done it basically in every business through some sort of giveaway, and I'll explain what that is. So the first massive increase, when I talked about, was actually through something that we called the six-week challenge, all right, which was where we actually just gave away six weeks of service and accountability and workouts and nutrition planning and everything to people. Now, no one else in my market could compete against that because they were just giving trials, 14 days, sometimes 21 days, and it was just like workouts

or it was just access to the gym. I gave away a full program. Now, I had a way of structuring it so that they would pay, but then they'd get the money back if they did it, and that encouraged people to give it a shot. But it was what took the gym to a completely different stratosphere. And just trying to do traditional marketing just didn't really work that well,

or at least I got traditional results, which were mediocre. Now, the next big thing that I did was in gym launch, I wrote the Gym Launch Secrets book, and you'll notice this is a common theme for me, is that I write books before I get into any market. And I do that for a couple reasons. One is that when I write a book before I get into a market, the writing process itself is actually a learning process for me.

And so it's like, how much can I learn, how much can I consolidate and synthesize information to put it into a really coherent way, because I think writing is one of the best ways of learning how to think. The Jim-O-Wen Secrets book, the reason this was so crazy is that it outlines everything that we did to turn around gyms. And I was so afraid to publish this because I was like,

oh my God, it's going to be all my secrets, everyone's going to have it. But then this is where a lot of the giveaway, the secrets, sell the implementation mindset came from. mindset came from. And so you should never be afraid of the things that you're giving away. This process of doing these types of giveaways is what generates huge amounts of demand. And so fundamentally, if you're going to grow a business, you either got to get way more customers, if we're going to 10x, it's like we got a 10x to customers, we got a 10x how much they're worth. And I'll get to that later. This one is one of the most effective ways.

And I'll give you a couple more examples. So when I started my software company, Allen, what I did was I gave away, and this is crazy, I gave away basically unlimited coaching and training, like a whole course that most people would charge a gazillion dollars for, I just gave it away for anybody who used my software. With Allen, we were able to go from zero to $1.7 million per month, all right, just using this within six months. Most people were trying to charge agency owners, like show them how to sell, customers, how to package their offers, how to run ads. I did all of that for free for anyone who just used my software. And so that was like a crazy offer. That was a crazy giveaway and that's what generated a ton of demand inbound for prestige labs which was my

supplement company the big thing that I give away there was the entire what I called supplement selling secrets I used to say secrets a lot I don't say it anymore but I eventually called it S3 which was the selling system for supplements and so this is something that had made me I mean so much money in my gym career that it took me two years to release it because I was like I held it so close to my chest but basically instead of selling this I just gave it away and then I just encouraged people to sell my product. Now the thing is, is that people could take this, and many people did, they just took the selling system

and then just sold other supplements. But I had built prestige to have specific technical components into how the business was operated that made it so much more advantageous for people who went through this training to use my supplement. So it's like I show people how to sell massive bundles, how to sell subscriptions, all of these things, and I priced it so that anybody who would sell

would be able to have a discount far below what someone could get for retail. And so it was specifically made for people who were gonna go through this free giveaway. And you're like, man, did he stop there? No, because with school, like right now, for example, we're giving $100,000 away or a cyber truck to the person who uses the software, right,

and builds the biggest group within a 30-day period. And we've done three of these so far, and I think we're doing another one here in December. The thing here is that this is what generates a ton of demand on the front net. And so it's like if you wanna 10x, you can't do an incremental change. You have to do an order of magnitude difference.

And so that comes from giving away actual tangible value, real stuff. Like people were charging $10,000, $20,000 for what I was giving away here for free. The thing is, it's not like, oh, I just like tossed it up. I actually had the support the same way somebody who ran a business that had like a coaching business would run it, except I just did it for free. And with Prestige Labs, same thing. We had reps who would go out, call the gym owners up, train their teams on how to sell the product. all stuff that you'd normally charge for we did for free.

Jim Launch Secret, six-week challenge, the $100,000, like all of these things had real costs that we were willing to incur because it generated so much more demand that it was offset with the amount of customers that we could bring in the door. And the only way that you can do a giveaway long-term is that you have to have some sort of product

that you know you're going to sell in the back end. Like, you have to still have a monetization system that makes sense. Like it's not to lead to something. So like here, it's like, cool, this led to the memberships. Right? And then Jim Launch Secret led to Jim Launch, which is the licensing. And then Allen led to the software, Prestige Labs, led to the products.

I gave away this thing that was really valuable, but then it led to we monetize the different way, which I've said this before, but my favorite business model in the entire world is look at what everyone else is buying, make it better, make it free, monetize another way. Even with Acquisition.com, I wrote both the books that are free, and I just recently released a scaling roadmap, which most people charge a gazillion dollars for. 14 hours and every single stage has 30-ish pages of what you need to do to solve the problems to get to the next level. And it's free. You can just go get it. It's on the site. But the whole point here is that this is what allows you to provide outsized value to people. And it's,

I bring this up and I show each of these examples, right? Because people don't believe me, or at least I see the giveaways people do and they're just lame. They either don't do it because they're afraid of giving too much value away or they give away something that just doesn't have a lot of value. The key is that there has to be some sort of hard costs that people can actually realize like, oh, this is real value that I'm getting for free. Because otherwise, you don't have reciprocity. And the key, like the key to a lot of this, at least in the U.S. within our culture, is reciprocity is key in a lot of human cultures.

We want to stat, we want to jam value into someone else's wallet so that they then have to transfer it back to us in the form of money later. The big key here is that you've got to be willing to wait. But if you can do that, the cool thing is, is that so few people have that level of discipline, this strategy will literally always be available. shout it from the rooftops and still 95% of you aren't going to do it. And so if you're like, how do I come up with this thing that I give away for free? In $100 billion leads, I wrote a whole chapter on this,

engage your leads with offers and lead magnets. And I basically break down exactly what you need to do and how to think about lead magnets in general, how they generate more money for you. And kind of the different types of lead magnets that you can do, you can reveal a problem, you can do a free trial, you can do a one step and a multi-step process. Each ones of these are different versions of this. So if we were to look at this as our little rules, here, right? Six-week challenge is going to be essentially a free step and a multi-step

process because most people who work out for six weeks want to work out more later, right? So it's like, okay, cool, you're going to need this other thing later. The gym launch secrets. This one was more about revealing a problem. So it shows all the things that you need to do. And then people are like, oh my God, this is so overwhelming. There's a lot of things I need to fix my gym. It'd be nice if I had help. And so then they take the next natural step. With Allen, same thing. Now, with this business, the way that this model was kind of structured, it was almost like a freemium, where again, you solve a problem for someone,

you help them grow their agency, and then they're going to need the software even more, and the way the software is structured to build as they grew. Prestige Labs, basically the problem that they had is they didn't have a supplement sales system. Once they implemented the supplement sales system, the next problem they would actually have

is what supplements do I sell, which, da-da, we have prestige labs, right? And so in each of these cases, you wanna think about, can I reveal a problem for my prospect, can I give them a trial of the thing I have, or is it one step in a multi-step process? And I give examples of these. And then you can have different delivery mechanisms, which I wouldn't get into.

But you can check that out there. So I'm going to put something to rest that you're probably worried about. I was so frightened to launch gym launch secrets, the book, because it was like, this is everything that I learned. I was like, this is like my life's work. In this book, it's 400 pages of how to just run a gym. Like it's everything. It's like the trainer ads, the salesman ads, the training, the scripts, how to set up your lobby, like the upsell process, the different pricing packages, how to do semi-private, how to do larger. Like everything was in there.

And I will say this, like at a lot of big decision points of my life, like Lela kind of like put her hand on my shoulder and she's like, if you're afraid that it's too good, it's probably the right thing to give away. And I remember being like, all right, like here goes nothing. This could destroy us. But the thing that ended up happening is two things. One is that all my sales team was like, can you give away more books? Anybody who's read the book is like so bought into our method, our way of doing things.

Like they immediately, like we don't have to sell them on the gym lunch way. They just like, they're like, can we just, I just need your help. I want to do it right. I want to do it right the first time. I don't want to try and trial and error this thing, which was the goal. But the sales guy saying that I was like, okay, well, that's super encouraging. And the second thing, I'll tell you later. So the third way to 10x your income is through making customers worth more,

which is going to come down to, in the fastest way possible, pricing. And so I talk about price a ton, and it's because it's the most powerful ever on profit. And if you're in the game to make more money, then you should try and raise it. it. And so the nice thing with this is that you can do this again, whether you're an employee or you're a solopreneur or you're at a super big business. It works the same way. So you got your pricing lever. As an employee, you basically have three options. So number one is you can simply ask for more money. Now, I don't recommend doing that because you're not going to 10x your income that way. So then it's like, okay, so if I just ask for more, ask, okay, I might get a little

bit of a raise, if I'm good, if I'm not, they might just say no. The way to really ask for it is to take on more risk. And so you will be compensated for the amount of value you create, your ability to negotiate, how replaceable that skill is, and most importantly, the risk you're willing to take on. And so a business owner gets paid more than the employees in the business because the business owner takes on more risk. Right, Eduardo Savran, who started, who was the first investor in Facebook, he put $30,000 up. And that was where, worth a gazillion dollars today. He really didn't do much besides providing

the first $30,000 of capital for the servers for Facebook to begin. And so he took on risk. And as a result of that, despite not really doing any work, he was able to make a significant amount of money. Now, as an employee, what is taking on risk look like? It means that you switch to a percentage of your compensation or the entirety of your compensation

based on some key metric that you have responsibility over, that you can draw a connection between what you do and how much revenue or profit the company makes. Now, in some positions like sales, it's a little bit easier to draw that, and that's typically how those roles are structured. But if you know your job well, then you can think of ways to tie what you do to what the company makes. And you should do that because the closer you can tie yourself to revenue, the more valuable you will be. The third thing you can do as an employee is you can just switch, right? You can start applying to other roles either within the business or in other businesses.

I actually think that the within business swap is one of the most underrated. So like, in terms of which one of these will make you the most money, this will probably make you the most, which is you taking on risk. You switching, sometimes you can get a significantly larger raise than simply asking. And I think the reason for that is that if you're in a role where there's multiple people in your role,

it sets a precedent for the business that even if you're a higher performer that they feel like they have to, then increase everyone else's pay, which is kind of a risk to the business. Basically here, you ask the business to take on more risk versus here you take on more of that risk. Now, the switch allows the business to maintain face

and allow you to get into a role that takes a more responsibility or has a different title and then you can earn according to that. Now, the final thing here is, obviously you can start a business which then would switch your category overall, but let's talk about that.

So if you have a business, then this is going to get... So the pricing lever here is really related to your income. The pricing lever here in businesses is related to what you sell. Now, I want to be really clear here. An employee sells your services.

You just sell them on a recurring contract, but fundamentally it's what it is. And so I think people see these in very different categories. I don't see them as that different personally. Obviously, the only real difference is risk. Now, from a business perspective, because think about that like this,

what's the difference in an employee in 1099? Mostly government shit. But the actual day-to-day, obviously there's control and you don't have to show up on time and you can have other customers. But the actual, like, what you do doesn't phenomenally change between being an employee and being a 1099.

But at 1099's a business owner and employee isn't. If I can smooth over that wall, I think a lot more people would be willing to take the risk because fundamentally like the doingness is not that dissimilar. And so here you have services which you sell your time for and you have a price, which is your salary or the way that you negotiate your compensation. And that's it.

Now as a business audit, you do the exact same thing. But instead of having one boss, you have many bosses and you have to talk to them every day, which are going to be your customers. I have talked to this at length and still none of you do it, but you want to have an ultra-high anchor. Now, a price anchor is basically just a price that you put way above your normal prices

that mentally anchors how people perceive the remainder of your menu. People actually frame all numbers with respect to the numbers they heard first. Now, I'll give you a simple example, and then I'll tell you a story. So if I said $10,000, right, and then I said $100, it sounds very different than me saying, $100, $10,000, right? It's a different shift in terms of, oh, my God, that's so many different units, right? Now, obviously, you heard the first one first, and that does influence it. But big picture, the anchor makes everything.

else seem cheap by comparison. Now the key to this ultra-high anchor is that it needs to be 10 times or sometimes 100 times more expensive than your current thing. Now you're like, okay, well, why would I go a hundred times more? How is it even possible? Well, you have to think to yourself, what else would have to be true in order for me to charge 100 times more for what I have or 50 times more for what I sell. Well, it would probably be an order of magnitude difference in terms of what you deliver. If you just 10x the top thing, you're not going to 10x your income. Now, you might be able to double because a certain percentage of people take your 10x and by doing that it's going to be disproportionately profitable and so that might double your revenue which might very well you know

3x 5x your income because of how net profit works with pricing but at the 100x you can absolutely 10x how much you make and that's even if only one out of you know 20 people take that offer it's still going to be so incredibly profitable it can disproportionately outweigh the profits that you're making from the core business now I want to be clear this is what we call in the biz a profit maximizer What a lot of entrepreneurs especially don't understand is that the thing you sell most of isn't necessarily the thing you make the most money on. All right, so let me say that again. So if you look at McDonald's, for example, they sell burgers.

They don't make a lot of money on burgers. If they only sold burgers, they would go out of business. Even though it's the core product, it's not the profit maximizer. They make significantly more money on fries and a Coke because the margins on fries and coke are way, way better than meat and a bun and fresh lettuce and tomatoes and onions and all the other stuff. The thing you sell the most amount of is not always the thing you make the most money on.

And so you can absolutely build, like their business, that McDonald's corporate's business is real estate, but the franchisee business is really the Coke, ice cream, and fries business because that's where they make the disproportion amount of their profit. This is why the giveaway thing

that I was mentioning earlier is so important is that you can have this very valuable thing that you give away for free and then you maximize your profit with this other thing that's significantly more expensive. That is typically going to be a very more handheld, more done for you, more heavy service, more concierge, more white glove

version of whatever it is that you sell. Now, if you sell on the product side, typically it's going to have to be newer designs, different materials that will make a better experience. And I'll tell you an example I think is ridiculous, but I'll still tell it. So there's this restaurant by Salt Bay, who's like a meme. But he actually has like, I think, like 10 or 11 locations, something like that called Newzaret. And so Newzaret is a super expensive steakhouse. And everything that is, everything they have is a little bit more than the very expensive steak houses. So like a normal steak there is I want to say like 90 bucks, which is pretty steep, at least today, even for a high-end steak place, maybe a hundred. But here's the thing is that they have this gold menu,

which they just wrap the meat in gold foil. And they charge like $2,000 to $3,000 for these stakes. And you're thinking, why on earth would someone go and spend $2,000 or $3,000? Because they want someone to know they spent two or three thousand dollars. And so that would be by its very different, a luxury item where the price of the thing itself confers the value to the product, meaning the more expensive it is, the more desirable it is. And the key to luxury products is that other people know how expensive it is so that you get status by proxy by being able to afford the product. Now that's very different than a premium product where the value isn't in the fact that it's expensive, the value is in the fact that it is significantly more valuable in terms of the result

or experience that it delivers. So a friend of mine actually implement this into his online business and he had this, he just created this super expensive 101 version of his thing that was ten times more expensive. So his thing was $500 a month he charged $5,000 a month for this thing.

It was a business to consumer business. And the craziest thing happened. He then had a ton of people take this more valuable offer, which he had zero intention of actually selling. He just wanted to have more people buy the next thing. But not only that,

a higher percentage people bought his, previously most expensive package because it looked like the much more affordable, more reasonable middle option. Because I want to over-deliver, I'm also giving you a fourth bonus way of 10x year income. And so if leverage is getting more for what we put in, then we want to take maximal advantage of the assets we already have. And so a big part of doing that is saying, okay, who do I already know? And so you want to hit your list with the combination of those three things.

So you're like, okay, I'm going to arbitrage myself, and basically sell stuff for more than it costs me. I'm going to live in places that cost me less than what I need to spend so I can be more aggressive and take on less personal so I can take on more business risk. Cool. Next thing, you're like, okay, I need to give something amazingly valuable away.

Got it. That generates more leads. Then I'm going to upsell people into a super expensive thing. Got it. And so then finally, the question would be like, okay, well, who am I going to do this to? And so this is where you look at your cell phone, you look at your email list. When I say email list,

just literally the contacts that are in your email, Not like you've developed some emails. Now, if you're a business, obviously, you should have an email list. And if you don't, shame on you. All right. So you've got your cell phone. You've got your email list. On top of that, you've got all socials.

And then let them know about this free thing that you have. And then create the ascension process that naturally leads from the giveaway where you solved a problem. So you revealed a problem. You gave them a trial of a solution or a one-part solution to a multi-step solution. so that they then naturally want to buy your next thing. And so our largest portfolio company actually ran this exact play. And in one email campaign, all right, so literally just like a three email blast, right,

to the list that they had, they drove everyone to a webinar where they just said, hey, here's this amazing offer, and they were able to make $2.3 million from this one campaign. Now, obviously, this is a business that has millions of emails on the list. I mean, I don't know what your income is now, but three emails for 2.3 million, ain't bad.

And so if we scaled this down one-tenth, then it would be $230,000, and if we did it 100x less, then it'd be $23,000. But this is a great way to implement all of the stuff that I just said immediately. Yeah, and the reason that this is one of the strongest ways of 10xing your income is that there's no real additional cost. Right? So you're just making money for not a lot of cost,

because we've already incurred the cost of getting the customers. And so, again, arbitrage being a theme here, We already paid for this, so cost is zero, and we're going to sell this thing that costs a lot to them, but not much for us.