The Game with Alex Hormozi - 4 Tactics to Maximize Margin | Ep 186

Episode Date: March 10, 2020

"If you just add that extra dollar, like overnight, you have $400 a month that just appears magically to you." Today, Alex (@AlexHormozi) shares four billing tactics to maximize margin, including adding 99 cents to all memberships and purchases, using backup cards to decrease turn, switching to a weekly billing cadence, and using ACH for lower processing fees. These small tweaks can add up to significant increases in profit for gym owners.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:(1:24) - Add 99 cents to purchases/memberships.(3:34) - Get backup cards to decrease turn.(5:05) - Switch to weekly billing cadence for extra cycle/year.(7:01) - Use ACH for lower processing fees.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

And these are all tiny little tweaks that you should do that will make you significantly more money. Welcome to the Jim Secrets podcast where you 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 that we have learned along the way. I hope you enjoy and subscribe. Good morning, everyone. I hope you guys are having an awesome start to your day. I actually slept the longest I slept in a really long time. And I feel like a newborn child. Anyways, but I wanted to give you four billing tactics to maximize margin.

You may have heard of two of them already at different times throughout the podcasts, but I think it is worth repeating because if you have not done them, then you should. All right. And so I'm going to start out with something different of the four, the one that you have not heard me say. And these are all tiny little tweaks that you should do that will make you significantly more money. All right. The first one is, and this is a sound tiny, is actually a small tiny, is actually. Adding 99 cents to all of your memberships and purchases.

Okay, so everything that you sell in your business, whether it's T-shirts, whether it's membership fees, whatever challenges, doesn't matter, right? Adding 99 cents to every single one of those things, you're doing hundreds of transactions a month, right? If you just add that extra dollar, like overnight, you have 200, 300, 400, 400 dollars a month that just appears magically to you.

All right, and like I realized this one time when I had done a big launch, I'd signed up. It was whatever it was. I don't know. It was like a hundred and and um, that's number one. The second one is I go for the the, the, uh, the, uh, the 99s instead of the 97. So we were like it's 497, right? Versus 499. I had signed up almost 200 people in a challenge and I realized that by giving up that, those three dollars, uh, I was giving up 600 bucks, uh, for that month. And I was like, well, I'd rather make an extra six hundred dollars. And so I charged everyone four 99 99, uh, at the time. That's when I was charging, uh, 500 bucks. And so all that to say, those little pennies and sevens and 99s actually add up when you look at the fact that you're doing high volume, right? You're doing hundreds of transactions. And so if you're at 167 bumping to 16999 for all of your stuff will instantly add a lot like real money to your bank account. It may sound completely insignificant. I'll bet you could probably even sneak it in and be like, hey, guys, just because I want to standardize everyone.

some people are kind of all over the place everyone's just it's going to be 16999 hope it doesn't bother no no no mind right it's not even it's not even a sale right and just like that you can generate six hundred dollars a month now if you're like huh Alex I don't know why I would care about that it's like well considering the average gym owner makes 30 grand a year if you could add 7,200 a year to your paycheck by not adding anything that sounds like that would be a good idea right so that billing tactic Number one, use your seventh tournament of nines and then make sure you add the 99 cents on every transaction that you're doing and it will add up. Pennies add up, right? So it's number one.

Number two, I give it to you yesterday, but it seemed just like make sure you get the backup cards. So make sure you get a backup card on the people who you are selling because it's just going to decrease your turn. So if you can decrease your turn from 10 to 5 simply by having the card on file, you'll make way more money. cut your turn in half through an administrative task rather than having to implement all of these operational systems to save people. It just adds another way for you to collect more money. And literally like one, you know, a card, if you think about it, if you had 10 people were supposed to cancel and five of those people, you had the card on file and you bill at, you know, whatever, 170 a month, you just made $850 because that month and maybe that every month thereafter

because of something you added on the front end. And so it's like, okay. Okay, billing tactic number one, got us $600 a month. Billing tactic number two, got us $850 a month. Now we're up $14.50. All right, let's see if we can find some more pennies here. All right, so that's number two. Real quick, guys, if you can think about how you found this podcast, somebody probably tweeted it, told you about it,

shared it on Instagram or something like that. The only way this grows is through word of mouth. And so I don't run ads. I don't do sponsorships. I don't sell anything. My only ask is that you continue to pay it forward to whoever showed you or however you found out about this podcast that you do the exact same thing. So if it was a review, if it was a post, if you do that, it would mean

the world to meet and you'll throw some good karma out there for another entrepreneur. Number three is the one that I've said a zillion times over and still people don't do it because they hate money or whatever. They hate having hard conversations. They hate change. Is that if you switch from a weekly billing cadence, a monthly billing cadence to a weekly building cadence. And it doesn't have to be weekly. It can be every week, every other week, every 28 days. As long as you're in a weekly cycle, there are 13, four-week blocks in the year and there are 12 month blocks in the year and because of that you get one extra full billing cycle per year than you would otherwise if you're on a monthly schedule and

dollars to donuts most people actually do their payroll every other week and yet they bill monthly so what ends up happening is that by the end of the year you had 13 payrolls and you had 12 inflows so 13 outflows 12 inflows which means that one full month of payroll by the end of the year just gets stomached by you right you're just the nice nice boss and you're just taking that one on the chin right so if you switch to that cadence you're going to get another uh whatever 7.8 percent per year now again you have to think about what like everyone everyone scoffs at these margin things but it's like average is making 12 and a half right percent per year so if you add almost 8 percent to that you're almost doubling the profit of the facility right like it's

It's kind of a no-brainer, except I had a higher-level business guy who showed up at one of our masterminds. And I asked and said, who here is on the weekly billing cadence? And he said, like, he looked around after I had just given that explanation and he saw that it was like 10% of the room. And he's like, what the fuck is wrong with these people? He's like, why are they not doing this? This makes no sense to me. He's like, I immediately used it in my business.

And so I don't know. So if you're not doing it, I don't know. All right. So first billing tactic. turn your sevenths and nines and add the 99s second one get the backup cards third one switch the billing cadence and then the fourth one and this is a this is a smaller one you can also use a c h so if you've noticed maybe you have or haven't noticed but jim lunch is actually almost exclusively run on a c h so our clients know that like we actually don't run a ton of credit cards

we run mostly um ach and we do that because uh there's lower processing fees and when I'm billing a lot of money, an extra 2% actually is a significant amount, right? And everything is relative, but it's still, it's still material. You know, if you're doing a million dollars a year, 2% is 20 grand, right? So like, you want to have all these little things out up. So we added a $600 a month, so that's $7,200 a year from the first tactic. We added $10,000 a year from the second tactic. So now we're up 17. The third tactic gives us a whole other month of billing, which would probably be about 20, right? So now we're up, uh, 37,000. Okay. Just from these, just little, little changes, $37,000 that we just found. And that's all

bottom line. That's my point here is that these little bottom line tactics sound like small money, but the thing is, is that if you're making 12% and you make $37,000 more, then it's just like you making an extra 240, right? Because 240, right, to get an eighth of that, right or whatever it is eight times eight times 37 so more whatever that would be 32 anyways 300 grand is what that would be the equivalent of making for you to get your 37 so it's a very big difference in terms of how much money you make right and then obviously the fourth one if you can get your backup card or you can make it standard for most of your people to have their a CCH on file then you're going to save a ton in your payment processing so most people have

Most people process through their CRM gateway. Typically, most people don't know this either. Their CM gateway is making the majority of their money on their processing, not on their fees. So the fee is sort of additive, but the majority of the money is made and they have partnership deals on the actual processing where they're going to get, they're getting 1% back or 1.5% back on your account. When normally, if you're a local business and you go to a business that just does payment processing, you might, process for 50 basis points. So now again, if you're looking at how much you make per year, 2% and you're making 12% normally, it's just giving you another 20% pay raise. So all of these things are four kind of billing tactics to maximize your margin. I would I could I could

really get into like actually just like raising your prices on things. But I won't for the time being. You should raise your prices by the way. But that is it I hope those were a tactical for you if you are not using them you should use them like each of these little things add up you know what I mean and then when you have 20 or 50 of these little things that you do better all of a sudden at the end of the month at the end of the year you're like wow there's more money there than I expected and that's only if you have the discipline to not just blow money when you look at your account and see that

you have money and then go spend it all right so as long as you have that that discipline that character trait in in place then all of these taxes will make you more money and help your gym grow.