The Game with Alex Hormozi - Building A $50 Million Business with Nose Strips | Ep 447

Starting point is 00:00:00 We have multiple transformations that have to occur. We can solve the acute problem of what they're coming for today. But once we solve that problem, they're going to leave unless we have a broader journey that they're going to be on. And some of the best journeys are the journeys of becoming because they never end. The wealthiest people in the world see business as a game. This podcast, The Game, is my attempt at documenting the lessons I've learned on my way to building acquisition.com into a billion dollar portfolio. My hope is that you use the lessons to grow your business and maybe someday soon, partner with us to get to $100 million and beyond. I hope you share and enjoy.

Starting point is 00:00:30 If I were to build a physical products brand, I probably would do a no strip. And the reason I would do a no strip is for a couple of reasons. One is that no strip costs pennies to manufacture. You can sell them for a hundred times that price. So if it costs you two cents and you can sell it for a buck, you're making huge margins on the actual thing. The second thing is that it's sticky, quite literally, but also from a recurring standpoint, if you can improve how someone breathes, they're going to buy it again and again and again, right, over and over and over again, and they're going to use it every day.

Starting point is 00:00:55 It's also something that doesn't require willpower to use. You don't have to remember to do it. The problem with supplements is that people have to remember to take them. They also have to associate it with being healthy, which most people struggle with, whereas most people always sleep. Most people sleep every day. Most people don't work out every day. And so I'd rather associate a product with something that people are doing on a regular

Starting point is 00:01:13 basis without willpower. It's the reason beauty products to me are more interesting than fitness products, by and large, because every girl wants to look pretty and not have to work out versus having to get the willpower to work out, et cetera, right? flip side, you can have fitness apparel, which you can wear even if you don't work out, because then you feel like you're somebody who works out. So you actually get the status without having to do the work. And so whenever I have things like that, those like little arbitrage, like status arbitrages are things that are interesting to me. And so I would probably

Starting point is 00:01:42 do a no strip because I use them all the time. And so I have deep product knowledge on like the goods and the bads of different brands that I've used. I don't promote any brand because I'm not thrilled about any brand. Just if anyone's curious, if I were to do it, then that would probably be a product I would build. And then I could have auto ship built into it, which would be nice, and it makes it convenient for people. You can also explain to people how to use it, which is like you want one in your suitcase so that when you travel, it's there. You don't have to think about it. You want one next to your bed. You want spares in the rooms that you ever, ever sleep extra in. You want one in your backpack if you're like traveling as well. So you have them in different places,

Starting point is 00:02:16 so then we also get more purchases. And then the things that I'd probably do to make a different is I'd focus a lot on the product, obviously, because like in these types of things, the reason that I don't pimping any brand out is because, like, I don't really like any of the brands. They've, like, all got big things that I'm not a fan of. But I would also probably try and tie in some sort of branding element, which is, like, I would put, like, volume or persist or endure across the bridge of the nose. And I would have it spelled backwards so that in the mirror, someone could see it and they could see it every day. And it would remind people of, like, a word that they're trying to focus on for a season. And so I like having those constant daily subconscious reminders around things.

Starting point is 00:02:53 They actually found in sales rooms that having a single word on the wall affected performance from the team even if it was just huge. So if you just have like one more, you know what I mean on the wall, then everyone sees that as this daily reminder that they need to keep going. They need to keep going. I need to do one more. And so I would want my face to be the walking billboard for my eyes. So every time I looked in the mirror, I'd be reminded of this thing.

Starting point is 00:03:15 And I would want that to be like the different flavors of the nose strips would be the words that people are working on. So it might be patience, it might be weight, it might be volume. It might be, you know, kindness, whatever it, whatever that, whatever thing you're working on right now. And so I probably do something like that. And so yeah, if anybody has the logistical capabilities to recreate that. And I prefer disposables because I've seen the ones that are, like, I've used the ones that are like pieces that go with it, not a huge fan because I lose them. And I walk around within the morning and I take it out, I put in my pocket and then I wash it or I, I leave it on my kitchen table and then it goes somewhere else.

Starting point is 00:03:52 Then I'm in bed and I'm like, gosh, and I need to go get out of bed to go get the thing. Like, I don't like that. I like the disposable ones. And I'd like to have one that was clear that had the word. So the only thing you see is the word, which I think would be really cool. And by far, the biggest thing that would have to work is it has to stick. It has to stick all the way through. So it has to work on non-oily surfaces and oily surfaces alike because people have different nose, you know, whatever's.

Starting point is 00:04:17 And so anyways, that would be the product that I would probably sell if I were going to get into physical products. And so that's the kind of the reasoning behind it. I have really high gross margins. It's really sticky. I would have a unique brand that was built around it. And I would have ancillary benefits like the words that are beneficial to the person outside of just the strip. And so when every time they put that on, not only do they have the immediate benefit of breathing better, but they also have the long term mental benefit of the thing that they're trying to work on being reminded of that every day, every moment, hundreds of times a day, which there are very few things that you can get reminded of many times a day subconsciously like that, that will make a

Starting point is 00:04:51 difference in your life. And I think that's one of them. And so I'll give you a basic estimate of what I think would end up happening money-wise. So they currently sell for about 30 cents a strip. They probably cost a penny or less to make, especially at scale. All right. So that means retail is probably, I would want to be a little bit premium. So I'd probably be at 1999 would probably be a price point that I would look at, maybe 2499. I would, you know, we'd split test the price points there. But it'd probably be in that range that I would sell the products. My cost of goods would almost be entirely based on the shipping cost that's associated. So if I put 30 days of strips in, and I'd probably sell 30, 60, 90 packs, because it's actually one of the things that I hate is that my upsells would probably

Starting point is 00:05:32 be like one, three, and then probably six, 12. I probably have five options on my upsell with, you know, all the way down to maybe 15% off if they buy, you know, 12 months worth and then cascading upwards in terms of smaller percentages off. But let's do the math on how much money this would make. So if I just did my own promotion, if I get, let's say, let's say 10,000 people a month would go to a page if I said, hey, check this out. And if I did it consistently, it'd probably be about 10,000 people a month, just clicks, right? So if I got 10,000 people a month to a page and then we converted 5% of traffic on that page, then we would have 500 buyers. So 500 buyers, and let's just keep it at the monthly rather than getting in the average bundles. And so let's just say, you know, we have very low churn because a product like this probably would have low churn.

Starting point is 00:06:19 So let's just say like 10% churn for, and it's not very low for physical, but just leave it at that. 10% churn. That means that every month I would sign up 500 and then I'd lose 10%. And so this business would keep growing with that level of traffic until we reached 5,000 users because it's 500 divided by 10%, which is the churn, which is the number of maxed out users at a hypothetical max for your equilibrium between number of signups. number of cancellations. And so I would be at 5,000 users a month. And if my price point was $20, then I would be making $100,000 a month from the no strips. My cost to ship the no strips would probably be in the neighborhood of like $4, maybe less, maybe like two and a half. It depends on like the 3PL that we would use. So I'd probably make like, let's just say

Starting point is 00:07:07 safely, even after the cost of the all the no strips, which is minimal, let's just say we make $16. gross margin on a $20 product, which is really good for physical products. So I would be making $80,000 a month, so a million dollars a year in profit from the no strips. And so that's a breakdown of how that would work if I were to launch it. And then I would probably send no strips that had the word. And so what I would really want to do is build the capacity to make the words easy to print on there. So we could have people put their own custom word in. So you can choose from one of my five words.

Starting point is 00:07:43 words, but if you want to put your own word in, it's $30. And I get this huge premium, but it's worth it for a lot of people to have their own custom word. So that would be like a unique competitive moat. If we're talking about like, what kind of moats can you build? If you just white label a glue thing from another country, someone else can do that too. But if you develop a manufacturing capacity that can like on demand create the word that someone wants, you can literally two X, three X, sometimes the price of the thing because it's a unique thing that other people have and the value is there for people. And so if people could pick the word that they could put on there as whatever word they wanted to work on that month or something

Starting point is 00:08:17 like that and they would get a text, they would say, hey, what word do you want to work on this month? They text it back. It automatically goes into the system and then ships it right out to them. Then that would be a really interesting business model that would have huge enterprise value. So if you're curious, a business like that, and I would probably ship the no strips with two or three variations of influencers that I thought were words that their communities dug. So someone sends me Mosy Nation or someone sends me, you know, Mosy Mobie. or S and me 500, right? Someone sends me those terms on a strip, then it's going to be something I'm going to be like,

Starting point is 00:08:50 dude, this is dope. And then because I have such high gross margins, I could say, hey, man, I'll give you 40% of everything and you don't even have to build the business. So you can make 40% top line on all the revenue of this thing, which, by the way, if you were making your own business, if you ran 40% margins on your own audience, it's a great business anyways. And so I'd be like, it makes more sense for you to just work for me because all the capacity I built. And that would be the influencer campaign. And so you think for me, I was able to

Starting point is 00:09:18 add a million dollars to the business. And then you add a hundred influencers. Maybe they're not as big or they're not as no strip-centric like I am. But maybe if they did, I don't know, a tenth of the volume that I could do on average, then it's 10 times what I'm doing, which is 10 million dollars. And theirs was only 40% margin to me, right? Because I had to give them 40 and there's 20 that was cost. Mind you stuff to run the business. But let's just keep it simple. for now. So let's cut that in half again. So I get another 20% from the 10x volume that I get from them. So now we're probably looking at a $3 or $4 million EBITA business that is recurring, that is not dependent on one single face that has very high gross margins so that they can go

Starting point is 00:09:59 into new channels that has a unique and competitive moat that allows it to have a premium pricing, which I didn't even factor in like if we sold it for 40 rather than 20. And then the final piece is is that what would this business be worth? So if we're doing $4 million in EBITA for physical products business like this on 10 million top line, or sorry, it would be more than that top line, this business would probably be worth somewhere in the $40 to $60 million range. And so that is a Mosey money business breakdown. If I were to get into physical products, what I would make and how I would make it to be a cool business.

Starting point is 00:10:30 Hey, Moza Nation, quick break just to let you know that we've been starting to post on LinkedIn and want to connect with you. All right, so send me a connection request and note letting me know that you listen to the show and I will accept it. There's anyone you think that we should be connected with, tag them in one of my or layless posts and I will give you all the love in the world. All right. So let's get back to the show. And if I was focusing on like a branding perspective of like what is this going to encompass, I would probably go after the entrepreneur community first because it's obviously a community

Starting point is 00:10:59 that I have access to. And I think it could afford or would be willing to pay a premium price for better notes strips that had the words on them. But I think the brand would actually be more of a personal development brand of like becoming the person you want to be with the daily actions and reminders of who you want to become. And so it's like you're literally taty. tattooing this thing between your eyes to remind yourself of the person you're trying to become the character traits you're trying to embody. And so I think that it would really be a very inspirational brand. And I would probably because I'd want it to be mass market, I would show different walks of life. And I would have them working on different problems. All right. So I start

Starting point is 00:11:35 thinking entrepreneurial because that's me, right? But also like if you have moms and their word is patients, right? Patients can apply to anyone. But like, or if you have a prisoner in the prison system who just gets out is an ex-con, it might be like forgiveness. You know what I mean? And so I think it could be a much wider brand if you focus on the deficiencies that people want to fill. And then I have to think it's some kind of sexy word for the brand name. But I mean, I don't know, I feel like it'd be something around like better. You know what I mean? Like better nose strips or like be better, be better nose strips. And then something that would, that's like short and simple that people could understand and share. And I think that that could be something that people,

Starting point is 00:12:15 would get behind because you don't want it to be about Mosey, right? You don't want it to be about you. You don't want it to be about the founder. You want it to be about the prospect and more specifically about the problem that we're solving and the person that they want to become and the promises that we're fulfilling. And so if you can help someone feel better about who they are, people will pay anything for that feeling. And so the wedge product is the idea. that we are helping people breathe better. But the brand and the promise is that we're helping people be better. They buy us for the breathing. They stay for the betterment. They stay for the person they're going to become. And so that's kind of the two-sided angle that a lot of brands can

Starting point is 00:13:03 accomplish. And if you're thinking about building your own brand, it's like the fitness space is obviously a space I have a lot of experience in. But like people come for the bikini. They stay for the community. Right. I remember a buddy of mine was in the dating space. He said they come to get late, but they stay for the confidence. And just for anyone who's feeling their troll vibes come, the point is not the space I'm focusing on. The point is that people come for one thing and they stay for something else. And I'll tell you a story that changed my life. So I had a mentor, and he told me this story, and it's called the garlic and the ham. He said, there's this little boy, and he really wants a dog. So he begs his dad to get him a dog. So after lots and lots of begging,

Starting point is 00:13:42 the dad says, hey, if I get you a dog, you're going to have to be responsible. for it. He's like, no, no, I understand. I'll walk it. I'll feed. I'll do everything. So the guy gets the kid a dog. And so dad's gone on work, whatever. Right. The kids at home with his abuela, right, his grandma. And he sees one day that the dog has ticks. And he's like, oh, my God, I haven't been take care of the dog. I should have been taking care of this. And he goes to his grandma when they freaks out. He's like, what do I do? And the grandmother calmly smiles. She's like, go feed the dog some garlic. It's like, you know, the smell will drive the ticks of and they'll go away. And so she breaks up a piece of garlic. She hands it to the kid. He goes in the other

Starting point is 00:14:20 room. He tries to feed the dog the garlic. The dog's like moving, you know, moving his face around. He doesn't want to eat it. If you ever tried to feed a dog something they don't want. So he goes back to the grandma who's really upset. He's like, there's even more ticks now than there were before. Like, what do I do? Like he's not eating the garlic. She's like, did you just try and feed him the garlic? He was like, yeah, you told me he feed him the garlic. He's like, meho. It's like, you don't feed the dog the garlic. He's like, you got to wrap it in the ham. And so she gives him ham and he wraps it in ham and he goes back to the dog, the dog eats the garlic a few hours later, the ticks are gone. And so the moral of the story is that you have to give people what they want in order to give

Starting point is 00:14:54 them what they need. The thing they come for isn't necessarily the thing they stay for. And if you're thinking about the customer journey and the customer experience are trying to bring someone on, we have multiple transformations that have to occur. We can solve the acute problem of what they're coming for today. But once we solve that problem, they're going to leave unless we have a broader journey that they're going to be on. And some of the best journeys are the journeys of becoming because they never end. And so if you can tell you. take someone on a journey of today, I'm going to solve this thing, but tomorrow we're going to become something else. Then they can stay with you again and again and again. And people will

Starting point is 00:15:22 vote for brands that they believe in because it tells them the things that they want to believe about themselves. And so when they pay for the products that they have, they're really buying into the identity they want to associate with and want to be. And so when they do that, they can continue to pay over and over and over again because it reminds them about who they are. And so when we're building brands, if I'm thinking through that and applying to physical products, applying to service, etc that's what we want to build

The Game with Alex Hormozi - Building A $50 Million Business with Nose Strips | Ep 447

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