The Game with Alex Hormozi - Future of Gym marketing & current state... 80/20 or 90/10. | Ep 78

Episode Date: September 14, 2018

"Everything comes down to where attention is, where eyeballs are, and the relative cost of those eyeballs." Today, Alex (@AlexHormozi) emphasizes the importance of doubling down on marketing efforts that are currently working instead of getting distracted by new platforms or strategies. He also shares his approach to scaling ad spend and encourages listeners to prioritize data over trusting anyone's claims about Facebook's algorithms.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:(1:17) - Attention, eyeballs, and relative cost for marketing success.(3:35) - Maximize current success, avoid new distractions.(5:43) - Invest in what's profitable, avoid passive income.(9:43) - Diversification as a hedge, focus on familiar.(11:35) - Invest in what works, avoid distractions.(13:53) - Break spending beliefs, increase profits with the right approach.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Hey, what's going on everyone? Happy Thursday. I was light on content this week, so I figured, hey, it is Thursday. I am almost missing any content for the entire week. And so I was going through my notes of things that I had kind of jotted down that I wanted to go over. And this is the one that spoke to me today. So I'm just calling this the future marketing in the current state, 80, 20 or 9010. What I wanted to just kind of address is just a single point that has been incredibly profitable for me in a lesson that I learned from someone else. Gary Vee is someone that I actually, I think, so people have very mixed, you know, mixed feelings about him. I mean, that's what a good marketer does anyways. But I think he's incredibly smart. And I think he really understands what's going on. That's just my opinion. And he has said repeatedly many, many, many times in many videos that one of his greatest regrets as a marketer was not spending enough on Google Ads when it was hot. for those of you who've been in the game longer,

you've seen the, there are cycles that happen within marketing, right? And everything comes down to just where attention is, where eyeballs are, and the relative cost of those eyeballs, so the cost of those eyeballs relative to the amount of them that are actively viewing. So,

in examples, you can buy television ads right now, but that ad platform has completely matured and now has gone far past maturity to the point where it's overpriced. relative to other things that you could be spending money on. And, you know, in my economics class back in the day, there's two types of profits.

There's economic profits. And then there's accounting profits. So accounting profits is just where you are spending money on something or you have a business in an industry that is not growing, but you are able to make a profit off of it. It is not like you are just making a profit off of a business that it is existing, but it is not new or different or sexy. It is in an established market.

Economic profits, is when you are getting a disproportionate amount of profits from dollars that you are spending. I'm trying not to make this confusing, but basically, it's looking at the opportunity cost of the money that you're spending. Meaning, if you were given $100 to spend on anything, where would be the best place to put that $100

rather than just a place that you would get a positive return. So accounting profits would be a positive return independent of opportunity costs and economic profits is where you're taking that same $100 and putting it in the best vehicle. to get the highest return for that $100. Now, a lot of us don't know, because we're not all knowing, you know, what thing or what vehicle is going to make us the most money for our $100.

And I'm trying to bring this full circle with what Gary Vee was saying, because what happens is as entrepreneurs, we love new things. We like more so than anyone. We love new stuff, right? We love shiny objects. We love getting excited. And there's this rush that you feel when you figure out a new platform or a new whatever. there's this balancing act that you have to do between doing what is working right now

and preparing yourself for the fact that it will change. And for those of you who are on here who are just listening, right now, for example, if you don't know how to run Instagram ads and Facebook ads profitably, you're just, you're missing the boat. You're like the 80% of that attention where I'm saying, like, there's what's working now and then what you need to prepare yourself for. a lot of times we put a disproportionate amount of effort towards future proofing, meaning like people will spend 50% of their effort trying to find the next thing

rather than doubling down on the thing that is working right now. And so it's this weird psychological trick that we plan ourselves. We're like, oh, this thing's working. Great. Let me find something else that's working like this rather than just saying, cool, let's spend more on the thing that's working. Right. And so I put out a challenge in our legacy group, which is double your ad spend for the month.

because if you look off of just our own metrics, my gyms, and then now having worked with over thousands of gyms that we have in launch and legacy, it's almost directly proportionate. The amount of money that you will make in a month will be directly proportionate to the amount of money that you're spending on marketing provided

you're putting it into a vehicle that works, which would be in this instance, Facebook and Instagram. Because they are now at this point where, and this is taken from a private, a friend of mine had a private dinner with Gary a couple weeks ago. And like five-person dinner, small dinner.

And they were just asking him, they were like, you know, what do you think, what platforms are coming up, which would be looking at? He said, first of all, we have four to six more years of golden years on Facebook. So if you're in here and you're like, man, I'm too late. I missed the boat. You didn't miss the boat. All right. Like people are still crushing it on Facebook.

We still crush it on Facebook. We still crush it on Instagram. And so the point is, it's like, we have like the gold rushes here the iron is hot and you need to strike all right you need to take like the uh somebody posted in our group uh you should sell your house take the money and then this is this is just a video from gary b but uh sell your house take the money and then put it into facebook ads because you'll make more money that way i mean that's obviously an extreme example but the the concept should still hold true which is we now have people who are asking us questions

what should i do with all this money that i'm making anthony ronchi made a video and here you know I think a couple weeks ago saying like the problems that he has now are different before he was having, you know, how do I fill my gym problems? And now it's like, what do I do with the money problems? Now I have capacity issues. Like there's different problems that you're trading. But most people are like, okay, well now I have 50 grand, 100 grand, 200 grand. You know, my banking out, what should I do? The reality is that you should still double down because right now, like, looking at an investment vehicle to try and get 10% a year and taking all the attention that it's going to take to go try and make 10%.

And that would be a phenomenal return on $200,000 a year, right, which is $20,000. But like, if you took $20,000 of your $200, so you just took 10%, and then you just spent it on Facebook ads, that you know you're going to get a $5 to $1 return on or $10 to $1 return on, or some of you guys, $20,000 return on, right? Where should your attention be going? Right? Should your attention be going towards actively pursuing something that's going to give you passive income, right?

Or should you be taking that attention? and putting it towards the thing that's already making you money. The whole point of like the investing game is there's only two things that you can do with your money. You can either lend it to someone or you can buy stuff with it. You can buy assets. You can buy pieces of businesses or you can buy real estate, whatever, right? But the point is that if you were a business owner, you already have the thing that most people try and invest in. And so you like, there's no point in trying to be passive right now and build up this passive revenue stream when you have this thing, this engine in front of you.

that is making you tons and tons of money. You should be spending more money on that thing. People always ask us, like, what is our investment strategy? Okay? My investment strategy is not to think about it. And what I mean by that is, like, we just invest in indexes because I know that I don't have to think about it and I will not need the money for 40, 50 years, right?

And I have enough cash like that is not there, that is liquid, that I can spend heavily on the thing that is making us money. And I spend as much money as I possibly can until the marketing is never my bottleneck. And so for a lot of people watching this, this is probably what I should have titled this, is that marketing should not be your bottleneck. This is the punch home point.

If right now you're not breaking your machine, your business, because of the inflow, then it means that you should be spending more on marketing. Okay. So what that would mean is that I will keep spending, provided I have a positive acquisition cost or negative acquisition cost, meaning I'm making money in the acquisition of customers, right? I should keep spending there until I have too many leads to handle or my salesperson is too booked, right? Or we're moving down the pipeline, or I have

capacity issues at my gym. Mozy Nation, real quick, if you are a business owner that has a big old business and wants to get to a much bigger business going to $50, $100 million plus, we would love to talk to you. And if you like that, we'd like to hear more about it, go to acquisition.com. You can apply anywhere on the page and talk to one of our team and see if we can help you get there. Right. At that point, then I go back to the marketing and then I level it so that I can deal with that flow, but then I want to increase the pipe, right? I want to increase the width of the pipe, which for the people who work with us,

the first thing that you're going to do to increase the width of the pipe is do ALN, which is automated lead nurture. Now you don't have to have someone who's manually working all the leads so that you can crank and not worry about having to be like, okay, now I need one person full-time and another part-time person. Now I need two full-time people or whatever it is, right? So boom, that's the first thing that you're going to do. So you crank, and then all of a sudden the next bottleneck would be your lead nurture process,

which now you've automated, boom, so now that pipe is wide. And then the next piece of that is going to be your sales guy, right? And so for some of you guys, it's you. For some of you guys, it's a salesperson who's working for you. And so until that person's calendar is completely booked, keep cranking. And then again, once that person's completely booked, are you able to continue to fulfill? And so right now, if you're marketing, if you're like, man, I wish I could get more people in the door, most times you just need to spend more. We're looking at, like, I'm getting questions from people saying, like, what do I do so I can get a 10% return when they have something right in front of them that gets them a 300% return in a month?

Warren Buffett said that diversification is a hedge against ignorance, which I think is like one of the most profound like investment statements, meaning he didn't diversify his funds because he knew what he was doing. And so right now, if you spend a thousand dollars or ten thousand dollars on Facebook ads, you know what you were doing because you have this machine that you've built for it, right? And so you can go all in on something because it's not risky. because you know the game, right? And that's part of the reason that for us, with our money, I know that if I'm going to learn another game, like I know how long it took us to learn the gym game, and now how long it's taking us to learn the game that we're in now,

I know how long it takes. And so for me to say, okay, cool, I'm going to go start buying real estate and buy, you know, a $20 million building. That's a whole other game. I'm not going to learn that in six months. It's going to take me three years, just like it takes you to learn any game.

To think that I'm going to like with ego, right, with pride, go in there and be like, I'm so smart. I'm going to figure this out. Like against other dudes who have been doing it for 20 years, who literally are going to actively try and get our chips, right, our dollars, because it's a deal. And in real estate, a lot of times it's a zero-sum game, meaning there's a winner and a loser, period, right? And so anyways, all that to say, some people right now, you probably need to just double down on the thing that is already working, not distract yourself with the new shiny objects.

We will go waste our money, testing those things for you guys, so that we can give it to you, already tested and working out of the box, so you don't have to worry about dropping 50 grand and being like, oops, right? We get to do that. I get to do that. That's our fun stuff, right? But for you, like, put all the money in the thing that you already know is working. Don't worry about your investment stuff.

Take the money that you have. Put it in the machine that you know is getting five to one. Right? So anyways, I hope that makes sense for everybody. Your marketing should be, should not be your bottleneck, and you should spend until the point that it is not that way. And if you are watching this and you're like, man, I'd love to have five to one or ten to one returns and I already know and know all the metrics of my business, then you should probably

hop on to gym lunch so we can show you how we do it. But anyways, hope you guys having an awesome Thursday. That was a note that hopefully someone here is listening to. And you know what? I might as well address this. So people ask, how do you scale ad spend? So there are a lot of different schools of thought around how to scale ads spend. One is you start with your budget and then you scale every 24 to 48 hours by 10 to 20 percent.

That was one school of thought. I personally don't do that. But that is one school of thought that is pushed out by lots of super guru Facebook people. The second is doing a duplication strategy. So let's say you spend, you've got five ads that are 20 bucks a day each, right? You can duplicate the ones that are winners. Let's say three of the five are real winners and you duplicate those ones. And now you're at 160 a day and then you duplicate one of those once again.

Now you're at 180 a day, right? That is another way of scaling your ad spend. That is how I scaled all the ads spend when I was doing my gyms. Now, the third way of scaling your ad spend is actually what I do with our business, right, gym launch like when I'm trying to scale to a lot of gym owners and this is what we do now. So I can't say that I've tested this with gyms but I'm saying this is our process. So what I do is I spend usually like three times what I want my daily ad budget to be and I start there and then I prune back to get to the acquisition cost that I want.

And so let's say that I wanted to spend a thousand dollars a day. I spent a lot more than that but I'm just saying let's say I wanted to spend a thousand day. So I want to spend a thousand dollars a day. I'll probably start with 30 ads at $100 a day. And then within 48 hours, I'll be able to easily cut out 10 of them. Right now I'm at $2,000 a day. And then I'll look again another 48 hours later and I'll be like, okay, these ones are definitely winners. These ones are maybes. Maybe I'll cut another five out and I'm at $1,500 a day. And then at that point, what happens a lot of times is sometimes I go a little bit higher than what my budget wasn't originally or what I was hoping to have. But I'm still ridiculously profitable in

my acquisition. So I sort of like trick myself into spending more than I was intending to and then make more money than I originally was going to. So I hope that makes sense. That's to answer a question that I got on our legacy page. That is how I scale at spend. The other, the second way of doing duplication obviously works really well too. We've done that over and over and over again. But the starting super highway is a good way to kind of break your own spending beliefs. And I would definitely recommend splitting that between a couple different ad accounts. I had this weird belief that Facebook thinks like once you, once you show that you can't spend money with them, that they start spending it more like aggressively, but not in a good way.

Like they'll just send you more junk traffic and sometimes the conversion on your page will go down. That's just my experience. So I split it up. But the reality is that anyone who claims that they know what's going on with Facebook is just either either they're lying or they're lying to themselves. It's just because, like, no one knows what's going on on on Facebook. I have friends who were very high up in the Facebook world. And they're like, we don't even, like, we don't even find out about rollouts. Like, they don't even tell their own employees about the changes that are happening

inside of Facebook. Like, they usually find out because clients call them and say, hey, this thing changed, what's going on. And then they have to actively figure out with people. Like, no one knows. It's a big black box. Anyone who claims otherwise is just trying to sell you a dream. all right um you just test and you look at what happened and you figure it out which is what

i recommend you do for everything in your life which is don't trust anyone just trust the data because at least the data is reliable and you can make your own darn inferences off of it cool so don't let so recap don't let your marketing be your bottleneck so spend until it isn't if you uh to scale your ad spend you can use any of the strategies i just outlined uh the starting high and splitting in between that accounts is what we do but it is up to you what you want to do And I would not be worried about how you're going to spend all of your time and attention trying to figure out how to go from 7% passive return to 10 or 12% passive return when you have this machine in front of you that you will regret five years from now not spending

tons of money into a known beast that you know the return on that you can control. So all these other investment vehicles, real estate, stock market, whatever, being a note holder on something, those are all things that you can't control. This is a machine you can control. So like, spend it where you can control. All right. Anyways, have an awesome Thursday. Hope that was valuable for you.

Drop a like or a comment to another gym owner who probably needs to hear this. Wow.