The Game with Alex Hormozi - Grow Your Audience By Avoiding These 3 Mistakes | Ep 777

Episode Date: November 27, 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

What's going on? Welcome back to the game. We're talking about making more money, making more impact, and all of that fun stuff along the way. So today, I want to talk about creators. I want to talk about people who have audiences, and that could be in the form of email list,

that can be form of subscribers or followers, but fundamentally, an audience of people who know like and trust you. I want to talk about the big mistake that I think a lot of creators or audience havers make when attempting to monetize their audience. Now, I will probably make a different podcast at a different time about what to sell if you're going to make your first offer to an audience. But for today, I want to talk about the actual mistake that occurs.

And so if you have an audience or like to have one, this is a big one for you. And I will promise you this, which is once you see this, what I'm about to share with you, you will never be able to unsee it. If you listen to this and realize that, oh, shoot, this is me. I've made this mistake. The good news is you're just like everyone else. So don't worry about it. But you can take steps to unwind. it, which I'll talk about as well. Okay, so here's the situation. So let's say we've got

influencer, influencer X, all right? And he's got an audience of, let's say, backcountry rednecks, awesome. Cool. That's the audience. He decides, okay, I'm going to sell something to my audience. And so he sells widget number one. And so he launches widget number one. He's very excited about it. And we're going to assume that he did the basic math of, okay, what percentage of my audience while I convert, what's the lifetime gross profit per customer? And I want to maximize whatever object I have or whatever widget, if I'm picking between four or five different widgets, to the thing that will sell the most potential units

at the highest lifetime gross profit per customer. All right, let's just assume that you did that basic math, which, by the way, if you did that basic math, it would put you in the advanced category because you'd be amazed at how many creators don't do basic math. Let's assume you did do basic math, and you do have widget number one, and it is doing reasonably well.

The creator then gets the creative idea to take this wildly next step, which is, hey, Alex says, if having one product's good, having a second product must be better. I should do more, right? Isn't that what that is? More products? No, that would be new, by the way. Have you sold yourself on your own idea? You sell yourself on your own BS. All of a sudden, everyone's quotes a line. Like, you know, all of a sudden, you read biblical scripture and you're like, oh, this actually means I really should raise my prices. It's like reticular activation. Like everything now reminds you of that thing. So you then say, I'm going to look at my original list of things that I was thinking about selling when I decided to sell widget number one. And I'm going to pick from the remaining list to sell widget number two. Now, why are we doing this? We're doing this because the creator says, ah, I want to make more money. And, you know, I already have a certain percentage of people who are buying thing one. So I'm going to sell them thing two.

Duh, right? Makes sense. Obviously, we'll just sell them something else. There's two problems that occur. problem number one is that widget number two that you attempt to sell is typically the second best widget because you didn't pick it first now you may make the argument i have new information i'll learn a little bit more this actually would have been better one fine maybe the second problem is that you've already made some sort of ask of the audience and unless your product was exceptional in which case by the way side quest it's not an ask if the thing you deliver on is exceptional the problem is that the world has normalized myself included the give give give before you ask ratio because honestly i have to assume that most people suck at product. Most people's products are not that good. But in an ideal world, when people buy that product, the next time you have a product, they want to buy it even more. And so it doesn't seem like another ask. It seems like yet another give. People are not upset

if Apple comes out with another iPhone-esque product. Now, I want to be clear when I say iPhone-esque, I mean, new and amazing thing, not iPhone 28,000 version, right? Hopefully this one sounds self-aggrandizing. but if I came out with another book, and then at the day after the book, I said, hey, by the way, I have another book, the likelihood that people would buy the second, you know, the next book after that if they enjoyed the first book or the one that I just, you know, they just did maybe to make this realistic. Let's say I waited six months or waited three months to launch the next book. Then the likelihood is that people would just buy that one too because they got value from it.

It doesn't feel like an ask. All right. So I make this as a clear point to differentiate this whole, or at least add nuance or color to this concept of giving and asking. Okay, back to the second widget. So you have your second widget, and it's not as good as your first widget, and you've already used up some quote, goodwill. So you get a lower conversion on a lower widget.

And so then, of course, you do this launch. It doesn't make as much as you want. It makes a little bit. And you're like, okay, but you know what would really grow our business? Because I did this for a whole year now because this is our second year. And I just finished my second year. Widget one was year one. Widget two was year two.

You know what I could do to this business? I think I could come up with a third widget to sell to my audience. Ah, a third widget, more products. And so you come up with the third widget. The same thing happens again. It's the third best thing to sell. You've already disenfranchise the highest buyers in your audience. And you go to a smaller conversion on a worse widget.

And so what happens is like, let's say the first thing sells 100. And the second thing sells 50. And the third thing sells 30. You just have this little, it's like you drop in a marble and they just keep the little bounces get smaller and smaller. And so unfortunately, a lot of creators or people who have audiences will fall in this very vicious cycle of just like they keep launching stuff. What I want to explain is the fundamental mistake.

Instead of trying to find new products to sell your audience, you want to find new audience to sell your product. I'll say that again. Instead of trying to figure out new products to sell your audience, you will likely be better served, trying to find more audience to sell your product. Singular. What a lot of people who have audiences fail to realize

is that all it does is give you an artificial boost in the beginning. You sell through the audience. Okay. And so it gives you an artificially inflated beginning. Now, if that product isn't good or it's not recurring, then you're going to be in a little bit of world of hurt because now you're like, okay, well, what would I do now? Now you have to make your regular call to actions

and you sell kind of a maintenance level, which is purely predicated on. on the amount of new subscribers and followers you generate from your organic content on a regular basis. You then just know that you add, call it 100 people a day to your following and you convert 1% or 2% of those followers and you get one or two sales a day depending on the price point. And that's it. That's the game. And then you get really sad because you're like, oh, man, the launch was so big.

Now it's not that big. So I should launch a second product. And of course, we know where that ends. I have seen so many influencer businesses that have like nine businesses that all make zero dollars. Not really. that makes some money, right? But you think that in your infinite wisdom, you're going to somehow, I'll compete

every other person in the space that you have for each of those verticals because you just had one launch to your audience. And then, of course, because sales aren't coming in the way they used to, you over-hired, and then you have to cut back there. And then, of course, your reputation suffers because it's not as good as it was before.

There's also less excitement. But then you're like, well, I can't cut the team because some couple customers there, right? It's just a big mess. So, what do you do? First things first is you recognize the fundamental truth that I just said, which is you likely need to find more audience to sell your product if you truly believe in the product rather than trying to find more products to sell your audience.

If the product is good enough, it will expand beyond the audience because you have word of mouth. You will also be able to run advertisements to colder and colder traffic. And if done well, that product will actually bring you more warm audience. There's a reason, by the way, I spend so much time on the books. I know that a huge percentage of people actually find me through my books. Someone recommends the book to them at some random conference. They read the book and then they follow my stuff.

Then they enter my audience. And so the product actually creates audience members who then increases the likelihood that they purchase other future products from you in the future. and that is the point. It's more so that you only know, and you have to recognize this as a skill deficiency. You only know one way to get customers. And you're probably also a little impatient.

The inverse of that would be somebody who knows multiple ways to get customers and who is patient. It would then follow that you say, okay, I have this product that I believe a lot in. It makes more sense, instead of making a second product, that I simply take all that effort, make this product better.

That's the back. And then the front, it makes more sense to, instead of promoting a second product to that audience to try and make even better content to expand that audience and or run advertisements or do outbound or whatever your next, or find affiliate partners that can send any more traffic,

whatever it is, to expand my audience. And if the product is good, the product will reinforce your position, ideally positively, in your prospects and then soon-to-be customer's minds. And I think this is like one of the fundamental mistakes. I mean, the reason I'm making this podcast is I saw some dude

who, I want to say like a couple of years ago had a, I would say like load a medium following. It just launched service after service after service and has like six different businesses now from an audience that now is dwindling because the guy just sold everything, anything that wasn't nailed to the floor he sold to him. Right. And the stuff wasn't good. You know how I know it wasn't good? It couldn't be good. No one's good on their first shop. Right? It takes so much effort to make a good product or a good service. It takes years. It takes iterations. I think the real, real, is that if you do have that big audience, instead of fucking launching the whole thing,

sell it to one to five percent of them. See what they say. Get feedback. Get some testimonials. Improve the product again. Sell it to another 5% of them. Right? You create this exclusionary process where you slowly ramp up revenue.

You add more people at the right pace. And then you're able to basically grow into a sustainable revenue level that's significantly higher than the launch and then crash model. Now, you're like, wait a second, Alex, you launched your book. I sure did. Fundamentally, you have to be able to do a lot of execution at scale in order to pull this off. And I'm not saying, yeah, I guess I am saying. I think it's unlikely that you have the skill set on your team to be able to do this.

And this is just me saying this from having met a lot of your teams. So yes, it takes operational skill and intelligence on your team to be able to pull this off an existence basis. But my launch was a book. I spent all my time into the book beforehand. I had high confidence that the book would be good. I vetted it and validated with other readers that I know, I trust, their opinion who gave me good feedback to make it simpler, to make it streamlined to cut out irrelevant stories

or parts that are like to advance or whatever it is, right? I don't see that process, that product iteration process from creators because they tend to be more marketing heavy, not product heavy. And this is obviously something that I've taken a long time in my career to recalibrate. I've spent a lot more time in the last, call it, four or five years on product,

because I realized once you know how to sell shit, once you know how to advertise, you realize how incredibly empty it is because you have to keep doing it again and again unless the product's good. And so in the beginning, you suck at product and you suck at marketing. Then you learn how to market and sell and then you start selling stuff. But you realize how little leverage you have when you have to keep selling every month. You have to keep reloading. You have to keep hunting at the first every month to make your nut. and that's tough.

I hate thinking about the amount of sales that I did 10 years ago that I don't get paid from today. And when I say get paid from, I just use that as loose hand for if I had had a better product at that point or I had consistently reinvested in that product, those people might still be with me now. And so the secret to very big businesses, here's the real real. The secret to very big businesses is just you don't lose customers because it's amazing how big a business can get, even if it sells a small amount of customers, but doesn't

lose them for 20 years. That's the real. Like, that's how it works. And I'm shouting this a little bit because it just took me too long to get. And a lot of these podcasts, I just make to yell at my younger self, just to be clear. And so you just got to figure that out. If you have an audience and you're trying to make more money with them, make the product as good as possible.

Consider slow ramping it instead of launching it so that you can get to a sustainable level and then look at finding more audience rather than finding more products to sell you're resisting people. And right now I'm telling you, you won't be able to unsee it. The amount of people who have like nine different products in their profile, you know what I mean? They've got, you know, five businesses, but they've got like seven employees. There's just stupid.

It's just stupid. Just dumb. Just so dumb. But it's a novice mistake. It's a naive mistake. It's ADD's entrepreneurial ADD. The thing is, fortunately, unfortunately, it's super normal. I would say it's more common than it is not.

You know, you get your rocks off bragging to people who don't know anything about business by saying that you own four companies. Anybody who does know anything about business is like, oh, this guy's super distracted. Novice entrepreneur, what I want. So, and the reality is that you also don't have four businesses. Your CEO of four businesses and you're running all of them, which means you can't run any one of them well. Also, while maintaining your media, which is probably the biggest part of your business, which you're spending all your time on. This is a bit of a cautionary tale. This is actually inspired by a real person that I saw.

and I ended up going into a deeper conversation about this. And I was like, you know what? I'm going to make a podcast about this because I think it's important. And so if that's you, I need you to look at yourself deeply in the mirror and say, if I can only do one of these businesses, which one would it be? And if I took all the time I put into the other three companies and just made this one better, how much more money would I be making? And sometimes the answer to that question will make you feel sick to your stomach.

Good. Change. Because at the end of the day, the whole process of entrepreneurship is the learning process. and yesterday is gone. There's nothing you can do about it. Fundamentally, it's sunk cost fallacy to keep something simply because you did it before. The only thing you can control is what you do today.

The day you realize the better version of your business is the day you should act on it. Everything else is emotion. With that being said, maybe this is a very frightening podcast for some people, maybe your boss has five businesses and has done the exact same thing selling to the audience. The skill to solve for is, focus, patience, and learning to iterate on a product rather than create new products, and to

increase the size of your audience via making the existing channel better or bigger, or finding a new channel altogether. And so if you're like, well, what do I do instead? Those are the four steps. Have an amazing rest of your day. Make money. Change the world. Go capitalism. All right.