The Game with Alex Hormozi - How to make a profit in 30 days with a credit card | Ep 346

Episode Date: November 18, 2021

Stacks on stacks on stacks! Today, Alex (@AlexHormozi) talks about a simple strategy that can help almost any business double their sales earnings into millions!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:(1:44) - Client fund acquisition: $0 to $2 million monthly, used on portfolio companies.(2:57) - Client-financed acquisition: customers pay for marketing and acquisition costs.(6:59) - Game-changing approach: unlimited power to acquire customers, grow companies.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

that helped me turn $1,036 into over $120 million in sales. Welcome to the game where we 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 we have learned along the way. I hope you enjoy and subscribe. In this video, I'm going to explain the single equation that helped me turn $1,036 into over $120 million in sales. And right now, our portfolio companies do about $85 million a year. So this concept has been the central concept to how we, we've grown each of our portfolio companies with 100% equity without taking on outside capital or

investors. Right. And so the key here is if you don't have a lot of money, you have to think different and play the game differently. Most people, when they try and play the game, when they get the investors from outside or they have some sort of seed capital of their own, they think I'm going to have to take two or three years before my business is break-even or positive. And that is definitely a belief that you can have, but not necessarily one that you have to have, right?

And so I prefer to, you know, change the variables of the game that we're playing to try and figure out a way to make money all the time, right? Because it's like, well, if I could make money the whole time, then that would make this definitely more fun and a lot less stressful. All right? And so the equation that I'm going to outline for you is what I call client finance acquisition. This is how we grew our first license, you know, shoot, I grew, I went from zero to six locations at my brick and mortar chain in three years, the 26 year old. And I was able to open up each of those locations at full capacity, except for the first one, obviously. But each of the ones after that, once I learned how to do this, on day one. So that's not normally common.

So we open up each facility at complete completely full capacity. And then I did this at 33 other locations over the next few years. All right. After that, we transitioned to our license business and we use the exact same model that I'm about to show you to go from zero to two and a half million dollars a month within I think it was like 12 or 14 months. And that's per month, not per year. So went from zero to 28 million top line, right? And then 12 months after that, we're at 4.4 million a month. All right.

And the second business that added that up went from zero to 1.7 million a month in four months. All right. The third business we started, our software business went from zero to also 1.7, ironically, within six months. All right. And so this equation matters, all right. Profit matters if you want to be in a capitalist society because it's the only way that you're going to be able to weather the storms. All right. So this is the right or downer.

All right. This is called client. This is an equation, but it's a process. All right. Client financed. acquisition. What this means in plain terms is get your customers to pay for all of your marketing and your acquisition costs. All right. And so what that means is if you can plug into the universe's money, not your own money, but you plug into the money of the universe, you can pretty much

cash flow anything you need because you can make more money getting someone to enter your world than it costs you to get them there. And if that is your case, and you still have all the lifetime value that you're going to collect, but if you can do that in the first 30 days and you can pay the cost of fulfillment and still have money left over, then you have what is called a negative acquisition cost, all right? It means that you make money getting customers. All right. So this is the actual equation. All right. So it is two times. All right. Now, there's probably, you know the number two, but then there's three things in here that you may or may not understand. And so I'm going to break down each of them. Let's call this number one. Let's call this number two. Let's call this number three. All right.

So if I were to read this in plain English, it would say 30-day cash, oopsies, I usually write this the other way, 30-day cash must be greater than two times the cost of acquiring customer and the cost of fulfilling that customer. Okay. So what this means is cost of acquisition. All right. So let's say it cost me 100 bucks to acquire a customer. And that includes my marketing team. That includes my sales guys and their commissions. That includes the advertising or whatever method I did to acquire a customer. the lead. Okay? So let's say all in it cost me a hundred bucks. I'm just using simple math here. Now, let's say that for me to fulfill this thing, whatever the thing is, let's say it cost me another hundred bucks. All right. So that's $200 that's going to cost me to fulfill and sell this thing. These are my costs, right? And so the idea is I have to have two times the sum of this. All right. Remember this isn't our little parentheses, all right? Which means this is $400. that is what I must make, right? That has to be less than what I make in 30-day cash, all right?

Which is a term that I use that I've never really heard anywhere else. I'm sure there's a fancier word for it, but I call it 30-day cash, which is the amount of money that I can collect in net-free cash flow to my business within the first 30 days of a customer entering our world. Now, we may have upsells and downsells and continuity and future things that we're going to sell, but none of that matters to the small business owner who does. doesn't have cash. 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 me and you'll throw some good karma out there for another entrepreneur. All right. And so the reason it's 30 days is because that's the amount of time that you can get interest-free financing. So if you have a credit card, people will extend you money for 30 days, interest-free. That means if you paid off in the first 30 days, you can pretty much take unlimited money, all right? For the most part, now you pay your stuff off, you get better your limits, whatever. But the point is, and this is literally how I started my second business, is that I would use my cards and put the money on the card to acquire the customer, right?

So on my card, there'd be $200 because that's what's going to cost me to fulfill and acquire, but I would have made $400 on that. And the reason it has to be greater than this is because I have net, right, because we have to take out the 200 that we lost here. Right, minus 200. So I have 200 left over. What a coincidence. That's the exact amount that it's going to cost me to get another customer and fulfill that customer, which means that I'm going to get, you get it.

it another $400 from this customer. And we play the game again, which means that you have unlimited power to acquire new customers, which means you get unlimited money, which is why if you play the game this way and you choose to think about acquisition in this manner, you can grow your companies without capital constraint. Now, it doesn't mean that there won't be constraints. There will be. You'll have operational constraints. You'll have hiring constraints. you have other things. But if you play the game this way, getting new customers and making sales will never be the thing that is limiting your company. It will be only you. And this is what we've done over and over and over again is design a process in every business that we can figure out

where the amount of dollars that we make in the first 30 days is greater than two times the cost to acquire plus the cost to fulfill. And that works in any business in the world. Now, ideally, I don't want to be just twice. It just has to be more than that, right? If I can make this, you know, 10 times, right? Then it's even better, right? All of those make it just even easier because then I'm getting multiple customers and I still have cash flow to go invest in other things.

But this is the minimum requirement for CFA, or what we call client financed acquisition. And so right now, if you don't have money or you don't have capital and you think it takes money to make money, you just keep believing that beautiful lie and let everyone else go win while you keep complaining. All right. So keeping awesome. Mosy Nation. I know you were not that type of person. And so we can beat all those people who have those limited beliefs.

But I had $1,036 in my bank account five years ago. All right. Right now, the portfolio we do does $85 million a year. I took no outside money to do that, which means if you can learn how to play and multiply and multiply and multiply and not use your own money, because I'm using my customer's money to finance all of the growth in this business. And so if that makes sense to you, I'm used to making ads. I was going to say, click, click subscribe. But anyways, if you enjoyed this, if you found value in this, I make these videos,

I have nothing to sell you. Click subscribe. I'll see you next video. I know this is a little bit more tactical. I'll talk about more managing your people and scaling the company side. But this is the stuff, right? This is the, these are the things that actually grow the business. All right.

So anyways, love you all. keeping awesome OZ Nation. I'll see you guys next video. Bye.