The Game with Alex Hormozi - How to Recover From Huge Mistakes in Business | Ep 704

Episode Date: June 12, 2024

"Messing up is a part of business.” Today, Alex (@AlexHormozi) discusses the significance of managing business mistakes effectively and transforming negative customer experiences into positive ones. He highlights strategies such as prompt accountability, issuing refunds, and delivering exceptional service, fostering loyal customers and boosting business reputation.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:(1:11) - Story 1: The bent gym equipment(2:41) - Story 2: The Ritz-Carlton experience(5:07) - Principles for handling mistakes(10:49) - The angry boat concept(11:54) - Going above and beyond(16:41) - Empowering employees to fix mistakes(20:50) - Turning mistakes into opportunitiesFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Everybody messes up. It's part of business. Your employees are going to mess up. You're going to mess up as a boss. Your customers are going to think you messed up even when you didn't mess up. Messing up happens. And so if you act every time like you have never had a mess up before, then you are going to mess up even worse. And so in this podcast, I'm going to talk about three different stories about big mess ups that I have done and been an experiencer of and some tactical things that you can do that have made our businesses so much better and turned one-star reviews into five-star reviews. and the step-by-step process thinking through that. Enjoy. What do you do when you mess up, right? Because you're going to mess up in business. You're going to mess up with a customer. You're going to build someone the wrong amount. You're going to give someone the wrong date.

You're going to forget to onboard someone. You're going to have a package that doesn't get delivered. It gets delivered to the wrong address. You're going to onboard someone and put the wrong company's logo on it. And every one of those examples that I just said is something that we have done at some point in my career. And so I want to tell you, you two stories. And then I want to drive home a couple of principles that have served us well. Use them if you want, but they have worked pretty well for us. And so I'll tell you two kind of

polar extremes. So I buy a lot of gym equipment, even though I'm not even in the gym industry technically anymore. I have a massive gym that is in our headquarters. That's really sweet. I'll just put it that way. We'd be like 85 unique pieces in the gym and it's just just for me and the team. And so I, all the pieces are bought from individual people. I kind of put the pieces together that I like. And so it's not just one distributor. And so I had a piece of equipment that I bought and I was really excited about it because I was like, oh man, I love this piece.

It's going to be awesome. And when it showed up, it was bent. Like the frame was bent. And the weight stack was kind of off. And so one of the main poles was bent. So then it was like this whole ordeal. And when we called the company up, he was like, well, I mean, you accepted the shipment. And I was like, yeah.

because the truck guy was like, what do you want me to do this? I was like, all right, we'll drop it off. He's like, well, as soon as you accept the shipment, it's your liability. And I don't know if it, like, it happened before or after that. And I was like, well, I'm telling you it happened before. And I just wanted to help the guy out, who was the truck driver, like, complete the runs that you had for the day. And he was like, sorry, dude. And I was, all right, well, I mean, can we, can we get like the pieces or something, like a new frame that you can ship out just that piece?

And he's like, well, that's going to be extra. And I'm like, dude, I bought this thing. It arrived not the way that I bought it. And now I'm incurring additional costs in terms of financial costs. But I also have the additional cost of now I'm talking to you when I'd rather be using the piece of equipment. And so the TLDR of that is I basically just threw the piece out. And I hate the person who I did business with. And I will tell anybody who ever considers buying from them that they suck.

Now, let's take the alternative example. So last year, I went to Orlando for JimCon and we stayed at the Ritz. And when I went to the Ritz, we had our team with us. And so we went out, they have a Michelin Star restaurant there, which by the way, I found out was actually named after Michelin Tires, totally random. I saw like the Michelin Tireman at the front of the restaurant. I was like, this feels weird. But it's actually what it is.

Anyways. And so we go in there and it's this really nice restaurant or whatever. but it took three and a half hours to eat our entire meal. We didn't get drinks for like 45 minutes. We didn't get the appetizers until minute 90. And I was like, dude, this is absurd. I was like, I honestly just want to go get Chick-fil-A. Like, I don't even care, right?

And so anyways, we finished the whole dining experience, if you want to call it that. And the manager of the hotel, you know, our team was like, hey, just letting you know, like this was pretty tough. And as soon as the manager found out about, that he was so upset he was like oh my god I can't believe this happened we had just switched staff over we're training some team up and I think we were under you know short you know short staff that day whatever he said but that's a hundred percent our fault he said please let me make it up to you and so for the remainder of the trip like one he comped

the dinner that we had there which was expensive then we got upgraded uh I think rooms for the rest of our stay they he said please like they delivered like fruit baskets and drinks and and other stuff to our room throughout the day and my team's room. So it's not just me. Like we had eight people with us staying in four or five rooms. And so all of everybody got taken care. If he made us reservations at two different restaurants, the next basically every other night for us to choose from.

And then he met us at the restaurant to seat us at the table. He got us the appetizers and drinks at the restaurants that he met us at to make sure that we were okay. Now, I'll tell you this. Since then, if I go to Orlando, know I stay at the Ritz and I talked and I talked to Javier because Javier is my dude and Javier goes above and beyond. And the other guy at the other company, I don't say anything about. Now, I don't even want to say the name of the company because I don't want to give them air time. All right. And so I think there's some really interesting principles about this that we've taken

from for our business. So Disney says that there's 37 magic moments that it takes to make up for one tragic moment. And I think there's two kind of levels to thinking about this. So the magic moments It means it takes so many good things to make up for one bad thing. So by all, for all intents of purposes, avoid the tragic moment because it's going to take you so many to make up for it. But if you do have that tragic moment, then you have to do a ton. And I see that on kind of bi-directionally. Now, one of the things that I like to think about a lot is like, I never want to become

someone's project. And what I mean by that is like, if you piss someone off or you do something wrong and you know you did something wrong, you don't, you don't want that. person to stew and just think like how am I going to destroy this person? Like you don't want to become someone's project. And so I've talked about the angry boat and I'm going to get to that in a second, but I actually want to hit on this point because I think it's really important, which is that a refund to a customer is an apology, but you have to do better than that. If you hit your wife and then you apologize, it's not just like, oh, we're neutral. It's just as if I hadn't hit her.

It's like, and I'm doing this as a natural extremity by hyperbolic, but like, you wronging someone and saying, I'm sorry is not enough. And so let me, let me prove the point. If you accidentally kill someone in manslaughter, society deems you saying sorry family isn't enough. So what does the government do? They sentence you and they put you in prison. So they say, you have to say sorry and you have to pay 10 years because of involuntary manslaughter. They say sorry isn't enough. And so. refunding someone isn't enough. If, if Javier at the Ritz had just refunded me the meal, I wouldn't be like stoked. I would have been like, well, you wasted three and a half hours of my night. And it's and like the food was cold, like all these other things. Like I'm not like, I'm not back to neutral, right? Like one tragic moment, he gave me a magic moment. Okay, give me a refund.

And so one of the things that you have to wrap your head around and this took me some time is like, you actually are going to go negative on refunds. Meaning like you're going to lose money. You're not just going to be like, oh, well, you paid me a hundred bucks. someone to pay you $100 back, now we're even. It's no, because there's additional cost that they incur. And so, like, they got dressed up. Like, or like, if we got dressed up to go out this nice restaurant,

we have expectations of the evening that are going to be really good. And so not only did we pay money, but we paid time. And every person, you know, the, the gals of my team got all dolled up and all that stuff. And all of this is for, it goes completely into the tragic perspective. And so as a customer or one of your customers has one of these experiences, it's like, dude, refunding them is not enough. Hey guys, real quick, I'm going to give you a little Easter egg. If you screenshot this episode right now and you tag me on the gram, I will share it,

but put the word, make it right. All right. So say make it right in the tag. And I'll know that you got to this point in the podcast because you are hardcore and you are always trying to make your business better and trying to do right by other people and yourselves. And so it's also a way that helps me know that I'm doing a good job so that I can make the little voice inside of me and say that I'm proud of me. Anyways, if you got value from this, it would mean a lot to me and I will do more of it.

And so we have to do, have to go above and beyond. And so one of the issues that happens, though, is that when it happens, and this is, this is now me talking to the teammates, so people who work in businesses, like, what you can't do, and I'm just, I'm just, please, I'm begging you. What you can't do is try and minimize it to the customer, right? Like, Javier could have been like, oh, I mean, like basically by saying you're being ridiculous, don't be a victim. Like that's whatever you say when the person's like,

hey, the food was late, all you're doing is trying to invalidate them. You're basically saying you're lying or you're not telling the truth or, I mean, pick your poison. And you're basically saying that you don't matter. That's what you're saying. And so what happens is that people then escalate to be like, yes, I do matter and you don't understand.

And not only that, but I'm going to punish you. And so what do you think one star reviews are? Think about it for a second. A one-star review is a customer's way of being the judicial system and saying, okay, this person refunded me, but they needed to do more. And so I'm still going to jam them. I'm still going to put them in prison even though they apologize for killing my husband and manslaughter, right?

Even though they apologize, that wasn't enough. So I'm going to punish them with a review because that's all I can do. Those are the things that they have control over. And so we have to go above and beyond. And so I'll give you an example recently. And so we had a scheduling mishap. And we had seven people who were going to fly out to our headquarters. And basically they came here and there was nothing happening that day because the sales team messed up times.

And so it's like in five of these are international. Think about this. You travel across the country or across the world to you get your expectations up. Some people have to apply for visas. Like big, big, big, like expectations, big work. big money, all of these things like beforehand, right? And they show up and like nothing's happening. There was a scheduling mishap, right? And so what do you do? Right? Like that's a big, big mess up. That's a big mess up. It's absolutely unacceptable. So here's what you don't do. You don't say,

hey, you should have checked the email or hey, we sent some other correspondence that that might have, you know, conflict, like you don't go into any of that because it doesn't matter. They don't care. What matters is that it's always immediately your fault, and you have to be angrier about it than they are. And this is the angry boat. The thing is that even though I preach this, it's still hard to do when you're in the moment. Because no one wants to accept fault because fault is associated with all these negative things in our past. Because in the schooling system, if you say your fault, you go to detention. Like you get punished by saying it's your fault, so you always want to blame.

Hey, Timmy is the one who turned the music up, not me. So Timmy gets punished. But the reality is that in business, you always want it to be your fault because if it's, your fault, it's under your control, which means you have the power to fix it. That's what's key. And so as soon as you have that instance, you jump in the angry boat as fast as you can. You want to be quicker to the draw getting angry than the other person. And a lot of times customers will have one of these experiences and they'll shoot out the situation to wait to see how you respond because they want you to be upset about this because they are already angry

and they're trying to contain themselves, trying to contain their emotions. And what you need to do is be the one who gets emotional for them. That is the ultimate validation is that something bad happens and you say, that's ridiculous, that's unacceptable. Oh, of course we're going to give you your money back. Of course I'm going to refund all of your travel expenses,

which by the way is what we did. We give them the money back, give the travel expenses, but that's still not enough. It's not enough. Because if you travel across the world, you're like, okay, well, great, my flights, but like I just lost four days of travel

and I had these expectations that weren't met. And so we're taking the whole, you know, the seven people out for three hours. We're going to go to dinner. We'll probably end up doing three hours of personalized consulting for each of these businesses, which is not something that I would normally do in an effort to go above and beyond to make up for something that that otherwise shouldn't have happened. And the reality is, is this like let's be, let's put our hats on for a second. Is this my fault, Alex's fault?

Was I the one who took the call? Was I the one who messed up the scheduling? No. But guess whose fault it is? It's mine, right? I pay the people. I'm the, the buck stocks with me. And so the idea that sometimes I see business owners saying things like,

well, that, you know, my team messed. Dude, you fucking messed up. Like, that's the thing about the entrepreneurship game. It's like you get the upside, but you get the downside. You get it both. And you've got to be able to be comfortable with that. And the thing is, like, you have to accept. And I want, like, this is the thing as soon.

as I go in my mind is like, I flip this switch or it becomes a game of how can I blow these people away, right? As soon as I have like a clear and obvious wrong and it happens, we mess things up. We're human and humans work for us and humans make mistakes. And so when as soon as, as soon as that happens, it becomes this game of, oh, RY is out the window. I'm already going to lose money on this. Duh. Right? Like, you're going to give the money back plus extra cost that they incurred. Plus now you're still going to incur the cost that you would have normally done to deliver whatever it is that you do, right? But the thing is, is I am in a fucking advocate of the Ritz Carlton and Orlando and Javier. I tell everybody when they're like, hey, where should I go?

I'm like, go there, go to Javier. He's the fucking man. And I tell everybody that. And so I'll bet you they have more than made up for the transgression of the one restaurant experience and him meeting me at the other restaurants and sitting us down and taking five minutes before two or three or four other experiences we had while we were there, those little minutes meant the world's because I know what kind of business owner, what kind of entrepreneur, what kind of operator operates that way. It's somebody who gets it. You get the game,

which is that did Javier mess up? He's not even responsible for the restaurant. It's not even his division. But he did it because he knows that I don't care. And he had the power to fix it. So even if it wasn't his fault for the transgression, he had the power to fix it. And so it becomes his responsibility to make it right. And side note here with the angry boat is, one, you want to confront it head on. You don't want a pussyfoot around it. You got to say like, this was our mess up and I'm super pissed about it. Second, you want to get in fast.

Third, validate, validate, validate. You want them to feel heard. You want them to feel felt. You want them to feel felt. You want them to feel like you feel their pain more than they feel their pain. Because here's the reality, and this is the underlying highlight point. There is no way that you can minimize someone's pain. Only they can minimize it.

You cannot invalidate away someone's feeling about being wronged. The only person who can say, you know what, it's not a big deal, is them. And so the only way for that to happen is for you to be more upset so that they say, hey, it's not that big of a deal calm down. And then they said it not you. Because if you say, hey, it's not that big of a deal calm down, they're going to be like, roop. Yes, it is. You need to validate me. And then you're like, oh my God, you're right. I should kill myself. And they're like, do. Don't kill yourself. And you're like, it's not that big of a deal. Like, okay, fantastic. They come back down. And I say the, I use, I use hyperbotic extremes to make a point,

which is if you want someone to feel better about something that you did, that wrong, to them, they have to initiate it. And the only way they're initiated is if you make it a bigger deal to you than it is to them. Messing up is a part of business. And if this was not a mess up of an episode for you and you actually did get some value from it, to counter some of those one star views that I have. I don't think I have that many. But even if I did, a five star review if you've ever gotten value from this show, especially recently, would mean the world to me. And so it encourages more people, more business owners to watch and listen. And hey, I think this particular message, I think if every business acted this way, I think we'd all be happier customers. Also,

those businesses would make more money in the long run. And that's the key point in the long run. And hopefully you're not in this game to get in and out, but you want to play it for life. And that's what the game is about. So please review, enjoy the show, and I'll see you soon. And so I want to do a quick transition to employee stuff around this. So if you were the person who messed up, like you're the actual person. Now, of course, it's the entrepreneur. It's always our fault for sure. But on some level, if you're the person who messed up on the team, let me tell you what not to do. Don't try and skirt along. Don't try and pretend like it's not a big deal. When you say to the team, don't try and minimize me like, oh yeah, I kind of messed up the dates on that thing.

Don't fucking do that because it's the same thing in reverse. Because the owner, your manager, your leader, the entrepreneur, he's the customer. She's the customer in this incident. And tell you what I want to see. I want to see you losing your fucking mind over how upset you are at this mess up because the thing is, if you're not upset enough, I'm going to make you upset. And so one of us is going to make you upset and you want it to be you, not me, being really real with you. And so I'll tell you what I'll tell you what I told the individual. I said, listen, I know, because I know, I know the person, you know, like obviously, it's multiple parties, blah, blah, blah. But at some point, sometimes the buck can stop with somebody. I said, listen, I know that you're beating yourself up

over this and you're beating yourself up over it in silence. I was like, but the thing is, it's like, no one cares. No one will give you credit for beating yourself up in silence. They will give you credit for two things, making it right and making sure it never happens again. That's it. That's all that matters. And so there is, there is no more useless emotion than feeling sorry for yourself. It changes nothing. Like no one gets better by feeling sorry for themselves at all. And so if you did mess up, just skip past the guilt part, skip past the shame part, skip past that and go immediately into the what can I do to make it right? What can I do to make it better than right? Sure, you hit your wife. Sure you said, sorry, but now what? We got to take out to dinner and get her nice necklace,

get us some flowers and then go to fucking anger therapy and make sure that, you know, like whatever. Like you do all the things to go from tragic to neutral, and then you go above neutral to try and make them to a champion. And then you do all the things to make sure it doesn't happen again. That's the point. And so too many businesses basically think that a refund is the highest level of what they can do to make it. They're like, I gave him his money back. What else does you want? A shitload more.

That's what they want. Way more. And the thing is, and I'll tell you this, is that if you incur the cost of the refund plus the additional costs, and you lose actual money, actual resources trying to make it right. Guess what you try not to do. You try not to fuck up so much in the future. Because you know the real cost of it isn't just like, and like don't even get me started on companies that won't give a review.

Like don't give a refund on stuff. Like if people, if a huge percentage of your customers are asking for refunds, fix your shit or stop selling it. Like either you're selling it wrong and you're setting crazy expectations that no one, no one can live up to or you're just delivery sucks. But like if you're getting lots of refund requests and then you're like, well, I can't give the refunds otherwise I won't be in business, then maybe you shouldn't be in business.

Fix your shit. And I get I get I get I get I get I get I get jazzed about this. I like I came into the team this point. I was like, oh, I know what I'm going to talk about because this is hot because we just mess this up. We just had this mess up happen. And like you have to own it and you have refunds aren't enough. refunds are apologies. No one cares about apologies. People want more than an apology because they will punish you. And society believes that too. You don't just say, I'm sorry, I killed somebody. I'm sorry. I was a drunk driver and I killed your kid. I'm sorry is not enough. A refund is sorry. A refund is sorry. And people want more than that. And so you got to get them into neutral. And then, and here's the cool part. So this is my silver lining for this.

is that if you do turn a tragic moment into a series of magic moments afterwards, you can create brand champions. You have a higher potential to take somebody and make them a true believer in what you do. If when you mess up, you own it and you make it better than right. Because they're like, these guys messed up, but they went so far out of their way. And if anybody's ever had this experience, and I hope you have at least one time in your life where a business owner went above and beyond, They didn't just make it right.

They made it better than right. And then what happens? You become a customer for life. You have a higher potential for being a customer for life. And I remember there was an acquaintance of mine who was in the hot sauce business, just kind of random. And he had a customer. So he had sent them a hot sauce kit or something. And it didn't have caps.

And so they couldn't use the hot sauce because it didn't have a cap in the kit. And so he sent a handwritten note to them and he sent extra caps. not just enough, but like more of them just in case or whatever. And they said, they sent him back a note being like, wow, that was so nice of you. Like you went above and beyond, whatever. And so he actually started sending the kits with handwritten notes with an extra cap because of that experience because that person then changed their one star to a five star because of the great experience.

And I don't know if you've ever done this. You've seen this like updated reviews where people say, hey, I left this one star, the company, the founder reached out to me. He got on the phone with me. He made it right. The thing is, is that people want to punish you when they feel invalidated. And you can absolutely, you can, you can make them feel validated. Like the reason malpractice, so they did a bunch of research, like it's both my parents

or physicians. There's a ton of, ton of research on malpractice. The people who get sued for malpractice are doctors that people hate, not people who make the most mistakes. Isn't that interesting? So they tell this story of a lady who, uh, had some sort of thing that happened that was wrong in like a clear lawsuit. And she had had like two or three physicians that she was going for like cancer or something,

whatever it was. And when the, uh, she hired this malpractice journey because she wanted to go after this physician. And so after doing more research, the lawyer was like, hey, it's not this guy who actually technically made the mess up. It's this one, your primary care, your general physician. And the lady was like, oh, Sarah. Oh, I love Sarah.

No, it's, it's fine. And so it had nothing to do with the. transgression. It had to do with the fact that they actually hated the person. And so the thing is, is like people, people, people want to punish you if they don't like you. And you, you increase the likelihood that they do like you by going above and beyond. And so here's one tactical thing, one more last tactical thing, from my notes that I'll give you. If you deal in a business that has lots of transactions, high volume transactions every day, what you want to do is you want to give someone a box of responsibility. You want to give a box of decision making power. And so they do this in the hotel industry,

and this is why I like stealing things from one industry and putting into another. And so, for example, if someone wakes up in the middle of the night because they smell smoke, right? And they come, they call to the front desk, they say, hey, I smell smoke, I can't sleep, blah, blah, blah. That front desk person, if they have no power to fix it, the customer still holds them responsible. So they basically, you give them a losing card. They can't do anything. But if you say, these are the things that you have within your responsibility, that within your power, you can give someone free, free drink credits. You can give someone a free meal.

You can give someone a free upgrade. All right. So these are the three things you can do based on the level of the mess up, right? If someone had to wait 20 minutes for a bell hop, okay. Is that like end of the world? Probably not. Here's two drinks just in case you're waiting or for tonight to make it special before you go out. All right.

Now, if someone can't sleep because there's smoke and they shouldn't have had smoke in the, that's a pretty big mess up. So what do we do? Well, if the front desk person has the power to upgrade them for the next room for the next night, then you probably refund them for the night before and give them a free upgrade for the next night. But you have to give your team the two or three things that they can do and then just say, listen, if you're using up more than five of these a month, then like we need to fix a process here. But these are things that you can give out as freebies that you bake into the profit margins of the business

so that you know that you can make things right when things do inevitably grow wrong because people are human and humans dealing with humans leads to mistakes. So what to do when you mess up is don't just refund someone. That is not enough. Go above and beyond. And if you do that, you might just turn a hater into a lifelong fan. Be awesome. Take care of your customers.

All that good stuff. Oh, by the way, share this if you can. Mean the lot to me and all that stuff. Otherwise, I'll stop doing these. Not really. I won't stop doing them. But it would just mean a lot more if you did that because then I'll know that you do like it.

And then I will actually, I will, I will probably make more if you share it. How about that rather than stop or start? I will probably make more if you share these. Anyways, keeping awesome. Catch you soon. Pop.