The Game with Alex Hormozi - How To Stack EFTs For Real...💰💰💰👆🏼👆🏼👆🏼 3 WAYS TO GROW YOUR RECURRING LIKE YOU MEAN IT #gymgrowthacking #notnattygyms #unnaturalgrowth | Ep 82

Episode Date: October 5, 2018

"It's math. You know what I mean? Like there's no magic around it." Today, Alex (@AlexHormozi) discusses how gym owners can break through EFT plateaus by understanding the EFT equation, cutting attrition rates, and increasing sign-ups. He emphasizes the importance of using math-based tactics to grow your gym and offers realistic numbers and examples to help gym owners succeed.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:(1:03) - Two factors: referrals and signups determine growth potential.(2:59) - Using the equation to predict gym capacity and future growth.(3:58) - 1st growth strategy: signing up more people through a launch program.(5:30) - 2nd growth strategy: reducing attrition through improved customer service.(7:08) - 3rd growth strategy: combining signups and reduced attrition for maximum growth.(11:09) - Combining referrals, signups, and attrition for optimal gym growth.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Everybody, happy Monday. Hope you guys are having a very productive caffeine filled, nicotine filled start to your week. If you don't like caffeine, that's cool too. So I just hope you have an energized start to your week. So my sales manager, Dylan was like, oh, that's serious to me, sales directory Dylan. I was like, hey, bro, do you think you could make a sweet video about how to break through EFT platelets? And so I thought I would use a nice sexy title like how to stack EFTs for real and the three ways to grow it. So I'm basically going to break down all the math behind this. So hopefully you don't get bored of this.

But where you can start, if you're trying to look at how to break through EFT plateaus, is just understanding how the EFT works in general, right? And most people don't know this. Like, we even own a gym and have a recurring revenue model. So first I'm going to show you the equation, and then I'll show you three ways to grow it. Cool. Awesome. So for those of you who are in my world, I call this the pie equation.

And the reason I call this a pie equation is because I figured it out when I was cutting and I really liked pies and it sort of looked like a pie But anyways, the way that it works is this, right? The top of the equation, you can split into two pieces, all right? You've got referrals People who come in and sign up because their friends told them about it and the other side have got cold traffic Okay, people who come in off of promotions, etc. Right? And these are only going to be the people who sign up for EFT for recurring not people who sign up for your front and all

offer challenges, little-barry-entry offers, whatever. Just people who sign up for EFTs. All right. And then on the bottom here, you're going to have your attrition percentage. Okay? So if you don't know what that is, that's just the percentage of people who leave each month. So if you had 100 people who were on your EFT last month and not including new sign-ups, of those hundred, 90 of them were left at the beginning of the next month, then your attrition

would be 10%. New sign-ups do not factor into your attrition. percentage. All right. So, you know, first billing in July, you have 100 people. Those same hundred people are colored red. And then in August, the next month, of those red colored people, 90 of them are there, it's 10% attrition. It doesn't matter if you send out of 100 more people, you still have a 10% attrition. Okay. Now, let's let's dive into how this works math-wise. Let's say you get two referrals, okay, this month, a little bit low, but let's just say you You get two referrals.

Let's see you get eight EFTs from cold traffic, okay? And let's say that your attrition rate is 10%, which is the industry average. All right, so 10% is the industry average for people who have micro gyms, owner-operative facilities. And if you look at these numbers, these are all pretty average numbers for the industry. Now, if you do the math here, I'll simplify this.

This actually becomes an addition sign. So it's two plus eight. So you've got 10 signups over 10% attrition. Right. What that means is your gym will cap out at 100 EFTs. Okay. So you can predict with a fair amount of certainty what your EFT is going to be if you change nothing. And so one of the things that my team gets on me about is that they like joke that I like see the future. They're like, he said that six months from now we would have 500 people in legacy. I'm like, yeah, it's math. You know what I mean? Like there's no magic around it. And the nice thing is that when you look at it, it is cold harm math, you can take your emotions out of it and just look at your business emotionlessly, whatever like, and then you can make decisions about it that makes sense and actually make you mind. Okay, so this is the equation. This is how you calculate your hypothetical max for your EFT and if you know that you change nothing in terms of your

sign-ups, right? This won't change. Now, let's grow it. Cool. So let's take the same concept okay now and let's say the first way you can grow and then we'll see where it caps out so let's say you join some badass program right let's let's call it a schmim launch okay and uh in this program you know you sign up 40 people 10 people a week on a front end defined end program and then you keep 75% on the back end which is with the average of people that we have do right and so you had 40 you came in on the front right and then that means you had 30 people Oops, that's ugly. We ended up staying on EFTs.

Okay? Now you have 30 on the top side, but let's say that you haven't improved your fulfillment at all, okay? And your attrition is still 10%. That means that you're looking at 30 over 10%, which means your new hypothetical max is 300 EFTs. Okay, that's it. Now, what happens, though, is if you look at this on a graph,

and you look at it month to month, what would happen is, let's say you're at 100 EFTs today. You're at 100 EFTs today. That means that month one, you'll be at 130, right? But minus the 10% from last month, right? So you'd be at 130 minus 10 because you're taking your 10% of your original month before. Okay? So you have plus 30 on the top, but minus 10% times last month, which was 100.

Okay? So that means that you now have 120. EFTs. Okay, that's month one. So you grew by 20 even though you added 30 because you lost 10. Month two, 120 is our last month number, right? Which means that we're going to lose 12 when we do this equation again, but we add 30. So we add 30, lose 12, and now we net 18. So you can see the growth went from 20, month 1, to 18, month 2. Now month 3, what are we going to have? So we're going to have 18 on top of 120, so 138, right? And then if you have 138 people that are in there, you're losing your 10%, which means

14, right, 13.18, 14, right? So you have 14 people who are going to get lost this time. You add 30, lose 14. Now you only netted 16 as your growth, right? And so what happens is your growth rate. If you look at it on a graph, it's an asymptote if you really want to get mathy. It looks like this. For those of you on a podcast, I'm showing something.

That's a direct line that goes up and then smooths out as it approaches a hypothetical max. Okay, so 300 EFTs would be here, right, which is your hypothetical max, and you're going to grow like this. And then it slows down and then it hypothetically never approaches. So what happens is here, like, and you're going to see the majority of your growth in terms of crazy growth right here, which will probably be in your first six months or so, right? And then you're going to be at 250 and then it's going to start edging, right? It's going to get, you know, then you're adding five and adding four, adding three, adding two. You don't know what I mean? It gets really slow near the end because the attrition percentage takes bigger and bigger chunks each month. Because when you have 250 EFTs last month, right, your 10% means you're losing 25.

So you fill in 30, you lose 25, you net 5. Now you have 2505. Now you lose 25 or 26 this month. You don't have been to the net 4. And so and the train slows down, right? So the second way to grow your EFTs, I showed you the first one. just sign out more people, right? The second way to grow your EFT, let's take the same numbers.

Now, in the original example, we said we had 10 signers, two referrals and eight cold traffic. So we said 10 signers. Now, the industry average attrition is 10%, right? So if you have 10%, let's say you cut that from 10%, right? Because your staff, you decided to start reaching out to your customers on a bi-weekly basis. You decided to write handwritten cards once a month. And you decided to track your attendance and call anyone who has. and showed up by day three of the week.

Hey guys, love that you're listening to the podcast. If you ever want to have the video version of this, which usually has more effects, more visuals, more graphs, you know, drawn out stuff. Sometimes it can help hit the brain centers in different ways. You can check on my YouTube channel. It's absolutely free. Go check that out if that's what you are into.

And if not, keep enjoying the show. That'd be a good idea. Anyways, I'm just saying. Don't mind me, right? But if you just did those two things, you would measurably cut your attrition from 10% to 5%. percent. Hmm, might be worth it. Now, let's see how worth it it is, right? So, if you have 10 per 10 people that you're signing up, that hasn't changed, but then you cut your attrition in half,

your hypothetical gym max is 200 EFTs. So we went from a hypothetical max of a gym with 100 to hypothetical max with 200. We doubled the gym by cutting this percentage by 5%. It sounds, it sounds like, hey, all I have to do is decrease by 5%. It's cutting in half, and that's why the math is so strong, right? You go from 10% to 3%, it's going to be more than tripling. It's going to be 333 EFTs, which would be a hypothetical max, right? And this is why this number gets really funky, the lower you go. Okay, so let me show you, let me show you some fun, some fun stuff for our matter, right? This might be interesting for me, okay? So, legacy is our top end program, right? Right now we sign up on average about 45 people a month into Lexi. Okay,

I'm just telling you the numbers. This is what it is. Okay. And right now, now we have a 1% sure okay so if we do the math here then our hypothetical max right is 45 divided by 0.01 we knows what that number is 4,500 gyms in legacy because the growth rate because we don't lose people and that's what's key if we had a 10% attrition okay let's just show the math here right 10% attrition we're still signing up 40 40 40 uh 45 people a month, right? Just to demonstrate this, right? It means we only have a 450 person max in legacy.

Right now we already have 500. So like that should, like 450 EFTs versus 4,500 EFTs by changing the bottom number going from 10% to 1%. It's big. It's important. Okay. So I told you that I would show you three ways to grow your EFT, right? to stack it. So hopefully you're tracking

with me. The first thing is understanding the equation, right? What contributes to the top? What contributes to the bottom? And for those of you who always get confused with this, because I always get questions about like, how do I calculate nutrition again? I'm going to write this one more time, but I'll say it out loud as I do it. It's, you're

multiplying, let's say you had, this is July, okay? Or let's just say last month. Okay? Last month, you had 100 EFTs. This month, Okay, this month. Of those hundred, you had 90.

That means you lost 10%. That's it. Where people get messed up is they say, well, I also signed up 12 people. Okay. Because now I have 102 people in my EFT, so I don't have any attrition. I grew. It doesn't work that way, right? So you have to separate the fact that your signups in no way affect your attrition.

Okay, it's how many people from last month that you billed? Were you able to bill again this month? That's how you do it. Okay? So I just want to clarify that one more time because I get questions about it all the time. And it doesn't need to be copied. Okay. So the third way to grow, the EFT, is to do a combination of both.

And this is really what we do in Jim Watch, and this is how, like, guys like Joey Huber right now are adding 100 EFTs a month. I know that sounds crazy to some people who are on here, not in our world yet, but like Joey has 600 EFTs, and right now at his growth rate, he will be at 1,000 within six months. Pretty neat, right? He has less than 2.5% churn at 600 EFTs. Talk about scaling delivery. You need to have systems and process in place. Are you reaching out to everyone on a regular basis? Are they getting handwritten carts?

Are you holding an event every month? These are things that everyone's like, oh, those are all neat. That's how you measurably reduce churn. That's that bottom number that massively multiplies how much you're getting. Right? Okay. So let's give maybe two realistic numbers because you're like, I don't know how we can go from 10% to 3%. That sounds crazy.

Okay. That's fine. But let's just say you go from 10 to 5, and let's just say you go from signing up 10 people on EFTs a month to 20. Okay, that's it. So we went from 10 signups at 10% attrition, right? Two, with schmim-smosh, right? You know, he must not be named, right? You go to 20 EFTs a month that you sign up, and you cut your attrition in half, okay?

You're like, listen, hand-rated parts sound hard, sound time-consuming. They're not if you have a system around it, but you're like, you know what? I'm going to call people who don't show up by Wednesday. I'm going to start doing that. I think that's a good idea. And you're like, you know what? I'm going to reach out to every customer that I have at least twice a month, just via text or message. Just that, just a pulse check to make sure they're alive and they're like us.

That's all I'm going to do. And so what that does is a cut your attrition from 10% to 5%. And then you say, you know what? I'm going to start using client finance acquisition and start spending money, right? Or start making money in the acquisition. So now I'm not limited by a marketing budget. So I used to have to spend a lot of money, lose money, and then try and recoup it in conversions. But now my bottleneck is really just my sales staff.

And so now I have 20 people for a month that are signing for EFT. Neat. But look how the equation changed by going from 10% to 5%, and then 10 to 20 on the top. This is what happened to your hypothetical EFT. This guy's hypothetical EFT is 100. That's the industry average. That's what most people come to us with is around 100 EFTs, give or take. Okay.

Now, this new hypothetical max is 400 EFTs. Ah, neat, right, when you play with math. So these should feel realistic to most people. These numbers are not crazy. Five people a week signing up on EFT is not crazy. Like, this is really, really super achievable for everyone. Like, everyone can do this. going from 10% to 5%

everyone can do that going on sub 3 is more challenging you got to be really really deliberate about it you got to be consistent you have to have the systems in place you gotta have good staff they got to smile training has to be on point all those things going from 10% to 5% is really just giving it

giving a hoot right and actually just trying to make sure that you talk to everybody make sure that you foster relationships okay just by doing that you 4xed your gym you didn't double it you quadrupled it Hopefully that makes sense. So anyways, drop this up.

Dylan, your wish is my command. I work for you now. So, Dylan's our sales director. But anyways, I hope this math gave you a little bit more sense in terms of how to calculate your attrition. It's last month. How many people from last month I was able to build this month? That is what the attrition number is.

That's where most people get jacked up. Seeing the power of lifetime value in how like going down by 5% doesn't just mean you make 5% more. It means you double your gym. right double and then seeing the power of what like client finance acquisition can do to your gym and when you use both these things together decreasing your turn increasing your synops how dramatically it can increase the revenue that you're bringing it cool so hope that makes sense for you guys um some of my last few videos have been more attention based more you know

how to how to live as a gym owner more theoretical this is hardcore math tactics this is how you grow your gym this how you stack your eFT so anyways have an amazing Monday everybody I hope you are crushing your goals, living the dream, and I will see you on the other side. Right. And like, you know, like, comment, share, tag somebody who needs to know how to do the math. All right. Bye.