The Game with Alex Hormozi - Listen to These 23 mins Before You Try to Sell Anything | Ep 725

Episode Date: August 2, 2024

"There's no generic business consulting that can deliver as consistent of an outcome [for customers] as a very niche business" In this episode, Alex (@AlexHormozi) shares the story of scaling the sales system when Gym Launch was getting started. He breaks down fundamental selling principles that he had to learn before he started to succeed with sales and scaling a niched down licensing business.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.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Before you sell anything, you need to learn these fundamentals. He was honestly the first 10 customers I sold. His gym was losing money. He was working a 9 to 5 to 5.5 job. He would work from 5 a.m. to 9 a.m. at his gym teaching sessions. He'd go to his job at 9, 30 or whatever. Work from 9 to 5 to 5 to 5 to 5 to 5, 6, 7, 8. His wife had just had a baby.

She was pregnant with their second child. All of his income from his primary business went into the gym that was losing money, and they had nothing left over. And so he called me up, or he didn't call me up. He responded to an ad. And I got on the sales call and I was like, all right, it's whatever it was. And he was like, I would buy this. I need this.

But I just gave my last 10 grand or my only 10 grand to this coach that was going to teach me how to have an online fitness business. And I was like, do you have an online fitness business? And he was like, no, it didn't work or whatever. I was like, well, what if we just made your gym make money? Would that be more? He's like, yes, I'm fine with just making money. and make money. And so, um, I asked him put a thousand bucks down and he like put a thousand dollars

onto a credit card or something. That's so beautiful, bro. That's so, that's sick. They made $38,000 in the first 30 days. I think, I think that's the coolest story in the world. Whenever you give somebody the chance to buy an out of thousand, knowing you, you probably never even let nobody buy anything. No, everybody started a thousand bucks for the first three years. Wow. Wow. Because all gym owners are broke. All jing orders are broke. And so it was a thousand down, thousand a week. So the thing is, is that, and this is what everyone in the entire, like, the entire infospace still doesn't get because everyone's like, my programs, it's like, no, it's not. It's not.

It's not. The average gym that still, to this day, goes through gym watch space over $20,000, an additional new revenue in their first 30 days, average. Average. First 30 days. We track it because it's such an important metric for us. And the reason that we have to do that is because they don't have the money to pay me when I want to get paid. And so it's like, I know that this system's going to be.

going to on average, on average, triple your profit. We'll go from 36,000 to 112,000 in profit. Net of our fees is in after you've paid us. You'll make 112,000. That's the average over a year. But when you're broke, it doesn't matter because you're still broke and you can't buy anything. So it's like, put a thousand bucks down and I still needed him to have money for ads. So he had like $3,000. I was like, keep two for ads. Give one to me. And you're going to run this ad, which is a video of Layla. You're going to run this ad to this landing page that I've made. You're going to put your logo at the top.

And then when these leads come in, I was like, you're going to call them like, you need to feed your family, which you do. And so that's exactly what he did. And so once the second payment came in and I gave them like a 14-day delay because most them didn't have any money. And so they would pay it. They'd collect cash from the people that were coming in and they could make the payments. And then I gave them an incentive in the first 30 days to prepay the rest of the thing

at a discount. And so that way it turned $1,000 down into $16,000 in the first month. And so my LTV to KAC and my cash flow in terms of acquisition was super strong. And then like we ran that, we ran that for a very, very, very long time. I think like a year and a half ago, I think after after I sold and Kelton, he switched it from a front end and a back end to just selling a year for 36, I think is what it is. And so that's what they do now.

And it's just they bill every 28 days. I think it's 2997 or something like that a month. So it's, you know, 3K down or whatever. And that's fundamentally what happens. But like, I'm just saying, like, the reason the niching is useful is that when you niche down, you can productize the delivery. Like, there's no generic business, quote, consulting that can ever deliver as consistent of an outcome as a very niche business can.

Because imagine if you had to do it generically, you'd be like, okay, come up with an offer, make something free. and you'd want to run it to a lead gen page. And then when the leads come in, you want to call them quickly. You have to talk in generalities. Whereas I was like, here is the ad. This is the landing page. This is how you set up your lobby.

When they walk in, say these words. This is the price you're going to sell at. And by the way, here's the delivery for it. Here's the meal plans. Here's the cooking out guide. Here's all that stuff. You can put your logo on it. You can make it yours.

I already spent all the time doing it. And the sales training they went through. It was the sales training. I put my trainers at my gyms through, which, by the way, my sales training was less than hour. And so there's all this closer training out there that's hundreds of hours long. But when I needed to get guys to close, it was 60 minutes. It was like, this is what you say to them. It wasn't psychology. It wasn't like, so we want to increase their demand. I was like, when they walk in the door, say this.

And then after they agree, say the next thing. And if they don't agree, you don't move on until they agree. Then you go to the next thing. And then here's where you ask for money. That was it, because I wasn't trying to make a course to impress people. I was trying to make a training that got on someone a result. And again, I did turnarounds for two years. And so, like, I had to give stuff that to busy gym owners who hadn't paid me because the turnaround business, they didn't pay me. So I had to make the training for them like, how do you do nutrition? It was one 30 minute video. That was it. It was like, this is the color template. Weigh them in. Divide their weight by 10, which means you just move the decimal. I had to

break it down. I was like, okay, so it means of 21 food units. Put the first eight over here. This is all their protein. Then you can tell them, you can scatter the rest between carbs and fat. You just do the yellow list. Got it? Great. Have them take a picture with it in front of them. That way, their numbers there, put it against a wall like this. Like, there's just, there's nothing they could mess up.

And because of that, because all the variables were controlled, they all got a consistently good outcome. They just took a long time to do. Because I had actually done it at multiple locations. And then 30 plus turnarounds in different markets. So also, when I get the customer who was like, this won't work in my market, I'm like, I've got five other gyms on your block. But people are very limited.

You know, I had one of the gym turnarounds that I did, I launched the gym. This is important just for your customers. I launched the guy's gym. And when I decided to switch to licensing, I called back all the guys who had done the turnarounds for. I was like, these will be the easiest says. They literally saw me crack a hundred grand out of their gym in three weeks. Called one of the guys up and he's like, how do I know it's going to work?

I was like, I just did it in front of you. Like you saw me meet with 250 people. He's like, well, I don't know if it's going to work for me. And I was like, you will never went. But like some people are like that. So kind of like a really specific situation. So like, so I started as a B2C offer, right? But my top 10% of guys who like really kill it or the existing agency owners usually

stuck at a certain range and I install like the closer infrastructure and all that stuff. If I wanted to explore that and make that 100%, how would I deal with my existing 40 guys who got in at a B2C offer who have this like expectation that I could like help? The B2C offer is what to make money like a generic how to start an agency offer. Yeah. Yeah, I would get rid of those. Yeah. Well, the same thing about this way.

Just like, again, LTV to Kack. Like how much the cost to acquire them, how much, like, when people were trying to decide between avatars, which by the way, the concern you have is that probably the number one most common concern that people have in business. It's also one of the biggest leverage points that you can have is picking the right avatar. So you're in this overarching space of agency, but if you, like almost always when you go up market, you make more money.

always. And so when you deal with somebody who's a higher quality prospect, they pay more, their lower maintenance because they already have more skills coming into it, and so forth, right? And so if you just look at, because I had a hair salon lady asked me this question. So she was like, I have, I'm getting 17 to 1, or sorry, 24 to 1 selling hair stylists on my extension technique. So she had some extension technique that was like, extensions are like two grand. And if you, and she had a technique to do it in like 30 minutes. So they could make a ton of money in a very short period of time. And she's like, and I have business consulting or coaching or whatever, which has like 11 to 1, LTV to KAC. She was like, so should I focus on like my business coaching

offer or should I just sell this hair extension, just like teaching how to do hair extensions, which is not really a business offer at all. It's just like how to, it's like a hair thing. Right. And so I just boiled it down to LTV to Kack times Tam. So it's like if you have crazy LTV to attack and you have a massive market, which she did, there's way more hairstylists who don't want business coaching and just want to learn more about hair. So it's like you have both more customers and a bigger discrepancy between what it costs you and what you make. And so then the only thing is just N. And if there is a massive market, then you can crank N is in the number of units sold by a time.

And so I was like, and from there, you can cross out the coaching thing if you want to, the business consulting. but stop running two front ends focus on this one that you have the greatest arbitrage on smash the shit out of that and then all your focus becomes on ascension and cross-up that makes sense so for you i would probably like you're going to have to sunset the the 40 guys over time if you are better at delivering a result like go where the value is as in whoever you can help the absolute most is who i think you should sell to so if you're like i have three different people i help it's like well which of them like this happens in I had a lady who had a tile business.

So she sold tiles, like a very generic business. She's like, I sell to homeowners. I sell to designers, interior designers, and I sell to home builders. Three completely separate avatars. I was like, okay, which one's worth the most to you? She's like, well, home builders are pretty much just only care about price. I was like, okay, well, then maybe you don't sell to them. Interior designers, she was like, these people, they bring me customers all the time.

Like they come with the person they're doing the living room for whatever. And then the rest, you know, the people who just own homes, he's like they're, you know, they're kind of like one off sales, but they have the most margin. I was like, okay. I was like, which one do you like doing the most? She's like the interior designer. So I was like, how many people does an interior designer bring you on average per year? And she's like, 30.

I was like, okay. So she was calculating it at a transactional level rather than at the resident at the interior designer level. It's like, so how does it cost you to get an, I was like, how do you get interior designer? She's like, I do outreach for a week. once a month and I get like three to five more interior designers who come in. I walk the facility and then I share them what we do. And this, I mean, this business was doing 7.6 million top line and like five million in EBITA murdering it. And so I was like, cool. So you now are the red, the interior designer is now your avatar. So you need to become the interior designer deep, but you need to make their life

amazing. Don't sell to home builders, don't sell to home homeowners, just interior designers that are that you've got on your roster. And then all you do is you go from having 30 interior designers that send you business all the time to 300. And that's it. And there's 300 interior designers in every city. And so all she has to do, it's how to way to acquire them. I was like, forget everything else. So it's like you want to just like stink through that. And a lot of times that's where this massive unlock happens in businesses. Like most businesses go through this because you start throwing stuff on the wall. You start selling stuff. You start looking at the customers you have. And then you're like, huh, I'm really good at these people. I suck at these people.

these ones are okay. And then you start making your delivery, you make a decision strategically to say no to this money. And this is where people can't do it. This is why everyone fails. They can't say no to money. So you have to say no. So when the 41st person comes on the phone with you and it's like, hey, dude, I like really need this. Like I'd love to have a way to, you know, make money online or whatever. You're like, you should just watch for most of these videos for free and then start a business. And when you have a business, call me. Okay. So like I know my, I mean, what I'm best at is the acquisition fulfillment and in the operations of existing agencies,

like my two best clients. If your course away for the money people, give it away for free. Okay. Give it away for free. And then you'll be like, look, I've had 40 people pay me whatever they sold, you know, you paid.

It's like, and I just want to over-deliver in value and I'll give it to you for free. And so use it because I really just want to work better with the agency owners because the zero to one stuff, you can just do it. Just do the work. It's not that hard. Like that way you can self-prove that you're legit.

And then I will help you scale it from that. And then like tangible items, actually sunset them like what does that even look like how long was the sale for the 40 how long did you sell them for was the duration it was like uh i was started off it was like an inner circle just like 6k like lifetime right so this is the problem with lifetime deals yeah you have a one-time one-time income with a forever delivery um like right so the the real real the ethical way to do it refund i think pull the road refund so if i make a decision just hard conversation refund integrity restore that's going to suck but okay how many of them are there what's up

how many 40 i am send them to someone else maybe that way are they still how long is it been it's been like two months oh okay i mean i would like this is the like this is the tough part you know like you either i mean the alternative is you but like the thing of that thing i don't like is if you had said it's a 12-week program, then I'd have been like, fine, live it out, like, finish it out, but you're like lifetime, you're just going to have these people forever. You're going to have these people forever. Yeah. Yeah. Because that's at least going to be 12 months. You've got 10 months. So you've got to trade off. Like, you could probably get away with it if it had been a year. Yeah. But you were only just starting. Yeah. To go all in on school, I had to refit. I had a calculation

of how many of my mastermind members I had to refund. I had to refund $2 million. to go all in on school that was losing 700 grand a month how about that did you say losing? Yeah, losing is it not? I refunded 2 million to focus on something that was

losing 700 grand a month dang. Why? Why? I don't know. Nah, it's worth it. Like if you do all the math, it was a no-brainer. Yeah. Balls of steel.

Yeah, it's just if you want to just play in the big league. I mean, these are mistakes. Like, people make mistakes in the beginning. Lifetime's easy to sell, but just because you don't think about ramifications. But saying no to money is always what is the biggest thing that makes you, like that, after I did that, I had a massive jump because I could focus on school, right? And, you know, people offer me, like, a lot of money, too, to go and, like, speak in an event, probably nowhere near as much as Homosey. but 100 grand in first class flights, you just say no, no, no, no, no, no, no, no, no, no, no, no, no.

Then you don't even bother saying no, you just don't ever employ. Yeah, and that, if you don't have the discipline to do that, then you'll get pulled in a million directions. Also, when you feel that sting of the 240 grand you have to give back, it'll help you say no to everything else. Because you're like, I just refunded all these people, I'm definitely not going to mess that up now. Like, I just spent all this money to get this attention back.

like, why would I mess it up? Yeah, does something too for your personal power or something. When you say no to money? You don't need it. Yeah, you're like, you show, it does something to you. It gives you some kind of power. There's no better feeling than turning money down. I mean, making money is also pretty good.

Especially with clients, you don't like anymore. Yeah, right. I would prefer to never see you again. Here's your money. Yeah. Really. I got like a little taste of it because I was like, I'm like the gatekeeper, the main closers. So if I didn't think I could coach the guy, I'd be like, no.

But refunding is a whole different kind of thing right there. Totally. But you'll feel super convicted. And when you get on the phone with people, you'll be like, this is for agency owners. And I'll help you scale or whatever, you know, whatever you're good at. And if you're not, then you're like, that's why I have this thing. I used to sell it. I'll just give it to you, man.

Just follow the steps. Realistically, though, you're probably not going to do it. So at least this way you can save your $8,000, which I probably could have sold you. It's a big conviction. That's sick. Sweet. I have the same thought as him. because I have a program called Start and then Scale, but

Sell to the scale people if you're better at them and you like them better and they're worth more. 100%. I did have a question. If it's better offline, that's cool. How do you, for instance, like somebody joins at 30, gets to 200, how do you market that testimonial without a financial claim? So how can I actively share these stories? So getting into the, like, nitty-gritty with FTC is beyond my scope,

but for the most part, it comes down to timelines. That's the thing that, like, most of these platforms hate. It's like X in Y time. But if you just say X, I thought about this quite a bit. Yeah. And I've noticed that the only people that ever get in trouble, they did way worse shit than make a claim. Right?

Because I know the people that got into trouble, and I know what is going on. And I'll tell you how it happens every single time. Yeah. It's they don't give refunds. their disputes go up. They piss so many people off that enough complaint to the Attorney General that eventually so many complaints go to the Attorney General

that they investigate them and then they find everything. The first thing to go is always you get kicked off of Stripe. That's like the canary in the coal mine. No one that doesn't get kicked off Stripe, they never get in trouble, even if they're making wild claims on ads. but then when these people get pinged, they've got to like say, oh, everyone's doing it. Everyone's breaking the rules because they're trying to show like that they're not a criminal.

Yeah, we just crossed, we just stepped on this little rock. The refunds thing is bar none for sure. Like I, there was a guy, I'm sure we both know it, but who, who got dinged by the FTC. Dings a very nice way of saying it. And I knew for like, I was in a room like this because I was in the back room and he was speaking yet the same thing as me. So like kind of funny. Um, and he was like, how do you guys like stop all these chargebacks? And I was, I was, I was like, yeah, all these people like, they're just, these assholes are charging back. And I was like, well, I mean, I was like,

we don't have, we just refund people if they ask for it. He's like, oh, no, we don't do refunds. I was like, I mean, at all. He's like, we say no refunds. I was like, but you, you literally don't give any refunds. He was like, oh, no. I also, I mean, Sam said this, I think like three ago, and I just love this is like you don't want to become someone's project. Like you don't want someone waking up thinking like how can I destroy Shark today? Like how can I ruin this guy's life? Because because that six grand was the last six grand he had and it meant a hell of a lot more to him than it does to you. So just give it.

It means more to him. Just go get another customer. Bro, it's always worth it. You just give them money back. And they come back too. Like we noticed that. A lot of people come back when you didn't make a big deal about it. Or they'll buy something else.

Yeah. Because you know what? It's like yourself. You buy something. You ask for refund. You're like, how's hard this going to be? And if it's easy, you're like, damn, I'm, I like this company, right? Yep.

So Planet Fitness, believe it or not, obviously, a fitness example is. I know a lot of the big businesses there. But Planet Fitness figured this out, which is, so you might not know this, but a Planet Fitness to make money has to have 10,000 members, like a brick and mortar has to have 10,000 members to make money. And they still crank. And they can do that in a market that only has 50,000 people in total, which is insane to think about. But they don't have like zero turn.

They have like 5% monthly churn, which is you're like, wait a second. How would you do that? They cycle through the entire town over and over and over again. And so what they figured out was rather than being like the dicks on the way out, they said they call it the friendly goodbye. And so it's like they're like, oh, you want to cancel? No problem, Steve. No worries. Let us know when you're, you want to come back.

Like, we'll get you going. Like very friendly on the exit. And so then Steve, when he like gets the next gig or gets to the next job or he feels fat again or whatever it is, he signs back up because he was no big deal. Also crazy how many people don't actually use the membership. They like paid for it and then. Oh, 92% don't use the membership. Yeah, it's the only way the business model works. If they did, they'd have to charge $200 a month.

Beavit, yeah. It wouldn't be room. Yeah, I mean, the reason microjims are priced that way is because people use the membership. And it's the same screw fetch. So like the worst thing that, and so like, I mean, I can talk about penis fitness, but I'll stop. How would you choose between the friendly goodbye and then the one that he mentioned where it's like, if you leave, you have to pay the entry fee to come back? Those are different. One is a refund. One is like someone trying to cancel, which I see is separate things. One saying, hey, I want to cancel your service. One is like, I paid you, please give me my money back. It's not very friendly to say you can't come back ever again. And it's also not.

early true, I think, because someone can just make another account. How are you going to know? Well, for a high ticket, I can imagine. But like, I just, whatever. I mean, I've, all the people that I know who have done it and don't have good communities, it does nothing. If you have a great community, then it matters, but then does it matter at all because the great community is the reason that it happened. So TLDR, I don't know if the tactic does anything. I have this on a way smaller scale. It was like my second close, like 10K and I was all excited. And he's on the coaching call and he just wouldn't knock on doors. He said he tried it for 30 minutes. because one thing we teach is door to door marketing to book jobs.

So I was really hesitant on what to do. And I just bring down the energy. So I let him out of the group I refunded him. And then I posted my free Facebook group, A, had a client, wasn't really ready to knock on doors. You know, if any of you guys are actually willing to do this, if you have a spot open. And it brought my ideal clients.

I actually book close four off that post. You're like, in every week, you're like, I had a spot open up because, yeah. Yeah, not mean, to speak, tell the truth. Yeah. I got one question about like, I've heard you guys talk about like off-boarding interviews or like, you know, like taking, you know, somebody wants to, you know, wants to cancel their membership or wants to refund.

You're like, yeah, for sure, just do an interview, right? Is there any way we could maybe get that going on in school? Like, whenever somebody churns, like, obviously, like, it's hard to get them on the phone, right? You know, at that point. But I'd love to, like, figure out maybe that at some point. Like, oh, yeah, you want to cancel? Cool. Press this button.

Schedule an appointment after we talk. I think they have to be able to cancel easily, but I think, yeah, they have to be able to to cancel easily, but I think you could encourage them to take a call after the cancellation, try and resell them. Could we do a Zapier integration for the cancellation? We were just thinking an auto-D-M would probably be the best. Auto-D-M. Yeah.

I've noticed the Zapier integration. The Zapier integration feature on school is amazing, by the way. But we started doing this in one of our communities where people join, and we immediately send them like a welcome call, and then we just like immediately upsell them. It does really well. Are the new customers at? Yeah. Oh, yeah.

That crush is just for everybody. by the way. If you let people come in and just give them an onboarding call, it's just, I mean, think about what an onboarding call really is. It's like, what are your goals? What have you struggled with? Where are you at currently? What do you, like, why haven't you succeeded so far? Oh, I think we might have some things for you. It's just like, it just lends itself naturally to a sales call.