The Game with Alex Hormozi - Make up to $75,000/hr with These 10 Lessons! | Ep 397

Episode Date: June 14, 2022

Are you ready to up your money game? Today, Alex (@AlexHormozi) talks about the 10 lessons you can start doubling the amount of money you earn per hour, dives deep into each factor, and why time is the most important ingredient of this money-making formula.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:(0:46) - #1: Focusing on what truly matters(2:32) - #2: The importance of your share in the business(4:14) - #3: The value of time in achieving big goals(6:04) - #4: Building a strong brand(7:59) - #5: Simplicity as a key to scaling(9:14) - #6: Managing emotions in business(11:23) - #7: Attracting top talent with big opportunities(12:35) - #8: The power of compounding in business(15:10) - #9: Minimizing risks for sustainable growth(18:25) - #10: Aligning product offerings with customer desiresFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

So what the brand does is give you pricing power. And that pricing power translates directly to bottom line profits. 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. Our portfolio of companies does $75,000 per working hour, 40 hours per week. And building this has taken a long time. And so what I share with you is 10 lessons that I have learned in observing all of those companies. over the last, you know, 10 years.

And so let's start with the first one. And if you don't know why I am, my name's Alachshamazir, I'macquisition.com. It's a portfolio of companies does all that stuff. All right. So the first one is something that I actually learned from the private equity managing partner who acquired two of the companies last year. Number one is that most things don't matter and a few things matter a lot. And you can achieve outsized returns by only focusing on those few.

And so once you figure out those few things, you can ruthlessly and eliminate the rest. And the thing is that this is very hard because a lot of us get really excited. We go to workshops, we go to seminars. We see ads on Facebook and we think, oh, you know, I should be doing this new sexy thing. And the reality is that there are very few things that can give you 10x, 50x results. And so if you just focus on those few things, you can get a lot of other stuff wrong. And I think all of us could use more second chances and more padding. Right.

And so if you can just focus on those big things, you can make those mistakes and still succeed. And so when the private equity partner who kind of taught me this lesson is when I was observing some of the things that he's doing with Jim Longer, Prestige Labs. During the last quarterly meeting, you know, our team was going through all the things that they were doing to kind of, you know, improve the company and grow. And I could tell that he was only interested in only two conversations that occurred. Number one is that, you know, we were building in some technology into the business, because that would yield a much bigger multiple for the business in the future. The second was accretive, which means basically value additive M&A. So looking at companies that are similar in the space that

they could roll in to the overall conglomerate. Because in his mind, he knew that the only way to, you know, sell that, you know, those two particular companies for over, you know, 250 million or more, which is the goal, would probably come from those two main things. And the rest of it, for the most part, he just considered blocking and tackling, which was just, yeah, of course, you know, we'll grow, we'll do these things. But the big, the big nuts, the big levers for getting that growth was going to come from very few things. And that is where he allocated all of his attention. And to me, That was a very important lesson to witness. That was number one.

Number two is that the size of your slice of the pie matters more than the shape. All right. So a lot of people's egos, mine included, right, want 100% of the pie, which is a perfect circle, right? We want 100% of the pie. But our bank accounts only care about how much that slice of pie weighs, right? If you are a 1% owner in Facebook, you're being significantly wealthier than owning 100% of probably the small business that you have. Right. And so the thing is that in order to do that, it means you have to give up slice of the pie

because it takes more people to build big things, right? And so getting other people tied and compensated for the achievement of your vision is one of the key things that is required. And I noticed that because as soon as we've done profit sharing plans and given, you know, bonus pools and things like that to tie leaders into the success and the achievement of the overall vision, we got significantly outsized returns in excess of what we had given up. And so it's just the weight of the slice that we have or that we keep is now worth more. than if we had 100% and not had that incremental growth through enlisting the spirit and willpower and drive of other people, right? And one of the interesting things that I've witnessed is that if you look at the richest people in the world, the vast majority of them do not own 100% of their company. I mean, the vast majority don't even own a majority of their company. You look at Basis only

it's 10% of Amazon at this point. Elon owns 20 and 17% of SpaceX and Tesla. Right. And so, you know, if we take lessons from these people, it's that the more people you make wealthy, the more wealthy you will become, right? And it's true from a business to consumer standpoint, if you sell kind of at B2B, but also just from the overall infrastructure of the, of the marketplace. Like, the more people you have who are rooting for you because they are vested in your success, the more you will ultimately make. And this is difficult for our egos. And this took me way, way too long to realize. Number three, is that big things take time. All right. I knew that when I was, you know, younger in the entrepreneurial game, I was very obsessed with fast wins, fast wins, fast wins. What can we do

this week. And what can we do this month? Rather than thinking 10 years out, 20 years out. And the thing is, is that when I, and I learned this lesson from Andrew Cherm, who owns Panda Express, and he lives in the building above me. And he actually owns this entire building, which he bought for, I think, like, 150 million. And he owns the building next to us, which he bought for $5.6 billion. So, yeah, big, big dude. And he owns 2,600 locations of Panda Express. And he owns them all 100% he is no franchisees, no licensers. And when asked on an interview, what the keys to success were, there were two themes that came out. One, he said, your customer must absolutely love your product. And number two is that big things take time, right? It took him 45 years and he still continues to

grow to this day. And the majority of the growth has happened in the last, you know, five years or so. This year, he opened up 600 locations of those 2,600. So a huge chunk happens near the end. And that depth of expertise takes time to build. Because remember, we're competing against other people who've also been doing this for a long period of time. And the one thing that we can take to our advantage is if we've just been doing this longer, right? And we get these compounding results that happen over a long period of time. And so I think rather than making this a patience platitude, thinking of this as, what could I do for a very, very long period of time?

Because the only things that will be very big will take a long time. And I must be motivated to not change my course or see some shiny object that's going to take me away from my overarching vision or goal. And so I think when I started thinking this way, the companies that I have, had continue to grow better with higher quality people and made higher quality decisions because it wasn't about the short win. It was just, is this going to matter in 10 years? And what are the few things that will matter in that long period of time?

And then let's ruthlessly eliminate everything else and just focus on those things. Number four, brand matters a lot. All right. And so this is something that took me, again, a very long time to understand. And the way that you build brand is that you make promises and you keep promises not only to the level that you've made the promise, but in excess of that. So you make a promise. deliver above that promise. And so brand is simply the reputation that you have in the marketplace.

What people say behind your back, right? And what most people don't have is the invisible hand behind the scenes that's pushing higher and higher return on advertising because more and more people have heard of you from a friend before seeing your ads or your reachouts or whatever it is that you use to get customers, right? And so what happens is that most people do the opposite of that. They make big promises. They under-fulfill. And then over time, their cost of acquisition raises beyond the increase in cost per impression or cost of time on their labor because they have an invisible hand that suppressing their growth, which is negative word of mouth, which is much stronger and much more viral than positive word of mouth. And so people don't understand. They think

they blame the platforms. They blame, you know, pixel changes and things like that when the reality is that they have negative word of mouth that's working against them and they just don't know how big of a deal it is. All right. And so the beauty of brand, if you build it the right way, is that it gives you, this is the tactical goal behind brand is that branding gives you premium pricing power. If you look at a cup of coffee that's plain, a cup of coffee that's Starbucks, they can charge four or five times the price. If you look at a white t-shirt that's plain and you look a white t-shirt that has a Nike logo on it, they can charge 10 times more. You put a Gucci logo on it. You can charge 100 times more. And so what the brand does is give you pricing power. And that pricing power translates directly

to bottom line profits. And so when you have that branding power, you can have outsized profits compared to the marketplace and give yourself a competitive mode that over time, if things, if cost of goods increase or supply chain gets broken down, the people who are trading in commodities and do not have a brand behind them will go out of business where it's you will have the padding of your profit margin to continue to weather the storm and endure for the long haul. Number five, simple scales, fancy fails. When I look at the companies that we have that are the biggest in the portfolio, they have these simplest business models because scale creates complexity all on its own. You don't need to add complexity. We don't need to help.

complexity exist. It already exists at scale. And so we have to make the fundamental units as simple as humanly possible. We have to make our offer suite as simple as humbly possible. We have to make the customer journey as simple as humanly possible and who we serve as simple as humanly possible so that we can streamline our messaging, streamline the customer experience, streamline the products. We streamline the pricing so that the customers understand what we're doing, the sales team understands what we're doing. The customer service team and success team understands what we're doing. And so all we're doing is adding more to that machine. rather than adding complexity and adding new doodads.

And I love this quote because I think it's a really good one, which is do not risk the empire for a pot of gold, which I heard from my good friend, Sharon Sarvata, who sold his company for a zillion dollars. And I just really, really like that. So simple scales, fancy fails, and a lot of times we need to ignore the shiny objects that are sent here to test how good we are as entrepreneurs and how dedicated we are to keeping things simple. Because if you cannot keep it simple, a lot of times it means you do not understand it,

means you may not even understand your own business. Number six, emotions are the enemy. When I look at the portfolio founders who are the most successful, they are the least emotionally reactive. They are the most rational in the decision making. They are the most long-term minded. And so one of the, one of the truisms that I've adopted is nothing is ever as good or as bad as we expect except for the things that we don't expect.

All right. And so I'll unpack that. So from a tactical perspective, when we make these projections, we think there's this new thing that we want to add. A lot of times it's not going to be as good as we think it is. right it's usually going to be less than that and to the same degree the equal opposite side of the coin is that if there's some threat that comes in most times it's not as bad as we think it is or it's going to be so we catastrophize negatively worse than it really is and we and we project that something is going to be much better than it is and most times it's in the middle it's less than our imagination could anticipate except for the things that we never expected which is why the outsized returns often come from things that we didn't expect at all right and so most times we need to be much more conservative uh in our estimates on either direction so that we do not become emotionally reactive and swayed by the greed or excitement of the upside or the depression and fear of the downside.

And I can tell you the amount of times that I thought I was going to lose the different companies that I've owned over time is a lot. And the amount of times that we have lost them is zero up to this point, you know, in the last 10 years. And so a lot of times we think things are much worse than they are and we make bad decisions because we think we're up against a wall. we think that things are going to die. And so that's not true.

That's your mind fooling you. And I think one of the disciplines from the character traits that has to be honed over time is a decrease in emotional activity. Real quick, guys, you guys already know that I don't run any ads on this and I don't sell anything. And so the only ask that I can ever have of you guys is that you help me spread the words so we can out more entrepreneurs, make more money, feed their families, make better products, and have better experiences for their employees and customers.

And the only way we do that is if you can rate and review and share. this podcast. So the single thing that I asked you do is you can just leave a review, but take you 10 seconds or one type of the thumb. It would mean the absolute world to me. And more importantly, it may change the world or someone else. Number seven, level 10 talent is only attracted to level 10 opportunities. I learned this from Stephen Schwartzman, who wrote what it takes. He's the founder of Blackstone. Now he's worth, I think, $30 billion. And Blackstone, I think, manages almost $700 billion, so a lot of money. And he said this very well. So I'm not going to try and, you know,

as though it's my own. He says, you need level 10 talent to build anything big, right? And so we have to think long and hard about how big this can be so to others people's dreams can fit inside of it. And so like if you want to build a dry cleaning, a local dry cleaning business, there's nothing wrong with that. It's just that level 10 talent is not going to probably be attracted to that opportunity. And so we have to think long and hard. Now, if you think my true goal, you're not just saying this, but it has to be true to you, is that I want to build a different way for people to clean their clothes in a convenient way because that's something that you are driven to do and you think you can do it for a very long period of time and you don't think you get distracted by other things that are shiny

objects, et cetera, you will be able to build it to a size where other people start to believe you and then you will be able to enlist level 10 talent. And I also learned this one from Sharon because I like this quote a lot. He said, your best talent isn't even on your team yet. The best talent exists in the future. And so we have to make room for those people, which goes back to the slice of pie and things that I was talking about earlier. All right. Number eight in terms of lessons that I've learned in building our portfolio. Compounding in business creates breathtaking results when you add the one ingredient that people hate the most, time. Everyone hates to add time because everyone is impatient. And if you look at the people who I think, in my opinion, I look up to, we're the most

successful. They have one thing under control, which is their impulses. They can control their impulses because they see that adding time is the single greatest variable to achieving the outsized returns that you are looking for. And so one of the things that I have noticed of the portfolio companies that we have, the biggest companies are portfolio, obsess over the 100, 1% improvements versus trying to double in 90 days. They can extrapolate the fact that a 10% per quarter growth rate means a 40x growth rate over a decade. And they can actually think in decades

because you know what? Right now, if you're doing a million bucks a year, if 10 years somebody could do $40 million a year, would you be okay with that? You don't need to swing for the fences every time. If you just hit singles and you do that consistently, you A, set goals that are far more achievable, B, that people will actually believe they can do.

And C, gives you room to overachieve those things. And I think that the goals that I've set for the portfolio companies and my own companies has consistently got more and more conservative. Now, some people set goals that are completely silly, right? And they're useless in that they're so achievable that they're not worth anything. And so that's not who I'm talking to. And I'd say the vast majority of entrepreneurs I talk with, that is not their problem. They're usually setting goals that are way too unrealistic. And that goes back to the expectations of thinking that things are going to be better than they really are.

Right. And so we have to set goals that, in my opinion, if we were just to do these things, And that were the assumption. If we just did 10% or quarter, how much bigger would we be at the end of the year? If we did just 10% a quarter for the next two years, how much bigger would we be? Right. And obviously give ourselves rooms to overachieve those things. But if we just did those things, what would it look like? And a lot of times it would look really, really juicy. But most people are unwilling to take that short-term goal and say, I'm just going to hit the 10%. We're just going to make sure that beyond any shadow of doubt we can hit that. Right. Because that is where the breathtaking results occur is that those 1%, 5%. percent, 10 percent improvements that happen over the very long period of time. And that is what

creates the magic in compounding. A lot of people talk about compounding from an investment perspective. But if you are in your own business, shifting your hat a little bit more to the investor hat, even though all of your net worth or probably the majority of your net worth is in your company, if you can think about it like an investor, you will start to getting the investor like returns, which is probably what you want rather than the erratic, unreliable, you know, do or die type of mentality that happens, especially in the earlier stages of a business. But as you mature in the business itself, in the business matures, the thinking must change. Number nine, any number, no matter how big, multiplied by zero, is still zero.

All right. And so risks are to be respected. All right, the biggest companies take actions that have very little downside. All right. And so you would only take a company-sized risk. You put your company on the line when not doing so risks the company more. All right. And so that's the big thing is I see people who want to be portfolio companies.

so companies doing, you know, three million, five million, et cetera, who right when we hop on the phone with them, be like, hey, I want to do this big thing. And I'm like, you know, that's extremely risky for the business at the size right now. They're like, yeah, but we have to do it. And I always kind of think, do we though? Like, do we really? Because the answer is probably no. And it's usually emotions that are causing a distortion in reality for the founder. And so you only take a company size risk when you really know that if you do not do, if in action, right, or continuing to do what you were doing will create a failure. Now, we've heard the case studies of Kodak, you know, losing their business and, you know, blockbuster losing their business. But there are far,

far, far, far more times where a business was perfectly fine and the founder basically destroyed it because of their own irrational fears or excitement or exuberance over a new opportunity that was not core to the business and then put the business on the line and lost. And so you do not take company size risks unless the company is truly on the line and you have very strong. evidence to support that, which is in the vast minority of circumstances. And most times, if you were solving a problem that most people suffer from because you already have product market fit, because people are already buying the thing, people are always going to want to make more money. People are always going to want to improve skills. People are always going to want to lose weight.

People are always going to want to have better relationships. People are always going to want. There are a lot of things that those demands, those desires will not disappear. And the reason that we invest in businesses that are non-tech related for the most part is because we know that we can consistently, I would say 80% of portfolio is not tech-based. So the vast majority of businesses, we know that if we can do the boring work, we can repeat successful actions. Once we find product market fit where people want this thing solved and we can solve it well, most of the growth comes from not putting the company on the line,

but doing the things that no one wants to do, which is simply improving, simply getting better at fulfilling the promise. And I'll give you a quick story on this. Dragging dictation way long ago. There was a dictating software. This is probably like 20 years ago that came out very early days in computing, because a lot of people weren't even good at typing this, so they created Dragon Dictation. They created a 2.0 version of Dictation that had zero new features, zero.

All it did was be more accurate at Dictation. When people would speak, they would get more accurate results on the screen. And they were praised by so many people for making this move. But the thing is that most of us don't want to do that hard work of making the thing that we actually sell better, improving the experience, decreasing the time to experience results. decreasing the time to value, improving the customer health score, segmenting customers by their needs and try and match those better with the products suite that we have. A lot of people don't want to do that work because it feels boring, it feels heavy. It's not sexy. It's not exciting. But that

is where you drive the outsized value. That is where you build the brand that gives you the premium pricing power. That is where you build the word of mouth that ultimately creates the competitive mode that you can stand on as a company for years, not days. Number 10. Sell what the customer wants, not what you want to build. All right. And this was a big one, all right, because our egos want to matter. But the thing is, is that we don't matter. We want to be right.

But what matters more is what the data says. And so we have to lead with data rather than ego. And I mean, there was a company that we have in our portfolio that really wanted to do this at a new extension, a new product line that was going to be an upsell and a very high ticket thing in their business. And I felt strongly that it was not what the clients wanted. They're like, dude, but we're so good at this. This is what we could provide so much value, et cetera. And I said, well, let's just, let's just survey, right? And let's survey, this is what I think we should, we should offer, which was more of what people were already buying, just an increased version of the thing. Or this new thing, right, that's really exciting for you guys. And so we did the survey and guess what came back? 85% of the people who were customers just wanted more of the thing that they already had. 15% wanted the new shiny thing. And the things is that these types of huge pivotal decisions, in a business can completely off-road you and destroy your business by simply not taking

this step to listen to your customer because a lot of times our egos don't want to listen to that. We want to be right. We want to do the thing that sounds exciting to us, but that a lot of times isn't what the business requires. And so what the business requires is a founder or CEO who's customer-centric, who's customer-focused, who's not focused on building what they think is exciting, but building exactly what the customer wants, even if it's boring to them. And hell, if it's born to you, awesome.

It means you're already probably pretty good at it, right? And that is where the depth of expertise gets built and compounded over time. Number 11. And this is my simplistic way of putting business success into a series of statements. All right. So the recipes for success, in my opinion, can be boiled down to this. Make promises, keep promises, build brand, use brand to increase pricing power above the market, use extra profits that were supported by the brand to spur growth through hiring better

people and adding new acquisition channels, give slices of the pie to get a bigger slice over all and enlist more people in your vision, and then give time, time. And that is it. So if you don't know how I am, I'm Alexer Mosy. Like I said, managing partner at Acquisition.com. We take $3 million companies to $30 million plus and beyond. That is what we do every day. You can find out more at Acquisition.com. Love you guys, Mosy Nation. You guys are amazing. I don't deserve you, but I appreciate you nonetheless. And if you knew the channel, welcome. you guys on the other side. Bye.