The Game with Alex Hormozi - My Worst Mistake | Ep 270

Episode Date: January 22, 2021

Sometimes, it’s not always about trying to conquer. Today, Alex (@AlexHormozi) takes us back to when he made one of the biggest mistakes in his entrepreneurial career and really shares the “losses” rather than always hearing the “wins” in order to give us more perspective about the industry.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:(0:53) - Mistakes break you more than wins; Alex's company struggled with churn.(2:56) - Idea of "more for less" cost Alex millions.(4:46) - 3 Moral lessons: prices, raise prices, understand benchmarks and solutions.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

I personally have made a lot more mistakes than I have correct choices. 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. What's going on, everyone? I wanted to talk about one of the biggest mistakes of my entrepreneurial career. I'm going to try and talk about more of these because I think a lot of, you know, a lot of times we only hear about the wins and not about losses and most of us who've been in the game, you know, a while will tell you, you know,

like you'll make way more, or I personally have made a lot more mistakes than I have correct choices. And so before I dive into that, the longer I've been in this, the more I've adopted a single belief that I've inherited from people smarter than me that make more money than me. And it's, your mistakes will break you more than your wins will take you. And what I mean by that is at least I think it's true in business and in life and even in, you know, marriages and relationships and so many things, the downside, it's many times it's more important to mitigate downside risk than it is to try and maximize upside return. And so what I mean with that is like a lot of times we as entrepreneurs get excited about the story about that one thing that changed

and then like the company doubled or whatever it is. But so many more times we get killed through our mistakes more than we get, you know, made through our, you know, our wins. And so as I have, you know, I feel like matured in the entrepreneurial role, I'm less interested in the big home runs and more interested in avoiding the mistakes that get, you know, the mistakes, right? And so I'll share this with you. So this is one of the biggest mistakes I've ever made. At one point, it's probably a year or two ago, our company was struggling with turn. And part of the reason that this is interesting is that I'll say this, I believed my company was struggling with churn. My company was not struggling with churn. I believed it, and it was because

I was extrapolating data from one industry to another. And so I didn't know, right? And that's why expectations and proper, you know, proper benchmarking is important, right? But because of this, I was driving myself and my team crazy about trying to, you know, fix churn, because it was just, it was driving me nuts, right? And in reality, it was actually, it was, it was fine. It was at or below market. But anyways, in this process, some of my team was, you know, they were responsible for churn, like their, you know, their bonuses and what they were being measured on was churn, lifetime value, right? And I, and this is actually really funny that I even said that. Lifetime value and churn are very different.

right? Because lifetime value is influenced by price. Churn is just what percentage of customers leave, right? And so I will tell you what I did, and I will tell you how much it cost me. So we decided we're going to do this crazy, great idea and provide more for less. Wild, right? And so we had this huge announcement. We were going to add this huge, you know, this new, all these new services. in for our clients and whatever they were they were they were they were they were paying we were

going to just literally have them pay less how stupid does that sound to you but i you know i i i the people in the front line who's who were being measured on turn uh were persistent and um It was ultimately my call and trying to be an accommodating CEO, I said, okay. And so we snapped our fingers and we made the change. And it cost me $5 million a year of profit. 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. And churn didn't change. $5 million a year in profit. And it didn't.

And churn was unaffected. Unaffected. So the moral of the lesson that I learned from this failure was that many times lowering your price is pretty much never the solution ever like ever

number one number two you can raise your price because you feel like it you can number two number three understand

benchmarks and expectations before making these types of decisions. And I said this in a past podcast, and I'm going to say it again here. Jeff Bezos has a thing about making decisions quickly, which is if I make a decision, I decide whether it's reversible or irreversible. If it's reversible, I just make it quickly and move forward. If it's irreversible, we take more time. And thinking about decisions like that allows you to move faster in an organization,

this was an irreversible decision because I couldn't just lower it and be like, yeah, just kidding. You guys are back at higher price. my bad. And so it was just wild. It was such a terrible decision. It was such a bad decision. And the thing is, is the price reduction so that you have a relative understanding of what the reduction was, is we did a, I mean, it's crazy when I even say this out loud because it was so dumb. It was a 25% reduction in price. A 25% permanent discount. Imagine cutting your top line by 25%.

For most people, that's your profit. And I was somehow so obsessed with trying to conquer turn and thinking that price was the thing. And it wasn't. It's like retaining employees. The price is usually never the thing, right? It's not like people don't stay for higher pay. They stay for other reasons.

They for fulfillment. They stay if they feel like they're growing. They stay if they feel like they're contributing. They stay if they're making an impact. They stay if they enjoy who they work with, right? They don't necessarily, like, they don't really, like people don't get happier when they get a pain increase. They have a momentary blip and then they return back to baseline. And so to the same degree, we didn't decrease turn at all.

In fact, I even had some people complain. They were like, I can't believe you charged me what you were charging me before and they were upset about it. And so I share this story because I just want everyone to know the many, many, many, many mistakes I have made. that was the single greatest mistake I've made. It was a single greatest mistake that I have made. And so my hope is that if you are considering this, first off, don't do it. Let's tell you right now, just don't do it.

But if you are considering it, don't do it. Don't do it. But if you are considering it, I'm going to say don't do it again. But the next thing, the point is, understand how much churn would have to be reduced in order for this to make it worth it. And the answer is, buy so much that it wouldn't even make sense. And so that is just one of my more than $1 million mistakes.

So I will continue to tell you more mistakes that I've made that cost me more than a million dollars. But that one is a single greatest mistake I've made as an entrepreneur. So that's all I got. That is my scar of the day to share with you on my entrepreneurial journey. I hope you find value in it. and I hope it just prevents you from making the same mistake rather than, I have no lesson. It's just, I have no tactic for you.

It's just if you can avoid that mistake, you will make so much more money by just not doing the terrible thing. If you don't get a DUI and get pregnant before 16, your life will likely turn out better than otherwise. So you can't. It's just you have way more likelihood of succeeding, right? And so if you don't just cut your prices for no reason, 25% of your top line, then you will likely make more. So that is my gift. That is my thing for the day. And I hope you have an

amazing rest of your day of the week. Bye.