The Game with Alex Hormozi - State of The Union- The Gym Industry & Gym Launch | Ep 219

Episode Date: July 7, 2020

Genuinely my interest is in making you money. Alex (@AlexHormozi) talks about the major changes that the fitness industry has experienced in the past few months. He also breaks down the events and offers insights into the current state of 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:(1:57) - Market outlook: rough year ahead due to current circumstances(5:06) - Driving growth in fitness industry amidst new habits(7:47) - Alex explains why his company adapted to online model(13:51) - Online model surpasses gym revenue and profit in 4 months(17:39) - Unknown if fitness industry improves; online model more scalableFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Welcome to the Jim Secrets podcast where you 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 that we have learned along the way. I hope you enjoy and subscribe. Jim owners, happy Monday. Hope this video reaches you at a good time wherever you're at. This is, I think this is a very important video that I want to make. It's been on my mind for probably the last month or two. but it became apparent to me that we needed to clearly state our position. And so I think it starts with context of where the industry is out right now and then kind of how gym launch sees ourselves best supporting the industry and gym owners within it. So right now, as I see it from the various sources that I've collected, 25 to 30% of all independent gyms have permanently closed.

I believe, and I said at the very beginning, that I thought it would be to 30, but I think I was wrong. I think I underestimated how many more gyms would actually not be able to stay in business. And so I think that number may climb over the next six months to maybe 40 or even 50% of independently owned and operated facilities. The reason that I wanted to start with that is that in the world of investments in finance, they have a saying, which is, is in a, if you can pick between a strong operator and a weak market or a strong market with a weak operator, in both cases, the market wins, which is you can be the best, you know, entrepreneur in the world, but if you're trying to figure out something that helps newspaper companies, you're probably not going to succeed because newspapers are going out of business.

And I'm not saying that gyms are newspapers. That's not my point. The point is more so that just to illustrate growing versus static versus shrinking markets. So where do I think the market is going? I think the gym industry has a very, very rough next year ahead. I think that the vast majority of consumers, as I said earlier, have already had the opportunity to switch to different fitness vehicles. I think that the brand of fitness that we have to offer right now, given the constraints

in the political environment and what we are forced to do, whether right or not, are our massive constraints on the business, right? We cannot create the experience that we have wanted to create for our customers. We want to create a memorable experience for them. And I don't think that the constraints that are there give us that opportunity. I also think it creates tons of variability in workforce and labor because we cannot predict how, if we're going to get shut down again or if it's going to reopen or if there's going to be a spike or there's going to be a new constraint or we have to do temperature, thermometers, or this type of mask or they have to, you know, all of these different things massively weigh into.

And I don't know if you've, just to illustrate this for you personally, I am not going out to eat at restaurants nearly as much, mostly because I just don't feel like dealing with the hassle. And I think that that is true amongst many people who are looking at coming back to service-based facilities. Right now, if you're looking at, you know, if you're a woman and you're trying to get your nails done, or you get your hair done or any of those types of things, go in and ask them how business has been, right? They have the same constraints that, you know, Jim has,

and many of those people would like to go back and have that desire, and yet they have not. And so I think what we've done or what's happened in the marketplace is that we've permanently trained consumers to consume or fill this need in a different way. And I think just by nature of, you know, from zero to 100, if we had 100% of our clients before this, if all of those clients are introduced to a new type of service,

or a new solution for this need, an amount greater than zero will stick with that. And so I think that the market overall is shrinking and will continue to shrink for the foreseeable future. So to put this statement open and clear, gym launch is loyal to gym owners. We are not loyal to gyms. My goal is to equip everyone here in this community with the best opportunity vehicle to package their skills to be able to provide for their families and be able to serve their communities in a way that makes them healthier. That has been the goal since state one. Jim's at the time for the last

three, four years, has been a vehicle for that individual, which when put together with, you know, the gym launch system, creates a profitable business for the gym owner and creates a superior experience for the customer and helps people get healthy, which is the goal. To that end, gym launch as a company will be pivoted. And that is because I believe that the best opportunity for gym owners is remote for a variety of reasons. I think that first off, from a lead generation standpoint for most small businesses, lead generation is the hardest thing. In a remote environment or an online environment, you have virtually unlimited lead generation. You will never fatigue the United States' need for weight loss.

You won't even fatigue a 50 mile radius for weight loss, but a five mile radius, it's definitely possible, right? It's much more difficult. And I can tell you this right now firsthand on the GLX side, the people that we're working with for in person versus remote, they cycle through the copy and creative at three to four times the rate. It burns out much faster. So there's more effort that has to go in for a lesser volume result at a higher cost. and the lead costs, if you just think conservatively, if 30% of people are not going to, like people already have excuses to not going to the gym

when they have no constraints. But if you add even a little bit of friction towards something that they already kind of don't want to do, then that constraint might double. And that's pretty much what we're already seeing, that lead costs on average across all the markets for in person is about $30. For many people that does not,

and that's for a free offer, right? Not even paid, right? That's average. Now some people might be better, some people worse, but this is just, on average what we're looking at. And so when we take these things into account, right, we can get way more leads at a way

lower price with less effort and more consistency. Factor one. Factor two, the model itself, how difficult is it to implement? How much margin remains for the business owner? How does it enable the business owner's lifestyle? in an online setting or remote setting that business owner can move and live wherever they want. They don't have to be in a single area. They can have freedom with their family.

They don't have to show up at the gym at 4 o'clock in the morning. They don't have to be there until 9 o'clock at night. They don't have to drive in for an appointment to have that person no show and then have another one at 7 o'clock at night that they just sit there and wait for. A lot of those things that we've had to deal with as gym owners and small business owners in a brick and morber setting no longer have to have. to exist. All right. And very frankly, I have always wanted to figure out a way to make online work at scale. Why? Because you no longer geographic constrained, you're far less temporally constrained,

and financially the model is more profitable, period. And as a, like just from the business setting, that would probably be enough for me. But on top of that, many people achieve superior results in a one-on-one setting compared to a group workout setting, right? Many of you have hired TKN, have worked with Trevor, have worked with an online coach, whether on the strength side or the nutrition side or body composition or whatever. And you did that because you knew the 101 attention

allowed you to get a better result, right? If you had to change someone's life, then if they signed on and if somebody in your family are going to die, what way would you train them? If you had the option of group workouts or one-on-one coaching online, if you had to, which one would you do? Because if you say group workouts, but then you'd start doing the one-to-one restriction, that's not the model. That's not the question. The question is which would you?

Because that is realistically what we're offering in the marketplace. And so I already said there was enough of a case from a business standpoint to make that argument. But on the fitness component side, I believe that the actual fulfillment is better for the end user and is more profitable. on top of that, you have fixed margins in the business. You do not necessarily need to have rent. Now, if you have to deal with the fact that you have rent, then that's a separate issue. But the business model itself is not constrained by the sunk cost of decisions that have been made in the past. And the reason that I did not have an online business model until COVID hit was one, because we didn't have to.

But two, because no model that I could find, and I looked at everyone's out there, could be done at scale by anyone without a superior skill set without having an authority or having a following or requiring an inordinate amount of effort. For example, there are three primary models that exist in online today, excluding the GLX model that I'm going to talk about. Vehicle one, outbound messaging, right? We have the cold messenger training. I bought two or three $10,000 courses. I took all the best findings and I put it into a course for $37, right? You guys all have access to it. Fundamentally, why is it not something that I see is enormously valuable? Because it requires effort, right? Simply put, you have to spend two, three, four hours a day outbound messaging

people. Does it work? Yes. Does it require a ton of effort? Yes. Can you scale that? Not really. Right. And so that is opportunity vehicle number one. And if you've seen all the gurus over the last 30 years, the reason none of them have an enormous business is because the vehicle is not that good. it's okay right with an okay vehicle you can build an okay business all right so that's vehicle one vehicle two is doing a webinar so it's building out a sales presentation that edifies you generating traffic online to register for the webinar watch the webinar pushing to an application that they then schedule a call with you so you can do a two thousand three thousand dollar plus sale typically those models do not make a ton of money one because the webinar is fatigue two because the

cost for application is extremely expensive. You're looking at $100 applications many times. Three, some of the people who I know in that space who are experienced only get one to one, two to one up front on their ad spend with a high ticket sale. And that's the people who know what they're doing. That doesn't seem like a model that I would scale to others. Third, model is doing an online challenge model. What that means is not the way that we're talking about it, but they do group challenges. So that's where you tell everyone to sign up for a group. It's a five-day challenge. You make content day one through four, and then you make a pitch on day four and try

and pitch on day three. It doesn't matter. The point is that you're trying to solicit people from a free group where you provide value where you're somewhat edified to then get on the phone with you to buy some stuff. Right. And that model is, again, a very effort-based model. It's very stop and go. It's very clumpy.

And in my opinion, it's very difficult to scale, which is why you don't see any massive online weight loss companies that just do these five-day. online challenges. And I'm going to say massive. I'm saying real massive, not like small person massive. I'm saying real big businesses. And so because of that, those are the three models that I saw that existed for people who did not have a following and it was not a consistent acquisition model. And so I could not put my weight behind it because I knew that if I were to implement one, two, or three or all three of those together, the vast majority of the people in our community would not succeed. Period. It is what it is. All right. So the reason I like the model that we have,

now is that after all the trial and error that we've been able to create, we can start a new business, which is essentially what this is, overnight, because in a semi-regional marketplace, so the same state as you, you have a certain amount of trust that exists. With a free trial front end, it does not require a tremendous amount of skill in order for you to sell it or scale the sales to someone else. try and outsource a $3,000 high ticket fitness sale. You're not going to be able to do it well. I can promise you.

If you ever in trouble outsourcing a $200 sale, try outsourcing a $3,000 sale. It's not going to happen. Hey, if you're a return listener and you have not rated or reviewed the show, I want you to know that you should feel absolutely terrible about yourself and everything else in the world. I'm kidding. But it would mean the absolute word to me if you guys would go ahead and do that.

You don't even have to pause the show. You can keep listening and you can just do it with your thumb right now. It'll take you less than 60 seconds. And like I said, the only way that podcast grows through word of mouth and this is you joining hands with me and helping as many entrepreneurs as we possibly can because no one is coming to save us. It's just us. All right. So please go do that now and let's get back to the show. So the front end, we know that the acquisition is easier because we have unlimited leads. That's massive for consistency of business operations

and for consistency of cash flow. On the sales side, on the lead nurture side, Alan has already solved this problem at scale. Up to this point, you couldn't get. 800 leads, a thousand leads a month, and have any, any, any dream of being able to work that lead flow without two to three full-time people, not going to happen, right? With Allen, we can do that. And we can set the price at fixed so you always know what it costs to get a new customer, right, on the phone, period. For the sale itself, for a free trial sale, someone with very, very low skill set can still sell a free trial on the phone. It is such a low risk offer. And so the magic of the model is the fact that we have now found out after this

whole community has tried and tested it, that the trainerized app that we've built out, my accountability, right, when paired with a free trial person and the model that we espouse, which is supplement sale number one, and then abandon hope number two, right? Both of those sales are easy enough that you can scale them and break even or come close to it on the first transaction. And then by day 30, you will be able to convert those customers at the same prices you were able to before in a gym setting, except you have far more of them, you acquired them for less, and they're staying at a higher profit margin. You no longer have to do sessions. There's no rent that you're forced to do.

And ultimately, there are many of you who over the last month have built out three or $4,000 a month of recurring revenue. That's in 30 days, right? For those of you, like Marcia, and hopefully it didn't mean to call her out here, she's built up $40,000 in a row. recurring revenue. Rawls built out another $40,000 in recurring revenue. She's been doing it as well. This model, if you give it one month, two months, three months, four months, it is going to be far superior to the revenue and profit that you were able to make at the gym except it has no signs of slowing down, right? You do not have to be constrained by your geographic five mile radius. If you've had the desire to impact your community in a much bigger way, if you've had the desire

to not be constrained to the five miles around the location of your gym that's only valuable to you when your ads are converting because you have the combination of ads copy and creative and placements that are actually working in this specific market at that time with the promotion you made which is real talk how it works right if instead of having all that you can virtually have an unlimited front end and all you have to do is tweak the skills on the back end that you can consistently create because there's only three roles that exist in the model, person who sells the trial up front, the coach, and that's it. Right. And there's you as the owner. And so as long as you, and if you want it to at scale, you could have one person who does all

three, right? But the point is, is that each of these roles, getting someone to sell free trial, it's not difficult. Getting someone to convert on a same day off where they don't even have to pay on that day, which is like, hey, normally it's 59. Today it's 49. You don't have to say yes right now. Or so you don't have to pay right now. Just say yes right now. You want to use the card you have a file. Many people can make that sale. for the nutrition. Hey, don't need to buy all these things. I need you get this stuff to get started.

Right. Great. Most people can make that sale. These sales are not complicated, but can be done at absolutely massive scale and routine a customer at a $2,000 price point where you can acquire them in high volume very consistently. All right.

And so I need everyone. So I wanted to at least clarify this for everyone in terms of where Jim Watch's position is in this marketplace. We are going to be serving gym owners and we're going to be serving gym owners in the way that we know best, and we're going to align ourselves with the model that's going to make them the most money. And very transparently, I'm going to be doing this because I believe that I would like to serve a marketplace that's going to grow and make the most money because the more money you make, the more money I make. And you know that I'm a capitalist

at heart and always have been transparent about my intentions, right? My goal is to run a profitable, wildly profitable business that grows fast, right? And so to that end, if I'm in a B2B space, I have to align with a model that I believe has the highest likelihood of success and profitable growth for my customers. And so for the foreseeable future, that is where Jim Launch is going to be focused. We're going to be focused on bringing the online revenue to everybody here. And I can tell you that if you have been on the fence, it is not going to get easier. If you're clinging to in person, it is not going to get easier.

Now, is there anyone in this marketplace that I believe is better at running in person? No. Why? Because they all bought my book to try and build their whole team coaching program. Right. Like the business mentality, the business models behind that system are running in parallel. We're using the exact same skill sets, the exact same choreography of sales. The only thing that's changing is that we're filling through an app instead of in-person workout. That's it. That's all that's changing. And so if you have the same $5,000 to spend on marketing, if you spend that same $5,000 for online clients, you will make more money. Simply put, it is easier right now to get 50 new online clients than it is to get 50 in-person clients. And I don't see that trend changing any time for the rest of 2020. And the thing is, what I do feel is known is that the rest of 2020 is going to be shit for gyms

in general. What is unknown is whether 2021 is going to get any better. And so it's, I feel like I've been, I've been holding this back. I've been handsome. at it, I've been alluding to it, but I have not been able to be transparent in the fact that I believe this is the best model for this community. I've been always loyal to gym owners, and I believe that this is the best opportunity vehicle for you to package your skills, serve your community, serve your family. And in terms of ROI on your time and your capital and the skills that you need to train your team on, this model, I believe, is more scalable, more profitable and will have higher ROI over the next six to 12 months than the in-person

model. The fallout questions that happen as a result of that is, well, what do I do with my in person business? So there's something called a sunk cost fallacy in economics, which basically means because I've invested X, Y, Z before this moment, I'm going to use that to cloud the current decision at hand, right? And so it's like if I've spent, I'm trying to, hopefully everyone knows what some cost is, but it's basically you have a, you've made an investment that is irrelevant in the, in the variables of the current decision in front of you, right? And you're using that. Like I committed to, you know, like I spent money on XYZ and, all right, hopefully you get the point. That being said, if you still need to make decisions about it, you have a couple of different

versions that you can handle this with. All right. One is that you can simply walk away from your gym and deal with the ramifications of that. I don't think that the court systems, I don't think that evictions and creditors are going to be hitting hard on businesses that so clearly were affected by this. I think that we'll have, if there's ever a time that you'd be able to get out of a lease, this would be it. This would be the time where you would be able to get out virtually scot-free and many of you already have. The second solution is that you make enough money in the online setting that you can pay for it. Because if you think about it, you have the same $5,000 that you're going to spend. You're going to have to spend it on whatever business

you're doing, right? If you spent it on the superior opportunity vehicle, you will make more net money doing that. And then you can still, like, you will make more money doing that, even though you have this gym as your anchor. If you spent $5,000 trying to fill the gym up because you have it versus spending $5,000 on something else, you will make more money and still be able to cover the cost better because the opportunity vehicle is superior. Think about it. Let it sink in. Right. And so anyways, my entire goal is always to make people the most money possible is to give them the freedom they want, give them the security they desire. And I believe that this is the best way for us as a company to do that. And so all of my focus will be to that end.

I do think that we are actually on the precipice and we're currently in a golden opportunity era where there's this huge amount of demand for online services and there's not a lot of supply. I don't know how long that window is going to happen. But for the people that take action now, most of you already have. But if you were on the fence, this is the time to take that action. What you don't know is that many of our seven-figure gym owners, the top guys you see in this group, have pivoted 100% online. Some of the guys you hear me talk about their names all the time, they've already sold their gyms. And they've pivoted 100% to just going on because they sell all the math. They didn't let their emotions cloud the judgment.

Now, I understand that everyone listening to this as human makes emotional decisions and then puts logic to them later. So let me just speak to your emotions. If you have the desire for more security, if you have the desire for less unknowns in the future, if you have the desire to not have to worry about acquisition, not worry about where your next customer is coming from, worry of whether or not your lead cost is getting too. I worry about whether you're going to have to have just another creative, another home run to save the month, right? If you don't want to have those concerns, right, you want to be able to travel with your family. You want to be able to leave your gym for God's sake.

You know, I didn't take a vacation for five years. I never even left because I was so afraid. I went back for Christmas and every single year for three straight years came back after two days because I couldn't handle the stress of being gone. And so if you don't want to deal with that, I do believe that there is a time window that we're in right now where the entire marketplace understands now what online training is. And there is a massive, massive shortage of professionals who have the skill set like gym owners, right? Like us, we are all very experienced fitness professionals. If you compare us to some guy who's interested in fitness on Instagram, right? or compare us to even just some of your trainers, right?

We are more experienced than they own. And so if you want to do the market a favor, let people work with the best professionals. And that's you because they're going to do it anyways and they might as well work with you. So anyways, to wrap this up, that is what all of my direction is going to be on, is going to be on executing the model. because this model now is as clean as a whistle, in my opinion. This thing is just about as robust as the original gym launch model. The front end offer is compelling. We will always be able to get people to sign up for free things for weight loss.

Period. That is something I can bet on. Second, do I believe that people can sell free trials at scale with low skill? Yes. Do I believe that you can sell supplements to people who want to lose weight in a one step in upsell environment? Yes. Do I believe that getting people to stay on continuity at $49 week, $39 week, $59 week is something they will do for one-on-one training and support? Yes. Do I now believe that people prefer or value or get a superior experience from a 101 customized meal plan, customized workouts and groups online? Yes, I do. And because of those beliefs that I have, and you may not share those beliefs, but I've made some pretty big bets in the past in this space. and most of them have been right. And so I'm asking you to at least factor that in

if it's something that you're still on the fence about, that you at least consider the argument that I'm giving you right now. Because genuinely, my interest isn't making you money. And so our interests are aligned. It's just a question of whether you believe the vehicle that I'm talking about right now is the best way. Most of you've already made this call.

But that is what we're going to be doing with Jim Launch. And it's been very transparent that the people who run that simple model can scale and can make a lot of money. Because the only thing you really have to do is just make sure that you're fulfilling the clients, using the app that automates 80% of it anyways. And that is so much easier than having to worry about trainers and sleeping with clients and broken equipment and cleaning out the bathrooms and getting the right music.

All of that stuff is gone now. Or it has the opportunity to be gone if you make the choice. Obviously, the choice is yours. We will support you at gym launch independent of what you choose. If you want to rock in person, we will help you. All right. We've done it. And I honestly think you're like having seen and talk to most of the people are in this

industry with half of them being ex-clients of mine slash ex-employees of mine, right? With half of them being that, I can tell you without any drop of doubt in my mind that we are by far the best, not even close. Like there's not like, oh, yeah, we are ages. We are eons above. And the proof of that, if they were as good at business as we are, then they would be bigger than us. but they are not. And so I would say, trust the people have been doing this the longest

and doing this the best with the biggest reach and biggest data set. All right? If you want to stay in person, we will try and set you up for the best success. But given your skill set

and your desires and your wants and needs, I think that that same skill set, desires, and beliefs will be better packaged in this vehicle. The question is just whether or not you want to take the jump.

All right. So anyways, for those you have made the jump, I think you made the right. the right call. Hopefully this entire video is just reinforcing that belief for those you had made that jump, for those of you not, hopefully this at least gives you some transparency to why we're going to be talking more about online, why it's going to be my focus. And all the clients that we're going to be bringing in are all going to be gyms who

want to go online and or, you know, experienced fitness professionals who want to go online and scale. Because now for the first time ever that's possible, right? You couldn't do this without an authority. You couldn't do this without a following before this, but now you can. That is my perspective. I hope that provides value to you. I hope it provides clarity in the direction of our company and where I believe that the fitness industry is going and where we're going to be aligning our company.

And we do that because we want to align on the winning side. And I think that that is going to be the winning side. No one 50 years from now I would say, right, if you're thinking about it, no 20 years from now, I'd be like, man, who would have thought that in-person gyms were going to survive this long, right? that online fitness was not going to be bigger 10 years from now than it is now, right? I don't think anyone is going to make that argument.

And so I think that it's, it was time for me to make that, that make that line in the sand for us as a business of what we are going to focus on. And that is what we are going to focus on. So anyways, lots of love. As always, we're still going to release plays. We're going to release, you know, the stuff that we do to help gyms because that is what we've always done. But I just want to be honest about what I see so that you can be on the same thing.

You just make. So lots love. Have an amazing Monday, amazing week.