The Game with Alex Hormozi - The Business Formula: Acquiring Customers Profitably, Goal-hitting Offers, & More…(with Tanner Chidester) Pt.2 - Aug '21 | Ep 442

Episode Date: October 1, 2022

If you never quit, then you won't fail. That's the prerequisite of entrepreneurship. Today, join Alex (@AlexHormozi) as he guests on Tanner Chidester’s YouTube to talk about how to acquire customers profitably, the formula, mindset, and models that he uses to achieve this success, and touches on topics about seeking family approval, etc. This is part 2 of the interview.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.Check out the episode on Tanner Chidester’s YouTube Channel! Timestamps:(1:17) - Alex's business approach: Organic leads without paying; no pre-existing formula.(6:54) - Strategies for easier marketing; significance of consistent growth.(9:50) - Addressing lack of support from family; advice for those struggling.(15:00) - Leila Hormozi's impact, Alex's daily life, and future plans.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Moses Nation, welcome in part two of the podcast I did with Tanner Chitister. On this podcast, we'll talk about how to acquire customers profitably and the formula and mindset and models that I use to do that in every business that I have encountered to date. I hope they serve you as much as they have served me. If you can actually just narrow it down instead of making it the faceless like everyone's opinion, but like who's that one person who's opinion you care about, then it's asking a more pointed question, which is like, is my opinion of what my father thinks of me more valuable than what I think of me?

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. Your business is the thing that impresses me the most is the fact of how much scale you've had with essentially, and I may be wrong, but in your portfolio, I still believe you don't run hardly any apps. That's accurate, right? Overall? That is accurate. Well, one of the companies, one of the companies runs a lot of ads, not Jim Moore,

different companies. One of six. So to me, that's the most impressive in the reason is I thought my profit margins were high. And then I heard yours and I go, well, shit. I guess if I didn't run ads, they'd be that high too. So, but then what impresses me further is the amount of scale. So when you're starting these businesses, did you just figure out a formula and then you make sure these businesses fit that formula?

Or did it just so happen that you'd start a business. you're like, how can we get these leads without paying for them? I think it's both those thought processes, honestly. Now, in terms of the checkboxes for a business, I have five that I look at. So it's my little moniker, it's unique, expensive, sticky air, and managed with a person of integrity who has a long-term mindset. So those are the five things. So I'll unpack it real quick.

So unique is like, is there something that we have a unique thing that only we can do that we have a unique, and it might not even be the thing that's different, but do we have a unique story that can still differentiate us? Like for me and Jim wants, there's nobody who's had as many gyms as I have or who did two years of turnerals. That's a unique angle that I know that I'm better at, right? Expensive is going to be just a function of pricing. And it's more than it is expensive in an absolute terms. It's more what is the gross profit of the business, right? Which has a function to do with the second thing, unique expensive, sticky air. And the error is the, sorry,

the fourth thing is basically no marginal cost. How can I, how can I sell something that costs almost nothing? Right. So that I don't want to have 80% or 90% margins. I want to have 97 and a half percent gross margins. And the difference between a 90% gross margin business and a 95% gross margin business is twice. That's what everyone fucks up. A 95% gross margin business is twice as profitable as a 90% gross margin business because it means I would have to sell twice as many units, right? Or for each increment of cost, I can sell two versus one. And that is why it's twice. It's not 5%. Right. And everyone messes that up. So unique, expensive, sticky is how can I make it recurring and have some sort of habit forming component to it? And either it's recurring because of the model or because of how good the

product is. So how can I have some element of recurring that's going to come into it? Right. So unique, expensive, sticky air. Those are the four and then managed by someone who has integrity, who has a long-term perspective. And that way, they'll make the right calls at the right time and not sacrifice short-term for a quick pop. And so that's in terms of like the businesses that I'm looking at in terms of the question about how do we have such low ad spend related to our revenue. So this has been evolved over time having spoken with all the guys I know were worth 250 million and up. What was interesting to me is that the vast majority of them want to do one-time inputs with compounding returns. And so most people do the opposite. They do things that they have,

like spending money on advertising. For example, you have to come up with the whole campaign. You have to write all the copy. You have to put money in it, and then it stops working eventually, right? And you have to do it again. And it stops working eventually. Now contrast that with, I'm going to write a book, and it has to be so good that on its own, if I give it to 10 people, that more than 10 people will get it as a result of those first 10 people. So each of those 10 people sends it to two people. And those people send to two people. And so right now, this book was almost a test for me of that concept,

given the book and the course. And that has actually worked. So I made one post on Instagram. And that was my promotion. I brought no ads for this book and it's selling a thousand copies a day. It's nuts. Right? I mean, a thousand copies, you can multiply the math.

It's a lot, right? But there's no advertising. None. And so to round that point off, if you look at the six ways of getting customers, right? So you have paid ads. You have earned media, which is the followers that we all have, right? We have owned media, which is all the people who have given us permission to contact them. So all of our, all of our followers in their inboxes, the DMs, etc, your phone contact, CRM.

And then you've got manual outbound. I know you know this. I'm just saying this for everyone else. Manual outbound, which is the actual cold DM. So same concept, but we're doing it to on a 101 basis to people who haven't given us permission. We have affiliate. So people already have the pool of customers that we have that we can partner with and make a full integration to their business and they can keep sending us new clients. And then finally, you have word of mouth and referrals, right?

Now, if I were to ask the audience, right, which of those is quadratic compared to which of those is linear? Which of the six is which they might think for a second? Because we're only talking and I can't see the comments, I will answer the question, right? Referrals, word of mouth is the only one of this quadratic. So if I put a dollar in advertising and I get 10. dollars back, then I put $100 and I get a thousand dollars back. It is linear in the relationship, right? It's a straight line. Same thing with outbound. If I do 100 calls versus 200 calls versus thousand calls, I have the same response rate, more or less law of large numbers. With referrals,

if we make the product good enough, then I can give it to one person and that person gives it to two, two give to four, four give to eight, and then it multiplies. It's quadratic, right? And so when I look at the people who make the most money, they spend all of their time or disproportionate amount other time, truly getting product market fit. And a lot of people talk about product market fit, but they don't actually ever achieve it. They get their, their idea of product market fit is that people are buying it. That is not the way that product market fit is actually determined. Product market fit is actually determined based on the fact that these customers stay and continue to pay and want to buy more. That's how you find product market fit. And so the idea is we should

be promoting just enough to keep fixing the product until the product itself does enough selling for us that it becomes a virtuous cycle. But most people, people just learn how to make that first dollar and then try and max out, and then they're really disappointed by the fact that they're not making as much money or profit as they'd like to make, and then also feel shitty about things. And so when I look at that, if I'm trying to build something that has compounding returns, it's like, how can I take a one-time effort and really go all in on the product? I know enough about promotion now to make sure that I can get the first sales through, and then keep tweaking this until eventually it is good enough that I get an outsized

return on any effort I do, and then at that point, I'll turn the other ones on. Because then making the advertising profitable is basically inevitable because for every customer I'm getting one or two more customers. Yeah, the biggest lessons I've learned from you recently is, I mean, simply I've seen that. So I'm like, what can I do different to where I don't have to market so hard? Because I can market, but I cannot outbeat that performance with marketing. And then also it's wrapping my head around, okay, maybe these offers, what do I have to do to change these offers? What new offer would I need to hit that criterion?

I have a lot of experience. I think it's easier for me to wrap my head around that. But that, to me, is like, what I've seen is it's like, he's doing stuff in a way where it's like almost funny, where it's like, we don't really have to do anything to sell this. The cold calling, especially, I think, is absolutely ridiculous, right? That you can call someone the offer is so good. You're just like, yeah, we'll just kind of do it with you, whatever if it doesn't want to pay us. And they're like, all right, we'll do it.

And it's brilliant. It's brilliant. one of the questions I wanted to ask is, you know, in the book, and I understand this, but you said, if your company isn't growing, it's fine. And I think some people don't understand that. They think, like, well, my company's here. Like, it's not. Can you, can you give maybe an example? Because you've said it really black and white in the book that people can understand what you mean by that statement. So if you look at the marketplace in general, the marketplace is growing at 10% year, right? And so if you are not growing by 10% year, relative to the market, you are shrinking.

And so that means that you are dying. And I use grow or die as a very polarizing term because it's memorable. Right. But fundamentally, most businesses, if they are not adapting or innovating, we'll get outpaced by the marketplace and then eventually vanish into nothingness. And so the idea is that we must continually grow and must continually innovate to keep our product sharp and top of the game. And have you ever had a time in your business where I finally saw it this year?

where I felt like this was the first year where I was like, man, I got to start changing, or we're not going to keep going up. Have you had that happen in your business at all? Well, yeah, I got kicked into the nuts and COVID because that's for chimps. I didn't know you. I didn't know you well enough then, but I remember I said a distinct prayer and I was like, thank you, Lord. I'm not Alex Hermosey during this time.

So, yes, you know, I mean, I've definitely, you know, I've definitely experienced that. In the book, you know, your dad questions whether what you were doing, were legal, you know, after one of the pictures from your events. So you didn't initially have that support from your family. What would you say to people who are watching and are kind of in that same bone? I see it's a lot with beginners to how to deal with that because it's easy, I think it's easy to maybe say now. But I know when I started, I don't know how you felt,

but I got very close to quitting a few times, which in retrospect is crazy. But, you know, getting kicked in the nuts over and over is tough. How did you deal with it or how to people do you deal with it? such a visual just getting kicked in the nuts over and over again um especially you so i'll briefly share the the story that got me got me started because i think it might have relevance because for me the hardest decision was actually quitting my job so that was the hardest decision i had to make because i was actually a very good student i graduated from van derby magdum loudie in three years and i got a good job as a management consultant and i got paid good money and so i had i pretty much had done everything

that I was told to do up to that point. I was president of a fraternity. I, you know what I mean? I was editor of the things. Like, I did all that stuff, right? And so I'd followed everyone's path, and I was miserable. And so I remember I was looking out of my balcony because I owned a condo in a high rise. I was 22.

And I, all I could think about was how I just didn't want to be alive. And so it was, and that's why I say, like, a lot of my decisions have been in the face of my mortality because it's like, apparently the only thing they get me to move. And so one, I was faced with the fact that, like, I was like, if I'm driving tomorrow, I was like, I could just accidentally go on the other lane and like, it would be all right. Like, no one would, no one would know. It would be fine. And I wouldn't wake up and it would be over, right?

And so the thing is just like this kind of passive ideation was something that, like, was something that, like, it got to the point where I was in so much pain of just living this existence that I didn't want to live, that I was like, well, at least if I start a business, it'll be doing something that I like and I won't, like, I won't be thinking about fucking killing myself every day. And so that was really, that was kind of like, it was when I was faced with my mortality of like, well, I've got the judgment of my parents.

I was like, or I could die. And I was like, well, I guess judgment of parents is better than death. And so that was how, like straight up, that was how I made the decision. But then even when I did make the decision, I still had the same level of like fear of failure and judgment. And I told you so. And I would have been right all along and you should have listened to me that I never

wanted to hear. And so when I started the business, it was just that fear that I had so much anxiety every hour of every day, which is why I didn't take a vacation until December of 2019. Hey, guys, real quick, if you're new to the podcast, I have a book on Amazon. It's called 100 million offers that over 8,000 five-star reviews. It has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over 1,000 hours into writing that book. And it's my biggest give to our community. So it's my very shameless way of trying to get you to like me more and ultimately make more dollars to that later on in your business career. I can touch the partner with you. So that's my give. Go check it out. Amazon and back to the show. Yeah, I can,

I can relate to a lot of that. And I would remember distinctly after, you know, finishing football. That was my whole life. I just wanted playing the league. I mean, I was, I was an engineering class out of a year left. And I was like, this can, this just is not going to work. And it really hit me because I was looking at that for the rest of my life. So I can 100% relate to that. I didn't even know that part about your story that young. And to answer to the question for the people who are struggling with, like, their parents stuff or their sister or whoever that person is, like, I think the question,

because like a lot of people are like, I'm so afraid of what people think. But if you really narrow it down, there's only like two or three people whose opinions you actually care about. And maybe it's just one. And so then if you can actually just narrow it down instead of making it the faceless, like everyone's opinion, but like who's that one person? person who's opinion you care about, then it's asking a more pointed question, which is like, is my opinion of what my father thinks of me more valuable than what I think of me? And I think

if you can answer that question, and hopefully it's like, I think what I think is more important, then you can take that first step. I mean, I remember my dad called me, and this is after we had probably taken home 20 million at this point. You know what I mean? This a few years ago. And he was like, hey, you might want to hear this. And I was like, what? I like stepped out from dinner. I was like, what? He was like, you ready? And I was like, yeah. He was like, I'm sorry.

First time he's ever apologized. And I was like, for what? He was like, you know, for everything. He was like, you were right. He's like, but in my defense, if it had been in my time, I would have been left. Are you saying sorry, Dad? Right. But I remember when he said that to me, though, that my response was, I was like,

you rooting for me now when literally everyone else in the world, world has already recognized that I am good at this means nothing. And I was like, if I cared about your opinion, I would have never quit to begin with. And I was like, you know when people can stand on stage? And the first thing they say is, hey, mom and dad, thanks so much for always being there and believing me. I was like, I'm not going to fucking say that because you weren't. And I was like, so I'm glad that that's apology made you feel better. I was like, but your opinion stopped mattering to me a little time. And so that was the conversation that I had with my father. Hopefully it was, you know, less targeted than that for everyone here.

But I guess, you know, what conversation you want to have? And if you never quit, then you won't fail. And that is like, that's the prerequisite of entrepreneurship. If you do not quit, you won't fail. And so they can never say, I told you so, until the moment that you give up. That just resonates with me so much. Like, that's the number one thing. Like, I say that all the time.

I'm like, as long as you don't quit and you don't have a mental disability, seriously, and you can make decisions like that didn't work, that didn't work, don't do. that again, you eventually will hit success. It's just time. That's it. It's just time. Do you think you even have made it without Layla? So I had six gyms before I met Layla. You know what I mean? So I think I had a reasonable level of competence, but I wouldn't have made it as big or it would have taken me much longer. Yeah. I mean, was it easier with her? Is, is, oh my God. Yeah. I mean, everything blew up when I met Layla. And that's because I always had half the equation. right, I didn't have the other half.

And so half the equation is marketing and sales, right? And she had product operations fulfillment. And so that was, once I had that piece, because I could always outsell my problems, but I just couldn't, I couldn't keep people. I didn't get that part yet, which is, which might be funny for people listening to this compared to how I just talked about the first half of this talk, right? But like, it was, it's because I've learned that lesson, right? I've learned how much more powerful it is to not have to help, to tell you,

It's so much more profitable to make the product exceptional and then get people to buy over and over and over again. You make so much more money. And so, like, although I came up from the marketing and sales perspective, I would no longer consider myself that. I'm just much more of a business person now. At least I consider myself that way. But having Layla, as early as I did, I kind of got to leapfrog a lot of the pain I otherwise would have had to figure out the hard way. It was just like, you take all that stuff because I don't like dealing with that. And she was like, okay, and then she crushed it.

And so by doing that, it just blew up. And then in retrospect, I was like, oh, that was really important. I need to make sure that that's always there. And so now when we create businesses, it's like front end, back end, shared ops. And we always have all three with everything that we do. And then that way, they work on the first try. Let me ask you this. I mean, a lot of people, I feel like I got a good concept of what you do now.

But everyone's always like, what's the day in the life look like, Alex? What do you do? So what does that kind of look like now that, you know, you stepped out on most things. and you're basically just being an owner. I mean, it's like, it's like not a lot. So like today, I was reading this book, which is okay. It's not great.

It's okay. You know, I was writing these books. I still have book two and book three that are written. I'm just going through the editing processes now for those. The only things that are set on my schedules that I meet with the CEOs of the Acquisition.com companies, so I meet with those guys once every week or every other week.

And that's, that's like, that's the majority of that's that's like my those are my half to do's and all the and everything else right now my focus right now is promoting the book you know I wrote it so I figure I should promote it a little bit so Saturdays and Sundays there's nothing I usually have one or two days of the week that are completely blank Monday afternoons is when I do the meeting so that was a nice tweak if you if you uh for everyone else here so number one heart attack time in the in the US is first thing Monday morning and so mentor of mine sold his company for 3.4 billion

He did heart rate variability on all of his executives. And he found out they were most stressed in the morning. So he just pushed all the meetings back until afternoon and everyone was okay. And so I can tell you, it changes the feeling of everything. It's weird. It's so weird. I just don't work Monday mornings. And like my first meeting is like noon.

That's so interesting. That's first time I've heard that. I might have to try that. It's so interesting. Dude, it's weird. It's tripping. Like it's, you're like, I feel like I'm cheating. Like I'm not stressed right now.

And so all of a sudden, no one else is stressed either. And then it eliminates this fall. false urgency you feel because it's like first thing you gotta do stuff on Monday morning it's like no you don't like because us deciding now versus four hours from now is going to change nothing but like the stress levels go way down so my Monday afternoon spent like three or four hours in meetings and and then I have Thursday mornings I do it a little bit that's it final two questions Alex what what's next for you what's next for you got the portfolio companies are you just going to keep add into it what are you going to do next yeah it's all that's that's 100% my focus was like how can

I play something. So I spent probably two years trying to think about what the next thing was going to be. I know you and I've had offline conversations about this, but like I had no, I really have no more marginal utility for money. So money only solves money problems. And once you've solved all the money problems that exist in your life, there's not a lot more that money can do. And I recently did my will and my estate planner updated it. And like, I don't have kids and all the stuff that I have, I'm going to be donating anyway when I die. So like, there's really no reason for me to like, for me, idea of legacy is kind of silly because in 100 generations, my gene pool would be done even if I did have kids. And if I did have kids, I probably wouldn't give them the money because I think it

ruins them, which means that I can't give the money to anyone anyways. And even if I did in a hundred generations, someone's going to remember who I was to begin with. So it doesn't really matter. So all that to say, I had to think, like, what is my ideal day look like? And then how can I create a company that fits that? And that was, it was like a two year. I have, I still have note on my phone that has like 11 different big business ideas of what I was going to do next. And then piece by piece, I started crossing them out until I was like, the Acquisition.com one just kept feeling right. It kept coming back to like, I would have moments where I was like, this one might be cooler, but I would always come back to that one. And so that's why I think I'll

be able to win with it because I keep coming back to it. And I think that I'll be able to do it for a very long time. And so if I do it for a very long time, then I think it'll grow much bigger than anything else I've done. So for everyone who's listening, we're requiring minority positions in education or training-based companies that are really five million plus, like five to 15-ish. The biggest company in the portfolio is doing 35. Smallest companies doing $8 million. So just for like context, but that's kind of the range. But five million plus is kind of at least where we kind of draw the the line. But yeah, so we're looking at those companies and saying, hey, we've already done this like a zillion times now. So, you know, helping someone get to 30 million or 50 million or whatever,

understand how to do it. Yeah, it isn't too difficult for you. So guys, Alex, thank you so much, man. Guys, make sure you go to Amazon, get his book, and then, Alex, when of your next books drop? You can't get that stuff up. The next book will drop when I think it's good enough that when people read it, they'll tell their friends. Fair enough. So, you know, I think, I mean, it's done now. I have a whole rewrite in my head, though. I've rewritten the second one, three times now. So I'll probably end up rewriting it two more times. So I'll probably rewrite it one more time. When you're writing it, Alex,

are you doing pretty much the heavy work as well? Like you're not getting a lot of help. I do everything. That's, that's yeah, I do. That's incredible. Because it's a lot of work. People are watching this. It's not easy to write a book, by the way. So, incredible. And a good book's even harder.

Yeah. Yeah. It has to be so simple and so digestible that, because like, when I'm reading, because I've read this book is zillion times because every time I edited, I basically read it. It's like, where is it that my eyes, I gloss over? Like, where is it where is it where I lose interest or where is it that it's like chunky? It's like, then I have to rewrite it and massage it and how can I break this idea? I give a different example. And I think what happened, the reason I like the writing stuff so much is because

I get better. You mean, like, I get better at explaining the concept. So like my depth of understanding, my perspective on, on expertise is how deeply you understand the basics. I don't really think that there's a lot of advanced stuff in business. I think it's how deeply do you understand like people use the term value, right? For how long have you heard people say value? And no one had a fucking equation for it. People were like provide more value. Like what does that mean? Right? I mean, it's true. Like even that that equation, if you took that whole book and you gave me those two pages, that was what I got out of the book. That was worth the read for me. Because I was saying they're going, so if I just do one of these four things, then that makes it better. And then it's

easier to sell. And as soon as you start implementing it, or I have at least already. And so what's interesting about that is that it ends up creating scalable enterprise, right? Because like, you know how to build sales teams. I know how to build sales teams, right? But what really scale sales more easily, rather than having absolutely savage salespeople, and that's very important and good and amazing sales training, it's just giving an offer that would be so easy to sell. And then all of a sudden, you don't have to take nearly as much time to ramp up. You don't have as much cost in sales that are not closed by a new closure when you put them on the roster. Like there's all these other costs that are mitigated when you have a much better offer.

And people are more convicted about it because they believe in what they're selling. Yeah, 100%. I've already seen that across the board. Well, dude, everyone, please get his book. Thanks so much for your time, man. I know you're just so busy today. Just have any more time left out of the schedule. Guys, be on the lookout, I think I'll just doing 10 books, 10 books.

Yeah. He's going to be right. 10 books and gorgeous. Absolutely killer read. I loved it. That's part of why I wanted to do this. And he had a birthday yesterday, so spam his walls. Make sure to bother him.

I think he's 22 or something today. So just make sure to give him some birthday love. All right. All right, guys. I'm going to turn off the live in Tanner. All right, guys. I'm going to turn off the live stream until next time. See you.

See you guys. Thank you.