The Game with Alex Hormozi - The never-ending sales cycle...and the balance of goodwill vs sales/conversions | Ep 106

Episode Date: February 19, 2019

The more offers you make, the less goodwill you have. Today, Alex (@AlexHormozi) talks about how to balance goodwill and conversion in order to maximize profit. He emphasizes the importance of building strong relationships with customers and providing value to them while cautioning against nickel-and-dime tactics that can damage the brand.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:(0:37) - Balancing goodwill and conversion points for maximum profit.(2:29) - Building goodwill in your marketplace.(5:30) - Maximizing profitability through goodwill.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

What's going on everyone? I'm here from downtown Austin and I want to talk to you about something that has been on my mind for a little bit and today felt like the day to do it. I had a little bit extra coffee today. So I'm trying to slow down my speech. Otherwise, let's get right to it. So I'm playing this never ending sales cycle and the balance of Goodwill versus conversion. So the first time I heard even the concept of Goodwill was from a market name Frank Kern,

he's still markets now. And he talked about how the amount of money that you make is directly proportional to the amount of goodwill you have in the marketplace multiplied by the amount of conversion points you have, the amount of times you ask for money, so the amount of offers you make. What's interesting about that, though, is that the more offers you make, the less goodwill you have. And so it's the push and pool balance between how much goodwill you have in the marketplace and how many offers you have. Every time you make an offer, your goodwill goes down. But the more goodwill you have, times the amount of offers, the more money you make. And so what does that actually mean, right?

And so the way that we've, I think that we've done a really good job of having goodwill in our, in our audience, in our customer base by balancing this fairly well and putting a lot of attention to it. And so I think it's kind of goes in contrast to the concept of like nickel and diming people. So there's a lot of businesses that are out there that love to upsell like, well, you know, like let me give you an agency example. So if there was a company that was an agency, and they were like, well, we have, this is our base level. And then for an extra 10% we'll do your creative and an extra 10% on top of that, we'll do your copy. And it's an extra 10% on top of that, blah, blah, blah, blah, right? And so you're nickel and dyming someone in order to get more money out of them. But like, I think what ends up happening there is you lose a lot of goodwill because every time you make an offer, you lose goodwill.

So it's kind of like there's a psychological binary of every time you make an offer, you're beating down goodwill. but from a monetary perspective, all offers are not created equal. And the amount of money that you're going to make from every upseller, every offer is not equal, right? And so if you realize that, I'm trying not to get too abstract here, but the amount of money that you make varies widely from what you're actually selling, but the amount of times you make an offer is set. So an offer is a zero or one.

Either you're making an offer or you're providing value. That's it, right, from a consumer standpoint. But every time you make an offer that's not really that monetized, that doesn't make you a ton of money like a nickel and dime scenario, you're still losing a decent amount of goodwill, but you're not getting a proportional amount of upside from that offer, right? And so the way that I like see this from overall perspective is that most times, a lot of the things that most people would argue that you should charge for, you should still put in your marketplace, but only as goodwill. Now, here's where it gets more interesting. The fact that you're not

going to ask for money for the thing that you are going to be making to add value, whatever it is, right? If you're doing a member's event, or you're doing an internal challenge or whatever it is, right? You still need to sell the shit out of it. And what I mean by that is that, like, people still don't see the value of what you're doing unless you explain to them why it's valuable, right? And so this goes both internally and externally. So when you're talking to your team about this new thing that you're going to start doing, you want to sell them on how great it is. Right? You have to. Otherwise, they're not going to be into it.

And then they're not, in turn, going to emanate that enthusiasm to your clients, right? And so in the same vein, you need to sell the clients on why this thing is so good. Because if you're going to go through the process of making something that's going to be good and fulfilling on it, you want to make sure that you get your due goodwill, right? And so when we're doing this, like the goodwill, the way that I see it is that you're, there's two ways of it. One is that you're depositing money into a bank account, right? you're depositing goodwill into a banking out for a later extraction, right?

You're depositing, depositing, depositing, depositing for later extraction. Or you can see it as building up pressure, right? Like you're continuing to pump air into a defined amount of space, which might be your defined amount of customer base. You're pumping air. You're pumping air. And then the moment you release the valve, like, that's when all the sales start flowing in, right? Mosy Nation, real quick, if you are a business owner that has a big old business and wants

to get to a much bigger business, going to $50, $100 million plus. We would love to talk to you. And if you like that, we'd like to hear more about it, go to acquisition.com. You can apply anywhere on the page and talk to one of our team and see if we can help you get there. And so that's why, like, when we teach, like, that we want to fill people's base up before we start doing their high ticket or their semi-private training, is because we want to build up the pressure and the base of the business so that if we have 200, 300 members, when we say, hey, guys, we're on the offering more exclusive service. We've built up so much goodwill.

We've built up so much exclusivity that automatically that next level fills up without any effort. Right. And so that all comes from how much goodwill you're providing. And so, you know, Gary Vee wrote his book, Jab, Jab, Jab, Right, Hook. But basically it's, you know, what ratio do you go, how many times do you have to give before you can ask, right? And it's not take, it's ask. And so, I mean, being very candid, like this video series, this podcast, this content, all this stuff is me trying to put goodwill out there and show that we're good at what we do and provide value for you in advance, hopefully make you money before we get it. So you see that the stuff that we have really works.

But understanding that you still need to sell at all points in the process to your team, to your customers, and then picking and choosing the select opportunities that actually have the most upside. And so typically where you might have been just going jab, ask, jab, ask, right? And then the asks, you're not making much from them for two reasons. One, because you haven't built enough pressure up, but also because not all of the asks that you have in your business are going to be huge revenue streams, right? Like, there's a million ways Jim Launch could try and nickel and dime our customers, but we don't. We just try and make stuff and keep providing value, keep providing value, keep providing value

so that when it comes time where we actually want to make a move, we've built up so much goodwill that it blows the gasket off the top and it becomes, you know, an overwhelming surge of business. And it's business in a way that is in a maximal, like, convert, that is being maxly converted in a maximally profitable manner, rather than continually doing these little upsells and things like that, that in the long haul, I think, damage the brand, damage the customer relationship and don't allow you to maximally profit in the big picture from your customer base. So anyways. I hope that provided some value for you. I hope that when you were talking to your members, talking to your gyms, and if you're trying to innovate and create new things,

don't always try to monetize everything. Try and provide goodwill. Be cognizant of the fact that goodwill is what will make you the most money and pick and choose the battles that you want to monetize. Because that is how you're going to make the most money in the long run because you're going to have the most loyalty. You're going to have people who talk about you.

They just keep providing value. They keep over delivering. And again, I will just reiterate, The reason that they think that there is goodwill is because you sell them all the why it is valuable and so you can't just make this stuff and give it to them and just not like and barely explain why it's cool You have to sell it as though you were going to charge it charge money for it and then only then and only then Say that's it's I love you here it is right that's the key. That's the difference and that's what will allow you position yourself in such a way that when you do want to make your move You crush so lots of love hope you guys have an amazing 2019 and I'll talk to you soon.