The Game with Alex Hormozi - The Power of Prioritization: Making Every Move Count (GymCon Day 1) - Pt. 1 | Ep 558

Episode Date: July 4, 2023

"If it has stayed the same and you are spending all your time working on it, you're not gonna get more hours." Today, join Alex (@AlexHormozi) as he guest speaks during Day 1 of GymCon to talk about strategies for maximizing profits in a gym business and emphasizes the importance of identifying the constraint of the business to properly allocate resources. He also touches on the topic of branding and reputation, providing insights on how to cultivate associations with intangible ideas that customers want. This is part 1 of the talk.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:(3:51) - Maintaining brand and reputation is difficult(8:52) - Anxiety = don't know what to pick(10:01) - Strategy = prioritizing for the most bang for your buck(13:29) - Better priorities = most money(18:40) - Identify constraints of business to grow(23:42) - Small businesses need more A playersFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Strategy is a big, fluffy, amorphous word that gets tossed around a lot, and no one knows what the fucking means, but it's probably important. And in my opinion, is the most important. Welcome to the game where we talk about how to sell more stuff to more people in more ways and build businesses worth owning. I'm trying to build a billion dollar thing with Acquisition.com. I always wished Bezos, Musk, and Buffett had documented their journey, so I'm doing it for the rest of us. Please share and enjoy. Okay. What is up? Everyone pumped? Okay. So, like my new swag? I'm rep in a little bit. Okay, so I'm going to do something different than I normally do for any kind of talks because I was thinking about this and I was like, all right, like, how can I get everyone there

to make the most possible money leaving the event, right? And so I kind of structured this a little bit like many TikTok videos back to back to back. And so if you don't like or are not interested and something that I'm talking about for a moment, wait five minutes. That's how I'm going to structure this today. And rather than do slides, which is normally what I do, I actually want to draw the stuff live with you. And I think it's more engaging that way, because if you've ever seen like a math problem on a board

and it's just like all done versus like someone walking through the math, it like sinks or hits different, that's at least the theory. And if it sucks, you can tell me at the end. All right. Cool? Great. Okay. So I was originally asked to talk about branding on social media. I will talk about brand for about five minutes. And the main reason for that is because I don't think it's going to make you more money. So I'm going to be hijacking the other 55 minutes of my talk to more shit that I think will make you money than talking about social media branding. And that may sound conflicting with how I am doing things, but it's more about context. So everyone here, who here, who here, owns a brick and mortar gym. Can I just get like a show of hands? Wonderful. Okay. Here's my quick thing on brand and then I'll get all the stuff I'm going to draw.

So big picture, brand isn't actually a thing. It's an association we make between things that we know and things that people don't know, which is usually our company. And so if you think about a brand, like a bouquet of flowers, right? Got these little flowers. These are my flowers. A bouquet of flowers, Thank you. You're going to love the rest of the presentation. A bouquet of flowers isn't actually a thing. It's many things put together, and then we put it in our heads as an idea as one. But it's not actually anything, because if you spilled on the floor, it's not a bouquet anymore, right?

And so when we brand, think of a brand as a bouquet of flowers, but it's your bouquet of flowers. And what you're putting inside of that bouquet are the individual intangible ideas that you want to associate together with the thing that people. don't know about, which is usually your company, right? And so if I were to say some things about my brand, you probably know that I have the best calves ever, right? So that would be something that's like associated with my brand. There would probably be some things like dessert. That's something that's associated with my brand. Now, those are like fun little doodads. But hopefully, some of the things that you really associate with my brand are giving first, providing value, being patient, doing the boring work, whatever, doing blah, blah, blah, right?

Dot, dot, dot. And so there are these intangible things that we associate. And the thing is that, like, if I were standing on stage next to, let's say, a guy who owns a brothel and a drug dealer, you would associate my brand with that. And so you think differently, like the bouquet would look different. And the reason brand and reputation is so hard to maintain is because so many people want to rub their shit on your. Because as soon as yours gets better, they want to associate theirs with yours, which is the right move for them to make. But it gets harder and harder for you to make to get them to not do that because they continue to dilute and not really dilute because you don't actually dilute anything. You just make more associations that aren't with what you want to do.

All right. So let me give you an idea here. So let's say, here's my bouquet. Then I've got this sad flower. So this is a sad face flower. There's my sad flower. if I handed my wife this bouquet, all of the roses are perfect, and there's this one that's just wilted and dead. It looks a lot different, right?

The bouquet, the brand, the perception of it massively shifts even with one fucked up flower. And so that's why creating a brand is much more about cultivating deliberately the associations you want to make with the thing you have that people don't know, with the things that your ideal audience likes, that you want them to like too. Does that make sense? I'm seeing some head knots. And so if you have a clean gym, people will start to associate your gym with the intangible idea of being cleaned, right? If you have really friendly people, they'll start associating smiley faces, recognizing their name when they walk in the door with the brand, which in the beginning, they don't know what

it is. The name is meaningless to them. But we create the meaning by associating with the things that we know that they like. And that is the process of branding done at scale. and you do it over and over and over and over. Right now we put out 250 pieces of content a week, and in six months we'll probably be at 1,000 a week in terms of what we're going to be putting out. And it's just an absolutely brutal, repetitive, violent process to get as many people as possible

to remember one or two things about you. Does that make sense? Now, let me tell you what doesn't probably make sense for you. You probably can't do that, which is why. I talked to Kiel before I got up here. The brand that you're going to build in a local community is going to be based on the quality of your product and your service. Your reputation is going to be based on that.

And so if you feel like you want to strengthen your brand, strengthen the product. You don't need to make a video on Instagram every day talking about fat and carbs. Because real talk, you're not going to be better, most likely, than the hottest chick on planet earth talking about the same thing in terms of reach. And the thing is, and here's the double-edged sword.

Let's say you are amazing at it. If you do that, what's going to happen is that you're going to get more demand on your personal brand and online, et cetera, people who don't live close to you, that will be a greater business opportunity for you than a single local location. And so then you're going to have a choice,

and many of you probably have done this. Well, I've got some online clients. I've got some in-person clients, and I'm totally spread thing. I don't know what the fuck I'm doing. Right? Real talk? Anyone? Does this resonate? Right. Okay. And so that's why it's really about focusing on the one opportunity that's going to give you the highest ROI, which is going to be the remainder of the time that I'm going to be talking today. All right. And so I was asked to talk about social media and branding. I think that for most local businesses, the brand is going to be about the reputation. The reputation is going to be built on consistently meeting expectations. Now, the thing is, we always talk about over delivering. And I've even talked about over delivering. But I think, A lot of times I think about this, and the real real is that most people just can't even meet expectations because we sell so hot. And so if you could just meet the perception that this person has, the expectation they have of the service that they're going to get, you already want.

Make promises, keep promises. Make promises, keep promises. And if they like the first promise you made them and you keep it, they'll be with you forever. Okay. That was brand. So if you were like, I don't care about brand, welcome to the next TikTok. All right. So these are the topics that I want to hit on today. So we're going to start with a little exercise.

I'm going to call it the magic wand. All right. So right now, if I have a magic wand or you have a magic wand and you wave it, and you get to make as much money as you want, all right? So write down or put at least think about it in your head what number that would be per month. Okay? How much money are you making per month? Okay.

Hopefully it doesn't take too long to think of a number. Now, who here currently is making that amount of money? Please raise your hand. Wonderful. So we have just done established a gap between where you are and where you'd like to go. Fantastic. So here's you. Here's goal, which we all just established.

Now, in scenario one, you have these goals, right? And there's all of these different ways of getting there. right? And the problem is, you're like, which one do I do? Before I explain more on that, scenario two is I don't know what to do to get to there. Let me tell you how these feel. This one feels like anxiety. So if you feel stressed or you are overwhelmed about which thing you should do, that's this. If you don't know what to do, you're out of loss, you feel hopeless. because you're like, I don't know what the fuck to do. Like, I don't know what to do.

And it's not about picking. It's like you don't even know where to start. And this has been really important for me to identify if I feel anxiety, it's because I don't know which thing to pick. If I'm feeling sad, it's because I feel hopeless. I'm like, okay, helplessness means I have a lack of choices. So I have a lack of choices means I have ignorance around this topic. Okay, this makes it solvable.

So then I can start solving for I need a path so that I know what to do. It's the only thing for I know me. personally. That's what makes me sad. If I don't know what to do, I get sad. Is this resonating with anyone here? Okay. So, that was TikTok too. This one was about figuring out which thing to do. This is about figuring out what to do. So when you're deciding which thing to do, this is a clear case of lack of strategy. All right. Now, strategy is a big, fluffy, amorphous work. that gets tossed around a lot, and no one knows what the fucking means, but it's probably important. And in my opinion, is the most important. But I'm going to give you a different definition for this

to make it a little bit more useful, okay? Strategy is just prioritizing. It's all it is. Whenever you hear someone say, we have to figure out our strategy. It just means we have to figure out our priorities. It's all it means. And in layman's terms, it's what's going to get us the most bang for the buck? if you want the fancy definition that I have, it's how you choose to allocate resources that are limited against unlimited options. That is strategy. And the tough part about this, about strategy in general,

is that when you're looking here, you have all these options. Strategy is figuring out, actually, there's one that's right here that takes us off the page. Because the most costly thing in business isn't just the unknowns, but it's the unknown unknowns, as in the things that you didn't even know you could pick from. So let me give you three examples. Example number one, we had a company, so the first investment we made, I still owned 100% of Jim launch at this point. It was a photography company.

And so this photography company had a single location, and the owner had an agency to help photography owners. And he was like, I want to do what you did with gyms with photography. I was like, okay. And so the more I got to know him, the more I learned about the business, I was like, I don't think we should do that because I'll tell you the stats around it. So he's like, well, I charge five grand. And I was like, okay, well, what does the average photography studio add in revenue after using your thing? He said 400,000 year.

I was like, so they add 400,000 a year. And he's like, yeah. I was like, and you're charging. Say it again. He's like, $5,000. So I was like, okay, let's not do that anymore. And I was like, does it cost less than $400,000 to make? And mind you, that was added revenue, not total.

And his was doing millions. And I was like, okay, how much does it cost to start one of these? And he was like, not a ton. And I was like, ha, raise the idea here. I was like, what if we own them all? And so that's what we did two and a half years ago. Now we have 77 individual studio locations in terms of rooms where we take pictures. And that business went from a million and a half a year to two and a half million a month in that time period.

The point, the reason I bring this up. is that it wasn't a move that was on the board. It's like, how do I go to this agency? How do I turn this into a coaching thing? And I was like, no. Like, you have a business model that has amazing returns on capital. Let's just do a ton of them, right? And it was operationally simple.

We could centralize a lot of the stuff, which is different than like a gym. Jim is a lot harder to centralize things, more decentralized. So I show this to say that right now, if my goal here is to make you guys as much money as seemingly possible at the time I am done my 46 minutes, then if I can just get you to make the one chess move that will make you the most money, then it will ROI everything you do this year or maybe the next five years. Because fundamentally, people don't actually move faster than other people. Like you see me walk. It's not like I'm hyperactive. It's just you get more for each step when you are more strategic. When you have better priorities and you allocate your resources, time, money,

energy into the fewest moves that gets you the most bang for the buck. You make the most money. Hey guys, real quick, if you're new to the podcast, I have a book on Amazon called $100 million offers that over 8,000 five-star reviews and 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 a thousand hours into writing that book. And it's my biggest gift 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 Purchase the partner with you. So that's my give. Go check it out, Amazon, and back to the show. So back to this. You guys want to hear a different example? So we had a, we have a PR company that we

bought that was selling 100 units a month of PR services. And they did decent. Decent business, really good marketer, so, so delivery. But I really like the founder. And so we dove into the data and it looked like 85% of the businesses turned out within two or three months, which is horrendous. 15% of the customers paid the most and stayed the longest and they were different. I was like, wild idea. What if we stop selling these 85% and only sell these 15 and cater our stuff to only them? He was like, that would kill my business. Mind you, recurring theme of the first one, when I told him to shut his agency down,

he had to go to zero and then built the next thing. And for nine months, he was basically at zero-ish. Hard. Like tough, very simple to say, very hard to do. You guys imagine if you have two locations, I was like, hey, I can help you get there for a year. You're going to have to make no money. Cool. What do you do? Play a long game. And he was willing to do that. And that was me talking to him off a cliff every week being like, hey, man, we're going to get there. And so with this individual, with the PR, he cut 85 percent. We catered the messaging, and we made it way more niche down to this specific avatar.

And we 10x the price. And now we sell more units than we did before. We 10x the company. strategy rather than thinking, okay, what am I going to do to just get more? Now, there's always a time for more. Believe me. Violence is the answer. Big fan. All right. A brutal, relentless effort. But we want to make sure that we're capturing the most per unit of effort. And so the equation for this is volume times leverage equals output, which means the more times you do something and the more you get for each time you do it, the more you get ultimately. Now, if you're a lazy motherfucker, Guess what? You better have a shitload of leverage. No, you can't be lazy and still make tons of money. You just have to have lots of leverage. You've got to be really strategic in the moves you make.

The more activity you have, the more you can let a little bit of that violence work for you. But it ends up becoming a cap soon enough. Because at the end of the day, we only have X amount of hours. And if you want to do big shit, you need a lot of other people's hours to work for you, which is a form of leverage. Okay. So one moment. It's a different style, TikTok versions, all right? A little stop and go. Okay, we got that, we got that. I'll give you a third one.

So we had a company that is an association of trying to keep it vague. Let's call dentists. Association of dentists. They had a business that, like, they'd glob all the savings together of all the dentists so that they would charge less than all of them saved with the conglomerate of buying power. So if you save $30,000 a year as a dentist, they would charge 10, super sticky model, great business. And so he's like, hey, I think I could sell this thing for 20 or 30 million. And I was like, how many dentists do you have there?

He's like, I don't know, 500. And they all run the same systems. He's like, yeah. I was like, what's the average dentist make per unit? It's like, I don't know, 500,000? I was like, wild idea. what if we take 10 every year, bundle them up, and sell them from $100 million every year? Get 20%, give 80% to them.

That'd be chill, right? I was like, then you get your exit every single year. And then, if you want to sell it, we exit the machine that does roll-ups. Because in that you have a roll-up machine does 20 or 30 million a year in profit, and we get 10x on that. Now you have a $300 million year exit rather than a $25 million year. He was like, that sounds better. I'm with you.

I agree. Strategy. Prioritizing. What move will get me the most for the effort I put in? All right. Now, this is a perfect transition to you're like, okay, that sounds very pie in the sky. So, next TikTok, theory of constraint. So everything that we do at acquisition.com and the approach that we have with growing any business is spending a lot of effort to try and identify the constraint of the business because every single business is constrained. There's one thing that is limiting its growth. So right now, and here's the fucked up part, who here works all the hours of the day?

Like most of the hours that you're awake. Okay, half of you. If your business is not growing as fast as you wanted to, you are working on the wrong stuff. If it has stayed the same and you're spending all your time working on it, you're not going to get more hours. So you're doing the wrong shit. So it means that you have not properly identified the constraint of the business.

So I'll give you any good. example of this. We had a media company that came to us big YouTubers, 40 million plus subscribers, and they were like, hey, I was like, what's the goal? They're like, we want to make money. I was like, cool. Love it. Great goal. So they're like, we think that we need to create a better media machine. It's like, okay, they're like, we need to really systematize this and do it better. It's like, okay, how are you monetizing? Add sense. By the way, very inefficient way to monetize. okay and so they're like I think we're I think this is these are all the things that we need to do to eliminate our constraint for our production cool it's like have you thought of well an idea maybe we just like the constraint of the business is that you don't have something to sell I was like you're like a 97 out of 100 on media and you're a zero out of 100 on shit to sell and you're trying to talk about how to get to a 99 rather than like if we just went from zero to 20 we would probably make you 10 times more money than you making. And so that is an idea of the theory of the constraint, right? Like the constraint of that

business was not media. And many of you, the constraint of your business is not making better fucking workouts, right? That's not the constraint. It's not the constraint, right? That's not the constraint. And so right now, if you spend all your day working on shit that doesn't move the ball, working on the wrong shit. So let me tell you how we do it so that hopefully you can too. So one of the questions I like to ask is, why can't we 10x this business? Like, why can't we? And sometimes asking that question, and then it becomes really apparent what the problem is. And the answer is sometimes, well, we just need to hire all these people.

It's like, well, then let's fucking do that. Right. And so here's how we transition into the tactics around this. So this is the actual first part of my planning process, prioritizing process, strategy process, whatever shoe fits you, for figuring out what we're going to do with a company that we're going to grow up. So when we're thinking about all the objectives, all the things we could potentially do,

it has to map to one of these three objectives, which is, one, how is this thing that we're going to spend time, money, effort on, going to get us more customers? Two, how is this thing that we're going to spend time, money, and effort on? Get us increased LTGP, make them worth more. Or three, how is, the time, energy, et cetera, going to decrease the risk that this does not continue to happen in the future, which is another way of translating how do we increase the enterprise value overall?

So, for example, if you do all of this stuff, that's great, still really risky. Because if you die, the business dies. Now, if we have to hire someone to do the same thing as you, is it going to get more of either of these? Probably not. Will it make the thing more valuable? Absolutely. Does that make sense? So I'm going to segue briefly. We're going to side quest. Imagine two people. Five million top line, five million top line.

Two million in bottom line, two million in bottom line. This guy is a single owner, runs all the day to day, has lots of minions, known with real brains, and they just do what he says. Okay? If this person dies, the business dies. This guy has a team that runs the whole. thing and he makes $2 million in income from the business, but it doesn't require him. Who's richer? This guy. The question is how much richer? A lot. This guy, because he doesn't have to do anything,

means that somebody else could also not have to do anything and also collect that $2 million a year, which means his thing is probably worth depending on what type of industry it's in, 10, 15, sometimes $20 million. And so when this guy, here's where the leverage comes in, Big L, if you go from two million a year to three million a year in income, he just added $10 million to his net worth. This guy is concerned about all of the tax evasion strategies because he's trying to maximize his income and forgetting the fact that the asset is the thing that's going to build us net worth. This took me a really long time to learn. Like an absurdly long time.

Everything I did was all about like, how do I take the income I have, be more efficient with it, blah, blah, blah, blah, blah, when it's really like you become wealthy from the shit you own, not the shit you do. So everybody here has a business. And right now, many of the businesses in this room are not valuable. No one would buy them because it's really just you with some helpers. And so the idea is that we have to transition, and this is a skill that is worth getting, because no matter what you do for the rest of your entrepreneurial career,

you're going to need people, you need to have the skill of hiring, recruiting, training, onboarding, managing talent. Who here has one amazing superstar person who works for you? Cool. Imagine if you had four of them at your one location. How easy would life be? Right? you make a ton of money. Here's what's fucking crazy.

The difference is small businesses and big businesses is how many A players they have. And so what happens is most small business owners, hire a lot of people, get lucky, one sticks, actually works their ass off at a fair rate, and you're like, man, if I had six more Sandras, right, I'd be good to go. The thing is, is that big business owners

maintain a higher level or a lower tolerance for mediocrity. And so they actually do keep looking. until they find six andres and then it does become too easy for them to kill it because i got six anders how could i lose that's the idea makes sense okay this took me a long time to learn like i would just put up with people who are mediocre and right now many of you have a think of somebody who's mediocre on your team actually i make it easier think about that person that you thought about who you shouldn't have thought about because if they're not making you money you're not sleeping with them don't think about them first thing in the morning all right so

anybody have somebody in mind So if you have that person in mind, that person is taking up 25% of your bandwidth. What a cost, right? And probably many of you, the biggest lever of growth is on the other side of a few hard conversations. I now talk to portfolio CEOs all the time. And it is incredibly clear the people who will win and the people who will not is simply based on their ability to confront discomfort. And it's interesting because this is a mostly, eh, that's kind of 50-50, actually.

audience, between male and female. But a lot of guys beat their chest. I can cold plunge. I can run a long time without stopping. Woo. Lifts lots of weight. But you can't just say, hey, man, I think you suck a little bit. Real. Can't do it. And for that reason, they suffer for fucking decades because they can't fire Sarah. Not Sandra. Sandra's stud. Can't fire Sarah. It's like, yeah, I know she's left with one of the clients. But like, I mean, I think her heart's in the right place. It's like whenever you're, when you're qualifying that someone's hearts in the right place and deep down they're a good person, it's because it's obvious they suck. Right? Hit a nerve on that one.

So right now, do me a favor. Write down the name of the person that you know you need to get back to and start what we call a performance improvement plan. Which is you've got 14 days to fix your shit or get out. And many of you can't even have that conversation because you're too much. much of a fucking pansy. Real talk. And this will keep you poor. Seriously.

Like you got to grow up. Got to be able to have hard conversations. Be like, hey, my biggest piece of advice for this is you know the shit you say about Sarah while you're here behind Sarah's back? God, she's just like, she's been slipping lately. You know what I mean?

Like she's not showing up on time. She's not cleaning up after the classes. She's short with the clients. I had two people complain about her, right? Say that to her. That's it. Just think about what you'd shit talk and just say it to them. It's just the truth.

Just say it to them. See what happens. One of two things. Either they're like, fuck, I've had my head up my ass. That's why it's been so dark. Right. You're totally right. Thank you.

Pull it out. Right. And all of a sudden, they have a total 180. That happens like one out of five times. Four out of five times. you say these are the things that you have to do, they either say, I won't do that, or they say, sure, I'll try, and we both know they're not going to. And then you elegantly exit them from the business. The problem is that right now, Sarah teaches like six classes. Now what? Got to find somebody else.

She's killing your business. So get rid of Sarah. All right. So that was a side quest, but hopefully we found some treasure there. And write the name of the person need to have that hard conversation with and be like, there's this fucking speech, and this guy was talking shit about you, and I should have talked to your face. And so this is me talking shit to your face so that I feel better about it. You kind of suck.

Okay. Really took that TikTok thing to heart. Okay. So, I'm going back to this. That was a side quest, main quest.