The Game with Alex Hormozi - Unscalable Value → Scalable Growth | Ep 766

Episode Date: November 1, 2024

Guess what? Doing unscalable things well will lead to developing the skills you need to scale.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 and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

What's going everyone? Welcome back to the game. Today, I want to talk about scalable value. Sounds like two very big, kitsy terms, you know, scale and value. But I'm going to bring it down to the dirt for you. So I had the value equation, which is something that I wrote a long time ago inside of the offers book, which I originally got from my gym days. I'm just trying to think, like, what are the components that make anything valuable in general? And one of the things that's come up more recently because I deal with a lot of newer business owners on school was this concept of people struggling to make things that are good. I kind of like lost my shit, for lack of a better term, on the one call a week that I do inside of the school community from some of the questions that I was getting. And so I wanted to kind of share my rant that I had there with you, which is oftentimes I see entrepreneurs put the car before the horse. And I'll explain what I mean by that.

they will focus on trying to make something scalable before they try and focus on making it valuable. And so I see this kind of like in the gym world when a guy would come in and say, hey, you know, I don't want to get too jacked, right? Because then I'm going to have to change my clothes. And I'm like, well, why don't we just start with you looking like you work out? Like, why don't we just start with that, right?

And so basically it's like, oh, if I lose weight, then I'm going to have to change my clothes. It's so backwards in terms of thinking, right, that they're basically saying, like, I don't want to make any sales because if I make a thousand, then I'll have problems. It's like, duh, but you don't even have a sale yet. I think that scale should honestly be completely removed from your vocabulary, especially if you're starting out. But I think what I've seen, at least for me, is that I've been willing to do things that are unscailable

for significantly longer than most people do. And I'll tell you a tactical story about this. So, when I was running my gyms, I would do these way in. I would sell like, you know, call it 50 people who would do a challenge with us, and that would be, you know, a couple weeks of sales or whatever. And then I would have a Saturday where I would get everyone in for the nutrition consult, and I would do 48 one-on-ones. And that sounds absurd, right? 48 one-on-ones. And so I would do two every 30 minutes for 12 hours.

So I do 48 of them, back to back to back. And I had higher average revenue per member than anybody else in all the gym, you know, groups that I was in. did. What I would sell there was I would be selling supplements. I'd already sell the services, and so I would meet them one-on-one for nutrition, and I'd tell them supplements. It was an onboarding. Everybody else who competed against me was like, oh, that's such a waste of time. Like, I don't want to, I don't want to spend a full, you know, I don't spend a day doing one of one. It's like, I just get them in a room and then I just pitch them. But the thing is, is that like they would close, you know, 30%, maybe 50% on binds of product. And they would average, call it

$50 a head. But I would average like $250 head. And so I was averaging five times, more than them. And it was because I was just willing to meet with people one-on-one over and over and over again. And don't be wrong, those days were exhausting. Like at the end of the day, it was like going through a gauntlet. But when I had zoomed out, I thought to myself like, well, that business owner worked for the day and I worked for the day, and I made more money than him. And so it's like, we have this aversion to doing like repeated tasks, but it's like that repetition, and I'd even think about it then, but like that repetition is also it made me so good at sales. And when I talk about the 4,000 101 sales I close, like, I don't even count the supplement sales. I have no idea how

many. There's a lot. It's a lot, a lot. Like, if I counted those, it would be an absurd amount, right? Well, if you're like doing math, it'd be double. But it's, it was a lot. And it was in such rapid succession that I got such fast feedback loops on what I needed to say and how I needed to pause and all that stuff that I got really good. And so I had a different business owner who came out for one of our scaling workshops and I'll tell you what they did. I kind of told him the story. So he had a business where he would do these kind of like events and they would sell they did like a million dollars at their event so it worked out great and after they did that event they were like man that's a lot of work and so then they went back to kind of like they're like how do we automate this and so

they try to like you know make it a recording and do all this stuff and you know the ROAS dropped so return on outspin dropped precipitously it went way way way way down when i was talking to him I said, well, you got more than 10 to 1 when you ran your event. Why don't you do one every month? And he's like, man, it would just be a lot of work. And I was like, well, I mean, yeah, but you'd also make $10 million. So, I mean, no, but like, maybe 10xing my income feels like a pretty good idea. You know, like, worth it.

Right? But he was like, okay, I have to convince my founder of doing it. You know, the co-founder of doing this because, you know, his co-founder was kind of like the more public face, he was kind of the more of the integrator. So then we went through that of like, okay, how do we parse it out? So, you know, this personally has to show up and then you can do everything else. And so we walk through it, simply asking like, what would be the most absurd version of this? And then rather than saying, okay, well, I can't do that because it's a lot of work, just being like, no, what if I did do it? Like, what if we did meet one-on-one with every single

customer? And the thing is that that repetition ends up paying so many more dividends. Because, like, you get the immediate reward of, like, you'll definitely make more money, for sure. But on top of that, you'll gain way more skill. I think that this consistent approach to unscalability has been one of the things that has allowed me to move forward faster along the kind of business journey. And they even talk about this in the world of like software, like Ycomitor. There's tons of clips about Sam Allman and Paul Graham talking to Ycombinator founders. These are the companies that become the most scalable businesses in the world. And they talk about doing the unscailable thing. They talk about handing in the supermarket and just trying to get people to use your app.

And it's like, well, it's not scalable. It's like, yeah, but it's not valuable yet. One of the things that I was telling some of these new business owners is like they're trying to have a lead magnet to get people to engage, right, to get engaged leads. Their lead magnet is they're trying to just put like a PDF together. And they're like, well, you know, you have a PDF. I'm like, yeah, but I also have a really long history of positive products that I've put out. If you have two international bestselling books, then, yeah, when you have another written

format that comes out, people tend to want that because they associate or approximate whatever the lead magnet is with the other thing that they bought or consumed. And so that makes sense, right? But what I told them and what so few of them actually do, I said, why don't you just give away five hours of your time, 101? And so many of them are like, oh, but that's so much work. I'm like, bro, you're broke. You're broke. The alternative is nothing. You make no money. And so it's like, why I could only take on 10? I'm like, well, you have zero. And they're like, well, what do I do after 10? I'm like, we will solve that with the resources you gain from making money. Here's the 201 version of this, is that when you do things that are unscailable,

you tend to also be able to get, you can charge significantly more, you can have premium price, you can get way more profit from doing that. And guess what all that extra profit and information allows you to do? Invest into making it more scalable, because you'll also be able to parse out the components of your unscailable thing that are the most valuable and then say, okay, well, these components I probably can automate, they take me just as much time as the most valuable part, but they're not as valuable. So they cost the same time, but aren't valued as high. Well, cool, then I will automate that. And so then what

you're doing is basically focusing on the biggest point of leverage, where you get the greatest return for the effort they put in, and then trying to scale that part, or trying to scale everything else except for that. And so that gives you this huge multiplier on the remaining effort that you put in. I think you just got to roll your sleeves up. I still do this, though. I want to give more examples around this, but it's like, I want to beat this in. It's like, if your lead magnet isn't that good,

consider adding more unscalable value. Consider adding more personal touch. Consider adding more personalization to the stuff that you sell. Like if I said, hey, like, let's say you're a beginner website designer, developer, right? You can try and think of all of these amazing things that you could do for someone. But if you just said, I will give you five hours and I will improve your website, a lot of people will just take you up on that. Because what happens? Because I was thinking about this, why is that

unscailable value more valuable? And so if I look at the value equation, I think it's actually all top side. So four variables, dream outcome, perceive likelihood achievement, time, so speed, how fast it happens, and then effort and sacrifice. Well, if you provide unscailable one-on-one attention to somebody, a prospect, guess what happens? Well, the likelihood that they get what they want because it's one-on-one goes way up. The amount that they have to work goes way down because it's you doing the work. And the amount of time delay becomes irrelevant because they're receiving the value in real-time with you. So it's this unbelievably valuable product. I mean, it is a product. So if you're doing this web development and you're doing this and you're providing this unscannable value, one of the other things that it allows you to do, especially if you're starting out, is that you get all of this face time with your customers. And so Paul Graham said this, and you're providing, and so Paul Graham said this, and you're I repeat it a lot, which is that you can solve every problem in your business by simply talking to your customers. And so if like your marketing is not working, talk to your customers. If your product's not delivering, talk to your customers. Those are the core value created. Like you have to

let them know about it, then you have to deliver it. If you want a great way to figure out what to sell, talk to people one-on-one and do it for free. And then ask at the end, hey, if we were to work together and I charge this much, what would that look like to you? And then you can have them tell you the offer to sell them. Here's the big one. So this is the big, this is the big pain point, which is, well, shoot, I'm going to get all these tire kickers, all these people who don't really want to do this, who are going to take me up and waste my time. Well, guess what you can do? When you give an amazing offer, you can add friction. You can add qualifiers. And so I'm not saying give five hours, three hours, do a full project for any prospect. I am saying only do it for qualified prospects. Imagine right now the most perfect prospect that you can imagine, right? It checks

all the boxes, right? Well, you can make your free thing only available to those people. And so someone can still absolutely have to qualify for your free thing. And so people have this misconception that because it's free, I have to give it to everyone. But the thing is, is it's free to them. It's not necessarily free to you because you have hard costs associated with your unscalable value. I'm only going to make this investment for a qualified lead. And so when you marry those two things together, all of a sudden you have unscalable value, but only being delivered to the people who have the highest likely to purchasing,

and whose feedback you value the most, and who will tell you the offer that will have the highest likely you converting them. And so you can do this when you're starting up new product lines. So this is for the larger business owners for listening to the podcast. You can use this strategy or technique when you're trying to create new lead magnets for new audience or new avatar if you're again trying to expand or just get into or just improve your advertising, being willing to do work that you know has to happen in space and time

and then disappears is the work that oftentimes, in my experience, has resulted in the deep learnings that set me apart or set my business apart from other people in the marketplace that weren't willing to do it. And I'm always amazed by this. It's like if you knew that you could beat all of your competition because you have an information advantage, why would you not do it? And not only that, get paid more for doing it.

it. I don't get it. And so I think that, number one, I try to reverse engineer from what absolutely insane would be and then trim down. So in the offers book, I talk about the trim and stack process. But I think most people trim too much or trim the wrong stuff. Because what happens is, and this is where people mess up, is that when you trim the unscailable thing, you also trim the unscailable price. But price adjusts with value. You know, I told the example in the book, like, yeah, you could theoretically, you know, fly out to your, to your prospect's house, right? And then, like, reorient their kitchen and go grocery shopping with them.

It's like, well, of course you wouldn't do that. Well, would you do it for a million dollars? Probably. We basically sell out of our own wallet and cut things that a prospect would otherwise deem very valuable. But we don't break down into the actual dollars and cents what it would cost. us. So it's like, let's use that crazy example. You fly out because you're an online trainer and you sell this, you know, this onboarding process, which is absurd. By the way, if you do want to onboarding, guess what happens? You get more of the four hours. If you don't know what the four hours are,

I'll make another podcast about these four. But number one, you want a review. Number two, you want referrals. Number three, you want retention. Number four, you want resells. Every customer, you want those four things. Those are the actions you want them to take. And so when you onboard some one-one, you increase the like that all four of those things occur. But let's play it out. You're like, I can't, I can't do that. Okay. Well, if you charged 25,000 a year, would you do it? Well, shoot, okay, well, how much is a flight cost to their house? Okay. You plan it ahead. You know, say round trip, it costs you a thousand bucks. You know, you don't need to stay at the the writs, right? Just stay there for a day. And you can even fly in and fly out, not even have.

You'd come at first thing in the morning, leave in the evening. You don't even have to stay at a hotel. So if you did that, maybe you're knocked down to 500. It costs you a day and it costs you $500. If you sell five of these a month, well, then you have a million dollar business. And it's almost all profit. And your cost on that is a day and $500. So if you could get three times more of those sales and the added cost per customer was a day and $500, you'd probably do it. But no one just takes that, like, there's so many people that just don't take like the, okay, what would it actually take?

and then what would that actually cost? And then this is America. You can pick your price. Just pick a price where you'd be stoked to do it at. And I think that a lot of people don't, they're not willing to start with those unscailable value. And I think it's the best place to start. Here's why this is also cool is that if you've heard of the Tesla model, right,

where Elon started with the roadster, the most expensive car, which most people couldn't afford. Then he moved on to the S down, down market, which is a $100,000 car. And then he moved down to the, to the Model 3, and then he moved on to the Y, right? He kept going kind of down market, right? And so that whole process, that whole concept basically allows you to borrow the brand credibility of the premium product ahead. And so if you only take on customers that pay you $25,000 a year

in order to help them completely transform their lives, then when you do come out with a more scalable version, there's a reason for it that makes sense. You say, hey, I'm completely packed at my highest level. I can't do this level of service. But what I can't show you is all the stuff that I do with them, but I'll do it with you rather than doing it for you. It's reverse of what is typically taught, but it's, in my opinion, one of the better ways to do because you're going to get way more intimate knowledge of all the problems that someone's going to experience doing it hands-on with them so that you then can do a more helped or consultative version, which then eventually turns into the do-it-yourself or even more scalable version. And so what you want

to do is you want to do the unscalable value so that you can make the best scalable value later. Here's my parting question for you is think about the most insane thing that you think everyone would jump out, specifically the most qualified versions of your customers, the best ICPs or the best avatar you have. Then actually write down how much you think it would cost you in time and money to do that thing. And then, A, either charge for that and pick a price that you would do it at where it makes sense, or B, choose to give it away for free only for the people who are absolutely insane.

And I think that if you actually walk through this process with your team, you guys can listen to this together, whatever, there's an unlock there where there's unbelievable amounts of money that are just sitting waiting for you. The amount of personal trainers, physical therapists, chiropractors, dentists, whatever, roofers, who there is a version of a product that way more people would want, But no one just does the math because they immediately write it off. And that money is just sitting there waiting to be made for someone who's willing to do just a little bit more work.