The Game with Alex Hormozi - Your Market is Not Capped | Ep 531

Episode Date: May 2, 2023

"Your market isn't capped. Your mindset is capped." Today, Alex (@AlexHormozi) talks about how entrepreneurs often think their market is saturated when in reality their mindset is the limiting factor. He provides a framework for expanding into new markets, and emphasizes the importance of taking the time to build a successful business.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:(1:03) - starting a new business is not the answer(2:25) - Look at the platforms & methods. What haven’t you done yet?(5:10) - 5 directions under the pyramid of markets(11:33) - Your market is not saturated(12:32) - Takes time to build big sh*t, have an entrepreneur checklist(14:56) - Provide most value by absolute metrics in terms of dollarsFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

When you do niche down, sometimes you can still make more money because of all the points I said earlier, which is you're not even close to tapping the methods, the platform, the media, or the total amount of volume you need to do to reach all of those people within that niche. 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. Your market isn't capped. Your mindset is capped.

Let me tell you what I mean. So the other day, I had a business owner who was spending $50,000 a month, marketing his app that was a fitness app, saying he didn't want to spend any more money because he thought he had saturated Facebook for weight loss. A $60 billion industry in America. I shit you not. Mind you, this guy's making $3 million a year. He's not a moron.

But what? But his mindset was capped. Tell you a different story. I had an agency owner also spending $50,000 a month, also on Facebook, in the chiropractor niche, saying, hey, I think I've saturated my market. I was like, you've saturated your market, a $16 billion industry of chiropractor with your $600,000 of spend. Let me zoom out on this for you.

So you only run ads on Facebook. I was like, do you run ads on Hulu? Do you run it on YouTube? Do you run them on Spotify? Do you direct mail? Do you do radio ads? He's like, no, no, no, no. I was like, okay, let's zoom out even further.

I was like, do you do cold calls? Do you do cold emails? Do you do cold voicemail drives? He's like, well, no. Okay, let's zoom out even further. Do you make content for chiropractors? He was like, well, no. On any platform?

No. Okay. So what we just walk through is one of the multiple different frameworks to walk you through in terms of how you can uncap your mindset so you can realize how big the industries that you're probably in really are. And the reason this is so important is because many people, hit this first plateau and then think, oh, I should start a new business. Oh, I should start a new product line when really they need to confront the problem ahead, which is they don't know how to

get more customers within their current niche or space. And the easiest way to know that it's your mindset that's capped, not your market, is just Google how big the market is that you're in. If you're an HVAC and you're making $2 million a year and it's a $50 billion industry, guess what? You're probably not capped. So here's how we walk through it. Number one, From the marketing perspective, you have your method, which is the biggest thing you do. It's running paid ads. It's making content. It's doing outreach.

It's getting referrals. It's getting affiliates. Those are the methods that you do to get customers. Underneath of that, you've got the platforms that you do that method on. So you've got Facebook. You've got phones. You've got email. You've got Hulu.

You've got YouTube. You've got Tabula. You've got Google at. Like there's so many different places that attention are app. Underneath of that, you've got the media on the platform. So if I'm on Instagram, I can go Instagram DMs, I can go Instagram stories, I can go Instagram posts, I can go Instagram Reels. I have all these different media within the platform. And on top of that, one level below that is how much volume am I doing within that media?

Am I posting one story a day, one story a week? Am I posting multiple stories a day, multiple posts a day? What's my volume? Am I spending $100 a day or $1,000 a day or $100,000 a day? So each of these are levers. And this is just framework number one. in terms of how much available is out there. And if you've just done one method on one platform

with one medium and you haven't increased the quantity of that thing, and here's the telltale sign, if there are other people in your market, marketing to the same audience, so like that chiropractor agency, if there are 50, 100 other agencies that market to chiropractors and they're all marketing on Facebook, which many of them were, or still probably are,

then you could probably add up all of the ad spend every one of those agencies together, and that just gives you an idea of how much there is available in terms of numbered new clients per month that all of them together are selling, just on Facebook ads. Your market isn't capped. Your mindset is capped. Now, rewind real quick. If you're trying to pick what market you're going to go in, I talk about this in my book, $100 million offers. There's four things I want to look at. Number one, are they in pain? Am I actually solving a problem for someone? Number two, are they easy to find? Because if I can't find them, I can't sell them, right? Number three, do they have the money to spend in order to buy my thing? Because if I'm trying to sell

to broke people, it's probably not going to be a good idea. Number four, are they growing? I don't want to be selling to newspapers. I want to be selling to something like old people that are, there's more of them every single day that are retiring, right? So I want to go where the wins are. So if I have a market that checks all four of those boxes, then I know I'm at least in a good opportunity. Now, once I have that in place, and I looked at the four variables that I talked about earlier, can I do a new method? Can I do it on a new platform? Can I expand to multiple types of media within the platform I'm currently on? Can I increase the volume that I'm currently doing in the mediums that I have? These are the things you could do immediately to get more customers,

get more leads today. The next way to think about this is let's say you've capped all of those things, all right, which is probably not true. But let's say you did because we're going into fantasy land here, okay? We're going to a magic ride together. We're going to round this magic carp ride. It's going to be a good time. I'm going to introduce you to what I call the pyramid of markets, all right? There are five directions that you can go in any marketplace to expand. I'll tell you a story of when I learned this. So I went to this meetup of eight entrepreneurs. Together, we were doing $500 million a year in revenue. So this was like a multi-billion dollar room, which is kind of cool. And I was one of the smallest guys there. I think I was doing 30-ish

million a year at the time. So I was small. There's only eight guys do the math. I was one of small guys. And the thing is, is that I saw all these guys go around and gals, there was girls there too, and they were talking about their businesses and take this the way I mean it. I was like, these guys aren't smarter than me. And I didn't feel like they worked any harder than me. I was like, why are they making so much more money than me? Two main factors. Number one, almost all of them had been in business longer than me. Big lesson. Big shit takes time. And I had to learn that. Like, I want you to feel that because it took me a long time to learn. All right. There's not many billionaires under 30. There's like that made it themselves,

like 10 in the whole fucking world, right? There's not a lot of them. And fact checkers, maybe it's 20. Who fucking gears? It's not a lot. The second lesson that I learned is that all of them were going after bigger markets than I was. All right? Because at a certain point, you do saturate a niche. And I'm going to give you context to what that means. So Jim Wancher's a licensing company, we specifically, at the time, only focused on microjims. Now we do health clubs and microjoms because they expanded the market, right? And I'll tell you exactly the process in a second to how we did that. But within that pie, there was only 50,000 microjoms of United States. We'd already spoken with 20,000 of them. So we had absolutely, and still do,

have really maximized every media, every channel. We call, we called email, quote to you, we run ads on Google, we run on YouTube, we run some Facebook, we run some Instagram, we make content Like, we do all the stuff. We have books. We have free trainings. We do all that stuff there. And we have really done a good job of building a market leading business there. But again, it wasn't as big as theirs.

And that's why we decided to open up another avenue. And that's where the pyramid comes in. So that's what I'm going to talk about. So if you imagine a pyramid in your head, okay? And you're currently at the middle. And I'm not going to use gyms. I'll use salons to give a different example to mix it up. So if you deal with hair salons for whatever you, maybe you sell hair stuff,

or maybe you sell equipment. maybe you sell consulting services, maybe sell marketing. It doesn't really matter. You sell to salon owners. Okay. That's your current market. You can go in five directions. Okay?

Number one is you can go upmarket. That means on the pyramid, there are fewer people on the higher part of the market, and they cost more, but they spend more. Typically higher quality customers. That's where you go into enterprise sales. It's bigger stuff. We're talking franchisors, as in people who have hundreds of locations under one umbrella, or multi-location or chain owner.

That's upmarket for salon owners. Real quick, guys, you guys already know that I don't run any ads on this and I don't sell anything. And so the only ask that I can ever have of you guys is that you help me spread the words so we can out more entrepreneurs, make more money, feed their families, make better products and have better experiences for their employees and customers. And the only way we do that is if you can rate and review and share this podcast. So the single thing that I ask to do is you can just leave a review.

It'll take you 10 seconds or one type of the thumb. It would mean the absolute will to me. And more importantly, it may change. the world or someone else. Down market, the second direction you can go is you go to hair stylists. You talk about people who are renting chairs and doing hair with their hands full time, not running the business of hair. There's 10 times more of them than there are of these,

and there's one-thenth as many upmarket as there is down. So imagine a factor of 10 or sometimes more as you move up or down the ladder or the pyramid. The third direction you can go is you can go adjacent. So that means like sidestepping. So what's something that's similar in nature? but not exactly the same. That would be like a lash and nails place or a lip place, whatever. Some sort of side market, like med spas might, depending on the aesthetics of it,

might be one there too, right? So there's different adjacent markets. If I were a chiropractor, it might be physical therapy. Like they're similar but different, right? You want similar business characteristics, similar avatar in terms of the owner, similar types of customer within the same larger industry. Now, when you do that, you just open up a number. another vertical and you attack it the same way you did your first one.

All right? The fourth direction you can go is you actually go broader. So if you had our original pyramid of the salon, now imagine a pyramid that's all the way like this, and it includes all the adjacent pyramids within it, which would then just be beauty. So that includes med spa owners, lash owners, Botox places, which is medspaws, salon owners, massage studio, like all of that kind of falls in the same psychographic. they serve the same customer, right? So that would be going broader if we wanted to really open up the net. Now, the last direction you can go, and this is an interesting point, is the only one that makes your

market smaller, but it doesn't necessarily mean you make less money, which is you can become narrower. And so what that means is instead of just being all salon owners, it might be salon owners who specialize in extensions or a blow hair place. You know, they just do the Brazilian blowouts. Like they're just doing that specific thing. And what's interesting is oftentimes when you do niche down, sometimes you can still make more money because of all the points I said earlier, which is you're not even close to tapping the methods, the platform, the media, or the total amount of volume you need to do to reach all of those people within that niche. And so then when you niche down, become more specific with your messaging, your offer, and the value deliver. Because if you can make this one specific avatar 10 times more

money than the broad avatar, you should absolutely niche down on that one and be specific. in your messaging. And we've done this with companies and doubled or tripled or sometimes 5x the revenue in the business, despite cutting down who they market to you by like 85% by getting really specific about who we serve best. And so big picture, zooming all the way back out, if right now you're not getting as many leads as you want and you think that your market is saturated because of what you do and realistically all you did is you know there's five other competitors and you think you have 20% of the market, you should be looking the way an investor looks at the marketplace and says, this is a 60 billion.

dollar industry, I have not even 1% of this industry in order for me to reach everyone before even going into this second pyramid of how I can expand, I should be looking at saying, I've already talked to 40% of the industry. You talk to 40% of the industry, you have all of my blessing to start the next vertical or move one of those five directions. The last thing I'll do is I'll tell you at the end, why we decided to do health clubs as our next move within the licensing business at gym watch. But my whole point here is you have your four initial levers that you can immediately pull to grow how many leads you're getting. And you probably haven't even done one of them. So do one of them, do another one of them, and then eventually

try and do them all. And if you're like, man, that's going to take a long time. Welcome to the main point I had originally, which is it takes time to build big shit. Usually there's this big checklist that you probably already know as an entrepreneur of what I call the should do's. I know I should be calling my leads faster. I know I should be following up better. I know I should be making more content. I know I should start a cold call thing. I know I should be running ads on more platforms, but you're not. And so instead of just doing the easy thing, which is just going straight to your warm audience and trying to make another offer, confront the work that has to be done to build the much larger enterprise that serves one avatar. Now let me tell you about why we decided to do health

clubs. So when we looked at our adjacent markets at gym launch, we had micro gym owner. So a micro gym owner is a lot of those boutique studios. So you see the Orange Theory's, the F-45s, the Crossfits, the whatever, those types of businesses, to be clear, this is not an affiliation with any of those. This would mean just naming them. Those types of businesses where you have large group training facility where you have like 10 to 25 people in a class setting that are doing usually circuit training of some sort. All right. They became really popular right after the crash in 2008 because people couldn't afford personal training anymore. And so group training became the more economic option. And then there was a big opportunity there.

And then it got super, super flooded with people in that market. Anyways, I won't go into gym history. But the reason that we decided to go up market rather than down market, you're like, wait, why is that one saturated? I'll tell you. Because literally the amount of gyms per capita in marketplaces that were people who were interested in buying, like the, we're talking thousands of that like CrossFit dropped by 30% because their gyms went out of business because there were too many of them.

You used to be able to just like open a CrossFit and they're like, it would just fill up. And now there was like 20 crossfits in a city. And then that same base got divided by 20. And then people got hurt. Anyways. So we could have gone down market to personal trainers. We could have gone a market to health clubs. We could have gone to physical therapists or chiropractor.

It was actually very similar in nature. We could have gone to any type of health studio in general, if we wanted to go broader. Or we could have gone more narrow, which, at that point, we had already taken that big narrow step, which was 30 customers, signed lease, one employee for a microjim owner. So, like, we were very specific on who we knew. And so we'd already taken that step. But those are the directions we could have gone in. The reason we went to health clubs is that I asked our team one question. I said, of these different potential avenues or avatars that we could pursue, who do we provide the most value to by absolute metrics in

terms of dollars made? And it was by, like, it was no contest, health clubs. owners, we are able to immediately make them like tens of thousands of dollars within the first like month by restructuring some of the things that we could do within their business and then like doubling or tripling their bottom line by adding by reorganizing their onboarding process, reorganizing their sales process, how they handle retention and how they handle upsells for personal training and supplements and things like that within their space. And it turned out that those business owners were actually even better fits in a lot of ways because they were business owners first. A lot of microjim owners are fitness passionate first, business second. And so we have to

break a lot of beliefs with them to be like, it's okay to sell. It's okay to charge more. Like, don't sell from your own wallet. Like supplements aren't evil. Like having multiple revenue streams. Like maybe you should pay people on time. Like there are things that we have to do to smaller business. I'm just being real. Like it is what it is. Like some people start out and they don't know and that's fine. That's why we're here. But with the health club owners, they already have 10 employees. They've already put $500,000 into the facility. Like they understand return on capital. And so for them, when they saw what we could make them versus what it cost, it was a much more of a no-brainer than someone who's still always worried about how they're going to pay payroll tomorrow. The personal trainer version of that for that business, we could add less value.

There's way more of them. But for us, I tend to, if you've noticed any of the business that I do, I tend to go up market because I prefer to always sell to better customers. That's me. And I also like building things top down in general. And I kind of started in the middle there because we weren't at enterprise health club multi, you know, location, and we weren't at personal trainer. And that was basically because I didn't know the stuff that I'm sharing with you right now when I started that business, but I did know enough to stick with what I picked.

And so if I started all over again, maybe I would have started health clubs, but I picked what I had and we built a great business off of that. So to wrap that up, the reason we picked the health clubs was because we could provide more value to them more consistently. And we already had multiple channels that we knew could work. to acquire them. So it was very minimal operational change. We didn't need to learn a lot of new stuff. We did a beta test with 20 of them. They crushed it. And then we used that data to substantiate how we'd market and set expectations for new health clubs that would come in of how we could help them

improve their job.