3 Tactical Ways to Immensely Grow in a Service Business Ep 427

Summary Notes


Alex Hormozi, the owner of acquisition.com, shares his insights on maximizing revenue in a service business, emphasizing the importance of diversifying product offerings. He categorizes products into three types: physical, digital, and access, each with its own subset of services. Hormozi highlights the high margins of digital products and access, and the challenges of scaling service businesses. He advises entrepreneurs to differentiate their offerings to avoid becoming commodities and to aim for monopoly status in the market. Hormozi also shares a cash flow strategy by selling high-value, limited access to personalized services, stressing the importance of maintaining demand and goodwill for sustainable growth.

Summary Notes

Introduction to Alex Ramosi and Acquisition.com

  • Alex Ramosi introduces himself as the owner of acquisition.com.
  • Acquisition.com generates approximately $85 million a year in revenue.
  • The purpose of the podcast is to share lessons learned on the way to building a billion-dollar portfolio.
  • Alex aims to help listeners grow their businesses and potentially partner with his company.

"My name is Alex Ramosi. I own acquisition.com. We do about $85 million a year in revenue, and this channel is just because a lot of people are broke, and I don't want you to be one of them."

The quote introduces Alex Ramosi and his company, acquisition.com, highlighting the financial success of his business and his desire to help others achieve financial stability.

Different Types of Businesses Under Acquisition.com

  • Alex Ramosi mentions various businesses under acquisition.com without disclosing specific names due to deal structures.
  • The businesses include a publishing business, photography business, certification business, online training for trainers, gym licensing business, supplement business, and software company for agency owners.
  • He emphasizes the importance of privacy for businesses that are influencer-based or personality-driven.

"We have a publishing business. We have a photography business, which is a chain of brick and mortar... We have a certification business... our gym licensing business, which is gym launch. We have our supplement business, which is prestige Labs. And then we have Allen, which is our software company for agency owners that helps brick and mortar agencies work leads."

This quote lists the diverse range of businesses under acquisition.com, each catering to different market segments and offering a variety of services and products.

Selling Products for Quick Cash

  • Alex discusses the concept of selling different types of products, particularly when in need of quick cash.
  • He hints at revealing one product that is especially valuable and easy to sell for a significant amount of money.

"What are the different types of products that we can sell? And I'll show you one of these that's incredibly valuable, that if you're ever pressed for cash, it's the easiest thing that you can sell for a ton of money."

The quote sets up the discussion about the strategic sale of products, specifically focusing on a type of product that can be sold quickly and for a high return in times of financial need.

Categories of Economic Offerings

  • There are three main categories of economic offerings: products, services, and access.
  • Products can be physical or digital.
  • Services involve tasks performed for others and can also be physical or digital.
  • Access refers to the ability to experience something or reach someone, which can be physical (like concert tickets) or digital (like virtual event access).

"All right, so first I was like, you've got products, right? You've got widgets. You've got stuff. All right, that's the first category. The second category is you've got services where people do stuff for other people. And the third, and this is the one that a lot of people miss out on, is access." "So you've got physical product would be getting supplements in the mail. A digital product would be buying Netflix." "If you're buying physical services, that would be like buying a massage, right? You've got digital services. This would be like a marketing agency." "You have access to someone or to an experience of some sort, and then you've got digital access. Right, which would be, you buy access either to a virtual event or you have access to me via slack or something like that, right?"

The quotes explain the three categories of economic offerings and give examples of each, highlighting the distinction between physical and digital goods and services, as well as the concept of access as an offering.

Enhancing Value in Offerings

  • To avoid being a commodity, it's beneficial to differentiate products or services.
  • Adding a service component to a product can increase its value.
  • The ultimate goal is to become a unique market player, aiming for monopoly status to command higher prices.

"And so when you're thinking about your products and services, right, one of the easiest things to do to make it more valuable is think, how can I add some sort of service component to it to make this more valuable?" "The goal is to be so different from everyone else in the marketplace that people have to consider you on their own as your own standalone business so that you can have monopoly prices."

The quotes suggest strategies for businesses to enhance the value of their offerings and achieve a competitive advantage. By adding services to products, companies can differentiate themselves and strive for a monopoly-like position in the market.

Audience Engagement and Networking

  • The host encourages listener interaction via LinkedIn.
  • They suggest connecting with them and tagging relevant individuals in posts to facilitate community building.

"Hey, mozanation, quick break. Just to let you know that we've been starting to post on LinkedIn and want to connect with you, all right? So send me a connection request, a note letting me know that you listen to the show and I will accept it." "There's anyone you think that we should be connected with, tag them in one of my or Layla's posts, and I will give you all the love in the world."

The quotes indicate the host's desire to engage with the audience on LinkedIn and grow their professional network. They encourage listeners to connect with them and suggest networking by tagging others in their posts.

Power Dynamics in Business

  • Companies with significant power can influence government policies.
  • This power dynamic is not the main focus of the discussion but is acknowledged as a reality.

"And now because those companies have so much power, they own the government now."

The quote highlights the influence that powerful companies can have on government, suggesting a level of control or ownership over political processes.

Business Model Diversification

  • Physical product businesses can enhance value by adding digital products.
  • Service businesses can differentiate by incorporating digital or physical products.
  • Adding access as a business model can be highly profitable due to nearly 100% margins.

"So most people just consider themselves, I am just a physical products business. It's like, okay, well, can we add some sort of digital products, right, to our physical products to enhance the value and differentiate ourselves?"

This quote suggests that businesses should not limit themselves to one type of offering and should consider diversifying their business model by adding digital products to physical ones to create more value.

"If I have a service, I have a physical service, maybe I can add some sort of digital component to it, or maybe I can add some physical products that go with it. Or digital products, right, that go with it."

The quote expands on the idea of diversification by proposing that service businesses could also enhance their offerings with digital or physical products to complement their services.

"Or thirdly, is there a way that I can add access, which is probably one of my favorite of the types of businesses? And here's why. Check this out. This one has almost 100% margins, right? Digital access has almost 100% margins."

Alex Ramosi emphasizes the profitability of adding an 'access' component to a business, particularly digital access, due to its high margin potential.

Challenges in Scaling Service Businesses

  • Scaling service businesses is difficult due to the necessity to scale people, culture, training, and onboarding.
  • Service businesses have hard costs and scaling people-intensive operations is complex.
  • These challenges make service businesses less attractive to potential buyers.

"So services, just so you're wondering why so many service businesses have a hard time scaling is it's very hard to scale people."

Alex Ramosi explains that the primary difficulty in scaling service businesses is the human element, which is inherently challenging to scale.

"It's also hard to scale things that have hard costs, right? And scaling people, you have to scale culture, you have to scale training, you have to scale onboarding."

The quote provides details on the specific aspects of a service business that are hard to scale, including culture, training, and onboarding, in addition to the hard costs involved.

Increasing Enterprise Value

  • To increase enterprise value, businesses should consider adding multiple types of offerings, such as products, services, and access.
  • Diversifying offerings can make a business more appealing to buyers and increase its market value.

"Which is why most people don't like buying those types of businesses, which is why if you want to increase your enterprise value, it's trying to figure out how you can add multiple of these things."

Alex Ramosi advises that adding a variety of offerings to a business can make it more attractive to buyers and increase its overall value.

Access as a Revenue Hack

  • Selling individualized, high-touch versions of solutions can be lucrative.
  • Offering limited spots for personalized experiences ensures exclusivity and can command higher prices.
  • Guaranteeing outcomes and offering to work for free until they are achieved can be a powerful sales proposition.

"All right, so you guys ready for this in terms of if you needed to make money the way that you do this all right? And this is my favorite one that you can use, which is access, is that you sell a more individualized, higher touch version of your own solution, all right?"

Alex Ramosi introduces the concept of selling access to a more personalized version of a business's solution as a strategy for making money.

"And so what that means is you can say, hey, I can only take five people for a one on one or a small group experience for one year for this big outcome that they're all going to want, and I'll guarantee that you'll get it, or I'll keep working with you for free until you do, all right?"

The quote details a specific strategy for selling access by offering limited spots for a personalized service, creating a sense of exclusivity and a strong value proposition with a guarantee of outcomes.

Prepayment and Value Creation

  • Prepaying for services generates immediate cash flow for businesses.
  • Offers that require prepayment do not necessarily need discounts.
  • Customers receive value through access, services, and expertise.

The only way that they can do this is if they prepay the entire period of time, all right?

This quote emphasizes the strategy of requiring customers to prepay for a period of service to create immediate cash flow for the business.

And so the thing is, you don't need to have any kind of discount for an offer that's structured like this.

Alex Ramosi explains that discounts are not needed when customers are willing to prepay because the structure itself provides sufficient value.

And the reason that they're getting a lot of value is because they're getting access, right? They're getting access in addition to a service, and they're getting some level of expertise on top of it.

The quote clarifies that the value proposition includes not just the service, but also access and expertise, which justifies the prepayment without discounts.

Strategic Limited Sales

  • Selling fewer slots than the maximum demand maintains pent-up demand for future offers.
  • Keeping demand high ensures the ability to sell out future offers.
  • Controlled sales growth is preferable to liquidating all goodwill at once.

What I mean by that is that if you sell 100 of these or you sell out in terms of, like, you sell out all the demand that's there, you running something else in the future will bomb, right?

Alex Ramosi warns that selling to the full capacity of demand can exhaust the audience's interest, leading to unsuccessful future offers.

Try and maintain the vast majority, 80% of the demand still there and have it pent up so that when you do another offer like this in the future, you'll sell out again.

The strategy outlined here is to sell a fraction of the potential sales to keep demand high for subsequent offers.

And so you will always be able to sell out, but the number of total slots will continue to increase.

This quote explains that by not exhausting demand, a business can steadily increase the number of slots for sale while ensuring they sell out.

Sustainable Goodwill and Growth

  • It's easier to maintain and multiply goodwill than to rebuild it.
  • Skimming a small portion of the demand can grow the base of interested customers.
  • Controlled liquidation of goodwill through high-value offers leads to better customer relationships and outcomes.

And it's much easier to maintain goodwill and multiply it and then feed and then just skim a tiny amount off the top and then grow the goodwill of the base to go from 100 people in your base who want to buy the thing to 200 people in the base.

Alex Ramosi advises that it's more effective to maintain and grow the audience's goodwill rather than depleting it completely with each offer.

And one of my favorite ways to liquidate that in a very controlled burn manner is to have access so you can have implied urgency and implied scarcity with a very, very high ticket premium.

This quote suggests using controlled scarcity and urgency, coupled with high-value offers, as a method to sustainably capitalize on goodwill.

And you'll probably get some of the best customers to do this with you. They'll be the least needy, believe it or not, and they'll get some great testimonials and great outcomes as a result of it.

Alex Ramosi indicates that this approach not only preserves goodwill but also attracts high-quality customers who are likely to provide positive testimonials and outcomes.

Business Success and Transparency

  • Alex Ramosi introduces himself and his company's success.
  • Emphasizes that he has nothing to sell, suggesting a focus on providing value and advice rather than promoting a product.

So anyways, Mosey Nation, like I said, my name is Alex Rosey on acquisition.com. We do $85 million a year, and I have nothing to sell you, all right?

Alex Ramosi shares his credentials and the success of his company, acquisition.com, to establish credibility with his audience while highlighting that his intent is not to sell but to share valuable insights.

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