Double Rates Without Changing Your Business Model (with Greg Hickman) Pt.1 Sept. '21 Ep 416

Summary Notes


In a comprehensive discussion with Greg Hickman, Alex Hormozi delves into the intricacies of applying the principles from his book "100 Million Dollar Offers" to both B2B and B2C markets, particularly focusing on agency owners and their small business clients. Hormozi emphasizes the importance of creating compelling offers that customers can't refuse, productizing services for scalability, and providing immense value to justify higher pricing. He critiques the traditional agency model for its lack of sellability and advocates for specialization, streamlined customer journeys, and rapid value delivery. Hormozi also shares insights on the significance of customer surplus, the equation for value provision, and the strategy of focusing on one product, one avatar, and one channel to scale a business effectively.

Summary Notes

Introduction to Agency Model and Application of $100 Million Offers Framework

  • Alex Hormozi discusses the use of his book's framework for agency owners and their clients.
  • The conversation explores how to use offers effectively in both B2B and B2C contexts.
  • Emphasis on increasing prices, getting more clicks, and creating irresistible offers.
  • The discussion includes tactics for productizing services to make a business scalable and profitable.
  • This is part one of a two-part podcast series.

"Mosey Nation. I was interviewed by Greg Hickman on his podcast related specifically to some questions that he had and his audience had of agency owners around how to use hundred million dollar offers, the framework within the book on their businesses as agency owners and then also on their clients businesses as small business owners because they're also getting leads for their small businesses."

The quote explains the context of the podcast, which is to address how agency owners can apply the strategies from Alex Hormozi's book "100 Million Dollar Offers" to their own businesses and to their clients' businesses.

Value Proposition and Customer Satisfaction

  • Alex Hormozi emphasizes the importance of delivering more value than what is charged to create surplus satisfaction.
  • Surplus satisfaction leads to customers promoting the business to others.
  • A fair exchange without surplus leads to mere customer satisfaction without further promotion.

"If I deliver $10,000 of value and I charge $10,000, I will have a satisfied customer, but there will not be any surplus. They won't tell their friends about it. They had a fair exchange, right? If I charge $10,000 for value, they'll tell everybody to know."

The quote highlights the concept that delivering value beyond the price charged leads to customers becoming promoters of the business, while a fair exchange results in mere satisfaction without additional word-of-mouth promotion.

Agency Model Limitations

  • Alex Hormozi critiques the traditional agency model as being unsellable and risky.
  • He points out the difficulty in scaling service-based businesses due to the non-teachable nature of valuable skills.
  • Service-based businesses face the challenge of employee turnover, where individuals may leave and take their client base with them.
  • Hormozi advocates for productizing services to create brand loyalty and divide work among teams.

"I think the agency model, as most people practice it, is not a sellable business."

This quote encapsulates Hormozi's view that the conventional agency model lacks the characteristics that make a business sellable, such as standardization and scalability.

Productization of Services

  • Hormozi suggests breaking down services into productized components to increase loyalty to the product and brand.
  • Productization allows for standardization and delegation of tasks, reducing dependence on individual service providers.
  • This approach enhances scalability and profitability by creating a consistent and replicable service experience.

"Which is why I tend to lean more towards, to the extent that we can trying to productize as many pieces of the service as we can, because then people are loyal to the product and the brand that's associated with it rather than the individual who's providing it."

The quote explains the benefits of productizing services, which shifts customer loyalty from the individual provider to the product and brand, thus enhancing business scalability.

Specialization and Niching

  • Hormozi discusses the challenges of being a generalist agency competing with large firms.
  • He emphasizes the importance of specialization and niching for easier mastery and differentiation in the market.
  • Specialized agencies can offer more value and optimize their services for specific niches, leading to better outcomes and pricing flexibility.

"And so what happens is I think a lot of people try and get in as a business generalist, but they have no experience and they have no credibility."

This quote highlights the disadvantage generalist agencies face when lacking experience and credibility, making it difficult to compete with established firms and underscoring the importance of niching.

Understanding Productization

  • Productization involves packaging expertise into a format that is not purely service-based.
  • It's about identifying high-margin services that can be standardized and delegated.
  • The goal is to create a more scalable and sellable business.

"And at least in our programs, a lot of times, what we're helping our clients do is take that specialty and start packaging up so that they are not pure service based."

This quote highlights the concept of productization as a way of transforming specialized services into standardized, marketable products.

The Importance of a Clear Customer Journey

  • A well-defined customer journey is crucial for a shared understanding within a company.
  • Many businesses lack a documented customer journey, leading to discrepancies in service delivery.
  • A clear customer journey allows for effective delegation and role assignment.

"So I think the first thing that needs to happen is you have to have a clear customer journey."

Alex Hormozi emphasizes the necessity of a clear customer journey for internal alignment and successful client management.

Identifying High-Value Services

  • Businesses should evaluate their client base to identify the most profitable and least troublesome accounts.
  • Finding the 'sweet spot' of high profit, low work, and high client satisfaction is key.
  • Niching down can help target the most valuable services and clients.

"The way that I would do this and approach this is I would look at my entire client base, historical and actual, and say, which of these clients were the best to deal with, these accounts were the least trouble, and which of these did we make the most money on?"

Alex Hormozi advises on how to analyze client data to determine which services and clients are most beneficial for the business.

Business Sellability and Specialization

  • The value of a business is tied to its sellability, which requires specialization and delegation.
  • John Warlow's book "Built to Sell" is recommended for understanding the importance of this concept.
  • Entrepreneurs need to transition from being integrated in the business to being business owners.

"And that means that the business, in order for it to be valuable, it has to be sellable."

Alex Hormozi points out that for a business to have value, it must be set up in a way that it can be sold, which involves creating a business that operates independently of its owner.

Streamlining the Offer and Customer Journey

  • The sequence for business improvement starts with refining the offer, then the customer journey, and finally delegating the delivery.
  • The goal is to remove oneself from the delivery process and focus on sales and acquisition.
  • Creating a pipeline for new business can involve various channels, but it's important to focus on one initially.

"It's like we have to get our offer right, then we have to get our customer journey right and we have to slice that up so that other people can do it, so that now we're fully removed from the delivery."

Alex Hormozi describes the step-by-step process of refining a business's core offer and customer journey to facilitate growth and remove the owner from the day-to-day operations.

The One-Product, One-Avatar, One-Channel Strategy

  • To grow from zero to a million dollars, focus on one product, one avatar (customer profile), and one channel.
  • Diversifying too early into multiple products, avatars, and channels can lead to failure.
  • Specialization and focus are crucial for early-stage business success.

"It's one product to one avatar on one channel, and that is how you get from zero to a million."

Alex Hormozi presents a formula for scaling a business by concentrating efforts on a single product, target customer, and distribution channel.

Selecting the Right Channel for Scaling

  • Paid media is considered one channel, with various platforms within it.
  • It's easier to expand within similar channels than to switch to a completely different approach (e.g., from Facebook ads to cold calling).
  • Businesses should choose the channel that best suits their strengths.

"Paid media is a single bucket, right? And then inside of that, there's obviously you could go pre roll YouTube ads, you could do Facebook, you do Instagram, you could do whatever, right?"

Alex Hormozi clarifies that paid media encompasses all forms of paid advertising and that businesses should focus on mastering one channel before expanding to others.

Business Sellability and Acquisition Channels

  • Businesses that rely on affiliates, manual outbound, and word of mouth are more sellable.
  • Paid advertising, earned media, and owned channels may not add as much sellability.
  • The choice of acquisition channel impacts the future potential to sell the business.

"I will say, though, that from a sellability, a company that is far more on the affiliates, manual outbound and word of mouth are going to be much more sellable entities than paid advertising, earned media and owned."

Alex Hormozi discusses how the choice of customer acquisition channels can affect a business's sellability, with some channels being more favorable for future sales.

Encouraging Audience Engagement

  • The podcast does not run ads or sell products.
  • The host requests that listeners help spread the word to support entrepreneurs.
  • Audience engagement through ratings, reviews, and sharing is sought to increase impact.

"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 word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experience tips for their employees and customers."

Alex Hormozi expresses his mission to assist entrepreneurs and asks for audience support in sharing the podcast to achieve a broader impact.

Sellability of Business Models

  • The biggest companies in the world are built on referrals, partnerships, and organic traffic rather than paid traffic, outbound sales, or affiliates.
  • Referrals are quadratic in nature, meaning they can exponentially increase business growth.
  • Most businesses don't make a lot of money because they fail to provide significant customer surplus.
  • Customer surplus is when the value delivered exceeds the price paid, prompting customers to share their experience with others.
  • Virality and cost of acquisition are inversely related; companies aim for high virality and low acquisition costs, often monetizing later.
  • Alex Hormozi's thrives without needing money upfront, creating a large customer surplus.

"If you look at the biggest companies in the world, almost all of them have a foundation of the latter three, not the former three."

This quote explains the foundation of the world's largest companies, implying they are built on scalable, customer-centric business models.

"There's not a lot of what we would call customer surplus."

This quote highlights the importance of providing value beyond the price paid to encourage word-of-mouth referrals.

"I have a huge customer per surplus. The reason the book sells 1000 copies a day right now with no paid ads is because there's a big surplus, right?"

Alex Hormozi attributes the success of his book sales to the significant value it provides, which creates customer surplus and drives organic sales.

Pricing Strategy and Value

  • The price of a product or service is a symptom of the value provided, not the cause.
  • Providing sufficient value allows businesses to raise their prices without altering the offer itself.
  • The book details how to solve specific customer problems to create more value.
  • Raising prices can also enhance the perceived value of the product.
  • Alex Hormozi raised his prices at Gym Launch because he provided significantly more value compared to competitors.
  • A high customer surplus leads to higher returns and reduces the need for advertising spend.

"So the problem is the price is the symptom, not the cause."

This quote suggests that inadequate pricing reflects a deeper issue of insufficient value provided to customers.

"Once you have provided significantly more value, then you can raise your prices."

Alex Hormozi explains that increasing value justifies higher prices, which can lead to a better customer perception of the product.

"You get so much more return by having some level of customer surplus sequentially."

This quote emphasizes the benefits of creating customer surplus, leading to better returns and potentially reducing advertising costs.

Path to Raising Rates

  • The path to raising rates involves providing significantly more value than what is currently offered.
  • Increasing value allows for higher pricing, which in turn, provides additional cash flow to fulfill enhanced offerings.
  • Value can stem from one-time investments with recurring returns, such as writing a book.
  • Practical experience in the field can provide nuanced insights and justify higher pricing.
  • The story of an agency owner who gained experience by working leads himself illustrates the importance of understanding the nuances of a service to provide real value and raise rates effectively.

"The first is that you massively fix what you're doing and provide 20 times the value and charge five times the price that you currently are."

Alex Hormozi suggests a strategy for raising rates by significantly increasing the value provided, which supports a higher price point.

"The money is in the tiny differences, not the massive things, right?"

This quote underscores the importance of understanding and implementing nuanced details to create value and justify higher pricing.

"Now you can have conviction when you talk to somebody on the phone."

By gaining firsthand experience, the agency owner could speak with conviction and justify his pricing, ultimately leading to increased earnings.

Providing Value in Business

  • Alex Hormozi emphasizes the importance of providing significant value to a specific target audience.
  • He suggests that many people enter business with only mediocre skills and fail to make more money due to their lack of expertise.
  • Alex recommends dedicating 6-12 months to deeply learn a craft before starting a business.
  • He shares his personal experience with gym businesses, where he provided immense value by personally turning around 33 gyms, which later helped him gain clients for his "done with you" model.

"And so we have to figure out a way to provide far more value to a very specific avatar. Make their entire lives amazing, because all the work that we did ahead of time, which oftentimes is one-time work, right?"

This quote highlights the need to focus on providing substantial value to a well-defined customer persona, which often involves substantial initial work that pays off in the long term.

"Then I started flying out because I wanted to make sure everyone was getting way more value than I was charging for it. And I did 33 turnarounds almost in, like, 18 months."

Alex Hormozi explains his hands-on approach to ensuring that he provided more value than the cost of his services, which involved actively turning around 33 gyms in a short period.

"I had 33 high ticket clients immediately. Right from there, client 34, who gets on the phone? I'm like, well, here, I'll just set you up with one of the gyms that's doing it right now, and they're like, dude, just buy."

The success with the first 33 gyms gave Alex Hormozi immediate credibility and a strong selling point for subsequent clients, making the sales process much easier.

Defining Value and Its Equation

  • Greg Hickman points out that while many talk about value, few have defined it as clearly as Alex Hormozi.
  • Alex Hormozi provides an equation for value, breaking it down into components such as time, effort, and sacrifice.
  • He advises that reducing the time delay to money is a key way to provide value and uses the example of a marketing agency delivering immediate results to illustrate this point.

"Price is what you pay, value is what you get. And so everyone can talk about price all day, but no one talks about value."

Alex Hormozi distinguishes between price and value, noting that while price is often discussed, the concept of value is frequently mentioned without being adequately defined.

"The fastest way that you can provide value is look what everyone else in the market is doing and do it in half the time."

Here, Alex Hormozi suggests that a straightforward method to provide value is to deliver the same services as competitors but in a significantly shorter timeframe.

"Effort and sacrifice is a nod to convenience. Effort is what a prospect has to now begin doing that they don't want to do... Sacrifice is what they have to stop doing that they want to do..."

This quote explains that value is also created by reducing the effort and sacrifice required from customers, thus enhancing convenience.

"We always try and engineer wins as fast as seemingly possible... we like to have it in the first seven days."

Alex Hormozi emphasizes the importance of creating quick wins for clients, aiming to deliver value within the first week of engagement to build trust and goodwill.

Application of the 100 Million Offer Framework

  • The conversation alludes to Alex Hormozi's "100 Million Offer" framework and its application in real-world business scenarios.
  • Alex Hormozi illustrates how the framework is applied across various industries, including both B2B and B2C sectors, by providing examples such as gym launches and marketing agencies.
  • He stresses the importance of speed and immediate results in business transactions to reduce buyer's remorse and increase customer satisfaction.

"Speed is so valuable to people, especially business owners."

This quote underscores the significance of delivering services quickly to meet the expectations of business owners, who highly value speed.

"If I sign a contract and nothing happens for 30 days, I think the company I'm dealing with, the ship immediately... But if I see activity, I see predictors, I see activation points that are happening, then I know."

Alex Hormozi explains that immediate activity and visible progress after signing a contract are crucial for maintaining client trust and confidence in the service provider.

"Hope you guys enjoyed the first part of this two part series with Greg Hickman going deep on the 100 million offer framework from the book applied to real world business..."

The quote indicates that this discussion is the first of a two-part series where Greg Hickman and Alex Hormozi delve into the practical application of the "100 Million Offer" framework in various business contexts.

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