How I Made My First Million Ep 500

Alex Hormozi recounts his tumultuous entrepreneurial journey, emphasizing the importance of focusing on profit over revenue. After a life-altering DUI incident, Alex decided to consolidate his efforts by selling off his multiple businesses and going all-in on Gym Launch. Despite facing rock bottom with financial setbacks, including a partner's betrayal and a processor withholding funds, Alex persisted. With his wife Leila's support, they pivoted to online sales and consulting, eventually leading to a profitable licensing model for gyms. Alex's story illustrates the power of resilience, the value of skills and experiences, and the significance of choosing the right business model to leverage one's abilities effectively. His approach resulted in a successful business, acquisition.com, grossing $85 million annually, showcasing that enduring hardship can lead to substantial rewards.

• Alex emphasizes the significance of focusing on profit rather than revenue, reflecting on his past experience of generating millions in revenue but taking home little profit.
• He explains the realization that came after a life-changing DUI accident, which led him to focus on one business, Gym Launch, and sell his other businesses.
• Alex discusses the Theory of Constraint and how he was previously limited by spreading his attention across too many ventures.

"But I was taking home basically nothing because I was so spread then. I wasn't paying attention to profit. I was just looking at revenue, trying to beef myself up and feel status rather than thinking about what I was actually taking home."

This quote highlights the crucial lesson Alex learned about the difference between revenue and profit, and how focusing on status through revenue can be misleading when it comes to actual financial success.

"I'm a big believer in the theory of constraint, which is a system will grow up to basically its bottleneck, right? And then until you relieve that, like, systems will grow as long as they are not constrained."

Alex introduces the Theory of Constraint, which posits that a system's growth is limited by its most significant bottleneck. He relates this to his own experience of being constrained by managing too many businesses at once.

• Alex details the unique business model he adopted for Gym Launch, which involved doing done-for-you gym launches and turnarounds without using the term "rescue" to avoid negative connotations.
• He explains the compelling offer he made to gym owners: filling their gym in 30 days at no cost to them, where he would cover all expenses and keep only the upfront cash collected.
• The strategy required intense effort, with Alex and Layla averaging ten sales a day and moving from one gym to the next.

"I would fill your gym in 30 days for free. That was the offer. And I was like, I'll spend my own money on the ads. I'll spend my own money on the hotels, the food, the everything."

Alex describes the compelling offer that was central to his Gym Launch strategy, which required significant personal investment but provided a strong value proposition to gym owners.

• Alex recounts the personal and financial challenges he faced, including the DUI incident, selling his businesses for less than expected, and a falling out with a business partner who withdrew funds from their joint gym.
• He describes the emotional toll of shutting down the last gym, issuing refunds, and being left with a clean slate but little money.
• Despite these hardships, Alex views the entrepreneurial journey as one of personal growth and improvement.

"I just got rid of all my gyms, I put all the money from those gyms into this last facility. That money got taken, and I then decided to close that one gym down."

This quote captures the low point Alex faced, having to shut down his final gym and deal with the consequences of his partner's actions, leaving him financially depleted.

"The entrepreneurial journey is one that improves you, not anything else."

Alex reflects on the intrinsic value of the entrepreneurial experience, emphasizing that the skills, experiences, and character traits developed are the true assets gained from the journey.

• Alex shares the rapid success of Gym Launch after focusing solely on that business, with significant sales in a short period.
• Layla played a crucial role in scaling the business by recruiting her friends to sell the Gym Launch service, quickly expanding the team.
• Alex highlights the effectiveness of their model when a new salesperson achieved impressive sales figures, validating the business's potential to grow.

"So she had six friends from high school that all were doing MLM shake mix stuff, and she said, hey, you should quit that and start selling this stuff. We can make $100 a pop instead of making $5 on shake mix."

Layla's recruitment of her friends illustrates the strategic scaling of Gym Launch by leveraging personal networks and offering a more lucrative opportunity than their previous engagements.

"He did, I think, 120,000 in sales in December, which is, like, a, a hard month to do it in, and b, it was a great first launch for somebody who's new, which also kind of proved the model to me."

This quote demonstrates the successful replication of the Gym Launch model by a new salesperson, confirming the viability and scalability of the business strategy.

• Alex shares a personal story of entrepreneurial struggle during the holiday season.
• Layla, his partner, takes him home to meet her family, illustrating her belief in his potential despite his current challenges.
• Alex is experiencing financial issues with his business, specifically with payment processing and funds being withheld.

like, super excited. I was, like, sick. This 100 grand is going to be the launch money for the next thing. This will be great. And so at this point, Layla says, this guy's a winner. I'm going to take him home to meet my family, which is hilarious, because I was not a winner at that time.

This quote shows Alex's initial optimism for his business venture, contrasted with Layla's humorous yet supportive perception of him as a "winner" despite the challenges he was facing.

• Alex's business had made substantial sales, but he encounters issues with his payment processor.
• The payment processor withholds funds due to an annual review and irregular activity.
• Alex's reaction to the situation is described as cold and mean, rather than explosive.

And what was weird was I was running all the money through just my gym processor because I still maintain the processing like my pos. Anyways, I always got deposits on Tuesdays. And I was like, this is weird. We haven't gotten deposit since. I didn't get a deposit last Tuesday.

This quote details the unusual situation where Alex did not receive his expected deposit, leading to the discovery of the payment processor's review and the subsequent withholding of funds.

• Alex experiences high stress, indicated by his elevated heart rate during a Christmas Eve movie outing.
• Layla's support is demonstrated when she reassures Alex that she will stay with him regardless of their financial situation.
• The emotional numbness Alex feels is a result of the intense stress from his business predicament.

I was stressed out of my mind, and so we left the movies, and I told her, I was like, the money's not coming. And she was like, what do you mean? And I was like, they're keeping it.

Alex's disclosure to Layla about the financial crisis represents a critical moment in their relationship, emphasizing Layla's unwavering support during a time of significant stress and uncertainty.

• Despite the financial crisis, Alex chooses to pay a large commission owed to a salesman, adhering to his principle of doing right by everyone.
• This decision leaves him with very limited funds to proceed with the planned business expansion.

I still owed the salesman from the last month who had done that huge launch, like, all these sales that had happened, and somebody had sold them, right? But I didn't collect the money from it, and so I owed a $22,000 commission check, and I had $23,000 left.

Alex's commitment to ethical business practices is highlighted by his decision to fulfill his financial obligations to the salesman, despite the severe impact on his own financial situation.

• With minimal funds and a high credit limit, Alex proceeds with launching six gyms.
• The launch includes significant daily expenses, and Alex faces the risk of accruing substantial debt.
• Alex's entrepreneurial resolve is tested as he sweats through the activation of marketing campaigns for the new locations.

I have $1,000, and I have a credit card that has $100,000 limit. I was like, I will do this. I was like, but this could go horribly wrong, so you don't have to stay with me if you don't want to.

Alex's decision to move forward with the gym launches, despite the financial risks, demonstrates his determination to succeed in his entrepreneurial endeavors and the personal stakes involved in this decision.

• Alex encounters further complications with processing sales and maintaining compliance with payment industry standards.
• The lack of PCI compliance and an overwhelmed part-time employee processing sales highlight the operational challenges in his business.
• Alex's search for a solution leads him to Alex Roy, who specializes in high-risk processing.

And so we had this one lady that we used to work at my gym that I was paying part time to process this. Mind you, I didn't understand how much work this was because we were doing, like, 50 sales a day right between these locations at, like, $500 a pop.

This quote illustrates the operational difficulties Alex faced, with an under-resourced and non-compliant system struggling to handle the volume of sales his business was generating.

• Alex Roy provides a temporary processing solution with a $50,000 limit, which poses a new challenge due to the volume of Alex's sales.
• The story concludes with a reminder to the audience that a video version of the podcast is available for those who prefer visual content.

And he said, I can get you set up. And I was like, okay, cool. He said, but given the record that you have right now, because you just refunded all those people at the last location, he's like, they're going to want a reserve, which means they keep a certain percentage no matter what, and they're going to put a limit on how much you can, you can charge.

This quote captures the moment when Alex finds a temporary solution to his processing problem, though it comes with restrictions that will require further navigation as his business continues to grow.

• Alex started with one processor and eventually scaled to multiple processors to handle sales.
• The first month ended with a loss of $100,000, but they managed to process sales to cover costs.
• By the second month, they had three processors and processed $150,000, turning a profit.
• Alex's business sold six-week weight loss programs at local gyms.
• A significant financial hit occurred when two facilities encouraged clients to refund and sign up directly with them for less.
• This refund issue wiped out Alex's savings and forced the business to sell more to cover the costs.

"And we ended up somehow, I think we ended up processing, losing 100 grand." "I processed another 50 to get 100 for that first month." "So the next month, I think we did 150 or 180." "I was like, holy cow. I think we made, like, 30 or 40 grand."

These quotes illustrate the initial financial rollercoaster of Alex's business, from incurring significant losses to eventually making a profit.

• Refund rates soared to 35%, a number Alex found hard to comprehend.
• The business model's flaw was the lack of control over fulfillment, leading to high refund requests.
• Alex's response was to increase sales to cover the refunds, creating a cycle of selling more each month.
• The refunds became an unsustainable burden, with all profit going towards covering past refunds.

"35% of all of our sales that we were making were getting refunded, which is an astronomical number." "One of the lessons I learned there was control the, like, you want to control everything end to end if you want a life lesson." "I felt like I was in a death trap."

These quotes reflect the high refund rate and the critical business lesson Alex learned about the importance of controlling the entire process to avoid such crises.

• Layla, who was initially uncertain about the business, was making $3,000 a month from her online coaching business.
• Alex decided to pivot to online sales, eliminating the middlemen and increasing profit margins.
• A well-crafted sales page and online marketing led to immediate sales, showing potential for the new business model.
• Alex informed the gyms about the shift away from the previous model, leading to an opportunity to sell his new strategy.

"So she had transitioned her personal training clients to online and doing like, three grand a month from that." "We started doing $1,000 a day of just online." "I told the guys the next month, the gyms that were lined up to launch the next month. Hey, we're not going to be doing this anymore."

These quotes highlight Layla's contribution to the business with her online coaching, the successful shift to online sales, and the decision to change the business model.

• Alex's new approach to gym sales became a lucrative consulting and licensing opportunity.
• He charged high fees for teaching his sales method, which gyms were eager to pay.
• The success of the gyms using his program led to rapid word-of-mouth marketing and significant growth for his business.

"I ended up doing $60,000 in sales in a day." "I ended up doing, like, 300,000 in sales the next month, selling a digital product, which was actually more like a consulting type thing." "The next 30 days, the average gym that used the consulting program, gym launch, did $30,000 in collected cash."

These quotes demonstrate the transformative impact of Alex's consulting services on his financial situation and the subsequent success of the gyms that implemented his sales strategies.

• Alex experienced significant business growth, scaling from $100,000 to over $15 million in a relatively short period.
• The growth was attributed not to marketing but to word of mouth and the effectiveness of the product.
• Alex emphasizes the importance of delivering a product that provides value, as evidenced by his ability to charge a high price due to the significant financial returns it generated for customers.

"And the thing is that when people ask me about this story, and now we're six months into 2017 at this point, so I've gone through, like, the hardest 18 months of my entire life, that is when we just went from, I think we did 100 grand that first month or last few weeks, then we did 300, then 480, then 780, then a million, then one, two, then 151822. We just grew like a rocket."

This quote outlines the rapid growth trajectory of Alex's business, highlighting the impressive revenue milestones achieved in a short timeframe.

• Alex's current book, "100 million dollar offers," sells around 1000 copies a day without traditional marketing funnels or ads, demonstrating the power of a good product.
• He stresses that a quality product naturally drives conversation and sales.

"And right now it sells about 1000 copies a day with no funnels, no ads, no whatever. And it's because the product was good. People talk if the product's good."

This quote explains the success of Alex's book, attributing it to the inherent quality of the product rather than marketing efforts, reinforcing the idea that a good product markets itself.

• Alex had extensive knowledge of his business, having implemented the systems himself in various contexts.
• He knew how to optimize different aspects of the business, from sales training to maximizing sales room layout and conducting nutrition consultations.

"And I knew every aspect, every piece of this process because I had done it not only for my six gyms, but for the 30 plus that we had launched."

The quote demonstrates Alex's deep understanding of his business operations, which was instrumental in his ability to offer a high-value product.

• Alex reflects on the personal development he underwent during challenging times.
• He suggests that skills, character traits, and beliefs acquired over time are the true assets that lead to business manifestations.

"I was developing skills, character traits and beliefs through this entire 3456 year period of just eating shit that I did not know was for me."

This quote emphasizes the importance of personal growth and the accumulation of skills and traits over time, which are crucial for eventual success.

• Alex criticizes the desire to shortcut the learning process, noting that his own success came after years of experience and not from selling knowledge prematurely.
• He emphasizes that providing value is key to making money and that this often requires a significant foundation of skills and experience.

"And so most people have a very small foundation. They took a course and then they want to start selling how know run Facebook ads. Right, or whatever. And so the reality is that they're just not good enough."

The quote criticizes the rush to monetize skills without sufficient experience or value to offer, suggesting that a strong foundation is necessary for sustainable success.

• Alex discusses the challenges of scaling a business while maintaining quality and culture.
• He credits the product's profitability for granting them the leeway to build infrastructure as they grew.

"All of these types of problems, there was different problems that we had to solve then, which is like, how do you double every month and somehow keep up with high quality service and support and train talent while also bringing new people in and keep a culture."

This quote highlights the operational challenges faced when a business experiences rapid growth and the importance of maintaining quality and culture amidst expansion.

• Alex transitioned from service-based to media-based business, which offered higher gross margins due to lower reproduction costs.
• He illustrates how the same skill set can be repackaged into different business models to create greater wealth.

"And then finally we switched to licensing code and media, right? And that is where the highest gross margins exist."

The quote explains the strategic shift to a business model with higher gross margins, emphasizing the importance of adapting skills to more profitable markets.

• Alex acknowledges that the path to success is non-linear and filled with hard work that often goes unrecognized.
• He encourages perseverance by sharing his own timeline of success, which came after several years of effort and skill-building.

"Every single person that I know is successful does that no one wants to talk about. Every single great big business owner that I know have these years of thankless work where they develop these skills, these traits in these beliefs that end up setting them free."

This quote serves as a reminder that behind most successful entrepreneurs is a history of hard work and skill development that is crucial to their eventual success.