How To Make Money Forever Ep 469



In this podcast, the host, creator of, discusses the importance of building a business with a focus on quality and recurring revenue, rather than one-time sales. He emphasizes that most businesses fail to scale because they prioritize short-term promotions over long-term customer satisfaction and retention. Using his experience with Gym Launch and other ventures, he explains that true wealth comes from creating a product or service so valuable that customers continue to pay for it over an extended period. He outlines a three-step process for scaling a business: promote to get initial customers, improve the product through customer feedback, and make the service indispensable. The host's central message is that by focusing on customer retention and value, businesses can compound their revenue and build lasting wealth.

Summary Notes

Quality of Product or Service

  • The quality of the product or service is critical to business success.
  • Many businesses fail to focus on improving their offerings and instead concentrate on promotion and customer acquisition.
  • Acknowledging that a product or service is not good enough is the first step towards improvement.
  • Wealthy individuals view business as a game and focus on getting better at it.

"So the big issue is that the stuff that most people sell sucks, right? And so they're constantly focused on promotion. They're constantly trying to find the next customer, but they haven't confronted. The real issue is that you're just not that good, right?"

This quote highlights the common problem among businesses of prioritizing sales and promotion over product quality. It suggests that recognizing and admitting the inadequacy of a product or service is necessary for improvement.

The Business Game and Wealth Creation

  • Business is seen as a game by the wealthiest people.
  • The speaker, Alex Hormozi, documents his lessons learned in building
  • The goal is to help others grow their businesses and potentially partner with his company.
  • Alex Hormozi shares his personal success in reaching a high net worth at a young age.

"The wealthiest people in the world see business as a game. This podcast, the game, is my attempt at documenting the lessons I've learned on my way to building into a billion dollar portfolio."

The quote explains the speaker's perspective on business as a competitive and strategic endeavor. It also introduces the purpose of the podcast, which is to share valuable business insights.

Importance of Recurring Revenue

  • Recurring revenue is essential for building a long-term, sustainable business.
  • Many businesses focus on one-time sales rather than creating a model for repeat business.
  • Recurring revenue acts as a compounding vehicle for wealth.
  • The concept of time as an asset is crucial for wealth creation.

"The big problem that most people have when they are starting their business is that they are in the selling business, not in the reorder business. They don't have recurring revenue."

This quote emphasizes the issue with businesses that rely solely on one-time sales and the lack of a strategy for generating repeat business, which is necessary for sustainable growth.

Compounding Effect of Recurring Revenue

  • Recurring revenue compounds over time, increasing the value of each customer.
  • Businesses should aim to make sales that continue to pay off in the future.
  • The speaker uses the metaphor of a "wall of glue" where customers stick and continue to pay over time.
  • The goal is to have customers who proactively ensure they continue receiving value from the service.

"Because what happens is, if you don't have that, then you're always selling for tomorrow. You're always selling for the paycheck this month. You're always selling to pay rent rather than benefiting from a sale you made ten years ago and having that person still pay you today."

This quote describes the disadvantage of not having recurring revenue, where businesses are trapped in a cycle of constantly seeking new sales to maintain income, rather than benefiting from past efforts.

Customer Retention and Value Proposition

  • Ensuring customers receive continuous value is key to retention.
  • Businesses should strive for a product or service that customers would urgently seek to maintain access to.
  • The speaker suggests evaluating a business's potential for creating an irresistible and ongoing value proposition.

"The easiest question that I like to ask when we're analyzing one of the businesses that we're thinking about purchasing an interest in is, is there a way that we can get someone to buy this and never stop paying for it?"

The quote proposes a critical question for assessing a business's viability for long-term customer retention and recurring revenue. It implies that the best business models are those where customers are eager to maintain their relationship with the service provider.

Importance of Value in Business

  • The significance of providing high value in products or services.
  • Comparing essential services to business offerings.
  • The objective is to become indispensable to customers.

If your credit card goes out, what do you call? Netflix? Right. You're going to make sure that your car goes through. If your utilities go out because your car doesn't go through, you fucking pay it. If your rent doesn't go through, you make sure that it's paid on time, because these are things that are valuables that you cannot live without.

This quote emphasizes the importance of making a product or service as vital as utilities or rent, which customers prioritize and ensure they pay for because they can't live without them.

Recurring vs. Reoccurring Revenue Models

  • Distinction between recurring and reoccurring revenue.
  • The aim is to have customers return, whether it's through subscriptions or repeat purchases.

So, for example, Facebook is a massive company. They do not have a recurring revenue model. They have a reoccurring revenue model. Meaning I go to the Facebook store today, I buy some eyeballs and tomorrow I might go back again and buy more eyeballs.

Alex Hormozi explains the difference between recurring and reoccurring revenue models by using Facebook as an example of a company with reoccurring revenue, where customers repeatedly make purchases without a subscription.

Customer-Centric Growth Strategy

  • Importance of customer retention for business growth.
  • Hypothetical scenario to assess the value of current customers in generating new business.

The key question that I like to ask the portfolio companies when they're coming in is if right now you could no longer market, you could not make content, you can't run ads, you can't cold call, you can't dm people. All you could do is have the existing customers you have get you more customers.

Alex Hormozi challenges businesses to consider how they would operate and treat customers if their growth relied solely on existing customers' referrals, emphasizing the importance of customer satisfaction in business growth.

Wealth Mindset vs. Poverty Mindset

  • The distinction between short-term sales focus and long-term customer relationships.
  • The concept of customers as continuous revenue sources.

When you start thinking like that, you start thinking like the wealthy, not like the poor, who are always in a rush for the next sale, the next paycheck.

This quote contrasts the long-term, wealth-building mindset of focusing on customer retention with the short-term, paycheck-to-paycheck mindset of constantly seeking new sales.

The Issue with Low-Quality Products

  • The problem of focusing on promotion over product quality.
  • The necessity of improving the product to build real wealth.

So the big issue is that the stuff that most people sell sucks, right? And so they're constantly focused on promotion.

Alex Hormozi points out that many businesses prioritize promotion even when their product is subpar, which is a barrier to building lasting wealth.

Steps to Scaling a Business

  • The importance of product quality in scaling a business.
  • Promotion versus product improvement in the business growth process.

You want to go to zero to a million, make a couple of million bucks a year. You can just promote and sell shit all day long and never build real wealth.

The quote highlights that merely promoting and selling without improving the product will not lead to significant wealth, as it doesn't ensure long-term customer retention and satisfaction.

The Role of Customer Feedback

  • Customer feedback as a tool for product improvement.
  • The process of refining the product or service to scale the business.

The point of making the first sales is to get customers. The point of those first customers is to give you feedback.

Alex Hormozi stresses the importance of using initial sales to gather customer feedback, which is essential for improving the product and achieving sustainable growth.

Importance of Customer Retention

  • Selling to new customers every month is necessary to maintain revenue if there is no retention.
  • Retention allows for a compounding effect, growing customer base without needing to increase new sales proportionally.
  • High customer lifetime value (LTV) enables greater marketing spend and competitive advantage.

"So do you understand the compounding effect of not losing customers?"

This quote emphasizes the exponential benefits that come from retaining customers, as opposed to constantly needing to acquire new ones to maintain revenue.

"There's a company that we're about to make a huge investment in and right now their lifetime value per customer compared to their competition is ten x."

Alex Hormozi points out the attractiveness of investing in companies with a high LTV per customer, which indicates a strong retention rate and potential for sustainable growth.

Customer Acquisition Cost (CAC) and LTV Ratio

  • A favorable ratio between the lifetime value of a customer and the cost to acquire them is crucial for business sustainability.
  • Companies with a high LTV compared to their CAC can outspend competitors in marketing.

"And their cost to acquire customer is the same as their competition."

This quote illustrates that despite similar acquisition costs, the company in question has a significantly higher LTV, giving it a competitive edge.

Marketing and Sales Strategy

  • Initially, promotion is essential to make sales and acquire customers.
  • The focus should shift to improving the product based on customer feedback, leading to referrals and organic growth.

"So step one is you promote just to get people to make sales and become customers."

Alex Hormozi outlines the first step in a business's growth strategy, which involves promoting the product to acquire initial customers.

Enhancing Customer Experience

  • Surveying customers to improve the product or service is key.
  • Making the product or service faster and easier to use can enhance the customer experience.

"And the way you do that is through surveying the customers to figure out what you can do better."

This quote suggests that direct feedback from customers is essential for continuous improvement and customer satisfaction.

Making It Harder for Customers to Leave

  • Strategies include contracts, increasing the cost of switching, adding community, associating with a cause, and unique value propositions.
  • In B2B, controlling the money flow can create leverage and reduce churn.

"And when you make something harder to leave, you can do that through contracting."

Alex Hormozi discusses tactics to increase customer retention by creating barriers to exit, such as contracts that bind customers for a certain period.

Importance of Consumption

  • If customers are not using the product or service, it's a reflection of the business's failure to create a seamless experience.
  • The goal should be to reduce the need for customer support by solving problems preemptively.

"If people don't consume your product, people don't consume your service. It's not that they're numb nuts. It means that you suck."

This blunt statement by Alex Hormozi stresses that the responsibility for customer engagement lies with the business, not the customer.

Scaling the Business: Three Steps

  1. Promote the product to achieve consumption.
  2. Ensure customers have an easy onboarding experience and can quickly realize the product's benefits.
  3. Continuously solve problems to reduce customer complaints and support needs.

"The three steps of scaling the business, number one, you have to promote it."

Alex Hormozi lays out the first of three steps for scaling a business, highlighting the importance of promotion to drive initial consumption.

Importance of Product Improvement

  • Businesses often fail to focus on improving their existing products.
  • When growth stalls, businesses tend to either market more or create new products instead of refining what they have.
  • Continual improvement of a single product or service over time can lead to significant quality enhancements.
  • The process of refining a product is not glamorous but is essential for building long-term wealth.
  • Achieving a high level of product quality can lead to a competitive advantage in the market.

"The second piece that everyone misses is that actual improvement loop."

This quote emphasizes the oversight that businesses have in neglecting the process of continually refining and improving their products.

"Because what happens is if you actually focus on one product for an extended period of time and you launch it again and again and you have first version, second version, third version, fourth version, it gets better."

Alex Hormozi explains that repeated iterations of a product can greatly enhance its quality and value to the customer.

Concept of Customer Surplus and Value

  • Customer surplus is the idea of providing more value than what the customer pays for.
  • The goal is to create such a good deal that customers actively ensure they continue to receive the product or service.
  • The price of a product is relative to the value it provides to the customer.
  • A successful business model involves selling a product at a price that is perceived as a bargain compared to the value it delivers.

"And so what we want is a customer surplus. We want an insane deal. We want a bargain that people do call ahead of time to make sure that they never stop getting billed."

Alex Hormozi introduces the concept of customer surplus, highlighting the importance of offering exceptional value.

"So if someone's price is here and the value delivers here, you can make this price whatever you want. If this price is a million and they get 10 million in value, they will pay you for it."

This quote illustrates the principle that customers are willing to pay a high price if the perceived value is significantly greater.

Building and Maintaining a Profitable Business

  • Providing more value upfront may be less profitable initially but can pay off through customer retention and reputation.
  • Iterative improvements can increase efficiency and value while reducing costs.
  • Many businesses focus on short-term sales and hype rather than building a sustainable enterprise.
  • Long-term customer retention is key to creating a successful and profitable business.

"And so even if you provide more value up front and it's less profitable, that's okay. Because then through the iterations that you have of getting better, you get more and more efficient."

Alex Hormozi acknowledges that while initial offerings may not be highly profitable, the focus should be on incremental improvements that enhance efficiency and value.

"But they cannot build a compounding vehicle of enterprise value. Because if every single launch, if every single customer that they had sold for the last ten years were still paying them today they would have more money than know what to do with."

This quote points out the lost opportunity for businesses that fail to retain customers and instead focus on repeatedly launching new products.

Personal Reflection and Business Strategy

  • Alex Hormozi reflects on his own experience, recognizing the value of customer retention.
  • The strategy of never losing a customer can lead to exponential business growth.
  • It took Alex Hormozi seven years to internalize the importance of customer retention and its impact on business value.

"And this lesson took me seven years to really internalize. Because when I looked back at my own customer list and I saw 5000 locations on there I was like, I would have a billion dollar business if I had taken more time up front to figure out how to never lose people."

Alex Hormozi shares a personal realization about the potential value of his business had he focused more on customer retention from the beginning.

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