The Pressure to Innovate How Challenges Drive Success (on Real Talk with Zuby) Pt.1 June ‘23 Ep 598

In a candid conversation on the Real Talk with Zubi podcast, Alex Hormozi shares his entrepreneurial journey from a struggling gym owner to a multimillion-dollar business mogul. Hormozi's story is one of resilience, innovation, and leveraging education and skills acquired through hard-earned experience. Initially, he revolutionized gym launches by mastering Facebook ads, enabling gyms to open at full capacity and rapidly scale. After facing severe financial setbacks, including theft and processing issues, Hormozi ingeniously pivoted to licensing his gym launch system, transforming his business model and achieving explosive growth. His company, acquisition.com, combines traditional private equity with the power of social media influence, buying businesses and aiding their growth. Hormozi's tale underscores the value of adapting to adversity, the importance of understanding over anger, and the irrevocable power of knowledge.

• Education is an asset that remains secure against external factors such as taxation, loss through personal circumstances, and government seizure.
• It is implied that investing in education is a wise choice due to its enduring nature.

"Education is the only thing that no one can tax you out of. You can't lose in a divorce, and the government can't take it from you."

This quote emphasizes the permanence and security of educational attainment as an asset that cannot be diminished by legal or governmental actions.

• Alex Hormozi is introduced as a successful entrepreneur with a focus on customer acquisition, value maximization, and retention.
• He shares his experiences, failures, and lessons learned in business to help others in their entrepreneurial journey.
• The podcast aims to provide insights into business growth strategies.

"Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe."

This quote outlines the primary focus of the podcast, which is to educate listeners on improving their business practices and learning from past mistakes.

• Alex Hormozi owns a portfolio of companies with significant revenue.
• He sold three companies in 2021, two for $46,000,001 and one for an undisclosed all-stock deal.
• His journey started with a chain of gyms, which he grew organically after leaving a management consulting job.
• He invested his savings of $50,000 into his passion for fitness, which was the most feasible of three business ideas he considered.
• Hormozi's current venture, acquisition.com, combines traditional private equity investment with modern social media influence to create a unique business model.

"So I own a portfolio of companies right now that makes a good amount of revenue. Before that, I sold three companies in 2021, two for 46,000,001 for an undisclosed amount."

This quote provides a brief overview of Alex Hormozi's current business status and his recent successful exits, highlighting his credentials as a successful entrepreneur.

• Alex Hormozi was an only child for the first half of his life and then had two stepsiblings.
• Raised primarily by his father, he was a quiet kid who focused on homework and sports.
• Hormozi's interest in fitness was sparked by a teacher who recognized his potential and introduced him to weightlifting.
• He experienced a period of teenage anger and resentment, stemming from a desire for parental approval and a feeling of being constantly misunderstood.

"I was pretty much just raised by my dad for the most part. So I was a pretty quiet kid. Just did my homework, did my sports, kind of kept to myself for the most part."

This quote gives insight into Hormozi's childhood, suggesting that his disciplined and focused nature may have roots in his upbringing.

• Hormozi's resentment towards his parents, particularly his mother, was a significant emotional burden during his teenage years.
• A college psychology assignment led him to understand his mother's life from her perspective, which allowed him to forgive and let go of his anger.
• This experience taught him that anger often stems from a lack of understanding and that gaining more context can help resolve negative emotions.
• Hormozi applies this lesson in business, recognizing the importance of understanding situations fully to make better decisions.

"To understand is to forgive."

This Pascal quote, referenced by Hormozi, captures the essence of his realization that understanding the circumstances and challenges of others can lead to forgiveness and personal growth.

• Hormozi's initial career path in management consulting was chosen to meet his father's expectations and financial aspirations, not his own passion.
• Realizing he was not proud of his life's direction, he felt depressed despite achieving what was expected of him.
• The turning point came when he decided to pursue his interest in fitness and entrepreneurship, leading to a strained relationship with his parents for a time.
• Hormozi's decision to start a gym in California was made independently, and he committed fully to the endeavor, even sleeping on the gym floor to make ends meet.

"I realized for me it didn't because I wanted to ultimately start a business."

Hormozi's reflection on a Harvard Business School application question made him realize that the traditional path of business school did not align with his entrepreneurial ambitions, prompting a significant career shift.

• Hormozi's early days as a gym owner were challenging, with long hours, sleepless nights, and a relentless schedule.
• Despite the romanticized notion of the "rocky cut scene," the reality of starting a business was far more grueling and less glamorous than expected.
• Hormozi's dedication to his business required significant personal sacrifice and a strong work ethic.

"And so I'm sleeping in a warehouse where there's cars that drive over the top of it and there's these metal partitions in this concrete box."

This quote vividly describes the harsh conditions Hormozi endured while starting his gym, illustrating the tough reality behind the scenes of entrepreneurship.

• Alex Hormozi expresses that his drive to succeed in business was fueled by a fear of failure and a desire to prove his parents wrong.
• He highlights that passion is not always the starting point for entrepreneurs; instead, pain, anger, shame, fear, or insecurities can be powerful motivators.
• Alex advocates for using whatever emotions or circumstances one has at their disposal to propel themselves forward in entrepreneurship.

"And I honestly don't think I would have been able to get through it if it had been for the amount of resentment I had for my parents at that point. And it was just the fear of going back not successful, that continued to drive me through that."

This quote emphasizes the role that personal emotions and fear of failure played in Alex's entrepreneurial journey, highlighting the power of negative emotions as a catalyst for action.

"And so if you've got pain, you've got anger, you've got shame, you've got fear, whatever that. You've got insecurities. If you don't have the passion, use the pain."

Alex suggests that even in the absence of passion, negative emotions can be harnessed as a source of motivation for starting and growing a business.

• Zubi describes the long and arduous process of building a business or career, which often involves years of hard work with minimal rewards.
• He emphasizes the public's tendency to only see the end result and not the years of effort that led to success.
• Both speakers acknowledge the disparity between the public perception of overnight success and the reality of the entrepreneurial grind.

"There's this period, oftentimes it's seven to 15 years of just intense grind where the amount of work you're putting in versus the reward you're actually getting back is so minimal."

Zubi highlights the prolonged period of hard work and minimal rewards that entrepreneurs often experience before achieving substantial success.

"People don't understand the grind that goes into it. So I even had people who thought that I went into this for explicitly, oh, you just want to make more money."

Zubi addresses the misconception that entrepreneurship or a career in music is a quick path to wealth, when in fact it involves significant grind and sacrifice.

• Alex and Zubi discuss their personal journeys and the decisions that led them to pursue entrepreneurship.
• Alex wanted to break free from expectations and constraints, choosing California as a competitive environment to challenge himself.
• Zubi's journey involved selling CDs hand-to-hand and doing pop-up shops, demonstrating the hustle and resourcefulness required in building a career in music.

"I wanted to get as far away from home as. And that was. It sounds more dramatic than it was. I just wanted space, you know what I mean?"

Alex explains his desire for physical and emotional space from his previous environment, which influenced his decision to move to California and start a gym.

"So I'd do one pop up shop a month for kind of half the month. Just be in there, make a small profit, sometimes barely break even because you have to pay all the rental fees for the shopping mall and all that, for the space, and you have to pay for all the merchandise and all that."

Zubi shares the financial challenges of running pop-up shops and the tight margins he operated on, illustrating the financial pressures faced by entrepreneurs.

• Alex discusses the uncertainty inherent in entrepreneurship and compares it to holding one's breath without knowing when it will end.
• Both speakers touch on the idea that having a fallback option, such as a degree or corporate experience, can provide a safety net but also highlight the determination required to persist in the face of uncertainty.

"I think people would be willing to do the grind, but they can't deal with the uncertainty."

Alex points out that the willingness to endure hard work is not the main issue for aspiring entrepreneurs; it's the uncertainty of success that deters many.

"You've got to bring your a game. Even if there are ten people in the crowd."

Zubi emphasizes the need to perform at one's best regardless of the audience size, underscoring the relentless effort required in the early stages of a music career.

• Alex shares his experience of reaching out to gym owners and becoming an apprentice to learn the ropes of the fitness industry.
• He discusses the serendipity of learning about Facebook ads early on, which played a crucial role in his gym's initial success.
• Alex's story of breaking even in the first month and then experiencing rapid growth exemplifies the potential for quick progress with the right strategies and opportunities.

"I moved out had, I'll back up because think this might be helpful for some people. So when I decided to go to California, I had emailed, I think, 40 or so gym owners that looked like they were doing okay online. No one got back to me except for this one guy."

Alex explains the importance of reaching out for opportunities and the impact of finding a mentor who can guide an entrepreneur through the early stages of business.

"I remember the first month, I made the exact amount of money that my rent was, which was $4,972."

This quote illustrates the initial financial challenges Alex faced and the milestone of covering his rent with the gym's earnings, marking an early sign of success.

• Alex Hormozi opened his second gym location within 15 months and continued to open a new location every six months.
• He developed a business model that allowed for low-cost customer acquisition, high upfront cash, and a profitable backend.
• This model enabled him to open each new gym at full capacity without having to invest his own capital upfront.
• By the age of 26, Alex owned six gym locations, five in California and one in Virginia.

"I had a pretty cool model, which allowed us to get a ton of customers for a low cost, a high amount of cash up front so we could liquidate our acquisition costs."

The quote explains the key to Alex's rapid expansion: a business model that efficiently acquired customers and generated enough upfront revenue to cover acquisition costs.

• Alex attended a conference where he learned about Internet marketing.
• He joined a mastermind group and presented his business model, after which he was advised to pivot from running gyms to teaching other gym owners his methods.
• Alex experienced a moment of disillusionment with his current business and began to consider other opportunities.

"I was like, is this all there is to life? I reached, like, a different moment, and I had seen this guy speak at this conference, and he talked about Internet marketing and all that kind of."

The quote reflects Alex's introspection about his career path and his openness to exploring new ideas, which eventually led to a significant pivot in his business strategy.

• Alex began doing gym turnarounds, using his model to fill gyms with customers and keeping the upfront revenue while the gym owners retained the customers for the backend.
• He systematized his approach, making it replicable and profitable, and completed 30 turnarounds over a few years.
• Despite the success, he realized that he could make more money with less overhead by not owning gyms.

"So I started flying to gyms and turning them around... I got to keep the money I brought in, and then they would keep the customers to get the back end, so that was no risk for them."

This quote summarizes the win-win turnaround strategy Alex implemented, which allowed him to profit without the responsibilities of gym ownership.

• Alex sold all his gyms within 90 days to pursue the consulting opportunity.
• He spoke at an event and garnered interest from many business owners who wanted to buy his services.
• Alex entered a partnership to launch gyms monthly but was defrauded by his partner, who stole all the money from their shared account.

"I sold all my gyms in 90 days... And of course, at this point, everybody in my life is like, you work so hard to have these five gyms. What do you mean? You're just giving them away."

This quote captures the drastic and risky decision Alex made to sell his successful gyms for what he believed was a greater opportunity.

• After losing all his money, Alex's girlfriend (now wife) advised him to return to the gym launch model that was previously successful.
• He faced further challenges with payment processing due to suspicious activity flags, which led to a freeze on his funds.
• Despite these setbacks, Alex persisted, found a high-risk processor, and continued launching gyms to recover financially.

"And so I had, at this point, exactly $23,000 left in everything... And so I wired him 22, and I had $1,000 left."

Alex's quote illustrates the dire financial situation he faced and the tough decisions he had to make to keep his business afloat.

• Alex's business finally began to see profits again after securing payment processing and launching additional gyms.
• He learned valuable lessons about scaling too quickly and the importance of managing customer expectations and gym owner capabilities.
• The experience taught Alex the significance of skills acquired through adversity, which could not be measured on paper but were crucial to his success.

"And so then I got two more online for 50 and 50, and then they bumped my limit on the other one. Whatever. And so that next month we did 200 something thousand in sales and I made like $30,000 in profit."

The quote demonstrates how Alex navigated financial challenges and strategically used available credit to keep the business operational, leading to eventual profitability.

• Alex Hormozi faced significant financial challenges with his gym business, including theft, processing issues, and a competitor undercutting prices.
• The average gym owner earns around $36,000 a year, which is less than what Hormozi's business made in a month from one gym.
• Hormozi had to come up with $150,000 in profit within 30 days to cover losses and refunds.
• Leila, Hormozi's partner, had a side business in personal training, making $4,000 a month for 2 hours of work per week.
• Hormozi decided to pivot to selling direct-to-consumer weight loss programs, leveraging Leila's brand and success story.
• They utilized digital products to maximize profit and started earning $1,000 a day, scaling up with the help of their sales team.

"And so he was like, hey, everybody, just sign up with them, refund through them, and I'll let you do it through me for half the price."

This quote shows the challenge Hormozi faced when a competitor encouraged customers to refund through Hormozi's business and sign up with them for a lower price, which threatened his company's financial stability.

"I have to come up with 150 grand in 30 days. In profit."

This quote emphasizes the urgency and the magnitude of the financial goal Hormozi needed to achieve to maintain his business operations.

• Hormozi brainstormed new business ideas to generate the required income.
• The decision to pivot to a direct-to-consumer model for weight loss programs was sparked by the profitability of Leila's side business.
• They created a compelling sales letter and started running ads, with Leila handling phone calls and customer interactions.
• The business model showed promise as they began to generate significant daily profits without additional costs.

"So what if I start running ads and we'll just sell direct to consumer? We already know how to. This whole gym thing hasn't worked out. Like, let's just sell weight loss."

This quote captures Hormozi's strategic shift to a direct-to-consumer model, focusing on weight loss programs instead of gym launches.

• Hormozi realized the potential in teaching gym owners how to market their businesses.
• He sold his marketing blueprint to a gym owner in need, which led to a significant income in a single day.
• Hormozi filmed ad training and provided gym owners with the tools to run successful campaigns.
• This approach was highly profitable and led to a rapid increase in sales and the establishment of a licensing program.

"I just sold our whole way of opening gyms for $6,000."

This quote reveals Hormozi's decision to sell his knowledge and systems to gym owners, which became a lucrative pivot for his business.

• Hormozi's licensing program helped gym owners make significant profits, which in turn generated high demand for his services.
• He expanded his business model to include a three-year licensing program covering all aspects of running a gym.
• The licensing program led to rapid growth and high margins, with the first full calendar year generating $26 million in revenue.
• Hormozi's business also launched a successful supplement line, leveraging the distribution base of gyms.

"That's how I opened all the tombs for free. And so these guys, they loved me. If you ever want to know how to make friends in business, make people money."

This quote highlights the success of Hormozi's licensing program and the positive relationships built with gym owners by helping them increase their profits.

• Despite facing personal and professional challenges, Hormozi leveraged his skills and education to rebuild his business.
• Hormozi's father, an Iranian immigrant, emphasized the importance of education as something that cannot be taken away by external circumstances.
• The story illustrates the value of skill development and knowledge over quick financial gains that do not contribute to personal growth or learning.

"Education is the only thing that no one can tax you out of, you can't lose in a divorce, and the government can't take it from you."

This quote underscores the lasting value of education and skills, which Hormozi relied on to overcome his financial obstacles and build a successful business.