From: alexhormozi
Starting four businesses that each surpassed $10 million in revenue provided a wealth of frameworks and lessons, many learned from early mistakes that ultimately led to significant success [00:00:00].
Gym Launch: Scaling a Licensing Model
The first major company built was Gym Launch, a licensing business for gym owners [00:00:12]. This model allowed gym owners to adopt a proven system, significantly increasing their profit [00:00:16]. At its peak, the business was valued at approximately 46.2 million after being impacted by COVID [00:00:23].
Initial Customer Acquisition Challenges
Early customer acquisition for Gym Launch involved labor-intensive methods:
- Scraping CrossFit’s database for emails via a VA in the Philippines [00:00:33].
- Uploading emails to Facebook to create lookalike audiences for webinar marketing, which initially had low engagement [00:00:42].
- Manually finding and messaging opt-in leads on Facebook to schedule calls, leading to the first few customers paying $500 for on-site gym turnarounds [00:00:54].
Key Factors for Scaling
The shift to a licensing model provided significant leverage due to virtually 100% margins on sales [00:01:06]. Sales rapidly grew, reaching 300,000, and soon over $1 million per month [00:01:13].
A core strategy was to identify and solve common problems faced by gym owners, such as churn, margin issues, or low lead close rates [00:01:23]. This involved:
- Creating hypotheses for solutions [00:01:33].
- Surveying the community to find high-performing members [00:01:35].
- Inviting top performers for calls to identify common successful practices [00:01:40].
- Focusing on the few critical actions that provided significant, long-term benefits [00:01:49].
Product Excellence and Word-of-Mouth
Exceptional product quality, though taking six years to develop, was crucial [00:02:05]. The return on investment from word-of-mouth referrals was immense and compounded over time [00:02:21].
Client-Financed Acquisition
A unique customer acquisition model called “client-financed acquisition” was employed [00:02:44]. This means customers fund the acquisition of subsequent customers, eliminating capital as a constraint for business growth [00:02:47]. By making more from the first sale than the cost to acquire and fulfill that customer (plus the next), a dollar in could generate multiple customers [00:02:51]. This allowed the business to outspend competitors on acquisition [00:03:09].
Operational Challenges
- COVID-19 Pandemic: A significant challenge, leading to a third of clients going out of business [00:03:19].
- Over-Hiring in Support: An inexperienced director of customer service over-hired, leading to 30 layoffs and a negative impact on Glassdoor reviews for years [00:03:25].
Success Factors
- Timing: Identifying an arbitrage opportunity on Facebook ads before competitors [00:03:45].
- Turnkey System: Creating a system to monetize this opportunity [00:03:50].
- High Customer ROI: The average gym gained an additional $30,000 in cash within their first 30 days of using the system, effectively making marketing unnecessary due to the strong results [00:04:03].
Prestige Labs: A Sister Company’s Scaling Journey
Prestige Labs was developed as a sister company to Gym Launch, leveraging its existing affiliate base of gym owners [00:04:43]. Its first month of full operation generated $1.7 million [00:04:50].
Leveraging Existing Distribution
The client-financed acquisition model was adapted for Prestige Labs: gym owners would sell supplements, covering their customer acquisition costs from the physical product sales [00:05:19]. A key benefit was that selling physical products added no additional fulfillment burden for the gym owners, as shipping was managed centrally [00:05:24].
The brand was exclusive to gym owners, priced higher on the main site to offer significant savings through the gyms [00:05:41]. A strong selling system and recurring subscriptions were implemented [00:05:50]. Initial rollout was staggered, starting with 10 locations, then expanding incrementally before a wider launch [00:05:58]. This approach created a unique market moat [00:06:07].
Investment and Obstacles
Starting Prestige Labs cost 1 million dedicated to proprietary tech for a gym-specific point-of-sale system (including a retail kit, kiosk, and iPad integration) [00:06:13]. The remaining $3 million was invested in product [00:06:32].
Major difficulties included:
- Supply Chain Issues: Running out of a single ingredient could halt sales of an entire product [00:06:34].
- Legal Challenges: Predatory law firms actively sought to test products for discrepancies or infringements, leveraging patents for lawsuits [00:06:41].
- Customer Stickiness: Low retention rates due to general lack of long-term adherence to fitness programs [00:06:54].
Lesson Learned: Focus on Core Business
The biggest lesson was that pursuing Prestige Labs likely detracted from Gym Launch’s potential [00:06:58]. Becoming CEO of two companies instead of focusing solely on one led to a slowdown in Gym Launch’s growth [00:07:10].
Allen.com: Software Scaling with AI
Allen.com, still operational, was built to solve the problem of converting leads to appointments, especially for small businesses with in-person services [00:07:16]. By aggregating data on scheduling, the platform could predictably optimize show-up rates [00:07:24]. This expertise in lead throughput later benefited other portfolio companies, increasing ad throughput by 20-40% [00:07:44].
Initial Problem and Solution
Initially, Allen solved a problem for gym owners, where only 9% of leads were converted manually [00:07:56]. Allen automated this, achieving nearly 20% lead conversion without manual effort, at a fraction of the cost of a front desk person [00:08:04].
Shifting the Scaling Strategy
Sales began by leveraging the existing distribution base, but it became clear that expanding beyond this base was difficult as small businesses often lacked lead generation capabilities [00:08:15].
The breakthrough was realizing the need to target agencies rather than directly selling to small businesses [00:08:26]. Agencies provided greater leverage, as one agency could represent 50 small businesses [00:08:36]. Further scaling was achieved by conducting webinars with large agency audiences, enabling a single pitch to acquire thousands of customers [00:08:42]. This strategy led to $1.7 million per month in revenue within six months [00:08:51].
Lessons Learned in Software Development and Pricing
Allen.com provided significant lessons:
- In-House CTO: Essential for software companies. Using external development shops (which are described as “close to a complete scam”) is a mistake, akin to white-labeling core business delivery [00:09:12].
- Pricing Surveys: Conduct pricing surveys early to unlock pricing power. Allen increased pricing by four times by repackaging how it charged, exploring usage-based, recurring, and API-based fees [00:09:37].
- Aligned Incentives: Aligning incentives with customers generates more revenue and facilitates growth. For Allen, the business owner, agency, and the company were all incentivized by increased show-up rates [00:09:52].
- Throughput on Appointments: Maximizing availability (days, hours, time increments) for scheduling sales calls or in-person appointments is critical for lead conversion [00:10:08]. Businesses with limited availability see significantly lower show-up rates [00:10:24]. Small business owners often make “small business owner decisions” that hinder their scaling potential [00:10:39].
Acquisition.com: Scaling through Content and Talent
Acquisition.com, the fourth business, is a portfolio of companies doing over $200 million annually [00:10:44]. This business was uniquely built on a personal brand and inbound content strategy, unlike previous transactional models [00:11:20].
Leadership and Learning
The core purpose is learning by being exposed to diverse businesses at a high level [00:11:41]. Co-owning businesses allows for cross-pollination of ideas and strategies across industries for outsized returns [00:11:54].
Hiring Top-Down for Growth
A significant factor in Acquisition.com’s rapid growth was hiring from the top-down [00:12:11]. This contrasts with previous businesses where hiring was bottom-up [00:12:28]. Hiring highly skilled directors (e.g., sales, marketing, people, IT, portfolio operations) who are better than the founders allows for automatic delegation and accelerates progress [00:12:13].
This top-down hiring approach requires strong capitalization [00:12:34]. Businesses accrue debt (financial, management, cultural, technical); choosing to incur financial debt (by hiring top talent early) can accelerate growth and avoid other types of debt in the long run [00:12:42].
Core Competency: Talent Recruitment
Acquisition.com has made talent recruitment its single core competency [00:13:01]. They excel at this due to:
- High inbound interest [00:13:10].
- The prestige of being a private equity firm, attracting higher-caliber talent than individual portfolio companies might [00:13:13].
- In-house training on their business methods for new hires [00:13:26].
- Offering direct support from their own directors to managers and directors within portfolio companies [00:13:31].
Ultimately, the biggest cost in business is “ignorance debt” – what is not known [00:13:46]. By partnering with businesses, Acquisition.com aims to accelerate their growth by leveraging their expertise and track record [00:13:50].