From: alexhormozi
The speaker shares insights and frameworks learned from building four businesses that each surpassed $10 million in revenue consecutively, aiming to help others achieve similar or greater success [00:00:00]. These experiences highlight various strategies for entrepreneurial success, common challenges, and crucial lessons in building and growing successful businesses.
Gym Launch
Gym Launch was the first major company built, operating as a licensing business for gym owners [00:00:12]. It provided a model that gym owners could license to increase their profits, with the average client gaining an extra 150 million, eventually selling for $46.2 million to a private equity firm after being impacted by COVID [00:00:23].
Early Customer Acquisition and Scaling
Initially, the first 10 customers for Gym Launch were acquired through manual outreach: scraping CrossFit’s database, uploading emails to Facebook for lookalike audiences, running a webinar (which no one watched), and then manually contacting 80 leads who had opted in to schedule calls [00:00:33]. A few clients were secured by offering to fly to their gyms for $500 to perform a turnaround [00:01:00].
The licensing model allowed for significant scale due to its near 100% margins [00:01:06]. Monthly sales quickly grew from 1 million by simply selling more units [00:01:13].
Product Development and Customer Focus
The strategy involved identifying common problems faced by gym owners (e.g., churn, margin issues, low lead close rates) [00:01:23]. They would then:
- Formulate a hypothesis for a solution [00:01:33].
- Survey the community to identify top performers in that area [00:01:35].
- Invite 20 top performers to a call to gather insights [00:01:40].
- Identify the few common practices among them that were truly impactful and worth implementing [00:01:48].
The speaker emphasizes that an exceptional product is fundamental for building a valuable business [00:02:05]. The “inch between good and great” in the product yields disproportionate returns through compounding word-of-mouth [00:02:19].
Client-Financed Acquisition
A key framework used was Client-Financed Acquisition [00:02:42]. This means customers fund the acquisition of subsequent customers [00:02:46]. If the initial sale’s revenue exceeds the cost to acquire and fulfill that customer, plus the acquisition and fulfillment cost for the next customer, capital ceases to be a constraint [00:02:51]. This aggressive acquisition model allowed Gym Launch to outspend competitors [00:03:09].
Challenges and Success Factors
Major challenges included:
- COVID-19, which led to a third of clients going out of business [00:03:17].
- Over-hiring support staff, resulting in layoffs and negative Glassdoor reviews [00:03:25].
The primary reasons for Gym Launch’s success were:
- Timing/Arbitrage: Identifying an arbitrage opportunity on Facebook ads before competitors [00:03:45].
- Significant Client ROI: The average gym earned an additional 36,000 [00:04:02]. This value meant marketing almost wasn’t necessary due to organic growth [00:04:17].
Prestige Labs
Prestige Labs was a sister company to Gym Launch, built on an affiliate base acquired through Gym Launch [00:04:43]. It achieved $1.7 million in sales in its first month of full operation [00:04:51]. The idea for supplements came from a customer spending excessive amounts on third-party products that could be provided more efficiently [00:04:54].
Business Model and Advantages
Prestige Labs’ model integrated with Gym Launch: gym owners would sell supplements to their clients, which would cover the cost of customer acquisition for the gym itself [00:05:14]. A key advantage of selling physical products was that there was no added fulfillment burden on the gym owners; Prestige Labs managed central shipping directly to consumers [00:05:24].
The brand was exclusive to gym owners, priced higher on the main site to incentivize purchasing through gyms, and offered a strong selling system with recurring subscriptions [00:05:41]. The launch strategy involved rolling out to 10 locations, then 20-30, before a wider launch [00:05:58]. The business invested 1 million going to tech development (a custom POS system for gyms) and $3 million to product [00:06:14].
Difficulties and Lessons
Difficulties encountered included:
- Supply chain issues (running out of a single ingredient halted product sales) [00:06:34].
- Predatory law firms seeking to find issues with products or patents [00:06:41].
- Low customer stickiness, as fitness product adherence is generally poor [00:06:54].
The biggest lesson from Prestige Labs was the opportunity cost of diversification [00:06:58]. While a good business, the speaker believes allocating more time to improving Gym Launch would have made it even larger, rather than becoming CEO of two companies simultaneously [00:07:04].
Allen.com
Allen.com is a software company that leverages AI and machine learning for appointment scheduling, particularly for brick-and-mortar businesses [00:07:16]. It aggregates data to predict optimal days, times, and follow-up sequences for appointments, aiming to maximize show-up rates [00:07:24]. It significantly increased lead throughput (from 9% to nearly 20% show-up rates for gym leads) at a fraction of the cost of a manual front desk [00:08:02].
Customer Acquisition and Scaling
Initially, Allen.com sold to existing Gym Launch customers [00:08:15]. A key breakthrough was realizing the need to target agencies rather than individual small businesses [00:08:26]. Agencies had large client bases (50+ small businesses) and understood lead generation, unlike many small business owners who only sought to improve lead conversion [00:08:31]. By partnering with agency influencers for webinars, a single pitch could yield thousands of customers [00:08:42]. This strategy quickly scaled the business to $1.7 million per month within six months [00:08:51].
Key Lessons from Allen.com
The speaker highlights several crucial lessons from Allen.com, which provided the most learning:
- In-House CTO for Software: It is essential to have an in-house CTO when building a software company. Relying on external development shops is akin to white-labeling core delivery functions and is highly inefficient [00:09:12].
- Early Pricing Surveys: Conduct pricing surveys early to unlock pricing power. Allen.com found four times its pricing power by repackaging charges based on usage, recurring fees, and APIs [00:09:37].
- Aligned Incentives: Aligning incentives with customers leads to significant scale and more money [00:09:52]. In Allen.com’s case, all stakeholders (small business owners, agencies, and Allen.com) were incentivized by increased show-up rates [00:10:01].
- Appointment Throughput: The availability of scheduling slots (days per week, hours, time increments) significantly impacts lead throughput for sales calls or in-person appointments, sometimes by 50% to 200% [00:10:08]. Businesses that offer more availability and flexibility achieve higher scheduling and show-up rates [00:10:31].
Acquisition.com
Acquisition.com is the fourth business, a portfolio company that currently manages businesses generating over 3 million or $10 million in revenue to help them grow further [00:10:48].
Founding Philosophy and Business Model
The business was founded on the question “What can I do forever?” and the desire for high leverage and a capital company vehicle [00:10:53]. Initial investments came from existing relationships, while later ones came from people who consumed their content and aligned with their values [00:11:00]. Most businesses in their portfolio are over 17 million [00:11:15].
Acquisition.com is built on a personal brand and inbound content, a shift from the transactional nature of previous businesses [00:11:20]. While slower, this model allows for continuous learning by exposing the speaker to various businesses at a high level [00:11:41]. The goal is to co-own businesses to learn diverse sales and operational models, enabling cross-pollination of successful ideas across industries for outsized returns [00:11:55].
Key Lesson: Hiring from the Top Down
The rapid growth of Acquisition.com is attributed to hiring from the top down [00:12:10]. This means bringing in highly skilled directors (sales, marketing, people, IT, operations) who are better than the founders in their respective fields, allowing for automatic delegation [00:12:13]. This contrasts with previous businesses where hiring was bottom-up [00:12:29].
- Capitalization: This strategy requires strong capitalization, as it means incurring financial debt to bring in talent before the business might organically afford it [00:12:34]. This choice is made to avoid accumulating other forms of “debt” like management debt, cultural debt, or technical debt, which can hinder long-term speed [00:12:42].
- Talent Recruitment as Core Competency: Making talent recruitment a core competency is crucial. Acquisition.com’s ability to attract top talent stems from significant inbound interest, the prestige of being a private equity firm, and structured training for new hires [00:13:00].
Ultimately, the biggest cost in business is “what you do not know” [00:13:46]. By partnering with experienced entities like Acquisition.com, businesses can reduce “ignorance debt” and accelerate growth that might otherwise take 10 years into three [00:13:48].