Strategic Pivots for Sustainable Business Growth

Key Quotes

"The question was i mean i don't think you should cut your cash flow you have you only have like four customers right currently at five okay so you have five customers and that means that if you're doing 8 000 a month you said 8 000 top line and 7 000 bottom line but you said your cost of getting a show is 210 on 500 those margins don't make sense what am i missing"

Alex Hormozi is questioning the caller's financial model, specifically pointing out a discrepancy between their stated revenue, costs, and profit. Hormozi highlights that the cost per show ($210) relative to the revenue per show ($500) seems too low for the reported margins, indicating a potential misunderstanding or missing piece in the caller's financial calculation.

"dude i think everything's fine but the the the i'd say one risk that i see that's relatively significant is your cost per show relative to the revenue per show is kind of low i would say the guys who i see like really murder it are at like 20 so you're at like 60 uh or sorry 40 so i'd want to see if we could drive that down because my fear of the business is that when you take this to scale you'll be less efficient and your margins are going to compress"

Alex Hormozi identifies a significant risk in the caller's business model: the cost per show is too high relative to the revenue generated per show. Hormozi contrasts this with successful businesses that operate at a much lower cost per show (around 20%), expressing concern that scaling this business will lead to decreased efficiency and compressed profit margins.

"The next issue that you're going to run into is the types of businesses that you're serving so you're going to want to go up market for people who can spend 50 000 100 000 200 000 a month in ads that's that's what you're going to want to go after because the volatility of your business is going to be predicated on the volatility of their business"

Alex Hormozi advises the caller to target larger, higher-spending businesses rather than smaller ones. Hormozi explains that the volatility of the caller's business is directly linked to the volatility of their clients' businesses, and by serving clients who spend significantly more on ads, the caller can achieve greater stability and scale.

"The second piece to it and by the way don't do that go up market and say because people that are up market have their own sales team and they understand that concept that even though you get somebody a show it doesn't mean that they're guaranteed to close you still have trained sales people so do not give into the temptation don't try and serve an avatar that isn't best for you more that's the biggest mistake people make which is like you're serving an avatar that isn't your best avatar and you try to go above and beyond for it you just don't want to do that"

Leila Hormozi cautions against trying to serve clients who are not the ideal fit for the business. She advises the caller to focus on higher-market clients who have established sales teams and understand that a show does not guarantee a close, rather than trying to over-deliver for less suitable clients.

"The second piece is that with the paper show model here's the place where it goes wrong which i saw firsthand which is why agencies had churn with it which is that um customers want to be able to predict how much money they're going to spend with you so if you look at churn and you look at customer attention the customers who retain the most are the customers who understand how much they're going to pay"

Leila Hormozi explains a common pitfall in the pay-per-show model: clients desire predictability in their spending. She highlights that customer retention is highest when clients can accurately forecast their expenses, suggesting that unexpected bills can lead to a significant likelihood of client churn.

"The other piece that you want to consider here though is like you're sending a newsletter it's like are there other places you can like you have 70k on social it's like we can charge for posts we can charge for stories we can charge for youtube video integrations we can charge for news like i would rather you do all that stuff first before even considering the niche down for now"

Alex Hormozi suggests that the caller should explore multiple revenue streams beyond their current newsletter advertising. Hormozi recommends leveraging their social media presence to charge for posts, stories, and video integrations, prioritizing these opportunities before considering niching down their business.

"The biggest mistake people make which is like you're serving an avatar that isn't your best avatar and you try to go above and beyond for it you just don't want to do that"

Leila Hormozi identifies a common error where businesses try to cater to clients who are not their ideal customer. She emphasizes that going above and beyond for a suboptimal client is often counterproductive and advises against serving an avatar that is not the best fit for the business.

"The first thing that you should try and get off your plate is the questions um because if you can bring somebody on and you can train them on answering the questions in the group that's like a it's almost like they're onboarding to then take over calls from you"

Alex Hormozi advises the caller to delegate the task of answering client questions. Hormozi suggests that by training someone to handle these inquiries, it serves as an onboarding process for that individual to eventually take over coaching calls, freeing up the caller's time.

"There's two different models that you can think of when you think of a coaching business like this and i think this goes for like any coaching business in existence which so i've talked to so many and i've helped structure multiple teams like this like there's really two models that work and there's tradeoffs in each one meaning like you kind of just want to pick your problems"

Leila Hormozi outlines two primary operational models for coaching businesses, emphasizing that each model has its own set of challenges. She advises that the choice between these models depends on which set of problems the business owner is most willing to manage.

"The nice thing with the partial model that layla just outlined is that one you're you're placing all these sales people right now and you already have a history of placing a lot of sales people already right and they already went through your training and whatnot and so i would say take your successful alumni and say hey want to make an extra five grand a month and give back to the community that you came from many of those guys will probably say sure i'd happily do it"

Alex Hormozi suggests leveraging successful alumni of the caller's program to fill fulfillment roles. Hormozi proposes offering these former clients