Alex Hormozi: "My business has stopped growing..what should I do?"

Last updated: Jun 15, 2023

The video is about a framework that Alex Hormozi uses to analyze businesses and how to use it to instantly 2-3 exit your own business.

This video by Alex Hormozi was published on Oct 1, 2021.
Video length: 09:25.

In this video, Alex Hormozi shares a framework for analyzing a business that can help entrepreneurs instantly 2-3x their business.

He explains the five variables needed for the framework: number of new sales per month, current revenue, price, churn, and lifetime value. He then walks through a hypothetical example of a business with 100 new sales per month, 380 active clients, a $1,000/month price, and a 13% churn rate.

Using this information, he calculates the business's hypothetical max and lifetime gross profit per customer, which can help entrepreneurs analyze the potential opportunity of their business.

  • Alex Hormozi shares a framework to analyze businesses and how to use it to instantly 2-3 exit your own business.
  • The framework requires five variables: new sales per month, current revenue, price, churn, lifetime value, and gross profit.
  • A hypothetical example is used to demonstrate how to calculate churn and lifetime value to determine the hypothetical max revenue of a business.
  • Business owners can use this framework to calculate their own churn and lifetime value, determine their hypothetical max revenue, and make informed decisions about growth opportunities.
  • It is important to ensure that customer acquisition cost is less than lifetime gross profit per customer.

"My business has stopped growing..what should I do?" - YouTube

Alex Hormozi: "My business has stopped growing..what should I do?" 001

Introduction

  • Alex Hormozi is an entrepreneur, investor, and CEO of Acquisition.com.
  • He shares a framework that he uses to analyze businesses and how to use it to instantly 2-3 exit your own business.
  • The framework requires five variables, and he will show how to get the two hardest numbers that most people don't know how to get within their business.
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The Five Variables

  • The number of new sales per month.
  • Current revenue.
  • Price.
  • Churn.
  • Lifetime value.
  • Gross profit.
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Analyzing a Hypothetical Example

  • A business was doing 100 new sales per month and $400k in revenue.
  • They had 380 clients paying $1,000 per month, but they didn't know their churn or lifetime value.
  • Alex helped them calculate their churn, which was 13%.
  • He then calculated their lifetime value per customer, which was $7,700.
  • Using these numbers, he determined that the business would cap out at $770k per month or about $9 million per year.
  • The business had over 90% gross margins, which meant their lifetime gross profit per customer was $7,000.
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"My business has stopped growing..what should I do?" - YouTube

Using the Framework to Analyze Your Own Business

  • Calculate your churn and lifetime value.
  • Use these numbers to determine your hypothetical max revenue.
  • Calculate your gross profit per customer.
  • Ensure that your customer acquisition cost is less than your lifetime gross profit per customer.
  • Use this information to make informed decisions about your business and potential growth opportunities.
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Framework for Analyzing Businesses

  • A business can only grow by getting more customers or making them worth more.
  • Increasing customer acquisition or increasing customer value are the only ways to grow a business.
  • Reducing churn can significantly increase customer value and overall revenue.
  • Private equity firms look for businesses with high growth, stickiness, and profitability.
  • Removing the biggest constraint in a business can allow it to grow.
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Calculating Hypothetical Max and Weak Points

  • Calculating hypothetical max with current numbers can reveal weak points in a business model.
  • Knowing how many new customers, current clients, and revenue a business has can help calculate hypothetical max.
  • Calculating churn can help identify areas for improvement in a business model.
  • The theory of constraints suggests that businesses will grow up to their nearest constraint, so removing constraints can allow for growth.
  • Smart business owners focus on doing the fewest things that get them the most returns.

Watch the video on YouTube:
"My business has stopped growing..what should I do?" - YouTube

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