Alex Hormozi: The SIMPLE FORMULA that has DESTROYED BILLION DOLLAR BUSINESSES

Last updated: Jun 15, 2023

The video discusses the importance of understanding the interplay between price, value, and cost of goods in a business and how it can impact the success and value of the company.

This video by Alex Hormozi was published on Oct 20, 2021.
Video length: 07:09.

In this video, Alex Hormozi discusses the three most important lines that every business needs to understand:

price, value, and cost of goods. He explains the interplay between these lines and how they can dramatically impact a business's profitability and value. Hormozi uses different combinations of these lines to demonstrate how businesses can increase customer surplus and create a viral business.

He emphasizes that understanding these three lines is crucial for building a successful and scalable business.

  • Alex Hormozi emphasizes the importance of understanding the interplay between price, value, and cost of goods in a business.
  • Every business has three lines: price, value, and cost of goods, and the interplay between these lines can dramatically shift a business.
  • The goal is to create a business that provides excessive value, costs almost nothing to make, and creates a big customer surplus.
  • The bigger the discrepancy between price and value, the more viral the business will become.
  • Understanding the interplay between price, value, and cost of goods is the trick to building a fortune in business.

The SIMPLE FORMULA that has DESTROYED BILLION DOLLAR BUSINESSES - YouTube

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Introduction

  • Alex Hormozi is an entrepreneur, investor, and CEO of Acquisition.com.
  • The video discusses the importance of understanding the interplay between price, value, and cost of goods in a business and how it can impact the success and value of the company.
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The Three Lines

  • Every business has three lines: price, value, and cost of goods.
  • The interplay between these lines can dramatically shift a business.
  • Customer surplus is the excess between what they pay and what they get.
  • The higher the surplus, the greater the distance between price and value, and the more viral the business will be.
  • Netflix is an example of a business that priced its service low, but its cost of goods was still lower, resulting in high gross margins.
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Business Scenarios

  • Business scenario one is a business with a high customer surplus, low marketing needs, and thin margins.
  • Business scenario two is a generic mom-and-pop business with decent margins and value.
  • The goal is to create a business that provides excessive value, costs almost nothing to make, and creates a big customer surplus.
  • The bigger the discrepancy between price and value, the more viral the business will become.
  • The ultimate goal is to have a business with a quadratic way of expanding through word of mouth.
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The SIMPLE FORMULA that has DESTROYED BILLION DOLLAR BUSINESSES - YouTube

Conclusion

  • The trick to building a fortune is understanding the interplay between price, value, and cost of goods.
  • If you can think about your business using these three lines, you can build a fortune.
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The Importance of Understanding Price, Value, and Cost of Goods in Business

  • Having a surplus of word-of-mouth referrals is crucial for business success.
  • Providing remarkable or noteworthy value is key to generating word-of-mouth referrals.
  • Lowering the cost of goods sold to a significant degree can increase profit margins.
  • Having a product or service with high value and low cost can lead to significant financial success.
  • Understanding the interplay between price, value, and cost of goods is essential for creating value, margin, and ultimately taking home the most money.
  • Using this simple framework can help entrepreneurs plot their own business and their competitors' businesses to create value and margin.

Watch the video on YouTube:
The SIMPLE FORMULA that has DESTROYED BILLION DOLLAR BUSINESSES - YouTube

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