Disclaimer: The Transcript Is Auto Generated And May Contain Spelling And Grammar Errors
Intro: 00:00 From ABC News Radio, KIBT 1490 in Southern California, this is BizNinja Entrepreneur Radio, with your host, Tyler Jorgenson.
Tyler: 00:14 Welcome out to BizNinja Entrepreneur Radio. I am your host Tyler Jorgensen. I just took the energy up a level, but I am super excited to be talking with Alex Hormozi the founder of Gym Launch because Alex and I go back a few years and I’ve got to experience kind of firsthand. We’ll call it like first and a half hand journey and I know a little bit of his background and most people know him today as the dominant force completely changing the landscape of fitness gyms and marketing. But I want you to learn from him what’s possible, what is he has done with his business and learn from him from his experience. So welcome back to the show Alex.
Alex: 00:50 Very happy to be here. It’ll be good to catch up. Hopefully I can live up to half of the introduction.
Tyler: 00:55 You brought the energy right back down. So Alex, alright, first thing, what is Gym Launch for those that may not know.
Alex: 01:04 So Gym Launch is just a comprehensive system to increase the profitability of the gym. And so if the predominant services that are out there for gyms solve only one piece of the problem, typically people will see an increase in one thing, one aspect of their business. But then it doesn’t trickle down to bottom line, right? And so they may have an agency who gets the leads, but they don’t know how to work the leads to get them to schedule. Or they can get them schedule with the Kincumber show. Once they show they don’t know how to close. Then when they do close them, they’re closing the wrong price on our packaging. And so that even if they do have people in their gym, they’re actually still not profit because the price points don’t actually make sense. And then once they actually, maybe do fix their price points in one out, they don’t know how to retain people so that they can actually grow the recurring revenue month after month.
Alex: 01:44 And so if you think about that, that’s just kind of five primary functions of the business, right? You have lead generation, lead, nurture, sales, fulfillment, and then resell and retention for a gym. And so we walked through all with a gym owner and we have a structured process of turning the gym around. And typically we start with acquisition because that’s usually where we can inject cash flow into a business. And so that gives them breathing room so that they can then break the rest of the gym because they realized very quickly. I thought like we have such a great community, we have such a great product if only people knew about us. But the real deal is that people haven’t heard about you because your product actually isn’t that good. Right. And if it were so good, you wouldn’t actually have these other issues. And so we kind of get them to terms with that because once they start acquiring customers and start churning customers, because they actually are bringing people in, then they realize fully my stuff. And so then we’re like, hey, good news. We’ve already solved this problem. Here’s the process to fix this. It’s very reliable. So that’s
Tyler: 02:38 So you know, you and I both came from running gyms right on. We both owned gyms here in Southern California. You’d consulted in some done some stuff. And for those that haven’t been in the fitness industry, yeah, most gyms are,
Tyler: 02:51 Barely breaking even or they’re losing money or it’s just they’re not healthy business. Even if they appear to be like they’re struggling. And it’s probably because from my experience having, I not only did open gyms that I owned, but I also helped open dozens of other gyms through like consulting and selling them products. And you mentioned five prongs. Most of them only think about that last piece, like retention. And it’s because their friends and family are in the business and they stay there. So they think the retention’s in place. But most of our thinking about any of it, they think if I just focus on good training, everyone else will be, they’d be here all the time. So they’re actually not running any of those five prongs of their business. So let’s go back now. Let’s peel back. What’s Gym Launch is? So you didn’t wake up out of high school and say, I’m going to create a gym marketing business. You probably also didn’t go to college at some fancy school and say, I’m going to open a gym. What was that first spark that happened to Alex Hormozi that you realized you’re not wired like everyone else and you’re an entrepreneur?
Alex: 03:51 You know, it’s funny because I think there’s a lot of like marketing out there. There’s a lot of like hustle mantra that it likes and talks about how entrepreneurs know that they’re entrepreneurs for the time. They’re three years old and like they’ve always been selling stuff and they’re not good at school and they can’t focus and blah blah blah. Like I didn’t really have any of that. I was great at school. You know, I finished napkin loudy finished in three years at Vanderbilt. Like I got a GMAT score about hundred score it. Like I didn’t have any of those things. And so mine actually came from just like an extreme period of pain, which was, I had done the trodden path that I was supposed to do and I worked at a management consulting firm, which is what you’re supposed to do after you go to the fancy school.
Alex: 04:26 Right. And, um, it was like a year into that business. I just like, I hate like I was able to buy a condo and high rise and I was 22 years old and uh, it was very much like a rock top situation where I was like, as I said, and I kind of hate my day. And so it was just like I got to a point where I didn’t feel like living anymore. So I was like, well, if this is it, like I might as well do something that I like. And all the people I worked with is like, I was like, I’m going to start a business. And they’re like, if you don’t start a gym, we will sort it for you. Like you don’t shut up about fitness ever. And so I was like, all right. And I knew from the consulting world that the easiest way to acquire information was to talk to experts, the fastest way to learn because they’ve already things. And so I emailed 40 people on the Internet that seemed like they had something together. And Sam Bakhtiar in Chino Hills responded. And I said, hey man, can I come out and work for free? And he said, sure.
Alex: 05:21 And uh, you know, more or less, I sold my condo, packed my car, and I, and I drove across in 36 hours and I was like, Hey, I’m here. And so he was like, that’s sketchy. I’m going to go out to lunch, but you can stay at the gym and I’ll be back. And that’s kind of what kicked it off. And then, um, I worked there for three months and then I opened my own facility in Huntington beach, which was the first, first one I opened. If I knew then what I knew now, I definitely wouldn’t have done that cause I didn’t know anything. But I think that one of the biggest advantage of being ignorant is that you don’t know what you don’t know. And you, you take risks that you don’t even fully understand and sometimes you walk out and things work. You know, two weeks before I actually opened the facility, a friend of mine was like, Hey, we should go to this marketing conference.
Alex: 06:01 And I was like, what is it about? And they’re like Facebook marketing and this is 2012 and so you know, I was in early on that. And so the conferences, two days in Vegas, it was $3,000 which was like all of the money that I had. And it was, if you don’t make $10,000 by the end of the weekend, we’ll give your money back. And I was like, cool, cause like I didn’t understand the information marketing world and so I did it and I did not make $10,000 but I understood enough about like, okay so you can place ads. And they didn’t even have conversions yet. It was like boosting a post with a really hot chick, you know what I mean? And that was like, and you know, that’s what I did. And I opened my gym and I was able to sign up I think 26 or 29 people in my first two weeks, but I didn’t know anyway anyone else from Baltimore. So it was truly 100% had to be off of paid traffic, a new note. And so that was kind of like what got me into it. I mean I could say more about sleeping on the floor for nine months, but like,
Tyler: 06:55 yeah, no, no, we will go down some of those roads, but my thing is like, I love that term. I’ve never heard that actually rock top. That’s right. You were doing well, but you were massively unfulfilled. Yeah. So you, you opened the first gym because you are like, you learn, right? You’re a vicious learner. You will go out and pursue whatever knowledge is needed to solve the problem in front of you. You took the gym idea that you knew was now looking back that you were missing pieces, but you went and you kept learning each thing that you needed. So you grew that right. You ended up with how many locations?
Alex: 07:25 Six.
Tyler: 07:26 So you go to six locations, but then you hit another, another wall, right in your hero’s journey. What happened next? It’s like why are we not saying, Hey, here’s Alex, the guy that owns the franchise of gyms. I’d say it’s right. So what happened?
Alex: 07:37 That was the original plan. So United fitness was the name and we’re supposed to be American gym and that was kind of the, the dream around it. And I had a plan to get to 10 locations by the end of the year. And when I kind of announced that publicly, like there’s a Facebook live and my stuff like surely there are for like my mom got sick and so I basically flew to the east coast to be with her and I just kind of left the gyms. I was a bit like, I didn’t like to do check-ins. Like I was gone like for months had gone and thankfully they kept running and like they ran themselves enough, like the profit went down. But like they still were making enough. Like, I still took my pay and it was that they just, they kept going, which is for anybody who has small business or even multiple like some miracle.
Alex: 08:21 But anyways, I was, you know, I was, I was on the east coast and I think when you kind of get out of the grind, cause I had my head down for, it was three to six locations in three years, just all off the cash flow from the gym. And so like I was, I was, I was asset rich and cash poor, you know, cause I, every time I had enough to have another facility and so I just saw what the next however many years was going to look like. And I was like, it’s just like the, the cadence of opening speeds up because you can, you make more money for us from the other ones to open the next one. But I was like, I just have to keep exposing more and more and more liability. All these leases, all these, you know, I mean all these things. And I’m, while I was out there and my mom was sick, my old coworker, the one who was like, you have to open a gym was like, Hey, there’s this guy, here’s the price.
Alex: 09:00 He’s got a gym, he’s struggling to get help. I said, sure, you know, I’ve friend ears, his friend of mine. And so long story short with Josh, I called him up and I said, hey man, do you have a you a marketing budget? And he was like what’s that? And I was like okay. I was like, okay, how about how would I spend my money and you know you can work the leads and sell them. We’d be like a rupture thing. And he was like well you know, can they meet between 12 and two cause off my to, you know my, my three month old and my and my two year old with me, is that going to be a problem? I was like, yeah, that’s going to be a problem. No one’s going to come between 12 and two which are kids. And so finally I was like, okay, do you have like a hat and the tee shirt that says, you know, across the Wsa, which was the two minute that his name.
Alex: 09:38 And uh, he said, yeah, sure. And I said, all right, well I’ll work your front desk for you. And so anyone’s had like something sick. You just want to keep your, you don’t have idle hands, you know what I mean? I was just like, right, you only thing I got how to do, which is to run a gym, you know. And so I was there and within a week we set up 70 clients at his gym. He only had 70, so we doubled his gym within a week. The deal I made with him was I’ll get the upfront revenue, I’ll pay the costs and I’ll do the work and I’ll do the sales. But then you get the customers and then you can convert them on the back end into, you know, recur 30 a long a risk on this side. Right.
Tyler: 10:09 Yeah.
Alex: 10:09 And um, I made, I think I made like 35 grand in that week. And I was like, well, this is Joe. Like that was, there was no operations. There was like, I was like, I was pretty mellow for a week’s worth of work. Like that was cool. I was like, I wonder if any other gyms would be interested in a no risk offer for me to fill your Gem. And it turned out they were a lot of gyms that were interested in that. And so really quickly, uh, between word of mouth and I made a couple of Facebook posts that were really poor and not well targeted. And I had enough people say like, I mean, people were questioning me for like $500 down to save the date. You know what I mean? Like I’m going to fly out. It’s like my flight cost. And so anyways, uh, we ended up looking 32 gyms over the next six months and you know, in classic style, I was like, if you’re gonna do it, let’s do it big.
Alex: 10:59 And so the first month we really did it, we had six gyms that we’re going to launch the same time with six guys. And, uh, and so it was during that transition between the time where I did that first launch and when we did the basically fully pivoting, the gym launch was May to January. So it was kind of like a seven month period. And during that period of time I made the decision to close the gyms to start this new venture. All right. Which was done for you, Jim Watching, you know, Fill your gym in 30 days.
Tyler: 11:28 So, and that’s when you and I connected was around this time of their model, right? You were starting a movie. It actually met before that while you were still doing running United, Vanessa. But then we connected again around this time when we started chatting a lot more about a bit possibly because I was a prospect and had five gyms. You were like, Oh I should talk to this guy. But also just cause you and I connected well. And so I mean now we’re onto our third wall. Right? So you’ve, you’ve now, you built the first career, you pivoted, built, you built a chain of gyms, you pivot, I guess it’s even the forth you built gym launch version 1.0 and something happened where you realized this was not scalable. What happened?
Alex: 12:03 So the fundamental flaw that there’s multiple philosophy model. First it was not sustainable for the sales guys because they were out 21 to 24 days a month. A lot of them had family and kids and so they were literally back home for six days, then back on the road again. And so they had all signed up for that and were excited about it. But like month three I guys being like, my wife’s going to divorce me. And I was like, yeah, okay, well, that could be a problem. Don’t get divorced. That was like a, a human issue. That wasn’t a fault with the model, but just the, like humans couldn’t do that. And I understand that the second year I knew it was, there was a ton of logistics. So for every single launch when it wasn’t me, it was flights, hotel room, every day, car rental, every day ad spend every day and then commissions for the sales every day.
Alex: 12:45 And then there still had to be some left over. And so we generate a lot of revenue, but the margins were not nearly as good as I had expected them to be. Like our first month we did 180,000 which was amazing for a new business, you know what I mean? Like unbelievable. But I mean the margins were paper thin and then the real issue happened when fundamentally I had no control over fulfillment because my fulfillment was sales. My promise was I will fill your gym and sell. And so for me, my fulfillment was too do that promise and stuff. Right? The problem is that what the customer was getting sold in, fundamentally, a lot of the gyms that I worked with were struggling and they were struggling for a reason, right? They didn’t. Their product was thinking,
Tyler: 13:22 and I’m saying that we talked about those five principles, right? So if you fixed principle one by not teaching them but instead doing it for them and then all the other principles still suck, you attached to the rocket, right. You put jet packs on a pig I think is the saying. You know, I’ve never heard that but I love it.
Alex: 13:37 Yeah, you um, you very quickly, you very quickly see that like when you have pro-level acquisition with not pro-level fulfillment, it’s, I mean it’s running a speed training to a brick wall. Like it’s, it’s ugly. And so I had two gym owners stand up in the middle of it cause they’re like, I want you to fill my gym and if you have, if you are, and we averaged over a hundred sales in 21 days and that was our average on top when we did 240 sales in a month, which was Layla of course she has the record but a, which is my wife. For those who don’t know, she always has to wait on me anyways. If you’re a gym owner and you have 100 clients, you don’t even have the famous concept of what getting 200 more clients looks like. You have no clue. You don’t have the capacity for it.
Alex: 14:21 Like you don’t understand the systems, the Admin, the retention things like all of the aspects of fulfillment. You don’t have any of that dialing because you haven’t had to. And so it just created this massive gap between what was stolen or what was being delivered. And so I had two gym owners, I think this was like March ish, so like three or four months in, I can’t remember the exact month, but one of them stood up on the chair because I got many emails from customers that we, cause we had the billing, there was like this gym owner just stood up in the middle of class and just told me to just leave and refund. And so in a span of like, five days, I’d like $100,000 of refunds that came through, which was horrible. And I was like, I don’t think this model works. Like there’s something that’s fundamentally off here.
Alex: 15:00 And so when it had happening is I was like, listen, we know how to market it, we know how to sell weight loss, why don’t we just take the gym more out of it and we’ll just do it online. Right. And so we started queen transformation, which was, Layla is, cause Layla has lost 85 pounds. She did fitness competition, all that stuff. And so I was like, you read the face, I’ll be behind the scenes. I don’t want to be. And so within 14 days we’re doing a thousand a day on that. And I was like, awesome, this works. We’ll get the eight sales guys off the road, we’ll bring them in, we’ll have eight guys do in a thousand days, 8,000 a day. And so I had to tell all the guys who were going to launch in May, hey, we’re not doing it. So we had eight guys were supposed to launch and call each of them up.
Alex: 15:32 And I was like, Hey, just so you know, like we’re not doing this. Sorry. And the first guy I talked to was Chris Barnett and he’s still with us. And he was like, do we need this? Like I’ve been doing this for six years. I put everything, I haven’t had it up to date in my eyeballs to make this work. Like we need this. He’s like, Russell said that I should talk to you like I’m here, he’s from boy, I need this. I was like, all right, listen man, I will not do it for you. And that was the fundamental shift was like, but I’ll show you how to do it.
Tyler: 15:59 You and I talked at this time and it was not a simple thing for you to get to the point psychologically where you are going to share your secrets.
Alex: 16:07 No, cause I was like this. I was, that was a big, I was like, this is me. This is, I was like, cool, I’ll go ahead and teach you. It was like that was a hard thing for you to make that pivot. Right. There’s a scarcity mindset at the time for me because I was like, well if I teach them my secrets, they’re not going to need me anymore. And like all this stuff, like what if they steal my, you know, it’s just like, it’s just retarded. And so the only way that I lasted for like an hour, but it was a big hour, the only way I was able to actually get over it was because I had finally made the decision that I was actually leaving the gym business. That was the decision because queen was working and that was the decision. And so it was kind of like a fire sale of like liquidating all my secrets.
Alex: 16:44 That was kind of like all the things that I knew about running the gym. I’m just going to give it away. And so when he asked me how much I didn’t want to actually like do it, so I just named a really high number so I wouldn’t have to, so you’d just be like, no, okay, I’m good. He said yes. And I was like, oh, okay. And so I called the next guy cause we had eight. And I was like, same conversation and it gives like how much? And I was like, uh, x plus two grant. And he was like, okay. And I was like, really? And so by the end of the day we made like $60,000 and I was like, I looked at Layla, I was like, babe, I think we’re still in the gym business. I think we were just doing it. And so that was fundamentally, that was pivot number three which went from gym launch 1.2 0.0 and so that whole weekend I had already put together the fulfillment section for the gyms because I already had to do that part. So it was really just the acquisition side that I added to. It took me like the whole weekend of film and then everyone got their logins on.
Tyler: 17:36 You took like the SOP of how you’re going to train your internal staff and instead you just pointed that at the customer, Hey, I’m going to teach you how to fish in. A big part of what Gym Launch has been is you’re the anti agency. You pay us to not run the business, which I absolutely love because most small business owners need to have their hand on the steering wheel and they need it because
Alex: 17:59 you have to be able to course correct quicker than what you can do when you delegate outsource, you have to own your acquisition, like you have to be your own rainmaker. There’s no one who pay more attention to your money than you, period. Especially at this scale.
Tyler: 18:09 So when you made that shift, that was like may ish, what’d you guys do that first year in terms of roughly what kind of revenue we did fuck with when you were trying to do queen transformation, when you’re trying to do this other stuff, did you think that level of revenue was going to happen?
Alex: 18:23 Doing Queen? No. I mean doing the original gym launch, like The v one model, I could see the revenue, the margins and like the scalability, it just, it was hard. I did, I wouldn’t have wanted to make five and a half million, like it would have been horrible.
Tyler: 18:34 Yeah. And so I guess what I’m saying is like what kind of mental paradigm shifts did you have to go through when you finally committed to that? Cause you grew a lot that year, man, like and you’ve continued to grow but you, that first year was like you were shedding streak, skin and butterflied, you know, all kinds of transformations were happening all at once. I mean I w I watched you grow personally, I’ve watched you grow professionally. You’ve added on like 800 pounds of muscle. Like you were just all growth. Like yeah, you had to change the paradigm of getting out of scarcity mindset, but you also step became a CEO and you had all these other things. So talk me through that a little bit. So
Alex: 19:08 there’s so many things that happened at the same time. And so it’s like, I’m not sure which one of them, but I’m pretty sure it was all of them that were the contributing factors. So I worked as coach for I wanna say nine months during my, during the hardest period of that time. You know what I mean? Like it was from me beginning to sell the gyms right from, it was really me deciding to not do my gyms anymore. So from that point through my head on DUI, my mom getting sick, our processing getting shut down, which was a wrinkle I forgot to tell about during the story where we could have this money and I was still floating $3,000 a day out of pocket waiting for sales that I would not be able to process for a month during that whole, you know, every day I worked on staff for 90 minutes every single day, five days a week.
Alex: 19:48 And the only thing that he had asked me was, what is your attention? And so piece by piece, the analogy that you gave them, this is the most visual analogy I can give. It’s like if you have human capacities, the jar, right? And so every time we’d have a little thing that bothers you or something that takes your attention, one of those little marbles goes out. And it’s kind of like keep human potency, your ability to process information and do right. And so if you’ve got issues with your mom, you’ve got things that you’re not coping with, so you’re drinking to cover it up. If you’ve got relationship issues, if you’ve got an employee who you don’t trust, you’ve got a bad partner, all of these things start adding up and then you have so few marbles left that seemingly small things can set you off and your ability to process and prioritize actions and information is really low.
Alex: 20:35 And so it was a nine month process of taking from a state of confusion basically where everything fell scattered. I felt like I was busy all day but didn’t accomplish anything kind of there to kind of hyper focused. We have very few distractions and just sure, just like a hundred percent focus on what we’re supposed to do. And I also got married, so like there was all of these things happened in a very short period of time because it was just, Tony Robbins says transformation happens in an instant, right? And so it was just, I think a decision that have to make this work. And that was really like, because what happened was the partner that I had at the last location that I opened of the six, right, I’d sold the other ones and put the cash into that business. And then that partner ended up taking that money out of the business and then file bankruptcy.
Alex: 21:25 Right. And I was the one in the lease. And so everything that I had worked for, all of the gyms within a matter of like I had this highest selling and then literally like a month and a half, two months later, the money was gone. And so it was like watching years of your life just disappear. And I was like, it has to be for something like this has to become something. And so that is kind of what propelled me through that like massive growth period of pain and discomfort to, you know, go all in on my relationship with Layla, which at the time we were like half and half ally, are we going to do this? Are we not going to do this all in on this business and cut out all the side businesses? I don’t as little side Hustles, I was like, maybe I’ll do this for chiropractors.
Alex: 22:04 Maybe we’ll do for dentists. Like during a little I can market to like all these little things. I’ll be so distractions. And it was just what is your attention on? And so piece by piece I strip all of these things wasted. There was nothing left. And so once I had all the marvels back in the bowl, that’s where things exploded. You know? And the first month we did 180 the next month, we did three 60 next week we did four 87 80 and then we cracked a million. And then 1.2 actually we do 1.3 to 1.5 like I remember the first, like that’s yeah, that was the trajectory that we did just in the first, like six or seven months.
Tyler: 22:36 I liked that concept of transformation happens in an instant because I think sometimes momentum is like you knock one domino and then the domino effect happens. But what I watched you do is you walked in and said, I’m just going to knock over the table. And all the dominoes are on the floor and then I can just focus instead of waiting for this ripple effect. Right. You just said no and you did a Facebook live actually on that marble analogy and it massively helped me. I was, it was awesome because then so I looked at what are all the little open loops, unfinished conversations that you’ve started and they’re not always business-related. It can be like you haven’t finished cleaning the garage,
Alex: 23:12 do you wish was or not necessarily. That’s the thing. Most of them are not situated and those impede your ability to do business and you’re like, why is business so hard? It’s because you have so little human attention left. That easy problems seem difficult, but like for anyone who’s experienced this, you’ve listening if you have a good night’s sleep and then sometimes you’re working on some problem, you wake up and you’re like, oh, that was obvious moments. I struggled with that. It’s because even overnight we did a little bit of attention back and then it’s like obvious, but like the effectiveness stripping, everything in your way, your life away is like that times a hundred and so like I think I’m smarter
Tyler: 23:46 than I was if I could take a test smarter and faster now than I was want all these things that weaned down. Yeah. You know, and we talk about it sometimes using like computers, it’s like having a thousand tabs open on your computer. It does slow down your computer. So it’s like, okay, close all those tabs. Work on the task at hand and not only does the computer work faster, you work faster and you’re less distracted. And so we can take this next couple of things a couple of directions, right? Like since then you guys have launched other things right now that you have systems and teams in place, you went from saying, I can’t be distracted. I can’t have side things to having more than one revenue stream in the business. Right. How did you know it was the right time to add another problem?
Alex: 24:27 The husband wife answer. They little. Funnily low. And then, yeah, and again, you know, you and I, you and I had been through some of this together. I won’t go into that here, but like I, you know, there was a time where you started to do the second prong and then you realize it’s not right. So it took me two years.
Alex: 24:44 Yeah. I mean it took people years, which in entrepreneur years is like 50 so or felt like it. Yeah, I think that, and this is what I told them where I’m from. It’s like when should I start someone else? It’s like you have to get to a point where the business is growing month over month and you’re bored out of your mind and that’s like, it has to keep growing. You just stay where it is. It has to grow continuously without any need for your intervention. And so that was, that was where I was at that point. And so I was able to, and part of the reason also is that we were trying to figure out more ways that we could monetize acquisition for the gyms. And so this was an easy zero cost way for James to make more revenue per member. You know what I mean? And so that’s why we introduced our, or some company in or someone’s like system and you know, the first month they’re at seven 50 the next month you’d have 1.7 so I mean like that took off like a rocket. It was done the right way.
Tyler: 25:36 Yeah. Yeah. And you waited until, so you know, I was listening to one of the Alec sharpens podcast the other day and he talked about that whole, like as the CEO, you have to step back into that role of CEO, stop doing the day to day. So that one, so that your team can actually fill that void and two so that you have bandwidth to lead and create and do the things that you have to do. And that’s kind of what you’re saying. You had done all of that. You had created that opening of bandwidth because your team was doing their job so well that you could say, okay, I have the resources mentally and physically to go create another piece. Right.
Alex: 26:11 And to be candid, it’s a, you know, I mean I don’t want to seem like I have it all together. It’s, there’s a balancing act that happens of like how far is too far away to step away and how far is too micromanaging. This is like the dichotomy of leadership, right? Like justice and mercy are Scott delegation and micromanagement like, and so you always have to walk the spray line and some days you walk a little too close to one side and other days, I think when I was doing the supplements, honestly I think I was a little bit too far away, but in some senses I needed to be to get all this other stuff ready. So totally get that. If I were the CEO I am now, when I went through that, I would have done it maybe a little than I did. But you are, you know, it’s just part of it.
Tyler: 26:44 Yeah. And likewise, right? Like you know, it’s all about growth. So a couple of big things, like you’re absolutely crushing it. Like looking back on when you were worried about paying for a lease at a gym that now you could, like, you could sneeze and it would be paid. What changes? Like my guess is that you’re currently not stressed about money for bills, right? So what stresses all of a sudden do you have to keep a better eye on when your core stresses are? Record needs are covered. Does that make sense? Totally shifted in your,
Alex: 27:13 I have a great, a great analogy for this, for you. Great for this, for the back of Napkin realization that I had. So you know, my original goal when I started out way back when was I wanted $4 million in cash after taxes. Cause I was like, I know if I can live on 5% of the sort of those in here this morning. Right? And then once I had that, I was like, okay, I need 10 million in cash after taxes and everything. And then like once we hit that, I was like, okay, so I see where this is going and is it because I’m greedy or is it because of something else? And I think there’s levels of self awareness and like I don’t think it was greedy. And so I was like what is it? What’s this thing?
Alex: 27:51 Right? That’s creating anxiety for them. And so the goals that we set for ourselves entrepreneurs, and this was the realization I had, is that it’s based on the business that you currently have. And so for like a working out analogy, if you’re benching two from five benching four oh five seems unbelievable, right? But when you actually bench four oh five you hit three 95 like two weeks ago. And so when you hit four oh five it’s actually not that unrealistic. And so to the same degree, the business that you have today is not going to be the business that creates the income that you want as your goal. And so that means that the level of liability that you’re exposed to in the business that would actually create that actually were, okay, let me reverse this. So I’m going to give you numbers example, cause it’s easier.
Alex: 28:34 So yesterday, and this is, this will resonate with hopefully any of the entrepreneurs who are listening. You make $1 million a year, okay? Just as a number, you make $1 million in revenue per year, and let’s say that you have a 20% margin, so you’re taking on $200,000 a year. You’re adding this like Tyler, why Brady? You stop working so hard, right? You know, and so million dollars a year, you’re making $200,000 take home. The problem is with that $200,000 take home, you’re exposed to 800 years in liability, right? Which means that in a quarter you could lose everything that you save. And so despite the fact that arbitrary amount of $200,000 to some person may seem like a lot in the context of where you are in the liability and risk you’re exposed to, it’s not a lot. If you got a quarter of pattern and then you’re done, right?
Alex: 29:25 And so to the same degree, when you take home $1 million off of 10 million or you take home 10 million off a hundred million, $10 million is one month’s worth of expenses. And so you never actually feel like you escaped the game of the anxiety of needing to continue to provide. And so that was kind of my realization from the numbers in relative scale standpoint that I realized I was never going to get out and just accept the fact that there’s uncertainty and always know what my plan B was. And so my plan B, like, I don’t know if you’ve heard this analogy, but like a building, like the lowest level in your building gets higher as your skillset levels are. And so when I started my gym, my plan B was I would Uber during the day and long strip at night. That was probably legitimate plan B.
Alex: 30:07 I was like, I’m a chap, I’m young, I could strip at night, I have the energy and I’ll make 150 grand a year and I can start something. Once I learned how to sell and I knew I was good at sales, my plan B was I’ll go sell cars cause that was something I knew I’d go to a dealership and making quarter millennial if I just want it, I know I can do that easily. And then like after that, you know, my next level of it was like, okay, I know how to market and sell. And so plan B is like I can go to any business that you acquisition and I can do a rev share things. So like, no, the next one is like right now, realistically I think if I made a post and said, hey, we’re doing business coaching, I could probably make a mastermind that is three to 5 million. And so that’s kind of like my lowest level, you know, Fluor right now just because of what we’ve achieved up to this point. That is what gives me the respect from the anxiety. More so than thinking about it within the context of my current business.
Tyler: 30:56 So essentially what you’re saying is cash flow and reserves will never be sufficient to stop the fear of uncertainty because they’re tied to the business, right? But if you say no, my plan B or my certainty comes from my mind knowing that I have additional ways to create revenue, then that’s what’s allowed you to have kind of that balance of certainty even in the midst. And that’s what’s so amazing, right? As people have a hard time looking up in paradigms and seeing risks, right? What you just said about Edna to Edna, why are you even stressed? You’re making $1 million a year and you’re like, no, I know I’m one bad month from like other chaos. One employee sabotage one, whatever, right? Or One gym owner standing up on a chair, right? We’re one situation. And so what you’re saying is it’s not about revenue or cashflow, it’s gonna do that. It’s about knowing and believing in your plan B and your ability to tackle whatever has to come next. So lets skills, it’s all about skills with a Z.
Alex: 31:50 I’m one of the, one of the biggest pieces of content that I made. It’s called talent stacking. And I could go on a huge rep about that right now, depending on your audience. But like I can choose not to. Okay. If we have time, I’ll bring it up. We got time, right? Yeah, we’re good. This just a single principal that I, that I talk to, everyone who, especially works, you know, for me, so stacking talents and skill acquisition is the single greatest investment that you can make. That’s not a new concept, right? But if you illustrate it, it’s not like a one plus one plus one scenario where it equals three. And so let’s say we take Jay Z, right? So Jay z now, but he’s a billionaire or whatever. He’s super up there. But right in the beginning he was a musician. Okay. So that was his first.
Alex: 32:32 I mean, even before they could say he had an ear for music first. Right. Once you learn how to play beats, third learned how to rap. He learned how to promote himself – skill. Once you learn, how to promote himself and make music as a musician, he then learned the skill of creating a label. Right? And then he learned how to promote other people, and so those talents when stack together became disproportionate in terms of how much revenue can be created in a different example for like everyday type, you know, employee, let’s say you’re good at math, right? Okay, you’re good at math, right? It’s a skill. Then you’re like, all right, I’m going to apply this and become a bookkeeper. Okay, I’m good with math. That makes sense. I’m a bookkeeper. Then you get a master’s in accounting. Okay, now this is a little bit more relevant.
Alex: 33:15 Then I start learning about tax. Ooh, okay, now I can provide value to a business. Then I start learning about insurance vehicles that I can use with tax to start having massive savings and decreasing liability risk. Then you add legal on top of that, or you add banking on top of that and then all of a sudden you can literally see it as resume for this person, and you literally go from 30,000 a year to 60,000 a year to 90,000 a year to two 50 a year, and he’s a partner at the thing. He’s making millions, right? And so when now hear these talents on top of one another, and the reasons are starting up, entrepreneurs don’t make money for such a long time. They’re acquiring the skills, but they acquire one skill and that’s still not all of the requisite skills to get to just zero to one, right?
Alex: 34:00 First you learn how to make an ad, okay, but you don’t know how to make a landing page. Okay, great. But then you learn how to make landing page, but then you realize that you to shut you off and then you learn how to write copy in, write like creative, and then you learned how to convert test and then you get a lead and then you’re like, what do I do with a lead? Right? And so it’s all up. And then you learn how to convert and when, how to monetize. There’s all these skills and people buy a course on email marketing and think it’s going to make them money when they, it may very well deliver on the promise of teaching your market, but you still need six other skills to make your first dollar, right.
Tyler: 34:33 Sorry. That’s my red one. Tell him no, that’s a huge rent. So here’s my question. Yeah. How do you balance continuing to up your game and talent stack with not taking on every role and properly delegating and assigning, right? Like to be the CEO you need to have the talent but not be the one stripe flexing the muscle. Right? So that’s a balance.
Alex: 34:53 So you are always coaching. It’s just who you coach changes. So in the beginning when you’re a coach, you coach your clients and then you coach your employees who got your clients and then you coach the people who clicked your importance. You coach the clients and the people who you are coaching their skill set that you bring in levels up. And so your ability to gain their respect, it has to be higher so that they respect what you were saying when you were coaching. And where you get breakdowns is where the people who are necessary to run an organization at a certain size, their skillset, their past is the owner and they no longer respect him. And that is why the organizational fallen. And so the owner has to consistently up their game to learn new skills, learn new perspectives, get different angles so that they can still value in exchange to the other people eventually.
Alex: 35:40 And so my views on talent have so fundamentally shifted over these last three or four years when I had my gym and expensive employee to me was 50,000 a year. I was like, this guy has got to do whatever. Like I mean this guy is running do right, right. And then we started a gym launch, like my most expensive employee, the year one was like 70 you know what I mean? Like that. And that was like, hey, you better be ready to work. I mean this is a real, you know, and then the level of skill that attracted from $70,000 jobs to $100,000 jobs, very different levels of scale. And then when you go from a hundred to 250,000 here, night and day difference. And so a lot of times we as afterwards expect someone to come in at x when in reality dye person, like you want somebody who’s going to direct your marketing and he’s going to work for 60,000 a year, right?
Alex: 36:32 Who’s going to direct the entire thing? Somebody who can make it rain is making it rain and he’s making it rain for himself or herself. And so it’s like you have to give that person an incentive or you have to give a good amount of money for that level of person to come. And so that’s where you’re almost buying someone’s small business, right? You’re acquiring all of their, I’m going to buy all your contracts and I’m going to pay you that much just to work for me. And that’s where you start getting kind of like the in between more freelancer then entrepreneur, but like they’re independent enough, you know what I mean? So there’s a middle ground between employee, freelancer, entrepreneur, it’s like that freelance ish type person. And then there’s some people in corporate where like if you want really high level corporate talent, smart ass people, right?
Alex: 37:18 But they want accurate. I mean they want stock options and like if you want real flyers, right? And so that’s what I’ve learned. Now some of the people that we brought in, you know, have, who have, you know, small stakes. I’m an artist, sticks in the company, the little skill set, a little experience, the insight that they have and true expertise because my CF note, CFO knows way more about finance than I ever write. Like way more than I ever would. But that’s not my role anymore. My role is to be able to identify skills in other people, right? That’s where like the level of discernment becomes important because you really have to just become a judge.
Tyler: 37:50 It stops becoming, acquiring the talent yourself and more like managing those talents. And so,
Alex: 37:56 and if you think about an organization or an organization is stacking people who stopped him. And so now we’re, we’re the sum of the parts, right? Because somebody who knows how to write copy, headlines, emails, blah, blah, blah. All that stuff means the marketing person, that person on their own without somebody who knows rockstar from film, it can’t make nearly the amount of money. And that’s how the entire organization creates disproportionate amounts of revenue than any of the individual parts. And that’s for profits.
Tyler: 38:23 Awesome. Okay. So that’s like that’s high level stuff that everyone should listen to and but if you’re early in your journey, it’s going to, it might come off overwhelming. And I think the thing to realize is like step one, you’ve got to get your attention back. Yeah. You got
Alex: 38:36 to develop the talents that are missing either through going and getting those talents or hiring them. So you’ve done some big changes and we’re going to start wrapping up here, but like how did you go through when you, you had employees that worked with you at the beginning, like it’s time to move up, right? There’s a human element there. How’d you manage that kind of growth? That still being a good guy?
Alex: 38:54 I mean we’ve cycled through or leadership wise. Yeah. I mean because the level, I mean I will share numbers just to give context for the people who are listening. The first year we did half a million secretary to fuck with 530 we did 28 this year we’re up at the 45 and so the level of skill set of somebody who is running a quote finance department at $5 million is somebody who’s like a bookkeeper.
Alex: 39:16 Slash. Accountant. The level of first news running the books at a $45 million business that could be valued at multiple hundreds of millions of dollars on a valuation standpoint has to be rocks, rock song, rocks, massively different. It’s really hard for those people to be like, oh, I’m going to step down and let a new leader there. They’re not going to do it and say it. There’s pride in leadership and stuff. Totally just moving forward. Right? And so we had to cycle, I mean, and everything breaks. It’s the rules of tens and threes, right? It’s a Chinese like, okay. For the listeners, everything breaks attends in threes. And so in terms of your team, once you get to 10 people, all the systems that you had up to that point break and then you create new systems, new cadences and new like where everyone reports and responsibilities, right? And then it grows and grows and grows and then do around 30 everything breaks, right?
Alex: 40:06 And then you grow from 30 to 100 and it breaks. And so it’s the rules of tens in threes because the organizational structure itself, it’s an organism. And so it has to also adapt with the growth of the company. And so it’s like the skeleton for what’s happening.
Tyler: 40:22 Yeah, absolutely. All right, so we’re going to wrap up. Here’s my one big thing. Business is amazing. You guys are crushing it like businesses to fuel life, right? So what’s one major item on Alex Hormozi personal non business bucket list? Are you going to do in the next 12 months? Like you might leave your house? I don’t have a non-business drinking. Um, it’s a good question. You know, I, this is my game. I know like, you know, we work from home, so like I want to do something, we go, if we want to go get coffee, we do in the middle of the day.
Alex: 40:54 It isn’t like we don’t have obligations in that sense. I don’t feel that need to, you know, go do things if we wanted to. You, I have nothing to escape. Right. I have nothing to escape it. So right now I’m all in on this and seeing the results that just a life change. And just to be candid, just the amount, I’m excited for the amount of growth that I’m going to have to go through to go from 45 to 150 all of the breakage and pain that I’m going to have probably have to go through and the ignorance tax that I’m probably paying right now for the things that I don’t know that are about to happen. So like that’s the railroad. So I love this game and I’m gonna keep playing it. I don’t have any, none on bucket list thing. You don’t have them and that’s fine.
Tyler: 41:34 You do. I mean essentially it’s that you know that you’ll grow as a human. You have to grow as a human so that you can, the human can run the business, right? That’s your game right now is personal growth. Yes,
Alex: 41:42 This is a really good one. This is a really good one for everyone who has a business. Either your business is growing or you are growing. And so if business is not growing, you are grown through the pain and then you grow. Then your business grows as a result until it stops growing and then you are forced to grow a response. So it’s this back and forth. If you think about it that way, then you stop getting butthurt about it, when things don’t go your way because you’re like, okay, it is not growing. What is the lesson or the skill that I do not have that I need to acquire in order to gain more? Right? And so if you can frame this, I can leave. One thing for everyone is that if you can always take a hundred percent accountability or responsibility for your business and for the reason that it is not succeeding, you have 100% of the control to make it.
Alex: 42:29 And so for example, if you have sales people and you’re like, I just can’t find good salespeople, do you really think that there aren’t good sales people or do you think that you suck at managing stuff? And that is now a skill that you can control and now this is something that you can grow on. There’s no one who’s good at, you’re good at marketing, I’ll use that one. Right? Or are you not good enough at teaching other people how to mark that on your behalf and giving someone that skill who didn’t have it? And so that is now the onus of power controllers in your court. And then you can take complete responsibility for the reason that your business isn’t growing, which makes you able to grow.
Tyler: 43:03 That’s awesome. I love that idea that you’re either growing or your business is growing. And that means if business isn’t growing, you’re in a process of development. Whether it feels like it or not, you’re there somehow. Please guys, if you’re listening, please go to gymlaunchsecrets.com I’ll have links and all the notes and bio’s and all that kind of stuff and tell you more about Alex and where you can learn more about them. Really appreciate you coming out my friends, my BizNinjas. It is your turn to go out and do something.
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