These 3 Things Will Make Your Business Unstoppable | Ep 816
The Game w/ Alex Hormozi
Deep Dive
Why do many businesses fail to scale according to Alex Hormozi?
Many businesses fail to scale because they serve small customers who are inherently volatile. Small customers, such as small business owners, often churn out of the market, leading to structural churn that destabilizes the business.
What is structural churn and how does it affect businesses?
Structural churn refers to customer attrition that is inherent to the market being served, such as small businesses that frequently go out of business. This type of churn is not related to the quality of the product or service but rather the instability of the customer base.
What strategy does Alex Hormozi recommend for businesses to reduce churn?
Alex Hormozi recommends targeting larger, more stable customers who have higher spending power and are less likely to churn. This approach reduces structural churn and creates a more reliable revenue stream.
How does Shopify's customer retention rate compare to other businesses?
Shopify, considered best in class for customer retention, retains 60% of its customers annually, while 40% leave. This highlights the challenge of retaining customers even for top-performing businesses.
What is the key to building a stable business according to Alex Hormozi?
The key to building a stable business is to serve customers who are financially stable and can consistently pay for services over time. This reduces volatility and ensures long-term revenue.
What is the importance of product iteration in business success?
Product iteration is crucial for staying competitive and meeting customer needs. By continuously improving products based on customer feedback, businesses can maintain relevance and avoid being outcompeted by new entrants.
Why does Alex Hormozi advise against pretending to be a software company if you're not?
Pretending to be a software company when you're not can lead to misaligned expectations and valuations. Investors value businesses based on their actual revenue and profit potential, not on labels or superficial changes.
What is the significance of customer feedback in product development?
Customer feedback is essential for identifying pain points and improving products. By asking customers what they value most and what they can do without, businesses can streamline their offerings and enhance customer satisfaction.
How does Alex Hormozi suggest businesses approach scaling?
Alex Hormozi suggests that businesses focus on doing the obvious things well for an extended period. Success comes from consistent execution and avoiding the temptation to overcomplicate or change the core business model.
What is the difference between a tech-enabled service and a traditional service?
A tech-enabled service leverages technology to increase efficiency and scalability, allowing one employee to serve many more customers. This leads to higher gross margins and lower talent acquisition costs compared to traditional services.
- Two out of three businesses fail.
- Focus on larger, less volatile customers.
- Structural churn is inherent in serving volatile markets.
- Building a business on a foundation of sand leads to instability.
Shownotes Transcript