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

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

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.

The Five Variables

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

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.

"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.

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.

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