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

## Метаданные

- **Канал:** Alex Hormozi
- **YouTube:** https://www.youtube.com/watch?v=f_ceDZqhKbw
- **Дата:** 01.10.2021
- **Длительность:** 9:25
- **Просмотры:** 36,853
- **Источник:** https://ekstraktznaniy.ru/video/16618

## Описание

Download your free scaling roadmap here: https://www.acquisition.com/roadmap-yta135
The easiest business I can help you start (free trial): https://www.skool.com/hormozi
Business owners: Want to scale faster? We provide in-person advisory for companies doing at least $1M per year: https://www.acquisition.com/workshop-yta135

If you're new to my channel, my name is Alex Hormozi. I'm the founder and managing partner of Acquisition.com. It's a family office, which is just a formal way of saying we invest our own money into companies. Our 10 portfolio companies bring in over $250,000,000+ per year. Our ownership stake varies between 20% and 100% of them. Given this is a YT channel, and anyone can claim anything, I'll give you some stuff you can google to verify below.

How I got here…

21: Graduated Vanderbilt in 3 years Magna Cum Laude, and took a fancy consulting job.
23 yrs old: Left my fancy consulting job to start a business (a gym).
24 yrs old: Opened 5 gym locations.
26 yrs old: Clo

## Транскрипт

### Intro []

Mosy Nation. Two days ago, I was speaking with some business owners that approached me um about becoming portfolio companies and acquisition. com. And I want to talk to you about how that conversation went. Um and I want to give you one of the most useful frameworks that I use in analyzing a business that you can use today to analyze your own business and instantly 23x it. Um which is exactly what I do when I'm looking at the portfolio companies that we're considering on investing in. The beautiful thing about this equation and as you develop as an entrepreneur, at least as I have and just so if you guys don't know who I am, my name is Alex Rosio on acquisition. com. Our portfolio companies do about $85 million a year. And so the reason I make this channel is because a lot of people are broke and I don't want you to be one of them. And Mosy Nation is not going to be one of them. Everyone needs if you are good at something, you need tools. All right? This equation is one of those tools that you have as an entrepreneur. If you have to rely on your systems, finance to get you the reports to get to make general directional decisions, then you're going to be weak as an entrepreneur because you have to be able to do these calculations in your head uh back of napkin. All right? And so I want to show you the most valuable equation that I use in analyzing my own businesses and potential portfolio companies. And it requires five

### The Most Valuable Equation [1:02]

variables. And I'm going to show you what they are. And then how I got the two hardest numbers that most people don't know how to get within their business. All right? So I can even give you the sixth number, which will be a bonus one. Number one is going to be number of new sales per month. Most people know this number. The next one is current revenue. So that's most people also know this number. The next number is price. Most people going to be churn. Most people do not lifetime value. gross profit. All right. So, I'm going to show you how in a simple conversation we can figure out all of these things and extrapolate where a business is going to cap out, where the weak points are, and how we can see the size of the opportunity. All right. So, I'm going to give you a hypothetical example um that I just had. I was talking to a business. They were doing 100 new sales per month. All right, so that's number one. I said, "Cool. What are you guys doing in revenue right now? " They were doing uh 400K in revenue. I said, "Okay, this is really important. You will want to pay attention to this video. " They had 380 clients. All right. Their current price was $1,000 per month. Turn. They didn't know. Lifetime value. They didn't know. All right. So, I said, "Okay, well, the first thing we have to do is figure out where your hypothetical max is going to be. " All right. So, if we know the current number of new sales, cuz they were like, "Well, I I have to get you these numbers later. I don't have them on me. " I was like, "If you know these numbers, we can do them live together. " And they were like, "Oh. " I was like, "Yeah. " So, let's walk through it. Okay. $1,000 a month is the price, right? And I said, "Okay, well, how many customers are cancelling every week? " And they said 13 people per week were cancelling. I was like, "Okay, so roughly 50 per month. " Okay, make sense? Everyone good here? They said they have 380 active clients. What we do is we take 380 active clients, we divide it by 50. Oops, sorry. 50 uh 50 people cancelling divided by 380 active clients. I already did the math for you. It's 13% churn. All right. So now we take our price, all right, which is $1,000 per client per month. We divide it by that 13% churn and we get 7,700 bucks. All right, roughly. So now I know that $7,700 is going to be the LTV per customer. All right, which means that this business is going to cap out at 77K per month. All right, which is about 9 million bucks a year. Now they were currently doing about 400K. Now the thing is a lot of business and they were growing really rapidly, right? It makes sense because they were because they had this kind of sales velocity. So with velocity, they're going to keep growing pretty quickly and then it's going to become an asmtote which looks like this. All right? So an asmtote is you have a hypothetical max and it approaches it but never gets there. All right? So the asmtote here would be 770K. The thing is that the growth rate would slow down because churn is going to start eating a bigger and bigger percentage of the new business that is coming in. We know the current clients, we knew the new sales, we know the current revenue, right? We know the hypothetical max, which for me helps me analyze the potential opportunity of this business, right? We know the churn now, which is 13%. We know the lifetime value of each customer now, which is 7,700. And I asked them, what kind of margins are we running um on this? And they were running over 90% gross margins. All right. And the easy way to do that is how much does it cost to fulfill a customer? So for them, for that $1,000 a month customer, it cost them less than $100 uh to fulfill on. All right? So it was very very lowcost business, which means all you do is you multiply this by 0. 9 and then you get let's see here. Let me see if I can do my own math really quickly. All right. So now you get roughly let's say $7,000. Okay. So, the lifetime gross profit per customer is $7,000. Which means as long as we're spending less than $7,000 to acquire a customer, we are going to be a profitable business, right? For the most part. When we had this little discussion, all right, let's

### The Opportunity [5:04]

go back to our little drawing. We know that they're going to cap, right, at 7700K, right? Whatever. You get what I'm saying here, right? So, if we want to grow this business, we either have to increase this one or we one. That's it. You can only grow a business by getting more customers or making them worth more. Period. That's all we have to do. And within this particular business, I saw the opportunity here because I saw 13% churn, right? Cuz check out how this goes. If we can just cut the churn to let's say 3%. Ah, let's do some cool math. You want to see something really quick? Sure, Alex. I want to see. All right, fine. I'll show you. So if we change this to just 3% churn, all right, the new LTV becomes $33,000 per customer. Now this business all of a sudden without changing anything else becomes a $3. 3 million per month business. That will become the new hypothetical cap. And almost all of that would be margin. Ah much more interesting, right? What most people do is they say, "Hey, I want to take this thing and see how we can get it to uh, you know, a,000, right? " Which would be, you know, awesome because then that would get us to 7. 7 million per month. But which of these do you think is easier to do? 10xing the acquisition or simply dropping your churn from 13 to 3%. And there's lots of ways to drop churn. And I had a different video where I said how I cracked Netflix recurring revenue model. There's eight C's to increase your stick or decrease your churn, whatever way you want to say it that we'd be going through to figure out how we can cut churn from 13 to 3%. And FYI, for a company to have enterprise

### Enterprise Value [6:37]

value, most private equity firms want to see 80% yearly retention, meaning you keep 80 you keep 80% of your clients per year. So if you start at a,000 at the beginning of the year, you have 800 at the end of the year. All right. Now, if anyone wants to venture a guess at what 13% year uh monthly churn looks like, you're probably keeping less than 20% of your customers by the end of the year. All right? And so for them, they don't think that's an enterprise that's very valuable because what they're looking at um just in case, I'll give you guys a little nugget here. All right? There's three main variables that they're going to be looking at any kind of potential buyer, which is what's the growth number one. Number two is how likely uh stickiness, which is like how likely is the business going to be here? And then what's the profit? Right? So you could pretty much multiply these things together, which is if I have a super fast growth company, all of the revenue is super sticky and we're very profitable, then this is going to be a very very valuable business. If I have a business that uh is mediumly growing, right? It is not sticky and I have low profit, then this is going to be a lowv value business. And so the objective for us at acquisition. com is how do we take one of these guys, right? one of these businesses and turn them into one of these businesses. And so it's really looking at these fundamental metrics to figure out where the weak points in the business model exist. All right? So right now, if you're a business owner and you don't know what your hypothetical max is with your current model and your current numbers, you are fooling yourself. You don't know where you're going to cap out, which means you don't know where your weak points are. All right? And so right now everyone should be able to do this math within their own business without any kind of complex recording you know uh Excel sheets that are getting sent from finance. All you need to do is you got to know how many new customers you're getting which is this guy. How many new sales you're getting? How many current clients you have where your current revenue is right? What your prices are. You should know all that stuff. And as long as you can know how many people are cancelling every month, then you can calculate the rest of this entire equation for yourself and figure out how you can debottleneck the growth of your business. Because I'm a big believer in the theory of constraints, which is a business will grow um up to its nearest constraint. And so all I try and do is simply remove the constraints of the business to allow it to grow. Right? I see business as organic beings. They want to grow and they are simply being constrained by something. And our goal is to find what the biggest constraint is and remove it. Most people try and do lots of things. I believe that the smartest people in the world try and find how to do the fewest things that get them the most returns. And removing the biggest constraint is the biggest one of those. Anywh who, my friends, this is Alexi reporting in from acquisition. com. We're doing $85 million a year in our portfolio revenue. Mosy Nation, keep being awesome. If you enjoyed this and you're new to the channel, hit subscribe if you liked it. If you didn't like it, I love you either way. Keep being awesome. I'll see you guys in the next vid. B.