You will stay poor if you don't understand this equation | Ep 346

The Game with Alex Hormozi

Alex Hormozi

Entrepreneurship, Education, Business, How To

4.9 • 4.4K Ratings

🗓️ 16 November 2021

⏱️ 15 minutes

🔗️ Recording | iTunes | RSS

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Summary

You need math people! Today, Alex (@AlexHormozi) talks about the two most valuable equations you need, why you need math when doing business, having high-quality data, and how these will help you make important decisions for the business!

Welcome to The Game Podcast where we talk about how to get more customers, make more profit per customer, and keep them longer, and the many failures and lessons we have learned along the way to $100M in sales. We've got roll-up-your-sleeves kind of hustle with a little bit of cleverness and a lot of heart.

Timestamps:

(1:26) - Alex shows us the factors to be considered in this fundamental equation: number of new sales, lifetime gross profit per customer, and hypothetical max revenue

(3:04) - Alex explains the “Lifetime Gross Profit Per Customer” equation and what this implies when it comes to profit margin per sale and the equilibrium between the number of people buying and those who are not

(13:03) - How can we figure out to make money by getting this customer?

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Transcript

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0:00.0	Mozination real quick, if you are a business owner that has a big old business and wants to get to a much bigger business,
0:06.1	going to $50, $100,000 plus we would love to talk to you.
0:09.5	And if you like that or would like to hear more about it, go to acquisition.com and you can plan anywhere on the page
0:14.4	and talk to one of our team and see if we can help you get there.
0:17.9	And if you don't have high quality data, then you will have poor decisions and you will not like the life that you end up leading.
0:23.4	Welcome to the game where we talk about how to get more customers, how to make more customers,
0:26.9	how to keep them longer and the many failures and lessons we have learned along the way.
0:30.3	Hope you enjoy and subscribe.
0:36.1	If you're an entrepreneur, then you need to be able to make decisions.
0:39.7	In order to make good decisions, you need to have high quality data.
0:42.4	And if you don't have high quality data, then you will have poor decisions and you will not like the life that you end up leading.
0:47.2	And so one of the important skills or attributes that I believe success swan entrepreneurs have is an understanding of the basic equations of business.
0:54.2	And so what I want to share with you today are probably two of the most used equations that I use when talking to the portfolio companies that we have
1:00.7	when analyzing decisions about what we need to do with the business, where our bottlenecks are, etc.
1:06.0	And so I also think that understanding the equations will make you a better business owner because you'll understand the things that move the levers within how much money you're going to make into business.
1:15.4	And so if you understand that these are the most important levers in the business, then you'll be more prudent in terms of when you make decisions around them.
1:23.5	All right. So there's the fundamental equation that I like as a simple understanding of business, which is just number of new sales or sales velocity, right?
1:33.9	Number of new sales.
1:36.9	So this equation has three variables in it.
1:39.9	One is the number of new sales per month, which most people know.
1:42.7	The second is the lifetime gross profit per customer, which most people have no idea.
1:46.9	And then the third is hypothetical max revenue, which most people also have no idea about.
	...

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