Many entrepreneurs start a business with grand plans of reaping the rewards of their hard work and becoming a success. Some make it and some don’t. Those that do have likely followed a structure, a blueprint, a method, whether intentionally or otherwise. Growing a successful and sustainable business is a formula that anyone can follow. Following a tried-and-tested method means less trial and error and fewer mistakes. Every business mistake has already been made, so it makes sense to learn from the lessons of others rather than tripping over them yourself on your way to the top.
Alex Hormozi is an entrepreneur and investor who specializes in acquisition and monetization. He is author of the book $100M Offers: How To Make Offers So Good People Feel Stupid Saying No, which dives deeper into scaling your business. After scaling over a thousand fitness businesses to seven-figure turnovers, Hormozi wrote his process into a licensing model that has scaled to over four thousand locations in four years. During this time, he founded and scaled three other companies to $120 million in cumulative sales across software, service, e-commerce, and brick-and-mortar industries. In 2020 he transitioned from CEO to owner in and founded Acquisition.com with his wife, Leila Hormozi. Acquisition.com now generates upwards of $100 million per year in cumulative sales across four different industries.
I interviewed Hormozi to find out his four key secrets to scaling your business.
Picking the right niche
Many entrepreneurs start by simply following their passions, but picking the right niche is an art. If your business ends up in the wrong niche, it won’t find a product-market fit and will likely be overlooked by the consumer, your customer. When Hormozi investigates a business, the first thing he does is look at the value the business is providing to the end user and whether or not that value can be repackaged to enhance its appeal and profitability.
“Take a look at what the most successful players in your field are doing and see how they are appealing to their consumer base,” Hormozi advised. “What verbiage, branding, or demographics are they using to get the consumer’s attention and generate successful sales? There is no reason to reinvent the wheel.”
Next, Hormozi recommends making sure your product or service is optimized for the niche it is in. “Examine all of the processes you have in your company and ask, How can I make this more efficient? Is there a way that could be easier for me to do this? How can I make less sacrifices (money, time, energy) to complete this task?“Efficiency sounds obvious, but in Hormozi’s experience, it’s often overlooked. Making money doesn’t need to be difficult when you find the right niche and get the basics right.
Perfecting your pricing power
Creating a business that can scale requires your consumer setting the same value for your product as you. “You might think that your product is worth $500, but if the person that is purchasing the product values it at $100, you will never make any sales,” explained Hormozi. The perception of value a product brings to the consumer can sometimes be even more valuable than the product itself. “It’s all about the different lenses or layers into the product that the company provides without having to change the product itself.” Overall, pricing power is all about hitting the sweet spot of charging what a product is actually worth, incorporating a premium and over-delivering to satisfy the client.
“The degree of the pain of the client will be proportional to the price you will be able to charge,” explained Hormozi, who knows, “When they hear the solution to their pain, and inversely, what their life would look like without this pain, they should be drawn to your solution.” If you can articulate the pain a prospect is accurately feeling, they will almost always buy what you are offering. Hormozi added that, “A prospect must have a painful problem for us to solve and charge money for our solution” and advised that you “Run tests with varying price points, get consumer feedback, and investigate what works for others in your niche.”
Enhancing your offer
Enhancers refer to the bonuses, scarcity and urgency that your product or service brings to the market. “I see businesses trying to mix or combine all of the enhancers into one, but there is a world of difference between each enhancer,” warned Hormozi. Scarcity is a function of quantity. If the consumer feels like there is a surplus of your product, they will shop around more than average for the best price or feel like they can always just buy it later. “When a pair of new shoes hit the market but only a limited quantity of them were made, it enhances people to feel like if they do not buy them now, they might miss out on having them in the future,” said Hormozi. “Whatever your product, you want the buyer to feel like if they do not buy it soon, then they might miss out in the future.”
Bonuses or guarantees help the client feel like they are getting a great deal and become confident in their purchase. If something has a satisfaction guarantee, then you know that if you are not happy, you can get your money back. This creates a sense of security and confidence when the client invests in your product or business. Urgency is when a customer feels they are running out of time or need to buy something quickly to reap the benefits. Creating a sense of urgency helps grow your business by encouraging quick and timely sales. Hormozi, “For a gym owner, maybe this means you want to remind everyone that summertime is coming so you need to hurry to start your gym membership before summer vacation.”
Choosing the right name
According to Hormozi, choosing the right name “is the most underrated part of running a business and scaling it to be as profitable as possible.” Naming promotions, products and the entire brand is incredibly important because this will dictate a consumer’s perspective on your brand. For example, just by changing the name of a promotion to something memorable to your consumer, you can get three or four times the conversion even though you haven’t changed the product. That’s the power of a good name.
Hormozi’s product names have included Gym Launch, Alpha Pak Stack, and Done For You Meals (DFYM). He emphasized that a good name should be memorable and catchy, and there are different ways to go about that, such as by using a rhyming scheme or applying alliteration. How are you naming your products and offers and could they be reimagined?
Alex Hormozi went from sleeping on the floor of his first gym to becoming a multimillionaire by perfecting these steps with one business and going from there. Pick the right niche so you can optimize quickly, bring more value to your customer, add enhancers to increase sales and pick catchy names for your products and promotions. Following these four steps and applying them to as many aspects of your business as possible will help you build a sustainable empire and scale your business to its full potential.