Alex Hormozi: I Lost Everything Twice… Then Made $26M In 18 Months | Alex Hormozi Interview

i mean a hundred thousand dollars in cash in twenty one days the first question you asked is is this legal then i wake up on morning and all the cash the bank counts gone and i was with the fuck i just got all my money stolen and i was like i wouldn't stay with me if i were you i am a sinking ship right now so from that brink of failure to what was it at the end of the year so i've spent forty eight hours to a ton of adderall and wrote the best sales under of my life and then the full next calendar year we did twenty six million and sixteen million dollars in eb dude that's insane so why do a saas deal or why do the school deal in my opinion it was the best deal i've ever done how much cash did you put up front feel go most of what's a company you would wanna go by right now yeah i feel like i could rude where i know i could be what i want to put at all in it like a days off on a roll stand if you've heard this about the story with your wife leila and yeah being on the brink of failure yeah waiting in the swamp of failure yeah could you take us back there what what was going on yeah so leila and i had so we started dating in april of sixteen i immediately who was like hey i've got this idea for this thing called gym welch i wanna go fly out to gyms and do turnaround because i can like sell my gyms up faster i can build up by the way context is at the time you owned a couple of gyms yeah five i've i had five gyms when i met her and the bank balance looked like what at the time i was making like twenty grand a month i know that so like i don't remember where my savings but i was making like twenty grand a month in cash flow and you're like wait five gyms it's like yeah some of them were good some of them were tied two corporate locations are a little smaller anyways but i was like twenty five twenty six so like i was hood rich you know as far as i concerned could buy whatever wanted i could deliver where i wanted you know i could out to eat whatever and so i started the turnaround business and i mean a hundred thousand dollars in cash in twenty one days and i was like holy shit it's like this is awesome and so i came back and she picked her from the airport and i had this big stack of contracts and i was hey we can go on that because i hadn't taken on our date in three weeks and we've seen each other every day so it'd been like twenty one days of hanging out and not one date and so you promised you take on a date after we after you did this launch and i was okay was like how many processes these so she process the contracts in forty five minutes she saw was a hundred grand she was like holy shit the first question she asked is is this legal and i was like yes it's legal and she was like alright i'm in and so she decided to join me so we went out to the next lunch together a few more launches and then one of the launch guys that i did that i did really well the one that i came back with the hundred grand four was like hey let's partner like instead of you know you just doing these gyms and then walking away let's just open new gyms i'm a really good operator i'll just open them behind you and run and then if you open up one or two gyms a month at do you you own twenty four gyms instead of just like doing the service and me being me i was like of course money on the table why would i not do that and the fact that he had been indicted for fraud like it was a misunderstanding whatever and he was like hey you know you should sign all the leases for these new locations because i had a little run like no big deal you should do it and so i personally guarantee the lease and i put all the capital up because you know i'm twenty five and don't know what i'm doing and so of course we don't how this story goes i launched it i cross launched at three hundred seventy six you know new members which were like cross slash micro is massive to to open up with then i wake up one morning and all the cash and the bank counts gone and i was with the fuck and i we know hit him up and i was like dude what's going on he's like that was my half and i was like what do you mean your half i was like you took call the money up he's like i know you've been skimming and i was like what i was like i'm here what i'm here with i'm what we so i i came to him with all the bank accounts like every transaction highlighted and i was like hey let's go through this like i just wanna make sure we're good and he threw it off the table i need you see that shit and i was like oh you okay got i now understand what happened like okay so i just got all my money stolen on and right at when that had happened i had decided to go all in on that business so i sold my gyms and i put all that cash in that account so the cash that i used to open the gym and the subsequent cash that came all of that was pulled into one place but that was what i had sold all my gems for and so when he emptied that i had basically the five years i had build my gym i had nothing and so that sucked and so leila was like you know dust it off forget the whole like build and whatever like let's just go back to the turnaround model like you made money doing that like let's do that i was like i'll do that and so the next launch is supposed to happen is in california there's a guy who hits me up randomly on instagram says hey do you have work for me i've got i've got a kid on the and i got a one year old i need the money and it just so happened he lived ten minutes away from the one gym that we were going to launch in the world and so i was like dude do this launch for me so he does a hundred he does a hundred grand in sales in twenty eight days and all of a sudden though as i'm like normally i know my deposit always hit on tuesdays over the weekends and so tuesday hits and i'm like there's no deposit i'm like well we're crossing the contracts like what's going on that i call up mind body which is you know heartland was the process they integrated with at the time and they you they give me the run around and they're were like oh it's a standard annual review and i was like okay and no no wednesday no thursday friday and or saturday then it's the weekend again and then tuesday goes back and no no deposit and i was like dude what the fuck so they said no you're still in the annual review so i did it one more week and now it's christmas eve and i had about twenty three grand left after all the money was there's basically my checking was what was from all that other stuff and so they got on the phone i said i'm not getting off it's christmas eve if i need to pay my guys like what the hell and they said we're gonna hold on to this for six months because it's a regular activity because i was processing these turnaround gyms through my brick and mortar location i did not process works i was like you know flying into calgary canada doing a turnaround running it through huntington beach california for an in person transaction like i didn't know how it works and so they were like this is weird we're gonna hold on to the funds and so i owed twenty two thousand dollars in commissions for sales that i hadn't gotten paid for for this guy who had you know the kids and the babies or whatever and so i didn't wanna like give myself the idea that i could not pay him and so i sent him the money and so i had a thousand dollars left it's christmas we're at the lay family's house i'm stressed the fuck out because i just lost all my money in the last like i got the money stolen and then the my my hail married to save the day was the hundred grand new launch i didn't get paid for that i ended up just having empty the the small twenty grand that i had and had a thousand dollars left she told six of her friends to quit their jobs to start that month on the twenty sixth of december because that's going into new year so i could do it like let's do six gyms because that's logical bill from one to six immediately since we're gonna go all in and so after i found out that i didn't have any money and i had a thousand dollars left and the ads were supposed to launch on the twenty sixth and i was gonna be spending thirty three hundred a day in advertising hotels rental car per diem for the six sales guys that were her friends and i had one thousand dollars in total and so i you know we're sitting at like the parents are downstairs were like the the spare bedroom where like the grandkids are so there's like this little mini furniture everywhere are they like i'm sitting in a tiny chair and i was like hey this could go horribly wrong and if you i said i i wouldn't stay with me if i were you i am a sinking ship right now and so in that moment she grabbed my chin and she was like i would sleep with you under a bridge if came to that and so i was like alright and honestly i just kinda felt relief at the time i kinda i can appreciate it more later but you know she quit her job to join me doing these turnaround and all she got to see besides the one that she did in the beginning was me just getting kicked in the nuts for like eight straight months and said to the next day i said okay well i still a hundred thousand dollar limit on my credit card from all my five gyms like am hadn't updated the fact that i was broke and so i put thirty three hundred a day on their credit card my do with no way to process money and so i'm was spending thirty three three three hundred a day of money i don't have with no way to process new money and so i i got like porn casino and like gambling processing that had like ten percent reserves and like six percent seven percent processing fees they were taking like seventeen percent off the top but i needed the cash and so i got one turned on with a fifty k limit and i needed i mean i had a hundred k cost i need it was we're gonna do two hundred i needed two hundred grand and there's like well if you do well you know you get fifty and i got it only turned on three days before the end of january so this whole time i'm front thirty three hundred a day and we're collecting these contracts with credit cards and i'm not processing anything and people are calling me be like hey i haven't seen the money come out hey like what's going on are you guys gonna run the run the card we're like yeah yeah we're getting to it and and so three days before the end of january the first fifty k processor hits and so i've run that in a day you know i had so much so much backlog but he's like the good news is it's per month so on the first of february you can run another fifty so i ran fifty fifty and that covered my hundred that went out the thirty three hundred a day and then i got two more processors turned on at fifty fifty and then and then i was able to to get out of it there's also another crash that happens after that where i lost it all again three months later but that was because all of the launches that we were doing i had a new hole in my model which is that i was selling and other people were delivering and then they would tell the customers to refund and then sign up with them for half the price after we'd leave so we'd sell like five you know we'd sell a five hundred dollar challenge or whatever and then we'd put a hundred people in the location and they would just tell them all like hey refund with them sign up with me for two hundred bucks and we'd already already funded the cost for the hotel the ad spent the commissions the sales guy like all that jazz and so that's when i lost everything again and that was that was probably the hardest of all of them because this was the only model i knew and so the more i sold the more refund risk i exposed myself to and so it it's just like i had to sell more to cover the first month refunds and then the next month was bigger and then i to sell more and more to cover that month's refund and so then i had to make a switch in thirty days to come about a hundred and fifty grain profit in profit in thirty days and i was like i don't know what i'm gonna the first two were out of your control you know business partner screws you the payment process turns you off this one your model was broken yeah we were like oh shit because i don't know if you know how this business worked it was basically like he would go my understanding is you'd go turn around the gym which means just you'd sell a bunch of memberships and the deal was like i keep the upfront cash and then you keep the members and so they were just like we he took all the upfront he made a hundred grand in like whatever a month or something a few of them were like well you know what why don't i just cut the cut them out and just do the deal directly with my customers who i'm gonna serve going forward and so that one was your fault in the in your control basically you're your model but then you fix the model right and that it it worked what's sort of so what ended up happening is i told layla i was like hey because she still had her fitness clients because she was a personal trainer and she to book a business so she converted like half them into like online training for online training was the thing and so she was making like four grand a month and one day we're sitting the kitchen table and i was like hey how much you make on that and she was like defensive she's was like hey this pays for our food and i was like no no i'm not i'm like i'm not say it's a bad thing and she's was like like four grand a month why i like how many hours a week to take and she's like i don't four hours i was like that's not a bad business i was well i know how to sell fitness wanna let let's cut the gym on around like let's just sell straight to consumer so i spent forty eight hour took a ton of adderall all and wrote the best sales letter of my life got ads live in forty eight hours to a sales letter and we started doing five hundred bucks a day five hundred to a thousand days is like a a women's weight loss yeah it was called queen transformation and so it it told late because explain behind me yeah it let's go no lots she lost a hundred pounds and then did a fitness competitor so she had a great four for green story i were and as though i yeah leila as though i were her so i'm like my thighs were shaking together and i couldn't go out of i'd like it was it was just me right my thighs are shaking yeah so this is working thousand was what i get that now i need to sign up for this clean transformation so we do the thousand bucks a today and i saw i got eight sales guys now and i was like wait if i got eight guys i can do eight grand a today with with covering costs i could make one fifty on this like this could work and so i call up the gyms that are supposed to launch the next month and i said hey we're i'm not flying out and they were like what the hell whatever what then what guys like dude i need this you turned around one of my buddies gyms and like because the for the other model network only like one out of five gyms had to fuck me so it wasn't like they all that like some of them were fine but like my profit was like twenty percent you know what i mean and so i called the first guy up and he's like i need this and so i i said he said he was poor so i just said the highest number i could think of at the time which was six thousand dollars i was like fine i'm not flying out there to save your ass if you he can't close but i'll show you how i did it for six grand and he was like six grand he was like done and i remember just like looking at the phone and i mean like i mean i still five hundred dollar three hundred dollar four hundred dollars at a time like six grand i was what what just happened and so i still had seven more calls that day so i called the next guy same conversation was like how much i was like eight grand he was like done and so next call same thing how much ten grand and by the end of the day i did sixty thousand dollars in in cash collected it and i was like holy shit now your now your thighs are really shaken yeah and so i caught so leila comes in after full day of sales and i was like i think we're still on the gym business and she was like what you just sold me on like this is the new direction we're gonna be online queen transformation i was like no i think i think we were just doing it wrong i i think we just need to show them how we fill gyms rather than flying out and filling it for them let them take the risk on the ad spend and the like they don't have to do a hotel they don't have to hire salesman like they can just do it themselves if you you know if i teach them how to do it and so we did that and then i called the thirty plus gyms we turned around and i was like hey remember that thing i did want me to show you how i did it and a lot of them saw me pool fifth hundred grand out and one out of five was like i'm gonna super fuck this guy but four out of five are probably like this guy made more out of my gym than i did like and so when i called him back almost all of them said yes and so i did like two hundred and forty grand in sales in that next thirty days that was almost all profit and i was able to pay off all the refunds that were gonna be due from all the other gyms so i paid the one fifty down and i was like in the clear and then that was what became that's what became too much dude that's insane have you ever felt richer than that first relief of being like out of the mess no i saying in my book in the the offers book the last the last chapters the first hundred thousand when we had our first hundred thousand which was like four or six weeks after that i showed it to lay on the phone and i was like we did it and she was like what do you mean and i was like look and i like pulled up but it wasn't like in the business account because i had that and like business you but it was like but that's like operating expensive and ear earmarked for other stuff but like this was like in the personal account and i was we can we can screw up for like three years then we're gonna be fine like we could do we could just do know we could take off for three years and be fine and to this day is it is a hundred percent the richest i've ever felt and i think it's because of relative change in wealth so i have thought about it because like if you go from a thousand dollars to a hundred thousand dollars it's a it's a hundred x increase in wealth in a month by the way the the end of that story is like within the first twelve months there's some like ridiculous than that you guys hit right so from that brink of failure to yeah what was it at the end of the year yeah so so we did the so december twenty sixth the of of twenty sixteen processor shuts me down and i make the big bet leila says i'll go you under a bridge it's three thirty three hundred a day it takes four or five months for me to realize the new model where i fly out to gyms has this big refund problem and so now we're into may of seventeen i flipped i flipped during that kinda like april may ish the model and we start doing the the licensing model and it goes like four hundred seven hundred a million one two one five like into the end of the year so we ended up like six point eight million top line and i think we did three million in profit and then the full next calendar year we did twenty six million and sixteen million dollars in eb what's insane yeah it was wild it was just as wild for me for anyone who's listening like i actually think it took me like three years to acc to the wealth that we were making it was like it was probably like twenty nineteen ish like end of twenty nineteen twenty twenty is when i started to like realize how much money that we were making because i didn't adjust my i didn't adjust my living like we did buy a house it's like three years later one day you just woke up and you were like holy shit i feel good wait a minute is this yeah well it's like because we had we took out forty two million in distributions prior to selling it and so that's why the sale was not like a i mean we got a ton of notoriety from the sale but in terms of material change in living like it wasn't a a massive step up sam if you actually read his offers book the purple one i wrote the terrible one hey no i'd read i yeah i i read it no it was leads i thought bro these the leads ones purple one and then say bro i read sorry leads well they're all like the same cover just a but they're like the same thing no i read the oh well they're like the same color yeah makes it look like they're working in one new i read the leads one alright so the compliment is alex you have a very useful thing on offers that i read a bit of the i read like the first twenty percent the book i was like sweet got it ready to act don't need the rest of this book right now knew exactly what i needed to do and it really wasn't actually something super specific in the book it was just implant the idea you sparked an idea of my head of how do you make somebody it offer so good that they would be stupid to turn you down and that stuck with me it was like that one line stuck with me and then immediately i went into this one business that we had started and we had this business that i was like what this business needs is a killer offer and we were gonna do nothing until we craft a killer offer and we've crafted a killer offer in that first year of this this business which we haven't announced on the podcast it'll probably four million in in revenue fifty percent margins it's a really great business and it needed a killer offer and i would not have had that idea had i not heard you kinda plant that seed of like why that matters can you give us the like couple minute version for anybody else that's listening because if it was that useful for me i know it's gonna be useful for a few hundred thousand other people that are gonna listen to this also i'll say because of what you said i wrote a summary and workbook of offers so that they can finish in one sitting does it come with cra my my kinda of guy yeah exactly yeah yeah cra are upsell so fundamentally know you think about like are there supply demand are there supply constrained businesses or demand can train businesses and i like going into band can train businesses because that's what i'm good at so the core if there is one framework in the book that it relates to it's the value equation which is that you have to understand how to create value so that you can charge as much as possible right so and obviously also convert as many people as humanly possible and so there's four elements that when is the dream outcome the second is the perceived likelihood of achievement and then below that so it's a fraction so dream outcome times perceived likelihood of achievement below that you have time delay and then effort and sacrifice and so the dream outcome is what i would say separates whether someone's even interested in your category of offer or not so it's you know men in general probably wanna make more money women in general in general usually wanna look better because both of those are more associated with status so okay why is it that b b offers tend to be more expensive than b2c offers because it's more closely to tied roi great so that's the category one but within let's say weight loss given the example we're talking about for b2c how is it that you can have a five dollar pdf and a fifty thousand dollar lip thing but they both fundamentally solve the same problem which is that they don't like the way their stomach looks right well it's the other three variables and so the next is perceived likelihood of achievement so taking the lip suction example if you're a surgeon or you're a girl or you're you're thinking about getting lip there's one surgeon that's just fresh out of medical school hasn't done a surgery yet and there's another physician who's got ten thousand you know five stars or surgeries under his belt who do you go to the guy with ten thousand why and and the crazy thing is that it's the same procedure but the perceived likelihood achievement that you're gonna get what you want is significantly higher and so you pay for that premium because the the equal opposite of this is risk right and so how do we decrease risk so you have this dream outcome and you want it to be absolutely certain that you're going to achieve it and so it's the category and then there's things you do in the offer like that's where guarantees come into place how can i further decrease their risk associated with that and then we have the bottoms out of the equation which is time delay so how how far between when they buy and when they get and so to use the the example of personal training versus the lip section personal training you got a arm wrestle somebody for an hour to get them to buy a two thousand dollar package of of personal training and the reason for that is because they might get their six pack you know twelve to eighteen months later whereas if you do lei section you know you're gonna go to sleep and then you're gonna wake up and you're gonna be significantly thinner so the time delay is so much shorter and so because of that it increases the value overall and then finally you have effort and sacrifice which effort are things that you have to begin doing that you don't wanna do as a result of a purchase so in the personal training example you gotta wake up early you gotta be sore that's the effort side do you have to stop you you know well sacrifices is the things you have to stop doing that you wanna keep doing so it's like you gotta stop taco tuesday you gotta stop sleeping because you gotta do it in the morning so it's both sides of the same coin effort in sacrifice and when you item all the things that a customer has to do as a result of a purchase what are all the things that they what are the things that increase their risk what are the things that make it take longer what are the things that make them start doing things they hate and what are the things that we have them stop doing that they love and then you create solutions for each of those categories then you create an incredibly valuable offer and so from the weight loss perspective many people like oh i'm help them lose weight but it's like well they're gonna have to go grocery shopping differently they're gonna have to learn how to prep food and so it's really getting granular about all the little steps that has to occur in order for someone to get a result and so looking at what happens immediately before and merely post purchase all the little steps and then trying to constrain each of those steps for them and then including those things in the offer ultimately creates a much more valuable a offer and b a higher converting offer and this is where you get these massive step wise increases in terms of company value because all of a sudden we can double the price or triple the price for offer and close at a higher percentage and so that's when these crazy kinda like lot of palo effects occur in the business where they go from two million to ten in a year changing nothing but what the core offer of what they said was and then we do these little enhance that i'll add on which is like you've got scarcity which is limiting number of units you've got urgency which is limit number of time you have guarantees which is things that we do to reverse risk if there's four types of guarantees you can do unconditional conditional zero guarantee and then performance right so performance what i call implied guarantee like if you know if you don't make money out i don't make money anti guarantee you lean into the fact that you don't a guarantee if for this type person needs to guarantee this isn't in for you conditional like i'll guarantee it if you do x y and z and then conditional unconditional like i'll give your money back with you ass for it then you have bonuses which are things that drive action in the short term buying decisions and so a lot of those things that you can make in irresistible offer or a grand slam offer from the book is by looking at each of those problems and creating kind of a bonus stack that solves each of them and so from a selling perspective hand to hand the salesman doesn't need to say all seven of the things that you have and so the idea is that you make the ask on the initial offer if they say no you figure out what the constraint is and then you plug that bonus in and then maybe you need to put three bonuses in in order to get them over the edge this also allows the sales team to stop doing discounts in order to close people we just add value rather than taking away price and then post purchase in order to make sure that ops is all the same you then give them a surprise and delay with the remaining four you say by the way since you did buy i wanna give you these other things and so if you get the fast buyer that doesn't need the bonuses you just give them the bonuses and they love you and if you got to somebody who means all seven then you give them the seven bonuses on the sales calls and that's kind of how you can just get increased close rates without giving weight discounts goddamn damn yeah highly highly useful i feel pumped up for brother i need to go read i need to go read the blue and the purple one like this is the stuff that i enjoy and that's the stuff that we do to like really grow the business in the portfolio is we're we're in it we're scripting the sales like we're we're changing the process overall like we bought a chain of thirty two teeth whitening studios is there anyone at acquisition dot com who's better than you at this or used still the best at when it comes to like offer rei imagining make like mixed with sales process that's probably my strongest it's probably the thing i'm best at and it just drives so much profit in a business since pricing is the strongest lever on profit there's a great example of the offer by the way i've been knee deep in like i do these two week learning experience sprints when i just picked whatever the topic i'm most interested i just go fucking ham on it like every minute that i'm not on this podcast or not on like a required meeting i'm just like going down on one topic in this case i've been doing like the old school marketers and there's a great story i think it's o who when he launched his agency he's like how do i get people to do this and he basically made a killer offer he was like take your top performing ad that you've spent years iterating on and you got this to be your top four performing ad i guarantee that i will beat it in an ab b test head to head within a month and i will fund my portion of the ab b test so i'll make the ad i guarantee you that i'll beat it and i'll fund the ad cost of the i'm so confident i will fund the ad cost if i don't beat it or even i think even not if i don't it i will fund the ad cost in order to win your business and what he said was this was like the response rate on this ad was through the roof because he's like but the best part was of the hundred percent of people that responded he's like we didn't even end up having to do it because the top twenty percent the most expensive clients were like okay cool forget the ab b test and the mechanics and the contract for that like the fact that you're willing to do that we looked into your track record we are big believers in this we'd like to just move forward and and go ahead and and retain you i we know that our agency would never be get that confident to pull that up so we're willing to to work with you and he's like he was incredible because i was a i use this killer offer to fill up the funnel and then i just picked the top twenty percent of clients in that funnel and that kick started og v which became you know one of the big ad agencies that's in the game and like we bought that the the teeth whitening chain and so i sat down with our director of sales and we script the sales process and basically reimagine how the offers were gonna happen and we five x lt tv per sale and so i was like okay here's plan just roll it out that fundamentally it's like a lot of times people think there's a lot more that it takes to grow the company but sometimes there's just a handful of leverage just make a huge difference does every business and product offering have a killer offer inside of them i do think so i think that sometimes you have like the big part with the offer is you have to operationalize it and so if you're ob it's like okay well how can i write all these split tests like it's like how if i'm gonna have all these bonuses that i have to add in in order to make the thing more valuable i have to operationalize that part and so yes i do think so it's just like usually you might sometimes have to like terms around that like if i an accounting firm something boring it's like i can guarantee that i will get you more than you pay me by just auditing your back taxes and saving that money today right but you have to provide all the back taxes and like you have to and then i have to have a separate team that i now have to create just for end conversion to shrink time to value using that little nugget and the big thing with most of the businesses i try and shrink time to value like really aggressively even that publishing business it takes a very long time for that business for our customer to get a result and so we looked at it we're like can we peel some element of what we do and drop it in the beginning and it turns out we could do something in like seven days that gave people a very positive outcome really quickly and then they like get bought in emotionally that you know what you're doing and to further on the point i think that probably a major difference between like the tiny slash wilkinson model and how we do it is that we are operators and so the investment strategy has slow you know continues to you know move over time but it's been fewer bigger deals that we have larger percentages of that we do more for and it's just like basically the more we work on the business the more money we make and so if we're gonna work on it then it might as well be big dude you you did that school deal right we had we had sam on the pod interest interesting guy sam ovens were talking about school dot com is at school to come he one of the odd people you'll ever have a conversation with but odd in the best possible way so one time i was with him it was my wife me and sam evans we're sitting at we're at a party or something and him and my wife get along great because my wife and i both love like quirky people he's extreme quirky it gets to a lull in the conversation where there's probably a five second silent silence where we're thinking about what we're gonna say next and he looks at my wife and he goes i delivered my baby and okay if we both at each other like what he goes i delivered my baby and i'm like with what he goes my hands and goes out to tell the story about how his wife gave birth at home because it i couldn't make it to the hospital but like he didn't laugh when he was telling any of that stuff and i thought it was so funny and he's one of the quirky people i've ever met but he's the type of people who i love where he's so logical that it's painful a little bit but also he's a type of guy who i think has read a book on how like normal people interact so and you could tell he's like i do care about you but i kinda have to learn a little bit how to adapt to fit your but and and you could tell that and it's engineering it makes me like bit more listening to you he's like i am active listening yeah it's like okay okay it got it thank you like and what which i love because he wants to show you he cares about you and i and i like that and it's like a real he's got a really interesting personality yeah no the school deal was going exceptionally well we've you know five or six sex the business in the last eight months well we'll break it down why do that deal it seems like you made a much bigger bet and i'm saying that because you started wearing the hat around whereas your other deals you don't promote so like okay he definitely like pony up for this one and made a big bet on this so why do a saas deal or you know why why do the school deal how how do you figure out the bet size and and was it like a butt butt cl number and then you know what what's the plan well i'll say this so breaking out of the end into the into the deal components any brand endorsement for me is by far the butt cl component of it not the cash because you only have three four brand bullets that you can use where you're gonna promote without becoming a shell right and so if i looked at my audience i think about the people who best monetize an audience do percentage conversion times lt tv that's it so what percentage of your audience you convert and what's the lifetime gross profit per customer and that's that's it that's the math the person who makes the much money wins the big thing that's so with my audience is that obviously we have a a very skewed you know monetization structure because we have portfolio companies where we just make a tremendous amount on like a handful and then everything else like kind of doesn't matter and do you even promote you don't even promote those others right no i don't know the other no not at all that's just but they come inbound though so that's it still comes from content often but a huge percentage of my audience or people who want to start a business and that's probably some of the people who listen to your stuff they're people who are employees they're high up their executives things like that or and they or they want to start a business with their own whatever and so i was like okay so there's this entire huge part of my audience that wants to start a business and i want to have something for them and so i also don't want to cannibal acquisitions acquisition dot com in terms of how we generate deals with things like that and so it had to be something that would help people start a business which in my opinion was gonna be the closest match you like audience match so highest percentage conversion it had to be a scalable thing so i didn't think a service would work given the amount of volume that we have and so it's like okay it has to be something that's demand constrained not some hawk constrained so it's like okay and ideally if there's something that we can create some sort of network effect been some sort of company hunting you know machine within it and it has to be at the right point in the life cycle of the business right if if if you're you know day day you know day a thousand at facebook is probably too late you know what mean to get in on facebook at any appreciable percentage right and also where i would have less leverage and less value to add to a company that size and so school was a big company in terms of its value and the rounds that they had done already but i also have a really big brand and so it took you know sam and i call it nine months to work out kind of every component of the deal there was in my opinion it was the best deal i've ever done not in terms of like winning over anything like that it was just it's a it's a really elegant deal the way that it works which i'm not liberty to explain all the pieces of it but basically like we both gave a lot and we both are happy without it's going and so we both made commitments to the other person of what we can and can't do like if if someone's gonna come on and you know be in an ad from school like i have to be okay with it because i have a strong association with that and things like that right it's just like there's how can i mitigate mitigate this risk how can you mitigate that and so to circle back to the original question why did i do the school deal i felt like i had seventy percent of the audience that i have because there's always way more people wanna start a business than have a business especially if you make this content so i wanted to have something for that audience that i that met all those other the requirements and i knew sam and sam told me about school two weeks into him starting school and so i was kinda like well it's i mean i'm not gonna try and bet on a platform at day one that's why that's where sam has just massive balls i think on our our on our podcast i think he said he i think he said he spent ten million dollars of his own money to fund the business and i think he also said that was the bulk of all his money yeah it was i mean i he's been public about it and he and then he still raised another five to still keep continuing reinvest in the business and when i saw the metrics of school it has everything that you want it had viral organic alert it was compounding you know twenty percent every single month month over month over month and i was like this thing's a fucking monster and it was right at that point where he's like we need to grow and i was like okay i need a product and so it was a perfect match and it's worked really well that's great with last time you were on you were talking about how like you started doing minority deals then you sort of realized like damn we're creating on the deals that win we create so much value though you know you basically wish you owned more on anything that works and you're like maybe we'll switch to doing majority like where did you anne on that like what's the evolved thinking on that and i don't know if that relates to how you did the school deal but just in general also yeah it's almost all majority it's almost all majority like if we're gonna do a minority it's gotta be a massive company you know like for for us to do that i i basically have and one of the unfortunate things with content is it's like my my deal line has continued to move up and so like we were like i finally hit a million dollars in profit and i was like i you know like we're kinda looking at like five million or ten million new profit now like frank minimum to look at because right now like the portfolio is two hundred and fifty million dollars a year we do seventy million in eb we have consolidated like the the smallest percentage ownership we have is twenty percent the largest is a hundred i think our aggregate is somewhere is like forty two or something percent if you blend all the the percentages together so we have meaningful chunks of the companies are you like our friends we have a couple of friends that are doing this and they they were talking i talking them about metrics and they were saying you know with the hold code like this there's a couple of different things you can go for one is just free cash flow so how much cash are these businesses spitting out and they buy cash flow businesses that's their play they don't care as much about the equity appreciation obviously they care but yeah first and foremost they're looking for cash flow generation so they picked free cash and i i know other people in private equity that are you know they're looking for basically ultimately like a return on capital invested or you know a multiple on capital invested so what do you what's the main metric for you with acquisitions how do you measure if you're doing a good job to point capital or not i have thought about it as deal by deal like school is obviously a appreciation play you know like that we'll realize all of the gains from that years into the future right whereas there some companies that will buy that are pure cash flow deals and so it really just depends on i mean deal by deal so we don't have like a mandate which is one of the reasons you know haven't had lps because i just look because the nature of having inbound deal flows is like we get weird deals and so some of them are very interesting i think have to buy out a partner and it's like this weird terrible situation but no one else wants to get into it but like we're operators and so we're happy to get into it so we can get really good valuations and maybe we get both in terms of cash flow but like i'd say like for us in cash flow we're probably on pace to do forty in cash flow just like our slice for the year that's incredible and how much capital did it take to get to that right because that's the that's the skill that's the finance if if it takes a billion dollars to generate yeah of cash flow you're that's one thing if it took fifty million to generate forty that's incredible right not a lot and it's been mostly because what leila and i have realized in this process that we're better at building better at building than buying yeah so like i so so we did twenty i did like a deal a month for like two years and of those i've gotten rid of like i basically just like here's your equity i even care to like eighty percent of them and then we just we just basically did in eighty twenty because it wasn't worth the time i was like you can keep the cash and i will give you the equity back i don't like this it's just not worth the time anymore but like the largest two companies the portfolio together we'll do a hundred and fifty million and we own very large chunks of those companies with probably consolidated some like sixty like a lot eb when you when you say build you don't mean inc bait like from scratch you're saying once we get in there we just do a shit ton of work or we kinda run the business yeah so like the company that's doing a hundred ten right now which is the large in the portfolio can you say which one no i just i just don't do i don't do any names besides school oh okay it's a it's a b business business consumer business but it started did two million in trailing twelve months when we got it and so we own twenty nine percent of the business and this year it'll do on its own between thirty five and forty billion at eb well what was the unlock for that one well what would you guys do that cranked it up so much because that's out that's i'll tell you tell you all the stuff we did so and by the way you still only have thirty percent of it yeah that's twenty nine percent hasn't changed so in the biz in the beginning it was just basically a handful of founders that were together and they'd figured out a way to to generate positive roi while on the front end in terms of getting customers but they had no backup can can you say category like e com licensing like just like a general architect publishing yeah it's publishing business and so they were they were getting like three to one upfront lt c and so i was like hey man wouldn't it be cool if we sold our customers something else and it's actually really funny story if you guys wanna hear it so we're negotiating this deal and we're like right near the end and they we all agreed we need to have some sort of second up upsell some sort of back end that's gonna build some sort continuity whatever and so they were like we've already got it we've already built it all out we're super passionate about it we wanna show people how to build this a business like this and i was like that's not is it was b business it's biz it's like a published like a helps publish book like things like that right and i was like this has nothing to do with what we what we do and they're like no we're passionate about it we know our customers are gonna be passionate about it too if we're passionate about it and so i was like this is kind of a deal breaker me like i don't wanna do that and they're like well it's done so i said okay and we're pretty much at the point where we're gonna walk away i said crazy idea why don't you just survey the audience and put your offer next to my offer and just see which one they want and i was like if they want your offer more i was like i'll kill myself and we won't do this deal and was like and if they do want it we do the deal and they were like fine if you're and so we ran it an eighty five percent of people wanted my offer and my offer was more of that thing you just bought and so it was a great it was a great moment everybody came together as we did the deal and then we built out that back end which one point nine x lt tv which now now we've actually increased this two point two x lt tv and so we kept the same three to one but we we're able to five x advertising in terms of how much we could advertise and spend so we could be profitable which is basically i mean this is just like like any digital marketer who's been in the game for ten years or you know like this is like the this is the game this is pretty standard shit but every business owner has blind spots right yeah of course a small money business i look at it's like oh yeah we have five x ro ads it's like why aren't you spending more yeah they don't have an answer it's not like they have some complicated reason that they don't they're say don't know i haven't really thought about it yeah it's like or they get romantic about it and they're like don't wanna we don't wanna like market it too much we'll be a norm read this thing that said we need to have this margins like no no dude you do this for two years you get ten x bigger right like you're either there's a story they tell themselves or a blind spot or hey how'd did you get all these customers like six months ago like i used to go to these events like you go to those events anymore no i got tired of it and then where's are going right do you want this to grow or really like what's going on here right so it went from it went from two million to did sixteen million to fifty then seventy then this year we'll do one ten and so we hired forty sales guys so that we could do we could add that back end we added a cmo we added a cp and a pro pulp product team to help the the chief product officer out we added in a controller so one of the things acquisition dot com what we do is that we recruit and so because we have a lot of inbound we a lot of talent that it's in my audience and so i i might not endorse the company publicly but from a private perspective we'll endorse we'll we'll recruit at hold c get usually higher quality talent than a portfolio can get place the high quality talent and then they just grow way fast well why wouldn't you recruit that or promote that company why wouldn't i it's because i don't want to keep well one i don't like promoting lots of things so that's a big thing for me because i don't wanna promote lot of stuff it's one that i am considering to be fair but like it couldn't handle the amount of volume that i can send now and now it it it's probably close because we actually built a saas component of that business and now the software is doing more about fifty percent of the revenue in that business and so that's gonna be a monster deal but the the point there is that like we took the team from like a i handful of dudes with like some vas right into now the company got you know a hundred employees and like a whole leadership suite a whole executive suite it's a company you know what i mean and that just took a lot of work in four and a half years and so our first kind of bash of deals that we did we have our handful of winners that have come from that what did you pay for that by the way the thirty percent how much cash did you put up front like most of it i say like a negligible amount relative to what we do so you made tens of millions of dollars in value potentially more in four years and and you made it for everyone it sounds like yeah dude i wanna normalize this because i think this is really cool so i just did this i just ran our stats this this last weekend our average founder return on equity so post deal how much more is their slice worth like every pe buyer says listen and you could make more on the second bite right it's that's everyone's like the same pitch right so our average founder to return on equity net of the chunk that we now own is thirteen x yeah that's silly that's silly that's crazy right so it's like a doctor i was you should pay me we'll do so so i did a deal that was similar i can talk about it now because the numbers have come out a little bit which was this deal that at the time was called she and now it's called somewhere so it's somewhere dot com is basically a way you can hire like top talent overseas so you know in the us that same role for a developer might be hundred fifty grand hundred and eighty grand a lot of business owners don't wanna do that they're trying to be more profitable it yeah so okay nick was in the business and then i wanted to join hey i like that blueprint i like okay that's a business i'm either gonna start i'm gonna buy into i'm gonna do something i tested all the services out and i was like okay i like this one so i approached marshall and cut a deal that i thought was so good for me which is my objective when i do a deal it has to be good for me i'm not gonna do a deal as bad for me but i want to be good for both sides but if i'm being honest in my heart of hearts was like i think this is a good deal for him and a great deal for me yeah turns out i had it like totally flips so what ended up happening was we put in a small amount of money and then actually you know but the business was already making millions of dollars a year of profit and so i was like i can't value this low but i'm bringing value that's not cash so how are we gonna do and they're like look how about we do this this is nick's actually nick was like the business will loan you the money to buy your shares and i was like sick okay you're gonna give me the money to buy my buy you alright sign me up you say no more and so and that's what that's when i was like okay this is an incredible deal for me and it's you know really good deal for them because i know i was gonna grow the business sure i didn't know exactly by how much and but how long it would take and all that and what ended up happening was at the time i think marshall had an opportunity to sell the business something in the range of let's call it like fifteen million bucks that's what he was looking at he didn't wanna sell he believed in the business so he decided not to sell but he had gone out looked at off shit offers and that was like kind of where where a realistic deal might have got done a year later now the numbers came out so he it basically you know the the buyout happened at a fifty two million dollar valuation so in a in less than a year basically like i know nine months of time the business went from being worth fifteen million to fifty two million and so i thought i was getting this incredible deal on my equity actually marshall got like by four like the most value out of the deal less of a year the only thing that changed was be going in and and you know being able to help the business in in different ways and so that way and i realized oh shit that's the metric that matters because like of course i'm always gonna protect my bottom line to try to make this work but the only way that this model works long term is if the founders get a stupid return on equity after my split and yc does the same thing yc which they used to get a lot of shit because they would give you twenty the original deal was like eighteen thousand dollars like six k per founder in a company and they would take six or seven percent and people used to be like well yc is getting in and effective like a million dollar valuation into these like future dropbox airbnb like those are yc companies and paul graham came out and he's like there's it's a very simple equation you do one divided by the equity you gave me so basically it's like if you gave me seven percent but i make the company worth ten percent like because you gave me because i'm now involved in the company the company were worth ten percent more it was a good trade you would do that all the time and obviously they add a lot more than ten percent so it it became kind of a no brainer is it was a different lens to look at than just total valuation which i think is where most founders get you know stuck on either due to shark tank or just whatever that's the the general par it's just is this the right am i a fair valuation or not versus if i gave you ten percent of equity but i knew you'd triple the value of my business of course i would take you a hundred percent the time right right and then the risk this associated is what if you don't do anything and so then you covenant it around that and i think i'm a big i'm a big personally i love performance stuff because i know i'll hit it and so people tend to be like if we hit that i'm like cool like if you're good with that right i'm good with that sam you were sm i'm like get high on my own supplier what what when were we laughing at you're not hiding not supply no i i like it i think that so we're we're glam this this the buying of businesses because alex you're doing it wonderfully and sean you told the story of doing it wonderfully whenever i hear these stories i'm like this sounds awesome and then i get into the nitty gritty and i'm like i hate this i love starting stuff from scratch like i get so much more joy like crafting the brand and putting my personality into it and like calling customers on the phone early on and like hearing like a it's like you're committing i'm practicing my bits to hear what like what works well i love that so much more than having to buy things because i just think it's it makes my soul feel better and now we could debate all day if the numbers make sense for you in both those examples that you guys the number like makes so much more sense and and it's it's hard to create that much value in four years starting something from scratch and so what i wanna know do you feel that way i mean you're you're you started something for like do you ever like get a little bit of that vibe when you're starting something from scratch artist regret the artist correct yeah you're like dude i'm producing all these artists i'm not actually writing songs you know what i'm saying like do i i missed that art that is actually more like the analogy would be like a label you're a label sure whatever then you get to go be in the in the studio i get that i would say first time i do consider myself a business band so if i were to like give myself a aside i feel like that's probably most appropriate that being said i do get a lot of the stuff that i like a lot which is the big picture decisions which is like what big bets are we gonna make like i love that stuff like okay we have we or like what's our one big bet for the year and then spending a tremendous amount of time doing research and be like okay this is where to go and this is howard what's an example of bet you made a year and a half or two the software component for the publishing business so it was not that it was basically a consumer service business fundamentally like education service whatever and it was i think the revenue is fifty fifty split between the two and so as like we have to put some sort of software thing in here that we can facilitate so either we get a tech enabled service multiple we just get a pure saas multiple and so it was a year and a half ago and we started putting a few million dollars into developing the software that now has just had a tremendous uptake rate has improved conversion rates improved client success scores all of these things and that was a bet you know i mean to be fair for a company that size even when we made the bet i think we're were doing somewhere like twenty million in eb but i wanna made the bet something like that so you know betting ten percent or fifteen percent of net free cash is not like a massive bet but from a resources perspective of the attention of the leadership team that was where the big bet was and so kinda like the point with the brand versus the cash like if i'm gonna do a deal and i promoted the biggest the biggest slice that i'm giving is is the audience and the attention not the cash what's a company you would wanna go buy right now let's say you had the money that today what type of company would you go buy i probably wanna buy a big professional services business what's that mean business plumbing so payroll financial services or business like counting tax like the things that every business has to have i like those businesses i i mean i love service businesses even though forty percent of our portfolio software i still like service tech enabled service it like and i still see software as software as a service like i just i feel like i get those types of businesses because there's so many things where my skill set of like tweaking pricing and figuring out sales process and demand gen like that's where i'm pretty good and so there's the businesses that i can make a huge impact on i got one more question for you which is what are you trying to figure out because one trap you could fall into is like you're the advice guy it's like here's the guy who turns on the camera gives everybody advice all the fucking time which is like inherently somewhat of a know at all position which is dangerous on the audience side of like eventually people start to resist that but also more importantly for yourself you're like you got where you got because you were the student and now you're getting good benefits of being the teacher but you still wanna be the student and so i'm curious where are you still the student right now like what are you trying to figure out what are your unanswered questions that you're you're n on that maybe maybe even we could help you out or or kind of help you you talk through this i would say the big things that i'm still like green on are the fund world raising capital like lps like i don't have any experience with lps i've always done my own my own money i don't use debt i will probably use more debt in the future i just haven't so those are all things that i am kind of more spending time on that being said like to be very candid with you i feel like in sam and i talk other sam sam partner of mine and i talk about this which is like there's periods of figure it out and then there's periods of due like i'm in a period of due right now and then when i get to a constraint because right now the plan of like grow more media grow the companies has been working and so i wanna do more better not new and so i'm gonna continue to do more better until more better stops working and then i will look at something new so like in terms of where i see my efficiencies from the private equity perspective lps and debt are things that i would say that our our weaknesses of mind in terms of understanding because i've used my own capital but in terms of limited for the business right now i think the biggest threat is always focus and so that's why i try and say no to everything except coming on this podcast because where your boys dude do the man you guys are the man i i'm happy you're feeling healthy you're looking good as always we appreciate you is that the pod sean is it i feel like i could rule the world to i know i could be what i want to put at all in it like a day's off on a road travel never looking back