$50 Billion Lessons From The Former Hand Of Pricing Packaging Product at Vista [ALEX HORMOZI]

Summary

• Attending events like SAS Academy and speaking there is incredibly valuable, as it presents opportunities to network with industry experts like Marcus Rivera from Vista, which is the world's largest private equity firm for software.
• Vista's standard operating procedures (VSOPs) are highly guarded secrets but they fundamentally rely on the concept of scoring leads, prospects, and customers based on their value.
• To achieve Vista's goal of tripling money in three years, they meticulously analyze data to pinpoint and then focus on the most valuable customers, using simple yet effective systems.
• To apply a similar strategy to Gym Launch, we analyzed a 90-day block of data to identify characteristics of both our least and most successful clients.
• Characteristics of successful Gym Launch clients include being full-time gym owners with a signed lease and, ideally, at least one employee.
• By implementing an enhanced qualification process for new gym owner clients during October, the number of escalations (issues with client onboarding and satisfaction) dropped from 22 to zero, while the sales numbers reduced to reflect higher-quality leads.
• Focusing solely on high lifetime value clients resulted in higher payments, better results, less work required, and an overall more profitable and operationally efficient business.
• Additionally, customer decision points in recurring business models typically occur between the sale and service initiation, as well as during the service implementation or onboarding period.
• The intricacies of their customer onboarding experience are critical—it's essential to over-deliver on value and meticulously plan out the entire orientation process.
• Setting correct expectations is crucial when selling to customers; if expectations are too high, even good results can lead to dissatisfaction.
• At Gym Launch, we now heavily qualify potential clients on the front end to ensure they match the profile of previously successful clients, and we're focusing on setting and fulfilling the right expectations during the sales process.
• Enhancing our onboarding experience is a continuous goal to ensure every customer knows what's happening now and what will happen next, ensuring a smoother transition and greater satisfaction.
• These lessons in customer qualification and expectation management can be applied to other businesses to improve customer quality, service satisfaction, and long-term client retention.

Video

How To Take Action

I would suggest implementing Vista's philosophy of scoring leads and customers based on their value. To do this effectively, start by analyzing a block of data, like 90 days, to understand the characteristics of your most successful and least successful customers.

Here's how you could break it down step by step:

1. Review Your Data: Look at the last few months, note the customers who left and the ones who soared. Jot down traits, behaviors, or patterns you see.

2. Score Your Leads and Customers: Use your data to grade your prospects and customers. Who is the most valuable? Think about lifetime value or how easy they are to serve.

3. Qualify Your Prospects: Create a list of characteristics your best customers have. Only take on new customers who fit this profile. For example, if you're in the gym business, only take owners who are fully committed.

4. Set the Right Expectations: Be honest about what customers can expect from your service. If you overpromise, you'll have unhappy customers even with good results.

5. Upgrade Your Onboarding: Make sure your onboarding is seamless and packed with value. Explain everything clearly, so customers know what's happening now and next.

6. Continuously Improve: Keep refining these steps. Work on your sales process, your expectation setting, and customer satisfaction.

By scoring your leads, qualifying them, setting proper expectations, and improving your onboarding, you can draw in high-quality clients, trim down operational headaches, and possibly, like Vista, triple your money in three years. Remember to keep it simple and focus on those valuable customers.

Quotes by Alex Hormozi

"We stick to simple systems, simple processes"

– Alex Hormozi

"Expectations are everything"

– Alex Hormozi

"Over deliver on the expectations that you've set"

– Alex Hormozi

"Focus on over delivering a value"

– Alex Hormozi

"The people who are the most advanced never don't do the fundamentals"

– Alex Hormozi

Full Transcript

what is going on everyone hope you're having a wacky wednesday um i am fired up today i'm gonna probably make a bunch of content because i've had like 10 straight days of events and i have all these questions that people were asking me on my mind and little anecdotes that i shared that people found value in so hopefully you don't mind me just sharing those things with you now so um the first uh two days were actually events that we attended and spoke at uh which is at sas academy dan martel's event and i was fortunate enough to be at the speakers table which was value in and of itself and one of the people who was at the speakers table with me was a man named marcus rivera he was vista's former head of pricing packaging and products so pretty much when they would acquire a company he would be the guy that would go in and retool the entire kind of fulfillment structure who they were serving how they would break down you know the the levels of membership etc and so for those who don't know what vista is vista is uh i think the world's largest private equity firm for software um if you put their whole portfolio together it's over 50 they do over 50 billion a year um they would be ranked third i think um in the world uh behind like facebook and amazon so like uh for like software companies so they're um they're really really big really really smart and uh i was fortunate enough to sit next to this guy for uh two days which was awesome for me um and one thing became really clear when we were having dinner um and so they have something called vsops which is vista's um uh sop so they're they're kind of their standard operating procedures and these things are so closely guarded you need like retinal scans and like there's like you only get access to certain numbers of them if you're at certain levels and then they you your access gets removed it's like super top secret stuff and this is literally how they create value how they purchase companies put their system on top and then increase the value of that company and so for them their whole mantra is tripling their money in three years so it's three and three and so um one of the things that he shared with me now obviously he couldn't share like the the intricacies but the concept was really really powerful for me and i'll tell you how we applied it at gymlodge and so um one of the things that uh most companies don't do is they don't score their leads right they don't score their prospects they don't score their customers based on uh the value of that customer right and so scoring them can be based on a number of of characteristics behaviors etc that that person shows uh to you know put them in a certain bucket right and uh what vista does and what they count on is the fact that when they go into a company when they're assessing a company in the diligence process that they're going to learn more about that company that the founder and the people in that company even know about it and so what they do is they parse out the data and they start trying to find the veins or the buckets of the most valuable customers once they find those buckets that vein of customers that's more valuable what they then do is they basically expand and focus on that vein of high ltv customers like it sounds simple and one of the things that marcos actually hit on a lot was like he's like we we stick to simple simple systems simple processes and so when when we when i've like said things like the people who are the most advanced never don't do the fundamentals i feel like i've seen this at like so many levels and seeing this from probably you know the biggest and probably biggest you know software turnaround increasing value company out there um is pretty cool and so let me tell you what we did um to kind of go through this process and so marcos was explaining that they don't even just do it for customers they do it for uh prospects opportunities and uh and customers so three different segments they're going to look and score at each each part of the pipeline all right using the analytics that they have in the teams that they do now you're like okay cool that's awesome alex how does this make more money at my gym and so let me tell you how we're applying it right now and so what we did um is we took the last 90 days i think it was july uh july august september or maybe it was september i think yeah i think it was july august september so it's like a 90-day block of time and we looked at all of our exits all of our escalations uh what the with the people who kind of kind of sucked the most are people who didn't get the most results whatever you want to put it uh the people were the the hardest to serve uh and who got the least results using our program and then we looked at the the conversation the reverse of that what were the characteristics of the people who made the most money who got the highest returns who were the easiest to work with right and so we found here's some unsurprising facts um if you are not a gym owner right uh you don't do as well as people who are gym owners crazy crazy facts right um and we also learned that if you're not full-time in your gym and you have a job outside and you're trying to do a gym as a side hustle or something you don't do as well as people who are fully committed to their gym if you don't have a signed lease or a building of your own you don't do as well as someone who has a building of their own right and if you uh don't have any employees it's harder for you to do this mostly because there's a huge time constraint right like it takes effort to implement new systems because not only do you have to keep your existing business going you have to start working on top of that in order to dig yourself out of the hole right and so when we found those characteristics what we started doing is we started uh uh filtering and qualifying our front end and so we started doing this uh for the month of october all right so we we took the 90 days we found we took the findings and then we implemented for the month of october right now we're in november and what's crazy is this from the the previous four weeks so in september the last four weeks compared to after we started doing this qualification there's two crazy two crazy numbers i'm going to share with you one is once we qualify prospects that they had to have at least 25 clients they had to have assigned lease they had to be a full-time gym owner right and ideally this was optional but ideally have one employee or more who worked with them so that they could share the load and so that they could actually focus more on selling and you know working leads etc when we looked at the after effect of that our sales decreased from uh over 100 a month uh in terms of gyms to about 40 to 50 right now here's where it gets interesting all right so that cut our inflow in half by qualifying our customers right by by really making sure that the people were coming in were the best fit who could serve the best right here's what's cool on our side now that we've done this in the first four weeks in the four week period since then the people who started after those qualifications we've had zero escalations from those people prior to that we have we had 22 escalations as in people who were having issues uh you know whatever it is you know i mean just red flags right um the the prior four weeks so from 22 to zero now think how crazy this is in terms of scaling a business and operational uh complexity as you go up right so we we had this huge vein of people who were taking up the vast majority of my team's time and were actually worth less right they made less they were worth less to us and so when you're thinking about scaling and maintaining operational efficiency and profit if you're looking at the customers that that are the highest lifetime value the best customers right and here's what's crazy the people so after that october date um we switched back to the define in program which is what we did for you know three years so we did a a brief stint where we uh where we basically signed people up for a year up front because we wanted to give them everything it was it was a trial we did a 90-day sprint and uh it turned out that that didn't work nearly as well as having defined it and it's kind of the same way you run the gyms it's like having a defined end program tends to be a little bit more it's a little bit easier for people to wrap their heads around a little more defined in terms of the skills that they need to acquire etc but what's interesting is that the people who uh came back in were actually paying more than the the people who uh were paying more than the people who who we were letting before so this this new vein of customer who's higher qualified is paying more is making more requires less work now that sounds like a recipe for a higher profit business right it also sounds like a recipe for better happier customers and so also what happens if you think about it from a reputation standpoint it's like you're if you if you lower the bar too much then what happens is you bring in people who are not qualified right they take up more of your team's time they cost you tons of effort and they're not making as much which means that then they say like your thing is not as good right when in reality it might just not be as good for them right which makes sense i mean like it makes intuitive sense and so i just like sharing these these mistakes learns with you so that maybe i can look back on this 10 years from now and be like hey i remember when we started doing that um but now what our focus is is cool we know who the best customers for us are and it's like dear god why did this take us three years to do this you know like you know learn from my stupidity like hopefully you can start doing this with your own stuff and now we're just gonna focus and double down on that vein of customers and try to expand that by really focusing on on them in multiple platforms right and so um i say this is to say if vista has has repeatedly you know been able to go from i mean they're not a super old firm you know from basically nothing all the way to 50 billion in a very short period of time it's because they know how to extract and amplify value and the biggest thing is not change i mean they do shirt they tweak the pricing they find the right buckets etc but they do that by analyzing the customers better than the business that they're purchasing purchasing even knows their own customers and so i challenge you now this may sound like super analytical it's not all you have to do is look over the last three months okay look at the people who left your business all right this is where you get the the best data is from all the people who leave right so look at the data from people who left your business try and get as like to think about as many character traits as you possibly can what's their age what's their you know what's their job uh what are their goals what do they sign up for how much money down did they start with um what do they sign up for in terms of their continuity etc and if you can if you can piece those things together then you're gonna get a really good idea of of uh of who the good customers are and who the bad customers are and it's okay to have a stern line because we're doing this now now the thing is is like in the in the short term you can be like oh my gosh my inflow cut in half but so did all my operational overhead and and the issues that like all that work that the team had to put together um to try and service these people who were not necessarily the best fit right and so um i share that with you and i'll give you one more tidbit that i learned from him and so uh we learned this from the from the whole event which we took is a huge takeaway for us that you can totally apply to your gym is that customers in a recurring base business or really any business decide whether they're going to stay at two points in the beginning of your life cycle all right between the sale and when they start getting the thing right the service the product the whatever and once they start using the product the implementation or onboarding period so in that period so if you're doing an orientation with your clients right they buy something all right the time between the purchase and when they start getting the thing which would be your orientation and the actual orientation itself is typically when people are already making the decision of when they want whether they're going to stay with you in the long run all right which means if right now you just think your your orientation is an aftermath it's like oh yeah now we have to fulfill that thing we sold you're screwed right you're getting by just on the fact that like you're you have enough volume in the door but you're losing massive amounts of money by not making that a completely choreographed experience that you're really focusing on over delivering a value and the way to do that is to demonstrate the skills that they're going to need to be able to use to use your services right and so whether that like they not just not just saying hey yeah you should download this app yeah yeah you'll figure it out but actually doing it with them holding their hand and then having them duplicate the process so that you can see that you've transferred the skill to them so that they now know and they are self-sufficient in being able to consume your services right and so if your onboarding is rushed right your orientation is rushed then expand the time period because it's going to massively multiply the lifetime value of that customer and the likelihood that they're going to stay with you so this is one of those few times where you don't want to be lazy and not and not deliberate and intentional in how you're onboarding the customer after you complete the sale so the communication that you have with them immediately after the sale which is like sending them a personalized video you know giving them swag maybe a letter whatever it is definitely texting them between the time that they make the sale or you make the sale and when they start the onboarding and the second piece i'm already going back to the big beginning is the sale itself and so what we're learning internally for us at gym launch and this may seem obvious but maybe i'm sharing it with you because we're learning it too is that expectations are everything right expectations are everything and if you set proper expectations for what is going to happen next and then you fulfill that beautifully your trust with the prospect goes up now here's where it can get uh tricky right and this is what we call selling hot it's where you where you set expectations so high it's impossible for you to ever fulfill or for you to hit that with the majority of customers right and so this is where selling towards behavior and selling towards sustainability and long-term change comes really into play so that you can shift and break the beliefs of your prospect to shifting their time frame to what is really going to be beneficial for them rather than um simply trying to sell them to say yes right and so um an example of this is you know for us if if someone has only consumed testimonial and we've we've changed this in our marketing we've changed this in our testimonials we've changed it in the in the post that we tag people in is that we're really no longer focused on on saying like hey look at these 10 people who made a hundred grand in their first you know six weeks with us right we have those right we totally do but the thing is is like but what are the averages right and so now we just share what the average gym does all right and it's significantly less you know appealing i think the average gym right now is like they do 16 000 in their first six weeks with us right now that's a lot but it's not a hundred grand in your first month and and showing what the average gyms are getting in terms of leak costs and lead flow gives people at least an average understanding and we can explain to the person that means that half the people who sign up get less than this right this is the average and so that way um if you if and when you do go above that mark then their expectations are reasonable and you can over deliver right um and in an ideal world you would probably try and sell on the bottom 25 of results so that the expectations are so low that everyone is excited about the fact that they're over achieving from that um from that baseline that you have set for them and so what i've like i'm continuing to learn this i like want to write like a whole presentation on expectations but expectation management is everything right it's amazing what happens if you set a really high expectations and like this is where this is where someone makes twenty thousand dollars in their first month and is disappointed with gym launch and we've had this happen plenty of times right they're like well this sucks i thought i was gonna do better right when in reality that's [ __ ] amazing right um in terms of the big scheme now maybe this resonates with you because you've had someone who loses five pounds in their first 14 days with you and they're disappointed now why would they be disappointed only one reason because the expectations that were set for them in the sale and in the orientation were were too high for the average person and then most people are disappointed with what would otherwise be considered an amazing great start and so if you can reset the expectations that are being uh put on the customer in the sale right and you sell around the fact uh not around yourself through the fact and you break the belief around what the explanation should be in a short and long-term vision so that you can shift their expectations towards long-term change and a process and behavior change so that they can ultimately achieve what they want which is being fit forever not fit for the next six weeks or six months right and so um all that to say the big takeaways that we have at gym launch is that we are now heavily qualifying people on the front end so that we have longer lifetime value we have superior client outcomes we have less operational complexity because these people have the right characteristics of people who are successful both externally in terms of like what they have their gym but internally in terms of how they work um and how like what level of effort they're willing to put in to be successful right we found out that entrepreneurs are not a very good uh demographic for us and so it's like cool we're not going to service them right we're not going to service them in this way maybe we'll create an info product that's um less for them so that they can go through it at their own leisure or their own time frame rather than the intense time frame that we uh put on to people uh when they start gym launch because it's really like ready fire go you know you have 72 hours and leads are starting to come in right and that's how we do things in gym much because that's how i am right um but we have now used this on the qualification side and then also how our sales people are tagging and setting expectations and then being extremely deliberate and we're still working on this um in making the onboarding and implementation even more choreographed and we have a pretty darn choreographed orientation process but even better even even more reinforced even simpler so that the handoff is seamless so that everyone knows exactly what is going to happen before it happens and then they know exactly what is going to happen next uh in their experience with us and so you can use this all these these lessons that we're learning right now um in your business so that you can increase the quality of the customer set the expectations properly and then over deliver on the expectations that you've set so that they can make the decision in the first two or three meetings with you that they're gonna stick with you for the long haul so i hope this is valuable for you like it uh drop a drop a comment drop a review if you're listening this on the podcast um and uh as usual if you uh want some free goodies you can you know download them somewhere you can go to alex'sbook.com if you want more stuff like this uh and get a free book anyways lots of love keep being awesome and have an amazing wacky wednesday and i'll catch you guys on the flip side alright bye [Music]