Biggest mistake that stopped me from getting past $30M

Summary

• Make sure you're selling something people actually want—surprisingly, not everyone does this.
• Businesses often plateau when their margins become paper thin, which is something to be aware of.
• From zero to $100k, it's common to have unreliable customer acquisition from various channels because you're figuring things out.
• To scale from $100k to $1 million, you'll need to develop a single reliable acquisition channel, focusing on one product and one audience.
• Achieving product-market fit (PMF) means people want your product. This is where businesses often make mistakes by simply doing more of the same to grow.
• As your business scales, expect three inevitable occurrences: cost per impressions (CPMs) go up, consumer conversion rates go down as you target colder audiences, and infrastructure costs increase, compressing margins.
• Combat margin compression by improving the customer experience and creating a customer success team focused on driving referrals and positive word of mouth.
• Monitor customer metrics like time to value, NPS scores, and customer health scores—these are crucial for generating referrals.
• Negative word of mouth can significantly increase the cost of acquisition and harm your business. Conversely, a positive experience encourages referrals and can reduce acquisition costs over time.
• You may need to slow growth momentarily to create operational changes that bolster customer success and experience.
• Set modest expectations for your products and then exceed them to surprise and delight customers, which leads to more positive word of mouth.
• A brand is essentially the reputation of your products and what people say about them behind your back. Maintain or exceed the promises you make to build a durable brand.
• Don't prioritize short-term sales over the long-term brand. Refrain from setting overly high expectations that can't be met.
• If you've built a strong brand, you may have the power to increase prices without impacting demand, potentially doubling or even tripling profits.
• Beware of the three pitfalls that can thin out your margins and endanger your business: rising CPMs, targeting colder audiences, and increasing infrastructure costs.
• Focus on long-term success rather than short-term gains; sometimes going slow initially can lead to faster, more sustainable growth.

Video

How To Take Action

I would suggest first making sure your product or service is something people truly want. This may seem obvious, but it's a step you can't skip. If you're making less than $100k, work on finding a single reliable way to get customers. Don't try to do too many things at once. Focus on one product for one kind of customer.

Once you hit $100k, look for ways to get from $100k to $1 million. Key here is to have a steady way to get customers, maybe through ads or social media. Stick to one channel and know who you're selling to. This keeps costs low while you're still figuring things out.

To keep growing, expect costs to go up, it gets harder to get new customers excited, and you spend more running your business. Don't freak out. This is normal. You can fight this by making sure your customers are super happy. Happy customers tell their friends, which can save you money on finding new ones.

Pay attention to your customer happiness. Measure things like how quickly customers see value from what you bought, and how likely they are to recommend you (this is called net promoter score or NPS). Make sure your customers have a great experience—so great they can't help but tell others.

Instead of just trying to sell more, slow down and make sure you're giving your customers an experience they didn't see coming—in a good way. Surprise and delight them so they talk about you positively to others.

In the long run, if you create a strong brand—the good stuff people say about you when you're not around—you might be able to raise prices without losing customers, which means more profit. So focus on being really good to your customers, not on just making quick sales. It might be slower at first, but it's worth it for better growth later.

Quotes by Alex Hormozi

"it means that people actually want the thing that you're selling which believe it or not a lot of people sell stuff that people do not want"

– Alex Hormozi

"you have to pause when you're in that one three maybe five million dollar per year range"

– Alex Hormozi

"cost per impressions go up, that is an eventuality that is a lot will happen over time"

– Alex Hormozi

"we need a acquisition channel that doesn't behave in these three ways"

– Alex Hormozi

"this is the invisible hand and the reason this is so important is that as you scale"

– Alex Hormozi

Full Transcript

it means that people actually want the thing that you're selling which believe it or not a lot of people sell stuff that people do not want crazy i know in this video i'm going to break down why all of these mass market biz ah businesses and uh consumer product businesses plateau and so if this is you then listen up and so uh this actually stemmed from a conversation that i had uh with a big uh business opportunity business owner who's doing you know 50 60 million a year and you know they were reaching a plateau where their their margins were paper thin and so i wanted to break down uh the reasons why the way a mistake that you can avoid that took me a very long time to figure out and a lot of pain and so if right now you are in one of these businesses that sells to a consumer products alright so mass market or b business opportunity or c even uh services to mass market then this video is for you all right and i'm going to show you how you can avoid a mistake that you won't know that you made until it's too late alright if you don't know hi my name is alex from mozzie i own acquisition.com it's a portfolio of companies that over 100 million a year i make these videos because i want you to get to 3 million a year so i can partner with you that's why all right but if you're not there then i make these videos just because i want you to be rich af all right so let's walk through a logical outline of what happens in a business all right so zero to six figures all right so zero to 100k you sell something to someone that's what you have to do in order to get to 100k and usually it is unreliable all right so you have unreliable acquisition and usually from different channels because you don't know what you're doing all right and that's usually what it is all right so it's unreliable acquisition but you are selling something to someone now 100k to 1 million you create a reliable and usually a single reliable acquisition channel which means you pick one channel one product one avatar all right and you sell that thing that's all you do and if you do it reliably you can get to seven figures that is what happens here now what i'm about to show you is the mistake that most people make all right at this point we have what i would call pmf or product market fit it means that people actually want the thing that you're selling which believe it or not a lot of people sell stuff that people do not want crazy i know all right so we have product market fit now this is the point where people mess stuff up because what happens is they say hey i did this thing so if i do more of that thing that is how i will grow this business and the answer is yes and also no and here's why if you do more of what you do there are three variables that are logical eventualities that will occur in the business that will eventually rob you of your margins and so if this actually worked then you usually are profitable right and so you were most profitable in the beginning of the business why because you usually had to figure something out and you usually have very low overhead less infrastructure cost etc in the beginning right now in a physical products business specifically you do have some economies of scale that happens when you buy more stuff but those are diminishing meaning you know the first two increases in orders of magnitude of purchase size is where you get the vast majority of your savings and then after that it's razor thin in terms of how much uh savings you're going to be able to have from scale all right from increasing the quantity that you purchase all right so you're usually profitable in the beginning and you're growing cool makes sense now here's the thing these are the three eventualities that happen in every business that's mass market all right number one is that cpms go up over time all right they go up over time that should make sense advertising today is more expensive than it was yesterday and more expensive than it was 10 years ago right cost per impressions go up that is an eventuality that is a lot will happen over time number two is that you will have to go to colder and colder audiences which means as you scale the conversion rate that you have on these audiences will go down right if you had that one channel that you were doing if you go deeper on that channel you go to lesser or lesser likelihood audiences of people who are going to purchase right this is a function of scale and so you think about it like conversion goes down as you scale that makes sense now the reason that a business can scale is because they make so much money on the on the smaller audience that when they go to a larger audience they still make enough money to justify doing it but it is a logical eventuality at some point you will reach a cold enough audience that they will not buy all right and then the third piece is that as you scale business costs of infrastructure go up all right which means that you have higher fixed costs in the business which means your margins in a railway can't compress all right so these three things are eventualities these are logical outcomes that happen as you scale as the business progresses and does more volume all right and so if we have these three things then what happens is let's say this is our our line of of top line and let's say this is our margin line is that this starts to compress right here and so we start making less and less money over time even if our revenue is going up right this margin still starts to compress and we start to get razor thin why because of these three eventualities right these always happen in every business so then you're like okay alex that sounds like doom and gloom then how do i combat that well it's understanding sequence all right and so if up to this point you said okay i made a million dollars we're making two million dollars a year or whatever selling uh mass market services mass market products you're selling to everybody you're selling to a big big big demo all right so this is where beauty this is where uh business opportunity this is where investment opportunity this is where weight loss uh relationship coaching big mass market things right these are huge industries okay and so how do we combat it we have to have an equally strong thing that is going in the other direction that is decreasing our cost of acquisition and increasing our gross profits all right now how do we do that do that through getting the invisible hand to work for us which is warm word of mouth all right now before you before you look away because this is important this is the invisible hand and the reason this is so important is that as you scale right if we're in this little you know example over here and we go you know uh 1 million to 10 million right and the margin goes from you know 40 to 30 and we go 10 to 30 million we go from 30 percent to sorry from 20 to 10 margins right and this margin keeps compressing the thing is is that we need a acquisition channel that doesn't behave in these three ways how word of mouth is quadratic in nature meaning one person tells two two people tell four four people tell eight and so we have far more leverage on the acquisition of one customer and this process right here is what will drive down your cost of acquisition over time at scale even if you're reaching more people less efficiently than you were in the beginning which makes sense of course you'd be less efficient at the beginning less efficient at scales you are in the beginning now you might say well our media department's better our buyings are better our advertising is better and sure all those things happen but these three things are absolutes cost impressions will go up you will market to colder audiences who are less likely to buy your thing and the cost of infrastructure will increase those are eventualities all right and so we have to and this is the piece that everyone misses you have to pause when you're in that one three maybe five million dollar pre-year range you have to pause to do something entirely different and you have to stop doing the thing that got you there because continuing down that path will eventually lead to a point where you have lots of revenue and basically no margin and then you will have a hiccup you will have a mistake or you'll have something that happens and it will blow your business off its course and all of a sudden you'll go from feeling like you're on the top of the world driving all this cash flow driving all this revenue to being like holy we're negative and we're paper thin and i don't know what to do and you feel like you have to keep selling just to pay payroll but there's basically no margin left and then you basically have created a massive non-profit that you're liable for right and if i'm talking to somebody you know who you are you're listening and you know exactly what i'm talking about right now all right and you and this is the eventuality that happens unless you stop and you fix this which makes it feel like you're doing something out of sequence but you're actually doing it the right way to do which is why you have to go slow to go fast sometimes okay so onwards what we have to look at is how can we improve the customer experience right the customer experience how can we create a customer success team or director who can start tracking things like time to value like how quickly can someone you know achieve this value what are nps scores what are our customer health scores what are the things that are going to drive the one thing that matters most which is referrals because what happens is that most people either have neutral or negative word of mouth all right and so here's a way that you know if you have negative word of mouth negative word of mouth is when your cost of acquisition increases at a faster rate than the cost per impression increases okay so if the cost per impression is up 10 and you're up 40 it means that you have that quadratic that beast that i was showing earlier that does this whatever you have that beast but that invisible hand is now compressing your business people who would otherwise would have purchased see your ads see your marketing and say oh i actually heard something bad about that and then boom they don't buy and not only that the negative ones tell 10 times more people than the positive experience one which is why it's so hard to build a wonderful business because it's so hard to have to be so good that you counteract the 10 times word of mouth that happens with a negative experience i know this is crazy it makes it feel makes business feel hopeless but there is hope because if we do this in the right sequence and we say we're going to pay attention to things that matter most because we're thinking about 10 years not 10 days from now we know that these three things are going to be the inevitable things that eat our business and eat our margins and so we have to combat that by pausing increasing our integrity about the products that we're selling right so that we can drive the thing that will be our our our guard our shield against this it will be the invisible hand fighting the negative invisible hand and increasing it because all of a sudden people heard something and then they see your ad say oh i wouldn't normally have bought it but i did hear something about this and then they purchased and all of a sudden what happens is holder markets become warmer markets as a result of the word of mouth all right and so that is how you can use this thing to give you the positive invisible hand that can combat you now some businesses at scale what they figured out is okay they're not shitty but they're just neutral right and the thing is is that these three eventualities will still happen no matter what and so you need to turn this negative into a positive otherwise at scale the eventuality of this business is it will do tons of revenue and you will reach a point of equilibrium where your costs and your and your cash flow are the same and you have run a massive nonprofit that you are 100 liable for and that is very very very stressful and so the only way to build the enduring brand that can continue to scale is to have this invisible hand in your team on your side which means you might have to slow down for a period to figure out what do clients really want what is the job that they hired our products or services to truly solve and how can we figure out a way to truly surprise and delight them in a way that they did not expect which means we want to increase the discrepancy between expectations and delivery all right we want the liver to be up here and we want expectations to be on here and the problem is that most people who are short-term short-term minded what they do is they say they raise expectations in order to make the short sale but then what happens is they can never live up to that and so we have a negative expectation to delivery gap and then that is what drives the negative word of mouth in the business which eventually dooms them and so the idea is how can we have modest expectations that we can set and then create such an amazing experience decrease the time to value so that people say wow this thing was so much better than i expected you should try this out and the easy way to show this is have you ever had somebody pump up a movie to you and be like hey this you got to see this thing it's so good it's good you're like oh man i can't wait to see this thing and then you're like okay that met expectations even though the movie was amazing movie that met expectations because you had amazingly high expectations on the flip side have you ever had an experience where someone's like oh this is a movie it's terrible blah blah blah you go in with super low expectations and then you're pleasantly surprised right even though the product was the same the expectation dramatically changed our experience of the product service etc right and so when we're dealing with consumer products right we want to set modest expectations and then create room for us to over deliver so that we can get this word of mouth and so what we do is we don't trade the short-term sale at the expense of the long-term brand and the brand in a nutshell does two things a brand is simply what people say about your product behind your back that's what a brand is it's a reputation right and the easiest way to build your reputation is improve the quality of your products is to keep the promises or more than keep the promises that you make that is how you build the brand that will endure and that is the thing that can achieve scale because once you achieve scale you also have the hidden power pricing behind you because once people love your products and services if you do a 10 or 20 bump in price and for those of you who sell mass market b2c products these things if you don't have a change in demand all of a sudden double triple quadruple the profit of your business right and you can only do this and have premium pricing power if you have a brand otherwise you're just media arbitraging and you will eventually run into this these three evils right here check check check these three evils right here that will eventually eat away your margins and destroy your business all right so this is a cautionary tale of what not to do and sometimes you have to go slow to go fast to build the thing that's worth building all right so mother nation i love you guys keep being awesome and i'll see you guys in the next vid bye mozzie nation you guys are the best and if you could do me the biggest favor of the entire world click the like button comment below so i can answer more of your questions in the videos and make sure that i'm not just making stuff out of my head but answering the questions you guys actually want like comment i'll see you in the next vid