This Video Will Make You Unstoppable
Summary
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Two out of three businesses fail within ten years, not necessarily due to the owner's failure, but often because they chose the wrong customers. It's crucial to pick a stable and committed customer base to ensure business longevity.
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Serving small businesses can be risky due to their inherent volatility, which can lead to high churn rates. For example, small advertising agencies struggle to maintain low churn when serving small business clients, as these clients often face unpredictable financial swings.
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Businesses like Chick-fil-A win not by changing their game strategy but by selecting the right team and customers from the start, highlighting the importance of a solid foundation.
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Large companies, like ad agencies, focus on serving larger, more stable clients who provide a reliable revenue stream and decrease churn rates.
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For pricing models, it's strategic to set prices based on a customer's worst month to consistently provide immense value against low cost, keeping churn rates minimal. This approach encourages smaller businesses to remain loyal even during hard times.
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Selling to beginners, whether B2B or B2C, often results in high churn rates due to their frequent transitions. Instead, target experienced users or companies who have a steady commitment to your product or service.
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Building a business model from the top down, focusing on larger, financially stable customers, can lead to less operational strain and a more reliable income stream. Once established with high-end customers, it's easier to scale by incrementally serving lower tiers at low cost.
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The perception of value is crucial; a high value discrepancy between price and perceived value keeps customers from canceling, even during financial strains. Low-cost consumer products, like Netflix, maintain their appeal by offering immense value relative to price.
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Continually improve and adapt your product or service by genuinely listening to customer feedback. Simple conversations with customers can illuminate vast opportunities for enhancement and innovation.
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Understand your type of business and embrace it. Don’t try to masquerade a service business as a tech business, for instance, because the underlying economics and value don't change with a label.
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Long-term success often requires persistent effort in doing the basic, obvious things without overthinking or attempting to shift your business identity unnecessarily. Focus on building and improving your core competencies consistently over time.
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When iterating your business, ask customers two critical questions: what one component they love and can't do without, and which component they least care about or can do without. Use their feedback for strategic refinement.
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Businesses often err by redefining themselves instead of optimizing operational economics like revenue retention, incremental margins, and customer service capacities. True business growth and valuation arise from improving these core metrics.
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The ultimate success strategy involves sticking to your plan, maintaining discipline, focusing on true economic enhancement rather than superficial changes, and committing to continuous and long-term growth.
Video
How To Take Action
I would suggest implementing these strategies to keep your business strong and growing:
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Pick the Right Customers: Focus on finding stable and committed customers. Avoid markets where there's a high risk of churn due to the inherent nature of the customer base. For example, prioritize serving established businesses over volatile small startups.
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Price Wisely: Consider pricing your services or products at a level that small businesses can afford during their worst months. This ensures you provide substantial value for the price, keeping clients loyal even when times are tough.
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Serve Upmarket Customers: Aim to start with larger, more stable clients who offer a consistent revenue stream. This reduces operational stress and allows for easier scalability. Once solidified at the top, you can gradually introduce services to smaller clientele.
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Understand Customer Needs: Regularly speak with customers to understand what they love about your product and what they can do without. Use this feedback to enhance and streamline your offerings effectively.
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Deliver Exceptional Value: Make sure the perceived value of your product significantly outweighs its price. This can help retain customers even when money is tight, similar to services like Netflix or Spotify.
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Stay True to Your Business Model: Recognize the core of your business and don't try to reposition as something you're not. Advancing in your true strength over time is the key to success.
- Iterate and Improve Based on Feedback: Continuously refine your offerings by identifying actions that lead to the best customer outcomes. Encourage these behaviors in new customers to improve their success rates.
By focusing on these strategies, you'll build a more resilient, attractive, and successful business.
Quotes by Alex Hormozi
"Churn is baked into the structure of the market you serve"
– Alex Hormozi
"If you sell to beginners, you're building on a foundation of sand"
– Alex Hormozi
"Success comes down to doing the obvious thing for an extraordinary period of time"
– Alex Hormozi
"You solve every business problem by simply talking to your customers"
– Alex Hormozi
"Don't pretend to be something you're not; solve for the things that matter"
– Alex Hormozi
