6 Hacks To Make More Money [Increase LTV] Without More Customers

Good morning everyone. It is Alex Hormozi here from Gym Launch, Prestige Allen and the many other companies that we have in our portfolio. They did $110 million in sales and I am going to tell you how we did that. Without further ado, the purpose of this video is to show you the six ways to increase lifetime value, alright? And I'm going to show you my favorite one at the end of this that I think is the most powerful of the six. Alright? And so first thing we have to do is define lifetime value, alright? So there's two ways to grow a business from a fundamental standpoint. Number one is you get more customers. Number two, you make those customers worth more. That's it. That's it. So it would behoove us as business owners who are trying to make more and grow our businesses, that we should know all of the different ways to A get more customers and B, make them worth more. Alright? Now when I say make them worth more, lifetime value is a very loosely defined term. You can look on the Internet, there's lots of different definitions for it. And what I'm going to do is redefine this as lifetime gross profit, alright? So ltgp, which is what I care about because for example, if I'm selling a meal for $10 and I make and it costs me $9 to deliver the meal, that means I make a dollar. So if I sell someone and it costs me $5 to get somebody to buy a $10 meal, is that a good business proposition for me? Well, you're making $10, it costs you 5, you're getting 2 to 1. Well, my cost of delivering it's 9 out of the $10, which means I spend $5 to make $1 of gross profit, alright? And so that is why it's gp that's why I don't like lifetime values. It's a very amorphous term. And so what we're looking for is how much juice, how much gross profit is there over the lifetime of the customer for us, alright? Now that's not net profit. Net profit is after you've paid all the other expenses, your rent, your payroll, all the other things. But this is just the gross margin that comes in. If it costs you $2 to buy a thing and you sell it for 6, then the gross margin is 4. Now you still got to pay, you know, your warehouse and whatever other things you have going on. Now, hopefully you understand lifetime gross profit so I can get into the goodies. Alright? So there's six ways to increase ltv the first one is increase the price. Sounds crazy, but believe it or not, price in and of itself is something that can actually draw allure to your products. You think of a Chanel purse sold for $20, people would think they're as cool. No price in and of itself can create allure around a product. It can put you in another category. So much so that people say this is so much more expensive. There must be something different about this. I'm going to look at this more closely, right? Number two is that you can decrease the cost. Alright? So if I can find a cheaper way to do the thing, I can invest in technology, invest in processes, I can invest in outsourcing all these different ways that I can deliver the same thing for less, I increase my gross profit. So if I had that meal thing that I was talking about earlier and it cost me $9 to make the meal, but I found this new automated robotic process that allows me to do the meals for $2, that very much increases the lifetime gross profit of my products and my business. But I didn't change anything besides decreasing the cost. Alright, the next one is to increase purchase frequency. All right. So what this is is getting people to buy again and again and again. If I can get someone to come to my restaurant today and tomorrow and then continue to come forever, then that's going to be a much more valuable client, right? And so that increases, if I can get all of my clients to come in an additional one time, that would increase my lifetime gross profit per customer across my entire business. So if you're tracking with me, number one, you can increase the price. Number two, you can decrease how much it costs you to fulfill the thing. Number three, you can get people to buy more times. And then 4, 5 and 6 are slightly related, but different. The first is that you can upsell people. Now upsells very important here. I'm going to define this for you. Is selling the same thing but a more valuable version. So if you upgrade right, from a Honda to a Lexus, then you are getting upsold. Right? Important. And I think it's important to define these terms because they are different types of sales. And if you can be more nuanced in how you think, you will think better. Alright? Especially when it comes to your business. So the next. So that's buying. So I'll give you a food example. So if I go from a 20 ounce soda to a 32 ounce soda, that is an upsell, it's more of the same. It's either better of the same or More of the same. But either way it's the same category of stuff. I'm just buying a bigger, better version of it. Alright, the next is a cross sell. A cross sell is an adjacent need that I am solving. All right, so in the burger or sorry, in the Coke example, if I sell a burger with the Coke then that is a cross sell, right? So upsell is small coke to big Coke or normal lemonade to organic whatever, lemonade, espresso, sun kissed lemonade, whatever it is, right? That's an upsell. A cross sell would be what do you want with that lemonade? Do you want a sandwich with that lemonade? What do you want with that soda? Do you want a burger with that soda? Do you want fries with that soda? That is a cross sell. That's a cross sell. So you're selling an additional thing. This is usually the next natural need that the person's going to have as a result of their first purchasing decision. Oftentimes these cross sells are actually where the majority of the profit happens. So sometimes there are strategies in businesses that are called loss leaders. Everyone needs this one thing, but. But the next thing they need is going to be the thing that has all the margin in it. And if you know your numbers, you can build a model around that very successfully. And then finally this is one that's overlooked is down sells, right? So a lot of businesses that I'll talk to or that I'll consult with, they don't have any downsells. And so that means that there's all this traffic that's coming to their site or getting on the sales calls with them. But those people have needs too and it might not fit in your primary category. This is especially true if you sell a higher level service or a more expensive service. A lot of times we're still paying for this traffic, right? This traffic, these eyeballs are still yours. And I like to think of this as one person's trash is another person's treasure. There's always a business that can do something with some of the kind of the sawdust, the excess capacity that we have that exists within our business, right? And so down sells, you can either downsell to someone else's product and, and get affiliate commissions, get referral partner commissions for sending business their way or. Right? And I like that a lot because you have a nice relationship with another business, you think they have a good product, they specialize in serving that type of customer and you both benefit, you make money, they get free customers, everybody wins, the customer gets solved and they're going to thank you for making the introduction. As long as you have good partners, which you obviously should, the other way to do this is to have lesser, you know, lesser cost of fulfillment, but it's solving the same need. So trying to think an example of this. So yeah, if you had like a done for you service of some type, right. And the person couldn't afford your full suite of services, you could downsell a kind of a done with you or do it yourself version of that, right? And so making those products, taking the one time investment of making that product or making that, you know, done with you version of your primary done for you service or whatever it is a lot of times can serve as a really good downsell, right? If someone walks into a facility for personal training and they can't afford personal training, obviously there's groups and things like that they could do that would be a natural downsell. But maybe they want to stay at home and you give them an at home version, right? So there's all these different ways that you can slice and dice this. But fundamentally if we have people that were normally not giving us money because they would say no, but now we're able to monetize them in some way, we have now made more money per customer and it's really per person who walks into our business. Six ways to increase lifetime value of a customer, lifetime gross profit. One is you can increase the price and automatically you make more money. Number two is you can decrease how much it costs you to fulfill the thing that you're promising. Number three is you can increase purchase frequency or getting the amount of time someone buys from you get them to buy more over time. Number four is upselling them. That means having structured upsells where they can buy more of the same stuff or better versions of the same stuff. Cross sells is selling the next adjacent need. So you have to think to yourself, someone buys my service, what's the next thing they're normally going to need? Well, I'm going to sell them that too, right? And it also makes their life easier because they can get all their stuff from one place, makes you more money, everyone wins. And then finally what can I do with the sawdust? What are all these people who are coming into my business who can't necessarily afford my main thing and how can I create something that's still going to solve their need but doesn't cost me that much, so I can still make a good margin on this stuff or how can I refer the business out to someone else and still get A kickback from it. And so those are the six ways to increase lifetime gross profit. Now, I told you at the beginning I was going to tell you the thing that I think is the most powerful. It's this guy understanding price. Pricing is one of the most underutilized levers in the entirety of business. Most people figure out their pricing by looking at the marketplace, taking an average, saying, I guess I'll charge that. The secret that they don't know is that everyone else is broke. Think about it, everyone else is broke. And especially if you're entering the small business ownership. The reason that small businesses are small is because they think like small business owners and not big business owners. That's why they stay small. And so don't model small businesses. Look at the pricing models of big businesses. Now, strong word of caution here. There are market penetration strategies that businesses can do because they have funding and things like that. But if you look at mature businesses, businesses that have gone through the rapid growth phase and then have sustained, look at the pricing model they have because the model that they had, they have already tested and obviously has produced sufficient margins that they are able to continue to grow their company. And so don't look at the small guys, don't look at the person who's out of shape and try and model what they're doing, right? Fitness is a horrible example because people have great genetics or bad genetics anyways. But point is, don't look for the dentist who has bad teeth, right? Look for somebody who's got nice teeth. And I'm sure there's genetics there too. These are horrible examples. But hopefully you get the point. All right? Is that pricing is the most important lever. And I'll give you one quick example on this. If something cost me $10 to fulfill, right? And I charge $20 for it, cool, I'm making 50% gross margin. But if I say, you know what, I'm going to charge $50 for this thing, or you know what, we'll say 30. So I go from 20 to $30, right? I just doubled the lifetime gross profit of my business. Doubled, right. There are very few of these other mechanisms that can double or triple or quadruple the lifetime gross profit of your business or per client rather than price, alright? Which is also why it's one of the ones that people have the biggest limiting beliefs around and the ones that most people struggle to increase. And the good thing is, if lots of people struggle to do it, it means that there's plenty of opportunity for all of us. So six ways to increase lifetime gross profit. There's two ways to grow business. One of them is getting more customers. The other one is increasing how much those customers are worth. And here are six strategies that you can think about within your business of how you can apply these things to your client journey so that you can make those clients worth more without doing any extra work. Lots of love. Keep being awesome. Catch you guys soon. Bye.