Alex Hormozi’s Warning: Stop Chasing AI, Build This Instead!

Alex Hormozi says

A productive agent generated $250,000 a year in gross profit, yet the business only paid $500 for a referral. A mentor suggested starting the incentive at $25,000 instead. He took his incentive from $500 for a referral to $25,000, and took his company from $10 million to $400 million.

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Calculate the annual gross profit a referred customer or employee generates and consider raising your referral incentive closer to that scale.

Alex Hormozi says

A business was paying something in the neighborhood of $11,000 a month for 11 virtual assistants doing data cleaning work that worked fine. The company then spent $350,000 trying to create an AI system to replace what those 11 virtual assistants were doing, which was over three years of the original cost. That process was not even the constraint of the business, just something they could automate, not something they should automate, since it was not what was limiting their growth. The real question for any automation spend is simply whether it is making you more money.

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Before automating a process, confirm it is actually your growth constraint and that it will make you more money.

Alex Hormozi says

He asks at what price something would be so expensive that someone would not even consider it, as part of a Van Westendorp analysis. He takes the survey data and puts it directly into AI to run the Van Westendorp analysis. He looks at area under the curve to see at what price he would make the most money with a higher friction sales process. He slices the data by customer type, asking what the rich customers think the pricing curve should be, and sometimes finds different curves because they are different customer groups.

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Survey target buyers with the Van Westendorp pricing questions and run the responses through AI before setting your price.

Alex Hormozi says

Company A sells 100 units in year one, makes a million dollars, and keeps all 100 customers. Company B sells 300 units and makes $3 million but loses all 200 customers again because it has no stickiness. Between one $3 million business and another $3 million business, he would invest in the one that keeps its customers, all day. The company that churns has to go sell 600 new customers next year just to grow. If a company solves retention first and then gets access to 10,000 new customers, it can become a billion dollar business because the revenue stays.

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Calculate what percentage of customers from a year ago are still paying you, and if it is low, fix retention before chasing new acquisition.

Alex Hormozi says

The most basic way to start a business is to get an LLC, open a bank account, have the ability to process money, and ask a stranger to do something for them in exchange for money. As soon as you do those four things, you are a business owner, and you have already beaten about 95 percent of people. Just like a customer's identity changes once they buy instead of just consuming free stuff, your own identity changes once you make that first dollar from a stranger.

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This week, form an LLC, open a bank account, set up payment processing, and ask one stranger to pay you for something.

Alex Hormozi says

Fear only exists in the vague, never in the specific, and the same is true of confusion. He asks whether it is failure if someone says no, and what happens if a hundred people say no. He asks what options are actually available, like whether you can go sleep on a friend's couch. It is only giving up if you stop trying. He split a bedroom with another guy for $400 a month and slept on a mattress on the floor.

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Write down the specific fear stopping you and walk through, step by step, what actually happens at each stage if it goes wrong.

Alex Hormozi says

Usually between 1 and 3 million dollars in revenue, you have to decide that some customers are easier to deal with and pay more than others. He changed an ad to say they help doctors generate patients using podcasts, so the right customer self-selects in. Serving one type of customer makes operations way easier because you can start templatizing and systematizing delivery. He calls this cut once, sell twice, not cut once, sell once.

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Identify your most valuable customer type and rewrite your offer description to specifically target them.

Alex Hormozi says

He writes all his persuasion using these elements: if you do the thing you get more good stuff, if you do not you get more bad stuff. If you do what he wants you get less bad stuff, and if you do not do the thing you get less good stuff. With a fitness program, signing up means more time with your kids and avoiding more health issues. He uses this same framework to think about behavioral change across hundreds of employees.

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Write your next piece of marketing copy using all the elements: more good if they act, more bad if they don't, less bad if they act, less good if they don't.

Alex Hormozi says

He put out 300 flyers early on and almost nothing happened, with only one person calling. His mentor asked what his test size was, and explained they usually put out 5,000 per test batch to know if something works, then 3,000 a day after that. The mentor was doing 150,000 flyers a month. The volume of activity people 100 steps ahead of you run is often 100 times more than you imagine.

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Before concluding a marketing channel does not work, check whether you have actually tested it at real volume, not just a small batch.

Alex Hormozi says

He took wealth in the United States and had it represent $100, showing the bottom 50% of people have roughly $2 of the 100. Many people starting out only see and sell to people with no money, keeping their view inaccurate and keeping them broke. He started by selling to startup founders with marketing budgets of approximately $10,000 and asking for $10,000. It was easier from a client management perspective to deal with Coca-Cola than with a small dating app founder. The price of a service almost has a one to one correlation with how advanced the business and business owner are. It is hard to hear advice to add a zero or two zeros to your price tag.

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Identify which tier of customers you currently serve and name the next tier up with more budget you could realistically reach.

Alex Hormozi says

Business school would cost $60,000 a year and he could not make money during that period. At the time he was making $50 to $60,000 a year. That came to roughly $240,000 as his opportunity cost for the two years. He asked whether he could take the money he had saved and in two years get to $10,000 a month instead. He could not answer the application question of how a Booth MBA would help his short and long term goals even after sitting with it for three days. Starting salaries after a good business school were around $120,000 a year.

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Before committing to a degree or program, calculate the tuition plus income you would forgo and compare it to a concrete milestone you could reach by building instead.

Alex Hormozi says

When you have no outcomes yet, you show proof of effort, like someone's first viral video simply counting to a million. To establish yourself in sales, record your entire day of selling and clip the best moment when something goes well. When you have nothing else, you have time and you have work. People follow those ahead of them because it compresses time, like compressing 14 years of business advice into a much shorter video.

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Record a full day of your work this week and clip the best moment into a short piece of content showing real effort.