Business Owners: You NEED to Know This Number

Want to SCALE your business? Go here: www.acquisitio...
Want to START a business? Go here: skool.com/games
If you’re new to my channel, my name is Alex Hormozi. I’m the founder and managing partner of Acquisition.com. It’s a family office, which is just a formal way of saying we invest our own money into companies. Our 10 portfolio companies bring in over $200,000,000+ per year. Our ownership stake varies between 20% and 100% of them. Given this is a YT channel, and anyone can claim anything, I’ll give you some stuff you can google to verify below.
How I got here…
21: Graduated Vanderbilt in 3 years Magna Cum Laude, and took a fancy consulting job.
23 yrs old: Left my fancy consulting job to start a business (a gym).
24 yrs old: Opened 5 gym locations.
26 yrs old: Closed down 6th gym. Lost everything.
26 yrs old: Got back to launching gyms (launched 33). Then, lost everything for a 2nd time.
26 yrs old: In desperation, started licensing model as a hail mary. It worked.
27 yrs old: "Gym Launch" does $3M profit the next 6 months. Then $17M profit next 12 months.
28 yrs old: Started Prestige Labs. $20M the first year.
29 yrs old: Launched ALAN, a software company for agencies to work leads for customers. Scaled to $1.7mmo within 6 months.
31 yrs old: Sold 75% of UseAlan to a strategic buyer in an all stock deal.
31 yrs old: Sold 66% of Gym Launch & Prestige Labs at $46.2M valuation in all-cash deal to American Pacific Group. (you can google it)
31 yrs old: Started our family office Acquisition.com. We invest and scale companies using the $42M in distributions we had taken + the cash from the $46.2M exit.
32 yrs old: Started making free content showing how we grow companies to make real business education accessible to everyone (and) to attract business owners to invest or scale their businesses.
34 yrs old: I became co-owner of Skool.com to help the many people who want to start a business online do so.
Today: Our portfolio now does $200M/yr between 10 companies. The largest doing $100M/yr the smallest doing $5M per year. Our ownership varies between 20% and 100% ownership of the companies. Many of them we invested in early and helped grow (which is how we make our money - not youtube videos).
To all the gladiators in the arena, we’re all in the middle of writing our own stories. The worse the monsters, the more epic the story.
You either get an epic outcome or an epic story. Both mean you win.
Keep crushing. May your desires be greater than your obstacles.
Never quit,
Alex
FULL DISCLOSURE
I make content to make money - just - on a longer time horizon than most. I want to build trust with business owners so we can find the best ones and help them scale. And if they’re awesome, write them a check and go all the way as partners.

[@speakingwithyasirkhan]

This sit-down format is my favourite by far.

[@tubax926]

100000% agree. More of this please Alex!

[@AlmightyChubb]

It's almost my favourite. Only second to standing with a whiteboard!

[@maddawgg2000]

Agreed 🔥

[@mouthfulacoque3580]

this

[@subhasrini2706]

@@AlmightyChubbmy fav! ❤😊

[@mainaste]

I can’t lie, this new style of video just ruined his past videos for me. These are soo much better to my ears without the unnecessary music and sound effects.

[@ConradBrink]

Agreed.

[@cutielush]

Not everyone responds to content the same way. Alex and his team know both styles are needed

[@ClimbClear]

same. This is much more helpful for me

[@darthsul7096]

Sorry I cant attend this meeting, Hormozi posted

[@Wealthprojectd]

real

[@nauz2633]

Alex would do meeting while listening to the video bro

[@DuroDP]

⁠​⁠​⁠@@bobsimpson9228I’d hate to be partnered with you. It was a joke, develop a sense of humour.

[@FitOneswithVarun]

0:00 - Introduction and Overview 0:21 - Achieving a $100 Million Net Worth at Age 31 0:30 - Importance of Maximizing a Key Number 0:49 - The Key Ratio: LTV to CAC 1:00 - Defining LTV: Lifetime Gross Profit 1:34 - Understanding CAC: Customer Acquisition Cost 1:56 - The Impact of LTV to CAC Ratio on Business Growth 2:32 - Case Study: Mismanagement of LTV and CAC 3:48 - Correct Calculation of Lifetime Gross Profit 4:40 - The Role of Gross Profit in Business Reinvestment 5:10 - Clear Understanding of LTV and CAC for Business Owners 6:02 - Example of Efficient LTV to CAC Ratio: Starbucks 6:42 - Marketing Efficiency and Customer Acquisition Cost 8:00 - Strategies to Improve LTV to CAC Ratio 8:46 - Ethical Competitive Advantage through Higher LTV to CAC 9:20 - Real-Life Example: Business Coach’s Misunderstanding of LTV to CAC 10:08 - Importance of Knowing Data for Business Scaling 10:31 - Breaking Down LTV and CAC Metrics 12:00 - Example: Service-Based vs. Product-Based Business 13:00 - Optimizing Business Structure Based on LTV to CAC 14:50 - The Power of Cross-Selling and Upselling 16:00 - Case Study: Glass Repair Business Optimization 17:25 - Example: Pool Design Business Optimization 18:26 - Productizing Services for Higher Efficiency 19:00 - Following Business Passion vs. Business Efficiency 20:00 - Example: Gym Launch and High LTV to CAC Ratio 20:46 - Strategies to Improve LTV and CAC 21:51 - Practical Steps to Increase LTV 22:54 - Improving CAC: Funnel Efficiency 24:54 - Front-to-Back Strategy for CAC Optimization 25:54 - Summary of Business Insights and Strategies 26:29 - The Importance of Understanding and Applying Business Ratios 27:00 - Advanced Business Metrics and Strategies

[@yuvrajwadhwani]

Thank you!!

[@antonycharlier3721]

your the goat

[@Brandon-gw4ed]

Some heroes don't wear capes.

[@FranzStFleur]

Bro thank you so much 💪🏾💪🏾💪🏾💪🏾

[@amritachodha]

So much needed

[@ajmalnajath1399]

how tf is this information free

[@DuroDP]

Because knowledge isn’t a fraction as valuable as applied knowledge

[@Nottherightgoat]

Because he is then going to make money off of you. You are the product.

[@Alex-ns6hj]

@@Nottherightgoat well i rather be the product with Hormozi and $5M on my pocket than not be with $0... you choose.

[@dooby1445]

@@Nottherightgoat Which isn't even inherently a bad thing, as long as the products are valuable. Things like this CAN be a net-positive for everyone involved. That's how most business is done anyways.

[@dtcpaidads]

How tf did we start believing that we needed to spend thousands for such trash info. He’s going over billions. Not course sales. Different game.

[@kevinjones6970]

No fancy edits, no sound effects, no crazy jump cuts. Just straight up GAME. Alex always delivers

[@karmenjane1257]

I ❤ his style. Just dropping gems with no chipping away at the dirt to get to them. 😂

[@AlTel633]

It baffles me that I didn't learn about this in college while studying corporate finance 💀

[@williamgras5598]

Bro I studied in finance too. The goal of these programs is to make you a corporate drone for a bank or insurance company 💀 i quit mid program when I realized they don't teach you how to make money.

[@copperheadroad567]

And they charged you for it! I hate that so many programs scam so many people not teaching them the real world important stuff.

[@PBurgaard]

You learn this in Marketing, not CF.

[@AlTel633]

​​@@PBurgaard that makes sense, but I feel like it would be a worthy addition to the program, as it seems to drive a lot if not most of the financial results of the business

[@ThiagoRicieri]

PLEASE MORE OF THIS TYPE OF CONTENT!!!

[@HugoGoncalves-et6ss]

Can someone explain me how do I know the churn is 20% just because the client program is 5 months? I always thought the churn was the percentage of clients that quit the program each month compared to the amount of clients in the beggining of the month and then do the avg on a full business year. Sorry if it's a stupid question, I'm kinda starting...

[@willtalebian]

27:30 I spent a few hours today charting and reviewing discounted cash flow projections until 2043 for an oil and natural gas company out of Alaska. When Alex said “can this apply to investing” I had the same face because I found myself finding ROI multiples for different projections 😅 lots of variables like barrel pricing, recovery rate, and regulatory factors but a base case 40x and a High side 270x are exciting projections. Thank you Alex for always bringing VALUE for FREE to everyone who is willing to listen 💪🏼

[@MrTaylorWillis]

TL;DR wining and dining will always work. We are service based. It’s been calculated the average CAC is 4,200 USD. . We immediately realized we were penny pinching ourselves out of millions. Introduced gifts, golf meetings, or anything we know the prospect/client enjoys into the sales process Since, our leads have increased and close rate is climbing.

[@AlmightyChubb]

Have started doing this in my business too. Gifts for no reason! Works great especially for service businesses.

[@BusinessWolf1]

Gg dude

[@DrDominikDotzauer]

Thanks for Sharing!

[@andrewmayo7457]

Next big channel is the guy who figures out what companies are killing it like Alex talking about Starbucks and break down each one into a case study/playbook that can be used in parallel or other industries

[@majedmohammad_]

“When you boil hot water and sell it for 6 bucks you make a lot of money“ 😂

[@KristenFish]

27:01 A business lesson that rolls a math class into a language class.🔥 100% invaluable and simplified. Thanks Alex, love this format.

[@pierceenglish2971]

This sit down and talk type format is just like the books. Every sentence feels packed full of content. I’m here for the long run :)

[@Marcus-Jones]

Great video, HORRENDOUS thumbnail haha

[@BrilliantMarkets]

“I’ve already watched this 7 times. It’s business music!” - BB

[@KSG148]

I LOVE the math oriented side(s) of these videos.

[@Woker.Achiever]

and how the hell does starbucks calculate its LTV? :|

[@tigreytigrey8537]

HELL YES!!!! HORMOZI UPLOADS I DROP EVERYTHING

[@azeezhajee2777]

Definitely watching this video 10 times a day, major value The Fundamentals are so important

[@philgambeck]

Mom, wake up!! Alex posted a new video

[@ayoubhr77]

As a software developer aspiring to be fluent in product and bussiness, this video sounds like engineering to me which made it super clear where to fit the pieces.

[@stefan1669]

Bullsit advice, always generalise but never give any actual advice on how to lower CAC

[@anthony-pierreturgeon1570]

The value of this content is crazy

[@syafiqkusni]

More of these content please!! Love getting into the hard numbers! 😆

[@JasonValasek37]

Our company is not large enough yet to get the attention of Alex and Leila, but we are actively implementing everything Alex is sharing with the intent of earning his attention in the near future. Thank you for all the knowledge! You and Leila are total bad asses 😎

[@iamDeej]

1. Is LTV always a “historical metric”? I.e. how do you factor in uncertain future profits from non-churned or new customers? And if its always historical, does that mean its only calculated with churned customers? 2. How can i calculate either of these metrics with my tiny food service venue? I can’t necessarily afford a fancy tech stack, so i dont really know whose coming back and how i acquire my customers… (empirically, i mean. I do serve and talk to my regulars, but i dont have a non arbitrary way to track)

[@alin2167]

He should reply to this

[@wawawhayaaa]

for 2. sounds like you need to start tracking data. For example, you can have an excel sheet where you store your customers history. If a customer comes back , you now update your sheet with that information so that you have actual numbers. You can say you serve your regulars but now you will know for example, that you served a particular regular 12 times in May. Overtime, you will now have data to calculate things like retention

[@iamDeej]

@@wawawhayaaa that doesn’t really sound feasible. However, I have found that my POS does have a rudimentary way to track new vs return customers though

[@NedimSabic]

An amazing summary as always! Thank you infinite times for sharing your overviews and views! Sending you a lot love, respect and thankfullness! 🧡

[@zdrux]

I don't run a business, but people out there thinking LTV can be a valid metric without first removing costs, is pretty wild.

[@GeorgeKaoCommunity]

If there was a Hormozi comedy clip collection this would have to go into it: 4:08 - 4:19

[@alvaromd3203]

This is a serious business class, top level. Gold.

[@El_Diablo_12]

2:00 disproportionate returns for successful business over other investments 7:45 massive businesses are created from huge discrepancy between ltv and cac 14:30 how to stack multiple products to maximize ltv to cac, and scale your business 16:50 why productive services with a narrower offering can scale so much better 19:20 wealth creation of concentrated in periods where your ltv cac ratio is extremely high, rev that engine even if the money your making is so absurd it feels illegal 20:00 for to increase ltv basics 24:30 CAC can disproportionately increased at the front end 26:20 LTV is what differentiates big businesses and small businesses. Since CAC ends up converging for the same customer avatar 28:00 if what you’re doing is not getting you more customers cheaper, or making those customers worth more to you - you’re probably wasting your time

[@TylerAdamsMedia]

Wow the hair extensions and coaching example is exactly my business. Felt like a custom solution. Extremely insightful, as always!

[@cricketheadz]

Me too. But Into Hair Extensions

[@JonRacesCars]

Probably one of your best videos. I couldn't agree more with what you are sharing.

[@deathveteranxd6650]

I love this type of in depth information. It seems to me like your hesitant for whatever reasons to make more content like this. You dont want to bore and confuse people, you dont want to go to in depth on your secrets, it would be alot more effort on your end to produce the content? Whatever your reasons are im sure they are valid.

[@josquinribeirostorm4011]

Gem of a video. I just understood how to bring my business to 7:1 before the end of the summer. This is a gem of a video! We Need more like it 🙏🙏. PS: what about sorting the videos by topic, it would be amazing

[@benlewis7548]

This is unbelievably valuable. Thank you, Alex. Appreciate you big G.

[@HighPeakEducation]

Hormozi math is what we should have learned in school.

[@alexandrete835]

Great stuff 👍. Thank you Alex & team for sharing that much value for free, on a recurrent basis.

[@operavin]

Fantastic information as always. I had to justify why I was starting with a weaker service, and the reason was that I needed to stress test the front desk/sales people at the practice. I did not want to push heavily on the most popular service and see them crash and burn.but when they asked about the next one, I was really just shooting in the dark. This video has shown me very clearly that the second or third thing that we push needs to be the service with the m highest LTV: CAC ratio

[@zunier2687]

A condensed video on all business math would be awesome

[@tomiokagiyuu1730]

Content just got better I think you should be more popular

[@ryanrhodescooking]

make so much it feels illegal, i like it

[@Someone-ct2ck]

I know realized everything revolves around LTV:CAC even brand, product, and offer.

[@vanillabreyer]

These lecture/conversation style videos are amazing. Thank you for them!

[@Monas99]

I love love these new videos without the stupid, annoying and distracting music in the background. Alex, please NEVER DO educational videos with music in the background- thank you! I absolutely HATE educational videos with music in the background. it's hard enough that you have to focus on the lesson, concepts you re trying to learn, but to have some music in the background makes it impossible for me to focus and concentrate on the content bc i love music and I'll be distracted by it during any talk. NO MORE BACKGROUND MUSIC, PLEASE AND THANK YOU. 🙏

[@abdnourbelalia2085]

Can someone explain to me please why we devide by churn to know the LTV? + (I know what is churn but I didn't get it)

[@marcusaurelius2773]

Pure gold - as usual. Thanks, Alex.

[@bilalazim1901]

I have an accounting background and it boggles my mind why people cant do basic math, makes me think my peofession is just a scam

[@joejauregui1372]

Alex, this was not too dense! It’s just like your work how Much effort are you willing to put in? not time……. Seriously, loved this video and loved the new direction of the channel. Keep it up, man you’re great.

[@rodrigosuperti8599]

Great class Alex - How to calculate LTGP in a food business? The typical customer are retail chains that buy according with the stock movements. Thank you

[@elborbo7315]

Freaking awesome!!! Alex you are solid in business!! Thanks for the inspiration!

[@joaquindimagic6437]

Me and my girlfriend have a birthday party building where kids come to celebrate their birthdays. We've been in business for 2 years. It's very hard for me to calculate LTV or LTGM because people generally hire us once a year. Maybe we can calculate this annualy? 🤔 So we would know how much money a client gives us in one year and how much money this client costs. Then if next year the same client hire us. It's even better What do you guys think?

[@thesearemyhobbies]

Hi Alex, I love money/business math! Please don't apologize and do more of it! Keep it up! You the GOAT

[@baddou-othmane]

For a service-based business, what is a good LGP/CAC ratio? What is the minimum we should be aiming (I know that we should go as high as possible but what's a good benchmark)

[@maxkearney114]

When calculating LTGP, you would not subtract overhead expenses like software subscriptions...correct? It's only things specifically related to the delivery of the product or service, not things that are fixed and distributed across multiple "deliveries". Am I understanding this correctly?

[@mattvhenita]

Hey guys, can somebody right down the formula to calculate LTGP?

[@abfitnesstrainer]

When you determine cac are you dividing by total number of NEW clients or just total clients in the business

[@IdeaFactree85]

WTF why would ANYONE be asking how to get richer at millionaire status. F those people.

[@JourneyAgency]

I've got a better title for the video, if you agree like the comment please: Star Metric for EVERY Business Owner

[@gavin-hall]

Excellent video. Thanks Alex.

[@Scaleupfast]

LTV of Starbucks customer 14K plus on average. Insanity! Solid reminder to sell things that a lot of people buy a lot of and consistently. Great stuff!

[@FlorentBonlong]

FACT!! The success of your business hugely depends on the decisions you make This is the sole reason you need to be well-informed about the financial health of your business

[@SuperLari1234]

Isn’t LTV/CAC just a standard Gross Profit Margin?

[@tomob5715]

Surely if you divide by your number of total customers that becomes your cost to keep customers? Rather than acquire. I would have thought it would be divided by new customers one day 12 months? Can anyone help? Alex is a beautiful man but won’t see this 😂

[@themoneysummit]

I am fairly new to the business world and especially the world of looking at everything from a business mindset. If that makes sense. I work with people help establish retirement accounts, which varies from Roth IRA’s to even life insurance. Every client is on a completely different spectrum for what they contribute which completely changes what my commission would be. Do I average out all of my clients from the year to see what my average commission would be to help figure some of this out?

[@WinsenLe-yj2tk]

Everything makes so much sense now. Please make more detailed vids like this. On my 6th watch.

[@krujuice]

I am starting a cooperative corporation geared toward taking over Muay Thai gyms across the country, and making these teachers all part of the company as full members. Do you have any advice for someone creating a cooperative, similar to something like an REI, Mondragon or Erie insurance? We are looking to create a nationwide Muay Thai gym under the proven programs we are running, coopertively ran across the country.

[@beenaturalbalm]

This was fantastic information. I make Natural products. I now see some of my newer products are selling without any ads because people trust my brand which is a great way to keep CAC low. My best seller and biggest LTV product is the Natural deodorants I produce because most of the time once a customer starts using it they will continue to do so. So after watching this I’m going to do the calculations you suggest and also that will be my primary product I advertise for customer acquisition. I’ll be watching to become fluent!

[@neombody]

Awesome video. Is there a PDF or chart that gives me an overview of the most important metrics to track as a total beginner just making 1000 bucks a month profit. Also is there a page in one of his books explaining it? Just started reading the first. Have a great day!

[@AlexOlmsted]

Man, Alex just keeps blowing my mind every time I watch him. Jesus, when will he stop delivering the keys to the kingdom?

[@mikesmith-ek1il]

Can you comment a little more on CAC. Is it total customers at the time or new customers for that given period (same period as the marketing/advertising costs are pulled from) ? How do you calculate situations with LTV and CAC where some of the customers are reoccurring revenue for years, and many are one off purchases (1 and done) ?

[@lennardterlouw7044]

This is exactly why I know our business model works in the long term and that’s how we attracted our investor with 100k. And still people won’t believe me 😉

[@whatznext28]

"Your ability to conceptualize ideas is directly proportional to your vocabulary in a given domain." You can just keep glossing over these gold nuggets like that. I'ma need you to put these words on the screen when you say them 😂

[@kay_liv]

❤❤❤❤❤❤❤❤❤❤

[@adallal777]

What if I can acquire customers without paying for ads? Just through outreach. Is my CAC my personal hourly rate or is it 0?

[@EmeroyB]

You had me at "growing a big ass"

[@JeffersonPapers]

Amazing video, wish he would talk about the more common 2:1 or 4:1 ecom or lower tier businesses not just the insane revenue businesses

[@Someone-ct2ck]

This is soo goood. I am privillegded to watch this. I kinda feel I should pay for it.

[@adriennefoxtrot8819]

I unsubbed awhile back cuz the content was too generic. This finance explanation is much more useful.

[@motivacaoviva1887]

More of this type of content please!

[@AloeNutritionTelugu]

I think most of this content is belonging to upcoming book $100M Sales

[@ellishammond]

In summary, if you are not focused on getting customers cheaper or making those customers worth more, you are probably wasting your time

[@fcoxavier]

Thats a loosing ads agency model. I take a retainer but ads budget runs on the clients account. They tell me what to spend for them but budget never comes out of my pocket.

[@streampunkent]

Thank you for all the info Alex!

[@SAMBODYfitness]

Pure GOLD. Thank you 🙏

[@tasmoulis2309]

Great lessons, thank you for sharing…ps, I like the delivery format too 🤙

[@fineartbymattphilleo]

The difference between the money-making ads that get served on this channel where someone speaks rigidly like they are reading a teleprompter, and Alex, who speaks extemporaneously, off the cuff (and yet with authority) is: experience. Amazing how he gives this content away for free!

[@nazirkabbani]

What if you are investing in SEO which takes months to show benefits. The cac is harder to calculate for the current month

[@MJPerformance]

On CAC in a gym you but on all payroll even those from the Coaches?

[@pinskiller9914]

very good video and informative, but how do you apply those strategies to startups who struggle with reaching out to customers?

[@Aedonius]

what about merchant vs service? how do you determine cac when you are just getting window shoppers in store or online?

[@SwaggerjackProductions]

This was the most info-dense video so far. Thanks man

[@saul2665]

We need more of this!!!!

[@DrThayil]

Is cost of delivery all monthly expenses. Like loans supplies etc?

[@nicolasn6074]

Question for anyone that can clarify - how did we get to the 20% churn number?

[@MindBenderMav]

"This isn't an opinion problem it's a math problem" - Gold !!

[@camgere]

You have much more of a belief that marketing creates profit than I do. Why don't American pickup manufacturers just spend millions on marketing for those $100,000 picks now experiencing lot rot and 1 year supply level? Oh, they have a low LTV/CAC ratio? Cause or effect? High LTV/CAC ratio products are very successful. Low LTV/CAC products are not successful. Maybe the intrinsic value of the product means something. $100,000 Ford SuperDuty Platinums are easy to find. $55,000 Toyota Sienna minivans are much harder to find. You haven't escaped the problem of creating a great product just because you did a little math.

[@Am_Thierry]

You have to open your mind a little, it's sometimes a question of informations that we have. So, the best way to know how the things work is to commit yourself to some experiences in your business if you have one or as coach....

[@sebtibadro4294]

Thank Alex a really learn from you much then I learned from anyone else's in any industry ❤