Alex Hormozi - Business Owners Need to know this Video Notes

Hey Guys,

In Alex's video he talks about this crucial ratio for business growth is LTV (Lifetime Value) to CAC (Customer Acquisition Cost).

Understanding this ratio helps in making better decisions, scaling advertising, and increasing profitability.

If you are interested I have created a calculator to work this out message me and I'll send it over to you.

Key Concept: LTV vs. LTV Gross Profit (0:30 - 1:32)

LTV refers to the total revenue from a customer.
Important to consider LTV Gross Profit, which is the profit after subtracting the cost of goods/services.
Example: $1,000 monthly revenue for five months = $5,000 LTV, but costs must be deducted for accurate gross profit.

Understanding CAC (1:32 - 2:30)

Real-World Example: Facebook Ads Agency (2:30 - 4:40)

Agency with a 5:1 return on ad spend was still losing money.
Breakdown showed their LTV calculation ignored key costs like ad spend and service delivery.
Importance of accurate LTV calculation to avoid losses.

Benchmark: Starbucks Example (6:20 - 7:32)

Improving LTV to CAC Ratio (7:32 - 21:56)

Case Study: Service Business with Two Front Ends (12:00 - 16:17)

Example of a hair salon business using a $2,000 course and $15,000 coaching program.
Recommendation: Focus on lower-cost, higher-LTV front-end offer, then upsell premium services.

Operational Efficiency and Scalability (16:17 - 19:40)

Example: Glass repair business specializing in shower doors for higher operational efficiency.
Focus on products/services that are easy to sell and deliver, with large market demand.

Applying the Ratio to Different Business Models (19:40 - 21:56)

Example: Gym Launch with a 100:1 LTV to CAC ratio, emphasizing the potential for rapid wealth accumulation.

Actionable Takeaways for Entrepreneurs:

Calculate and monitor your LTV Gross Profit and CAC accurately.
Focus on increasing LTV through pricing, cost management, repeat purchases, cross-sells, and upsells.
Decrease CAC by optimizing marketing strategies and improving offer quality.
Regularly assess and adjust based on LTV to CAC ratio for sustainable growth.

So if you complete these equations, message me directly and I can share the Million Dollar Equations calculator.

I look forward to hearing from you.

Jerry

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