Alex Hormozi's - Million Dollar Equations and Calculator

Jun 9 (edited) in Growth 📈

Ever wondered why some entrepreneurs effortlessly scale their profits while others struggle just to break even?

The secret isn't just hard work—it's mastering the art of smart investing in your business. In this video, Alex Hormozi unveils seven critical investing concepts that can turn your decent earnings into a powerhouse of profit.

Whether you're looking to optimize your cost-acquisition balance or expand your market influence, these insights will guide you through maximizing every dollar you invest. Ready to transform your business's financial health and outperform 99% of your competition?

Check out these equations.

Lifetime Gross Profit vs. Cost to Acquire a Customer (0:00-0:50):

Hormozi emphasizes understanding the Lifetime Gross Profit (LGP) to Cost to Acquire Customers (CAC) ratio as fundamental. A good LGP to CAC ratio indicates how much profit you make relative to the cost of acquiring a customer. This is crucial for assessing the scalability and health of a business.

Calculating Lifetime Value (0:50-2:20):

The explanation includes how to calculate the average customer lifetime using simple back-of-the-napkin math. This helps in determining the longevity of the customer relationship and expected revenue.

Understanding and Calculating Gross Profit (2:20-3:50):

Hormozi details calculating gross profit, which helps in understanding how much money is left after covering the cost of goods sold. This is especially crucial for physical products but is also applicable to services.

Cost to Acquire a Customer (CAC) (6:48-8:00):

This section covers not just advertising costs but all associated costs, including labor, needed to acquire a customer. Knowing the full CAC helps in better financial planning and ensures advertising budgets are not underestimated.

Return on Invested Capital (9:00-10:00):

This concept focuses on the investment required to expand the business, particularly through new locations or services, and the expected returns on these investments.

Sales Velocity and Lifetime Gross Profit (16:05-17:00):

Hormozi introduces the idea of multiplying the number of units sold per month by the lifetime gross profit per unit. This helps in projecting future revenue and understanding the potential size of the business at scale.

Churn Rate Impact on Business Health (17:00-18:00):

Understanding churn rate and its impact on customer lifetime value is crucial. A lower churn rate means higher lifetime value per customer, which significantly affects the sustainability and growth of the business.

Total Addressable Market (TAM) vs. Risk (19:55-21:00):

The final concept explores the potential market size (TAM) and balances it against associated risks. This helps in evaluating the scalability of the business and potential market saturation or expansion opportunities.

Alex Hormozi has armed you with seven transformative investing concepts that could redefine the profitability of your business.

The most pivotal takeaway?

Understanding and optimizing the lifetime gross profit to cost-to-acquire (LGP to CAC) ratio can significantly amplify your ability to scale profits sustainably. This isn’t just about spending less—it's about investing wisely to earn more from each dollar spent.

Here I put together a Million Dollar Equations Calculator https://docs.google.com/spreadsheets/d/1VbaPfSPZK9Ki1YUP0pMh5aifBi-rFm7woXVe5EOHZ9A/copy

Let me know if you have any questions.

Jerry

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