They Lied. You Don't Need Money To Make Money | Ep 832
In this episode of The Game w/ Alex Hormozi, the host outlines strategies for providing value and generating income without upfront capital. He covers leveraging other people's assets and money, including negotiating returns based on value created for companies, securing loans against acquired assets, and profiting from undervalued asset options.
The episode also delves into value enhancement opportunities like arbitraging price differences across markets, combining businesses to increase valuations, and promoting affiliate products. Hormozi explains how entrepreneurs can acquire and scale small businesses through mergers, seller financing, and valuation arbitrage.
This is a preview of the Shortform summary of the Feb 5, 2025 episode of the The Game w/ Alex Hormozi
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1-Page Summary
Leveraging Other People's Assets and Money
Alex Hormozi outlines strategies for providing value without upfront capital - like negotiating returns from increasing a company's value, securing loans using acquired assets as collateral, and profiting from undervalued asset options.
Sell Value Created, Not Time
- Offer to increase an e-commerce company's conversion rates. Negotiate a return based on the new value created, e.g. $1 million for a $5 million increase.
Borrow to Buy Assets
- Use loans to purchase assets like property. Tenants effectively repay the loan as the bank uses the asset as collateral.
- Get undervalued assets under contract. Refinance the full value from the bank and keep the difference.
Arbitrage and Value Enhancement
Hormozi covers taking advantage of pricing differences across markets, turning undervalued asset options into profits, and combining businesses to enhance valuations.
Buy Low, Sell High Across Markets
- Buy assets like Bitcoin cheaper in one market and sell higher in another.
- Purchase products inexpensively online and resell them on different platforms for more.
Secure Options on Undervalued Assets
- Acquire options to purchase undervalued assets for pennies on the dollar.
- Sell those options to others willing to pay higher future values.
Combine Businesses to Increase Valuation
- Merge smaller companies into larger entities that can be sold at higher multiples.
- Use seller financing to acquire businesses without major capital.
Promoting Others' Products
Hormozi explains leveraging affiliate programs and capitalizing on scarcity for digital assets.
Become an Affiliate for Trusted Products
- Promote and sell products you genuinely like as an affiliate.
- Build an audience's trust through honest recommendations.
Drive Demand for Scarce Digital Assets
- Create limited digital assets like NFTs to increase scarcity.
- Sell at higher prices fueled by competition and demand.
Combining and Scaling Small Businesses
Entrepreneurs are acquiring and scaling small companies through mergers, seller financing, and valuation arbitrage.
Use M&A to Consolidate Small Businesses
- Merge multiple small firms into one larger organization, as Hormozi's friend did with four info businesses earning $4 million combined.
- Negotiate seller financing to acquire with no upfront capital.
Leverage Valuation Differences At Scale
- Small businesses sell at lower multiples; larger entities sell higher.
- Buy low, consolidate, then sell the integrated business at a premium valuation.
1-Page Summary
Additional Materials
Counterarguments
- The strategies assume a high level of business acumen and negotiation skills that not everyone may possess.
- Increasing a company's value for a return can be risky if the value does not increase as projected.
- Using loans to purchase assets can lead to financial strain if the income generated does not cover loan repayments.
- Refinancing undervalued assets assumes that the market will recognize and agree with the new valuation.
- Arbitrage opportunities can be limited and may require significant time and resources to identify and exploit.
- Acquiring options on undervalued assets involves speculation, which can be risky if the assets do not appreciate as expected.
- Merging smaller companies to increase valuation assumes synergies that may not materialize, leading to a loss of value.
- Seller financing can be difficult to negotiate and may not be available for all business acquisitions.
- Affiliate marketing requires a significant audience and trust, which can take a long time to build.
- Creating scarcity with digital assets like NFTs relies on market demand, which can be unpredictable and volatile.
- Consolidating small businesses through mergers and acquisitions can be complex, with potential legal and integration challenges.
- Valuation differences at scale may not always be as straightforward as suggested, and larger entities can also come with increased complexity and risk.
- The strategies may not be applicable in all industries or market conditions.
Actionables
- You can start a side hustle by identifying local products in demand and sourcing them from less expensive regional markets to sell at a profit in your area. For example, if you notice a trend in artisanal coffee in your city, you might source beans directly from growers in a region where coffee is cheaper, then package and sell them locally at a higher price.
- Consider forming a small investment group with friends or family to pool resources and invest in undervalued local real estate. By combining your funds, you can collectively negotiate better terms, refurbish the property, and either rent it out or sell it for a profit, sharing the returns among the group.
- Explore bartering services with local business owners to gain access to assets or services without upfront cash. For instance, if you're skilled in social media marketing, you could offer to manage a local shop's social media in exchange for products or a small stake in the business, creating a win-win situation where you both benefit from the growth.
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Leveraging Other People's Assets and Money
Alex Hormozi outlines strategies for leveraging other people's assets and finances to create value and generate income, emphasizing the importance of selling value rather than one's time.
Sell Value, Not Your Time
Sell Conversion Rate Services For a Percentage of Value Created
Hormozi discusses providing services that can help increase an e-commerce store's conversion rates. By offering to rewrite their emails and redo their landing pages, one can significantly increase the company's value. For instance, if someone increases a company's value by $5 million, they could negotiate a $1 million return on their services.
Borrow to Buy Assets, Others Repay
Bank Uses Asset As Collateral; Tenants Pay Loan
The second method Hormozi describes is borrowing money to purchase an asset, then having tenants in the property pay off the loan. This practice is a foundational principle of real estate where you might not have the capital upfront but you use a loan to acquire an asset. Hormozi elaborates on an example where someone might only put down 10% on buildings, with the seller financing part of the down payment. In these cases, the bank uses the asset as collateral while tenants effectively repay the loan.
Refinance Assets For More Than Purchased
Contract Property Cheaply, Refinance Full Value, Keep Difference
Hormozi also touches on contracting properties for less than their worth and then havi ...
Here’s what you’ll find in our full summary
Leveraging Other People's Assets and Money
Additional Materials
Counterarguments
- Selling conversion rate services for a percentage of value created assumes a direct correlation between the service provided and the increase in value, which may not always be the case due to other variables affecting sales and conversion rates.
- Borrowing money to purchase assets with the expectation that tenants will pay off the loan carries risks, such as vacancies, non-paying tenants, and unexpected maintenance costs, which can affect the asset's profitability.
- Contracting properties for less than their worth and refinancing for the full value may not always be feasible due to market conditions, appraisal issues, or lending restrictions.
- The strategy of contracting big buildings and leasing them back to the original owners for profit relies on finding owners willing to engage in such transactions and may not be applicable in all markets or for all property types.
- Exiting the tax ...
Actionables
- You can partner with a web developer to create a simple tool that predicts e-commerce conversion improvements. By collaborating with a developer, you can create a basic online calculator that e-commerce store owners can use to estimate potential increases in conversion rates based on changes they implement. This tool could use industry benchmarks and user input data to provide personalized reports, which could then be used as a lead generation tool for your services.
- Explore peer-to-peer lending platforms to invest in real estate indirectly. Instead of borrowing money to purchase assets directly, you can lend money to others who are looking to buy properties. This way, you can earn interest on your loan as the borrower repays it, effectively having tenants repay the loan indirectly through your borrower. This strategy allows you to participate in real estate investment without the need for significant capital or management of the property.
- Educate yourself on real estate market trends and identify undervalued properties. Start by researching your local real estate market to understand pricing trends and identify properties ...
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Arbitrage and Taking Advantage Of Price Differences
Alex Hormozi delves into several strategies to capitalize on arbitrage opportunities by buying low and selling high across different markets, as well as enhancing the value of assets and businesses.
Buy Low and Sell High In Different Markets
Hormozi defines arbitrage with a straightforward example, which includes purchasing Bitcoin at a lower price in one country and offloading it at a higher price in another, thus taking advantage of the price differential in separate markets.
Additionally, Hormozi highlights the practice of buying a product for less on one platform, such as Walmart.com, and selling it for more on another platform, like Amazon, without ever physically handling the product.
Turn Undervalued Assets Into Options to Buy
Turning a profit from undervalued assets by acquiring the option to purchase at a fixed price and then selling it is another form of arbitrage discussed by Hormozi. He describes acquiring an option on an asset—an option that costs pennies on the dollar. For instance, paying a penny to secure the rights to buy an item for $2 within 30 days, and then selling that option for $20 to someone willing to pay $30 for the same item allows the seller to profit while also benefitting the buyer.
Hormozi further expands on trading options based on their future value, emphasizing the potential of options for larger acquisitio ...
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Arbitrage and Taking Advantage Of Price Differences
Additional Materials
Clarifications
- Arbitrage opportunities involve exploiting price differences in different markets to make a profit. Strategies for arbitrage include buying assets at a lower price in one market and selling them at a higher price in another, as well as leveraging options to profit from undervalued assets. Arbitrage can also involve combining businesses to create more valuable entities through mergers and acquisitions. These strategies aim to capitalize on market inefficiencies and generate profits from price differentials.
- Buying low and selling high in different markets, known as arbitrage, involves taking advantage of price differences between markets. This strategy allows individuals to profit by purchasing an asset at a lower price in one market and selling it at a higher price in another market. By exploiting these price differentials, arbitrageurs aim to make a profit without taking on significant risk. This practice is common in various markets, including cryptocurrencies, commodities, and financial instruments.
- Turning undervalued assets into options to buy involves acquiring the right to purchase an asset at a predetermined price within a specified timeframe. This strategy allows investors to potentially profit from the future increase in the asset's value without committing to the full purchase upfront. By obtaining options on undervalued assets, individuals can benefit from any potential appreciation in value while limiting their initial financial exposure. This approach can be a way to capitalize on market inefficiencies and generate returns by leveraging the difference between the current undervalued price and the potential future value of the asset.
- Trading options based on future value involves speculating on the potential price movement of an underlying asset within a specific timeframe. Options give the holder the right, but not the obligation, to buy or sell the asset at a predetermined price (strike price) before the option's expiration date. ...
Counterarguments
- Arbitrage opportunities can be limited and may not be sustainable as markets tend to correct themselves over time, reducing the price differentials.
- Engaging in arbitrage requires a deep understanding of different markets and the factors that influence price, which may not be feasible for everyone.
- The process of buying and selling across different platforms may involve hidden costs, such as transaction fees, taxes, or currency exchange rates, which can erode profit margins.
- The strategy of acquiring options on undervalued assets carries the risk that the assets may not appreciate as expected, leading to a loss on the investment.
- Trading options based on future value is speculative and can be risky, especially for larger acquisitions, as it relies on accurate predictions of future market conditions.
- Combining businesses to create more valuable entities through seller financing can be complex and may face challenges such as cultural clashes, i ...
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Promoting and Selling Other People's Products
Alex Hormozi outlines strategies for making money by promoting and selling products owned by others, as well as leveraging the digital assets market.
Become an Affiliate For Products You Believe In
Hormozi highlights a passive income strategy that involves making large commissions by selling high-value items one does not own, such as skyscrapers or houses.
Promote & Sell Others' Products As an Affiliate Without Creating Your Own
Hormozi proposes finding products from other companies that you genuinely like and becoming an affiliate to promote them. By offering honest recommendations and saving time for your audience, you can build trust and promote these products effectively. This strategy does not require creating your own products, just the dedication to build an audience.
Drive Digital Asset Prices With Scarcity and Demand
Hormozi talks about leveraging the dynamics of scarcity and demand in the digital marketplace to increase the value of assets.
Create Sc ...
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Promoting and Selling Other People's Products
Additional Materials
Counterarguments
- Affiliate marketing requires significant effort and is not entirely passive, as it involves actively marketing and selling products.
- Trust-building with an audience can be compromised if the affiliate products do not meet expectations or if the promotion is perceived as inauthentic.
- The success of affiliate marketing is highly dependent on the size and engagement of one's audience, which can be challenging to build and maintain.
- Digital assets, including NFTs, are subject to market volatility and may not always increase in value, leading to potential financial loss.
- The scarcity of digital assets can be artificially created, and their value is highly speculative, which may not translate into long-term profitabil ...
Actionables
- You can start by identifying your interests and passions to find affiliate programs that align with them. Look for companies that offer affiliate programs for products you already use and love. Sign up for their affiliate programs and use the provided affiliate links to share your genuine experiences with the products on your social media, blog, or YouTube channel. This way, you're recommending products you're knowledgeable about, which can help build trust with your audience.
- Explore online marketplaces that specialize in digital assets to understand current trends and demands. Platforms like OpenSea for NFTs or ThemeForest for digital designs can give you insights into what types of digital assets are popular and in demand. Use this research to brainstorm ideas for creating your own digital assets, such as unique graphic designs, digital art, or even simple but useful templates that cater to a specific niche.
- Educate yourself on the basics of digital asset creation ...
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Combining and Scaling Small Businesses
Entrepreneurs are finding innovative ways to acquire and scale small businesses through mergers and acquisitions (M&A) strategies, such as seller financing, and capitalizing on the valuation differences that come with scale.
Use M&A to Roll Up Multiple Small Businesses
Entrepreneurs can use mergers and acquisitions to combine multiple small businesses into a single, larger organization. Alex Hormozi's friend successfully merged four information businesses with a combined revenue of approximately $4 million.
Acquire Small Businesses With Seller Financing and Merge
By using seller financing, the entrepreneur Hormozi mentioned was able to acquire the businesses with no money out of pocket. He negotiated a deal with the owners where he would take over their business, guaranteeing them the income they would have made over the next two years. Although this approach left Hormozi's friend with debt service to pay from the businesses' profits, he substantially increased their combined value without using his own capital.
Arbitrage Differences in Business Valuations at Different Scales
Entrepreneurs can leverage the valuation differences inherent in businesses at different scales. Hormozi articulates a strategy where acquiring smaller businesses with lower multiples can lead to profitable consolidation when combined into a larger entity sold at a higher multiple.
One example is an entrepreneur who acquired four small businesses specializing in guru knowledge. Using seller financing, he rolled them into a single entity that now generates $4 million in top-line revenue and $1.5 million in profits. The integrated business now has a higher valuation due to increased scale and potential efficiency gains. This owner, who learned about M&A from a course, managed to co ...
Here’s what you’ll find in our full summary
Combining and Scaling Small Businesses
Additional Materials
Clarifications
- Seller financing in the context of acquiring small businesses involves the seller providing a loan to the buyer to facilitate the purchase. This arrangement allows the buyer to acquire the business with little to no upfront capital, as the seller essentially acts as the lender. The buyer then repays the seller over time, typically from the profits of the acquired business, instead of relying on traditional financing sources like banks. This method can be beneficial for both parties, as it enables the seller to secure a buyer and the buyer to acquire the business without significant initial financial outlay.
- Valuation multiples in the context of business acquisitions represent a way to assess a company's value by comparing it to a financial metric like earnings or revenue. For example, a multiple of 5x earnings means the company is valued at five times its annual earnings. In mergers and acquisitions, buyers often use these multiples to determine how much they are willing to pay for a target company based on its financial performance. Higher multiples typically indicate a higher valuation and can reflect factors like growth potential, industry trends, and market demand.
- Rolling up multiple small businesses involves acquiring several small businesses and merging them into a single larger entity. This strategy allows entrepreneurs to combine the resources, customer bases, and operations of these smaller businesses to create a more valuable and efficient organization. By consolidating multiple businesses, entrepreneurs can benefit from economies of scale, increased market share, and enhanced competitiveness in the industry. The goal is to leverage the strengths of each individual bu ...
Actionables
- You can start by researching local small businesses for sale to identify potential acquisition targets. Look for businesses that complement each other in terms of products, services, or customer base. For example, if you find a small local bakery for sale, consider also looking for a coffee shop or a specialty food store. This way, you can create a combined entity that offers a broader range of products to the same customer base, potentially increasing the value of both businesses.
- Develop a network with business brokers and advisors to explore creative financing options like seller financing. Attend local business networking events, join online forums, and connect with professionals on LinkedIn who specialize in small business acquisitions. By building these relationships, you can learn about seller financing opportunities that may not be publicly listed and gain insights into structuring deals that require minimal upfront capital.
- Create a simple spreadsheet model to analyze the financial impact of consolidating small ...
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