24. Section D. Expanded Employees Chapter. | $100M Lost Chapters Audiobook
In this episode of The Game, Alex Hormozi discusses how to build a business that can operate independently of its founder. He explores the connection between employee acquisition and customer acquisition, suggesting that businesses can use similar strategies—such as warm outreach and paid advertising—for both processes. He explains how a capable workforce not only reduces the founder's workload but also increases the business's market value.
The episode outlines specific approaches to training and managing employees who generate leads, including the implementation of detailed checklists and regular feedback sessions. Hormozi also provides concrete methods for calculating employee ROI, helping business owners determine if their customer acquisition costs align with industry standards and identify areas that may need improvement in their sales and advertising strategies.
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1-Page Summary
Importance of Employees to Scale a Business
Alex Hormozi discusses how building a capable workforce is crucial for scaling a business effectively. He emphasizes that delegating tasks to employees not only reduces the founder's workload but transforms the business from a high-paying job into a valuable asset. When a business can operate independently of its founder, Hormozi explains, it becomes more attractive to investors and commands a higher valuation in the market.
The Parallels Between Acquiring Customers and Acquiring Employees
According to Hormozi, the processes of acquiring customers and hiring employees share remarkable similarities. He suggests that businesses should approach hiring with the same strategies used in customer acquisition, including warm and cold outreach, content posting, and paid advertisements. This perspective simplifies the hiring process and makes it more effective.
The Process For Training and Managing Lead-Generating Employees
Hormozi outlines a comprehensive approach to training employees in lead generation. He recommends creating detailed checklists, demonstrating processes personally, and maintaining frequent feedback through one-on-one meetings and daily huddles. The focus should be on positive reinforcement and collaborative problem-solving, with six to eleven check-ins per week to ensure alignment and quick problem resolution.
Measuring the ROI of Lead-Generating Employees
For measuring employee ROI, Hormozi provides specific calculations involving payroll costs and engaged leads. He suggests dividing total payroll cost by the number of engaged leads to determine cost per lead, then using conversion rates to calculate customer acquisition costs (CAC). Hormozi advises that if CAC exceeds three times the industry average, businesses should examine their advertising strategy and sales approach for potential issues.
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Counterarguments
- While building a capable workforce is crucial, it's also important to consider the quality of the hires versus the quantity. Scaling with the wrong employees can be detrimental to the business.
- Delegating tasks is important, but the founder's vision and involvement can still be critical for maintaining the company culture and strategic direction.
- A business operating independently of its founder may be attractive to investors, but some businesses, particularly those that are personality-driven or rely on the founder's expertise, might lose value if the founder steps back too much.
- The strategies for acquiring customers and employees may be similar, but they are not identical. Employees are long-term investments and require a different engagement approach compared to customers.
- Using customer acquisition strategies for hiring might not always attract the right candidates, as the motivations and decision-making processes for potential employees can be different from those of customers.
- Simplifying the hiring process is beneficial, but oversimplification can overlook the nuances and depth required in evaluating potential employees.
- Frequent check-ins with employees are important, but too many could be seen as micromanagement and may hinder employee autonomy and satisfaction.
- Positive reinforcement is key, but there must also be room for constructive criticism to foster growth and improvement.
- Measuring ROI for employees is complex and cannot be fully captured by lead generation metrics alone, as employees contribute to the company in various intangible ways.
- The industry average for CAC can be a useful benchmark, but it may not be applicable to all businesses, especially those in niche markets or with unique business models.
- Reviewing advertising strategy and sales approach when CAC is high is a good practice, but it's also important to consider other factors such as market conditions, product/service quality, and competitive dynamics.
Actionables
- You can enhance your team's independence by setting up a peer-mentoring program where employees pair up to cross-train on different roles. This approach not only reduces dependency on the founder but also fosters a collaborative environment where team members can learn from each other. For example, a salesperson might pair with a customer service representative to understand the customer lifecycle better, while the customer service rep can learn sales techniques.
- Develop a referral program for your current employees to leverage their networks for hiring, offering incentives for successful hires. This taps into the same principle as customer referrals, utilizing the trust and connections your employees have built. For instance, offer a bonus or extra vacation days for employees who refer candidates who are hired and stay with the company for a certain period.
- Create a simple dashboard using spreadsheet software to track your employees' lead generation and conversion metrics. By inputting data such as payroll costs, number of leads, and conversion rates, you can monitor the ROI of your team in real-time. This hands-on approach allows you to identify trends and make informed decisions without needing complex software or analytics expertise.
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Importance of Employees to Scale a Business
Alex Hormozi shares insights on scaling a business effectively by leveraging the power of a capable workforce that can operate independently of the founder.
Employees Enable Business Growth Without Founder's Constant Involvement
Hormozi discusses the trade-off between personal work hours and management hours. To grow a business without being constantly involved, he emphasizes the importance of delegating tasks to employees. This delegation not only reduces the workload on the founder but also helps in generating leads and expanding the business's reach. The author suggests that by transferring skills to teammates, the business can scale efficiently. He relates a situation where the expansion of cold outreach sales necessitated hiring more employees to handle the increase in outreach tasks. The solution for handling an overwhelming amount of work, Hormozi reveals, lies in having more people work on it. This shift enables the founder to entrust employees with the success of various tasks, thereby making their own time more valuable and focused on the broader aspects of business growth.
Delegating Tasks Lets Founders Focus On Strategy and Growth Over Daily Operations
Effectively managing employees allows the founder to delegate daily operational tasks, thus freeing up time to learn new things and concentrate on strategic planning and business development. Hormozi notes that once he realized other employees could perform the tasks, he was able to concentrate on growing the business while the team ensured the smooth running of day-to-day operations.
Businesses Independent of the Founder Are More Valuable Assets
Hormozi contrasts two scenarios. In the first, a business heavily dependent on the founder’s continuous work is likened to a high-paying job rather than an asset. In the second scenario, a business earns the same profit but functions independently of the founder, thus increasing its value and making it an attractive investment opportunity.
A Business Generating Profit Independently of Its Founder Fetches a Higher Valuation Than one Reliant on the Founder
As Hormozi elucidates, turning a business into one that o ...
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Importance of Employees to Scale a Business
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Clarifications
- Scaling a business means increasing its capacity to handle more customers, sales, or operations without compromising quality or performance. It often involves improving systems, processes, and workforce to support growth efficiently. Unlike simply growing, scaling focuses on sustainable expansion that can be managed without proportionally increasing costs or effort. The goal is to boost revenue and impact while maintaining or improving profitability.
- Working "in" the business means handling daily tasks and operations directly, such as customer service or sales. Working "on" the business involves strategic planning, improving systems, and growing the company long-term. Founders often start by working "in" the business but must shift to working "on" it to scale effectively. This shift allows them to focus on big-picture goals rather than routine work.
- Cold outreach sales refers to contacting potential customers who have had no prior interaction with the business, often through calls, emails, or messages. It requires more employees because it involves high-volume, repetitive tasks to reach many prospects and generate leads. More staff can handle the increased workload efficiently, ensuring consistent follow-up and engagement. This scale of outreach is necessary to grow the customer base and sales pipeline.
- A business "independent of the founder" means it can operate and generate revenue without the founder's daily involvement. This independence reduces risk, as the business does not rely on one person's presence or skills. It allows the business to continue growing even if the founder steps away. Investors value such businesses higher because they are more stable and scalable.
- A business dependent on the founder requires their constant time and effort to generate income, similar to a job where you trade hours for money. Unlike an asset, it cannot generate value independently or be easily sold without the founder. This limits its scalability and long-term wealth creation potential. Investors prefer businesses that operate autonomously because they carry less risk and offer more growth opportunities.
- Delegating tasks allows employees to focus on specific activities like outreach, follow-ups, and customer engagement, which are essential for lead generation. It frees the founder to develop strategies and create systems that support scalable marketing efforts. Employees handling routine tasks ensure consistent communication with potential clients, increasing the chances of converting leads. This division of labor accelerates business expansion by multiplying outreach capacity and improving operational efficiency.
- A "transferable asset" in business means the company can be sold or handed over to someone else without losing value or functionality. It operates independently of the founder, relying on systems and employees rather than one person. This makes the business attractive to buyers because it can continue running smoothly after ownership changes. Transferability increases the business's market value and liquidity.
- Transferring skills to employees means teaching them the s ...
Counterarguments
- Delegating tasks requires finding employees with the right skills and trustworthiness, which can be challenging and time-consuming.
- Not all tasks can be effectively delegated, especially in businesses that rely on the founder's unique vision or specialized expertise.
- Scaling a business through delegation may lead to a dilution of the company culture or brand if not managed carefully.
- Hiring more employees to manage increased workload can significantly increase operational costs, which may not always be sustainable or beneficial for the business.
- The founder's detachment from daily operations could potentially lead to a disconnect with the business, risking oversight on quality and performance.
- While businesses independent of the founder can be more valuable, they may lose the unique edge or personal touch that the founder provides, which can be a key differentiator in the market.
- Empowering employees is important, but it also requires robust training systems and a supportive culture that not all businesses may be able to foster effectively.
- The assumption that a business will automatically be more valuable if it can operate wi ...
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The Parallels Between Acquiring Customers and Acquiring Employees
Hormozi proposes that there is a significant parallel between the processes businesses use to acquire customers and hire employees, reflecting on how businesses need to effectively attract both.
Hiring New Employees Is Like Gaining New Customers
The idea that hiring employees is similar to gaining new customers is introduced by Hormozi, who emphasizes that both require attraction and follow a progressive engagement sequence.
A Business Must Attract Both Customers and Employees
According to Hormozi, attracting employees and customers is a basic need for any business. He points out that both groups are essential and that the processes to engage them are deeply interconnected. Just as a business would appeal to potential customers, it must also appeal to potential employees.
From Uncontacted Lead to Sale: Analogous To Hiring a Stranger
Hormozi further compares the journey of engaging a completely uncontacted lead to making a sale to the process of hiring a stranger. The gradual steps from initial contact to final agreement mirror each other in both customer and employee acquisition.
Effective Strategies For Acquiring Customers Apply To Acquiring Employees
Hormozi argues that many of the tactics used for customer outreach can be effectively translated into hiring strategies.
Marketing the Job Opportunity to Prospective Employees
He suggests that businesses should employ similar strategies in ...
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The Parallels Between Acquiring Customers and Acquiring Employees
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Clarifications
- Alex Hormozi is an entrepreneur and author known for his expertise in business growth and sales strategies. He has founded and scaled multiple companies, focusing on customer acquisition and operational efficiency. His insights are valued because they come from practical experience in building successful businesses. Hormozi’s perspective is relevant as it bridges marketing and hiring, two critical business functions.
- A "progressive engagement sequence" refers to the step-by-step process of gradually building interest and trust. In hiring, it starts with initial contact, moves to interviews, and ends with a job offer. In customer acquisition, it begins with awareness, followed by consideration, and concludes with a purchase. This sequence helps manage relationships by nurturing leads or candidates over time.
- An "uncontacted lead" is a potential customer or candidate who has not yet been approached by the business. In sales, identifying and reaching out to these leads is crucial to start building interest and trust. In hiring, it means finding and engaging candidates who are unaware of the job opportunity. This initial contact is the first step in converting interest into a sale or a hire.
- Warm outreach involves contacting people who have some prior connection or familiarity with you, such as referrals, past applicants, or network contacts. Cold outreach targets individuals with no previous relationship, like sending unsolicited emails or messages to potential candidates found through job boards or social media. Warm outreach typically has higher response rates because of existing trust or recognition. Cold outreach requires more effort to build interest and credibility from scratch.
- Marketing tactics for customers translate to hiring by treating job candidates like potential buyers. Just as marketers identify target audiences, recruiters define ideal employee profiles. Outreach methods such as ads, social media, and referrals attract candidates similarly to how they attract customers. Engagement techniques like personalized communication and nurturing relationships help convert candidates into hires, mirroring sales funnels.
- Treating employees as customers me ...
Counterarguments
- While there are parallels between acquiring customers and employees, the motivations and engagement strategies can differ significantly; customers are primarily driven by product or service value, whereas potential employees are often more concerned with company culture, career growth, and job security.
- The depth of the relationship is typically more profound with employees than with customers, as employees are integral to the internal workings of a company and require a greater investment in terms of training and development.
- The risk and commitment involved in hiring an employee are generally higher than acquiring a customer, which may necessitate a more cautious and thorough engagement and vetting process.
- The analogy between sales and hiring might oversimplify the hiring process, ignoring the complexity of human resources and the importance of factors such as diversity, equity, and inclusion, which do not have direct parallels in customer acquisition.
- Marketing strategies such as paid advertisements and cold outreach may not be as effective or appropriate in the context of hiring, where personal connections and reputation often play a more significant role.
- Treating employees purely as customers could potentially undermine the employer-employee relationship, which is often based on mutual commi ...
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The Process For Training and Managing Lead-Generating Employees
Alex Hormozi discusses the intricacies involved in training and managing employees to ensure they’re proficient in lead generation, which is vital for business growth. The approach requires systematic training, consistent feedback, and supportive management techniques.
Processes to Teach Employees Lead Generation
Training employees in lead generation begins with the business owner’s own experiences and expertise. There’s an emphasis on replicating the success the owner had with generating leads through various methods such as ads and outreach.
Documenting Each Lead Generation Process Lets Employees Follow Instructions Precisely
According to Hormozi, creating a detailed checklist that documents every step of the lead generation process is crucial. This method allows employees to follow instructions with precision, ensuring tasks are executed consistently with the intended strategies of the business. By making adjustments based on performance, Hormozi asserts that the checklist can be refined further for accuracy.
Demonstrating the Process Ensures Employees Execute Correctly
Hormozi advises demonstrating the lead generation tasks by personally using the checklist in front of the employees. This not only ensures that employees understand each step comprehensively but also aids in correct execution when they attempt the tasks themselves.
Feedback and Coaching Cement Lead Generation Skills
The training isn't complete without feedback and coaching. Hormozi underscores the importance of letting employees attempt the tasks using the documented checklist as the trainer observes. Corrections to the checklist and the employee’s process are made iteratively, leading to consistent outcomes and cementing the employee’s lead generation skills. He highlights the importance of a useful and rapid feedback loop, coupled with patience and understanding when training employees.
Frequent Feedback and Check-Ins Enhance Performance
Post-training maintenance involves frequent check-ins and feedback sessions, which are critical for ensuring employees remain productive and aligned with company objectives.
One-on-one Meetings and Daily Huddles Ensure Alignment and Fast Problem-Solving
Hormozi recommends meeting with each lead-generating employee six to eleven times per week. This high frequency of interaction includes a weekly one-on-one session lasting 30 to 45 minutes devoted to coaching, feedback, and acknowledgement of successes. Additionally, daily huddles at the start and end of shifts help set ...
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The Process For Training and Managing Lead-Generating Employees
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Counterarguments
- While documenting each step of the lead generation process can provide clarity, it may also limit employee creativity and adaptability, as they may rely too heavily on the checklist instead of thinking critically and innovatively.
- Personal demonstration of tasks is beneficial, but it may not always be scalable, especially in larger organizations where the business owner's time is limited.
- The frequency of meetings suggested (six to eleven times per week) could be excessive and may lead to diminished returns, as employees might become dependent on constant guidance rather than developing self-sufficiency.
- Positive reinforcement is important, but it should be balanced with constructive criticism to ensure employees are aware of areas where they can improve.
- Collaborative problem-solving is ideal, but there should also be clear accountability when mistakes are made to ensure that they are not repeated.
- Focusing on following directions might sometimes overshadow the importance of results, ...
Actionables
- You can create a peer-to-peer coaching program where employees partner up to train each other on lead generation techniques. By pairing employees, they can role-play scenarios, provide immediate feedback, and share personal insights that might not be covered in a standard checklist. For example, one employee could simulate a customer while the other practices outreach, allowing them to refine their approach in a low-pressure environment.
- Develop a digital suggestion box for employees to submit ideas on improving the lead generation process. This could be a simple online form or a dedicated email address where employees can report what's working, what's not, and how they think the process could be enhanced. Regularly review submissions and incorporate viable suggestions into the checklist, ensuring it evolves with real-world input.
- Implement a gamification system to encourage lead generation ...
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Measuring the Roi of Lead-Generating Employees
Alex Hormozi provides insights on determining the return on investment (ROI) for employees generating leads by examining the relationship between payroll expenses and engaged leads.
Lead Generator Costs vs. Lead Value
Hormozi suggests using specific calculations to assess the costs and value associated with lead-generating employees. These metrics help evaluate whether the investment in an employee is yielding sufficient returns.
Cost per Lead = Payroll Cost / Engaged Leads
According to Hormozi, the cost per engaged lead can be determined by dividing the total payroll cost by the total number of engaged leads. He gives an example, stating if you have $100,000 in payroll costs and 1,000 engaged leads, the cost per lead would be $100.
Calculate Cost per Customer Acquisition Using Lead Conversion Percentage
Hormozi continues by explaining the calculation for customer acquisition costs (CAC). If the conversion rate is such that one out of every 10 engaged leads becomes a customer, then CAC would be $1,000, calculated as $100 per engaged lead multiplied by 10 engaged leads per customer.
Lifetime Value Triples CAC For Positive Roi
Hormozi advises monitoring various metrics to identify employees and activities that are leading to the best ROI. He emphasizes that having a CAC within three times the industry average is ostensibly satisfactory, but going beyond that threshold implies issues in sales or advertising.
Monitoring Metrics to Identify Leading Roi Activities and Employees
It's crucial to keep an eye on these metrics to understand which employ ...
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Measuring the Roi of Lead-Generating Employees
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Counterarguments
- The cost per lead formula does not account for the quality of leads; not all engaged leads have the same potential to convert into customers.
- The calculation of CAC based on lead conversion percentage assumes a constant conversion rate, which may not be realistic as conversion rates can fluctuate due to various factors.
- Using industry average CAC as a benchmark might not be appropriate for all businesses, especially if they are operating in niche markets or have unique business models.
- The recommendation that the lifetime value (LTV) should be three times the CAC for a positive ROI is a generalization and may not apply to all businesses or industries.
- The focus on CAC and payroll costs may overlook other important factors such as customer service, product quality, and brand reputation, which can also significantly impact ROI.
- The advice to monitor metrics to identify leading ROI activities and employees could lead to a narrow focus on short-term sales metrics, potentially neglecting long-term growth strategies and employee development ...
Actionables
- You can refine your lead qualification process by creating a simple survey that potential leads must fill out before engaging with your sales team. This survey should include questions that determine if the lead has the problem your business solves and if they have the budget to afford your solution. By doing this, you ensure that your sales team focuses on high-quality leads, potentially lowering your customer acquisition cost.
- Develop a habit of regularly reviewing your expenses and revenue in relation to customer acquisition. Use a basic spreadsheet to track your monthly payroll expenses and the number of new customers acquired. By comparing these figures over time, you can spot trends and make informed decisions about where to invest in your business for the best returns.
- Experiment with different sales scripts or advertising messages by running small-scale A/B ...
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