Business Was Hard Until I Understood This

Summary

• You might not be making as much as you want because you're targeting the wrong customers. Selling to small businesses can be volatile as they often cancel during tough times, leading to a weak business foundation.

• Switch to selling to less volatile customers, like big businesses or more stable clients. Big agencies thrive by targeting Fortune 100 or 500 companies, not small business owners who need more support than they can afford.

• Recognize that sticking with unprofitable customers creates structural churn – a situation where you lose clients not because of dissatisfaction, but because they go out of business, limiting your growth potential.

• Adapt your services based on customer type. For high-end clients, offer custom solutions. For small businesses, provide DIY or templated solutions that are affordable.

• Understand that low-quality customers lead to operational strain, low morale, and damaged reputation due to unmet expectations and negative word of mouth.

• Do a customer profitability analysis to find your most valuable clients. Look at their demographics, current situations, and actions taken after using your service to identify characteristics for a more profitable customer base.

• Be prepared to transition your business strategy, which might include reducing staff to adjust for a better customer base. This will eventually lead to higher customer retention and better cash flow.

• Shift towards serving more profitable customers who appreciate your value, which will increase your lifetime value (LTV) to customer acquisition cost (CAC) ratio, improve team morale, and build your reputation.

• Sometimes you need to cut back in revenue to adjust your business model with the right customer base. This may require overcoming emotional attachments to your current revenue level and willingness to go down the mountain to climb a higher one.

• Always keep a professional and positive relationship even if you have to let people go. This can leave doors open for future opportunities. Business is a long game; maintaining good relationships is crucial for long-term success.

• Growth becomes achievable when you serve customers who are more willing to stick with you, providing stability and eventually allowing you to expand more predictably and sustainably.

Video

How To Take Action

I would suggest implementing these strategies for a small business or an entrepreneur:

1. Customer Analysis: Start by analyzing your current customers. Identify who the most profitable ones are based on how much they spend and how long they stay. Look into their demographics, what they do, and any actions they take after purchasing from you.

2. Target Better Customers: Shift your focus to more stable customers. This might mean selling to bigger businesses or individuals who can genuinely afford your services. Create a profile of your ideal customer and tailor your marketing and offerings to attract them.

3. Service Adaptation: Offer options that match your customer base. For smaller businesses or individual clients who can't afford much, provide DIY solutions or templated services. For bigger clients, consider custom solutions that add more value.

4. Pricing Strategy: Don't be afraid to charge what your service is worth, especially for clients who will benefit the most. If necessary, increase prices to reflect the value provided to the ideal customers.

5. Transition Gradually: To make this shift without hurting your business, gradually reduce the number of less profitable clients. Focus on bringing in more of the profitable ones. This might mean initially accepting a short-term revenue decrease for long-term stability.

6. Team Adjustment: Be prepared to resize your team if needed, but maintain good relationships with those you let go. This can preserve your reputation and potentially open future doors.

7. Maintain Relationships: Always keep a professional relationship, regardless of business changes, as this can benefit you long-term.

By focusing on stable and profitable customers, you'll build a stronger foundation, improve cash flow, boost team morale, and secure business growth.

Quotes

"When you have the wrong avatar, the volatility of your business is based on the volatility of your customers"

– Alex Hormozi

"It's building a castle on a foundation of sand"

– Alex Hormozi

"Only you can save yourself"

– Alex Hormozi

"If I know something has to happen eventually, I might as well do it today"

– Alex Hormozi

"You want to have a shot at tomorrow, sometimes you have to make the hard decisions today"

– Alex Hormozi