Having Skin in the Game

Context

Peacetime CEOs know how to leverage growth opportunities when market conditions are ripe. It’s a different story when you’re steering a business in a volatile climate. From the CEOs we’ve featured in the past eight weeks, we’ve seen how the best turnaround stories call for a wartime strategy. 

No one knows this better than American entrepreneur Alex Hormozi, founder of the wildly successful business consulting service, Gym Launch. His own experience with a failed gym venture early on developed in him a never-say-die attitude, even when the odds were stacked against him.

True to his wartime CEO approach, Hormozi steers his companies through high-stakes situations, including periods of market saturation and struggles with profitability. However, his military-style sense of discipline has enabled him to thrive in highly competitive environments.

What makes Alex Hormozi a remarkable WarTime CEO?

Real-Life Story

Hormozi was only 22 when he realised a 9-to-5 job in cyber defence wasn’t for him.

With US$50,000 saved, he drove cross-country to Southern California, showed up at a gym and convinced the owner to teach him the ins and outs of the business. In exchange, he tapped into social media to grow the gym’s membership base before building his own venture. 

Despite Hormozi’s hunger to learn as an entrepreneur, his first foray into the fitness industry faltered. 

Being a new entrant in a highly competitive market, Hormozi’s gym failed to attract members. The sluggish sales and membership growth resulted in significant financial strain, forcing Hormozi to live in modest conditions, which included sleeping on a friend’s futon.

The setback taught Hormozi perseverance and became the foundation for his multimillion-dollar empire. After the collapse of his first venture, he set out to sharpen his skills in sales and marketing – taking on a sales role and mastering the very same techniques that would later benefit his businesses.

His iconic line, “The pain is in the pitch,” encapsulates his ability to capture customer pain points in his sales and marketing approach.

Never one to back down from failure, Hormozi used hard data to understand the struggles of other gym owners and to optimise a system that would raise their chances of success. From this emerged his new venture, Gym Launch, a consulting service that offers to turn around struggling gyms, tailoring their businesses to the needs of their customers. 

Hormozi didn’t charge a consulting fee but received a cut of the profit instead. If the gyms weren’t doing well, Hormozi didn’t get paid. The performance-based payment system meant Hormozi had skin in the game. This, ultimately, earned him the respect of fellow entrepreneurs.

What makes Hormozi a highly regarded entrepreneur is the importance he gives to value creation as the driving force behind profitability. He offers customers and clients more value than what they pay for in the short term to ensure their loyalty and commitment in the long term. 

Hormozi once famously said: “Money is the byproduct of value.”

After successfully turning around multiple gym businesses, Hormozi shifted gears and licensed his turnaround strategy as a business model. This approach enabled him to reach over 4,500 locations without expending significant capital.

PostScript: Gym Launch now brings in US$30m in annual revenue, exhibiting steady growth since it was founded. Over the years, clients have made over $1bn. The business model is built on performance, tying Hormozi’s success to the profitability of clients. This has played a key role in Gym Launch’s rapid growth and market success and Hormozi’s own credibility as an entrepreneur.

Key Lessons

1) Having skin in the game

Aligning earnings with client profitability, Hormozi demonstrated that true commitment to success comes when leaders share in the risks and rewards of their ventures.

2) Data-driven decision making

Hormozi used hard data to identify pain points and optimise business solutions, highlighting the importance of making informed decisions to steer businesses through tough times.

3) Focus on customer-centric solutions 

By tailoring his turnaround strategies to meet the specific needs of each gym, Hormozi showed that understanding and addressing customer pain points is crucial in tough times.

4) Building resilience through perseverance 

Hormozi’s refusal to give up despite early failures reflects the tenacity required of WarTime CEOs. Resilience and grit are essential qualities for navigating turbulent market conditions.

Find Out More

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Until next week, may the force be with you.

Kevin

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