The Game with Alex Hormozi You Will Stay Poor If You Don't Understand These Equations | Ep 527
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Apr 20, 2023 Dive into the world of business equations that can make or break your success. Discover why knowing your sales velocity and lifetime gross profit per customer is crucial. Alex breaks down how these formulas lead to smarter decisions and growth. He emphasizes the importance of customer acquisition costs and ensuring a healthy ratio for long-term viability. Tune in for valuable insights that challenge conventional thinking and can set you on the path to financial success.
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Understanding Business Equations
- Understand the basic equations of business to make informed decisions as an entrepreneur.
- This understanding allows you to identify bottlenecks and focus on key levers for growth.
Fundamental Business Equation
- The fundamental equation of business involves new sales per month, lifetime gross profit per customer, and hypothetical maximum revenue.
- Knowing these variables helps determine if a business is growing, shrinking, or at equilibrium.
Calculating Lifetime Gross Profit
- Calculate lifetime gross profit per customer using price, margin, and churn (for recurring businesses) or number of purchases (for non-recurring businesses).
- This metric is crucial for determining customer acquisition costs and profitability.