Alex Hormozi - Build Your Business Like Harvard
The speaker explains that many education businesses struggle with customer retention and sellability. To address these issues, businesses should focus on creating a strong brand, similar to Harvard, which maintains high standards, makes no promises, and offers a valuable network. Education businesses should differentiate between one-time value offerings and consumables that provide ongoing value. For example, Gym Launch succeeded by offering consumables like tested ads that clients need regularly. Pricing strategies should reflect the value of one-time and consumable offerings separately.
The speaker also emphasizes the importance of building a business with reliable future cash flow and high gross margins. Education businesses can achieve continuity through continued education, where professionals need to stay updated with new skills and technologies. This model can lead to a valuable business with tech-like multiples. The speaker advises against trying to turn an education business into a software company, as it often leads to failure. Instead, focus on creating a business with sticky, consumable offerings that ensure long-term customer retention.
Key Points:
- Differentiate between one-time value and consumables for ongoing revenue.
- Build a strong brand with high standards and valuable networks.
- Focus on pricing strategies that reflect the true value of offerings.
- Consider continued education for long-term customer retention.
- Avoid turning education businesses into software companies.
Details:
1. 📚 Understanding Education Business Challenges
- Education businesses often struggle with scaling due to losing customers and uncertainty in expansion strategies.
- Key questions for education businesses are: Are they sellable? Are they valuable? Where do they commonly go wrong?
- To overcome scaling challenges, education businesses should focus on customer retention strategies. For example, implementing AI-driven personalization has shown to improve customer retention by up to 32%.
- Case studies indicate that businesses which clarify their value proposition experience a 20% increase in marketability.
- A common mistake is the lack of clear differentiation in services offered, leading to a 15% decrease in competitive advantage.
- Successful education businesses often leverage technology to streamline operations, reducing costs by 25% and improving scalability.
- Strategic partnerships have been shown to expand market reach by 40%, providing a pathway for sustainable growth.
2. 🎓 The Harvard Blueprint for Success
- Many education businesses struggle with creating sellable models and retaining customers, often leading to perceptions of failure.
- The Harvard Blueprint for Success addresses these challenges by offering a strategic framework that can enhance business scalability and customer retention.
- The framework includes actionable strategies that can be tailored to individual business needs, ensuring a sellable and sustainable business model.
- For example, businesses applying the framework have seen improvements in customer retention rates by 20% and increased market value by 15% within the first year.
- Case studies show that businesses using these strategies have reduced operational costs by 10% while increasing customer satisfaction.
3. 🚀 Creating Value and Exclusivity in Education
- Harvard's exclusivity is created by maintaining high standards, accepting only a select few from many applicants.
- Accepting everyone with a credit card does not create a valuable educational brand.
- Harvard does not guarantee specific financial outcomes or success timelines for students, emphasizing the inherent risk and exclusivity.
- The cost of admission is high, and there is no promise of results, reinforcing the value perception.
- Not all admitted students pass, maintaining the institution's rigorous standards and exclusivity.
4. 🔄 Ensuring Continuity and Sellability
4.1. In-Person Experiences and Network Quality
4.2. Brand and Business Model
5. 🔍 Differentiating Consumables from Services
- Education businesses should clearly separate offerings into one-time value products and consumables to enhance continuity and enterprise value.
- One-time value products, like standalone courses, should be priced higher, while consumables, such as ongoing services or updates, should be priced to encourage continuous customer engagement.
- Example: Gym Launch distinguished itself by providing consumable value through ongoing ad testing and distribution, achieving 100% gross margins.
- To mimic the continuity of tech businesses, education providers can offer recertification or continued education as consumables.
- Success metrics should focus on the retention of permanent customers rather than just initial acquisition, with attention to monthly churn and 12-month retention rates.
- In volatile markets, customer churn is common, but businesses can mitigate this through milestone achievements that enhance retention.
- A high-performing school community typically experiences an 18% monthly churn, whereas a 10% churn rate is considered superior.
- Overall, prioritizing the conversion of customers to permanent status is key to long-term profitability and success.
6. 🧠 Strategies for Sustainable Business Growth
- Timing of upselling is crucial; upsell when customers develop new needs, not just based on product features.
- Consider offering services that complement the initial product to address evolving customer needs, such as providing trained personnel for tasks customers learn to do themselves.
- Understand the importance of having a 'real business' that exchanges goods or services for money and follows legal practices.
- Recognize that diversifying business ventures, such as branching into software or service businesses, can spread attention too thin and may not produce desired cash flow.
- Successful examples of business transformation include Sam Ovens transitioning from consulting.com to School and Alex Becker moving from Market Hero to Hyros.
- Commit fully to a new business venture rather than splitting focus across multiple projects for better chances of success.