The Downsell Math and How to Build an Offer Worth 10x More | Ep 986

**Alex Hormozi** (0:00)
In 2016, I had $1,000 to my name, sleeping on a gym floor. Nine years later, I broke the Guinness World Record for the fastest selling non-fiction book, and generated over $106 million in sales in a weekend. In this video, I'm gonna show you how I'd build a business if I started all over. So first, either sell extremely expensive stuff to a select few, or sell something super cheap to everyone.
The middle is where people die. The thing is, even if, and let me do the math for you, because this is important. Let's say you have a $100 thing, and you have a $1,000 thing. And let's say of the 100 people, 10 of the 100 are buying the really expensive thing. So 90% of people buy the $100 thing. What does that do to your business? Guess what it does.
It doubles the revenue of your business. And not only that, all of that incremental revenue, the stuff that came from those top 10 people, is 100% margin. So let's say that on your 100, you make 40% margin. So you're actually making 40 bucks on those 90 people. So you're making $3,600 in profit off of 90 of your 100 buyers. Now, the other 10, you make 10 times 1,000, so you make $10,000.
So you actually make three times the profit on your expensive thing and one times the profit on your cheaper thing. So three quarters of what you make comes from this thing. That's why people miss it, is they don't get the math behind it. You have the expensive thing because even in tiny, tiny volumes, lots of zeros still add up. And so if you're getting started, I would strongly recommend, even if you have a scalable thing, even if you're on school, you have a community, you charge 100 bucks a month, whatever it is, have something that's $1,000 a month. Have something that's $10,000 one time. Have it up there. Just make it available. And so I'm gonna give you three different frames to working through this. The frame number one is, what if we charged 10x or 100x more than your current thing? What would you include? Just go crazy with it. Just think, instead of $1,000, if someone gave me $100,000, what would I do? Just write down everything you would do, and then look at the cost of doing all those things. What you'd be amazed by is many of the things that you have these ideas for don't actually cost that much. And so cross out the ones that have hard costs, and then look at what's left, and then say, well, I think I could do that. And then we ask the question, would you be okay doing that for $1,000 or $10,000? You might say, well, yeah, for 10 grand, I would do that.
Make it available. The second way to think about this is, if I had to make a service or a product that was only grown off of word of mouth alone, and all you have is this one customer in front of you, and the only way that you will be able to get more customers is if you get that customer to tell their friends about your stuff. What would that customer's experience, what would the service, what would the components of the offer look like if that was the requirement? Write down all of that stuff. And if you're willing to do that for a higher price, present it. An amount greater than zero will say yes. And I'll give you a third frame. This is different than the other two, but I think it's still very valuable when you're thinking through how to make something, well, more valuable. If we had to take everything out of it that is unscalable, but we have to make it worth 10 times as much, now how do we do it? So this gives you three different intellectual attack vectors to think through the value creation for making your more expensive 101 unscalable thing that in many times will make you more money, especially in the beginning, than your less expensive thing. And the other part of this is that it makes for great marketing. One, because you could say, hey, this is one of my clients, one of my private clients, one of my individual clients. And what that does is people are like, oh, this guy must be a little bit, you know, has more authority, right? On top of that, when you share the learnings from those, quote, private clients, it gives you marketing material to actually talk about, right? And where do you think your best case study is going to come from? There. And so you're going to get amazing case studies. You're going to have amazing marketing materials in terms of the learnings and lessons that you're going to have. And then one of the things that I personally prefer is that these people are way cooler, and they will be people that you actually end up being friends with that you like. And they're the ones who actually shift your worldview because you actually will spend more time with these people than all of these people. And that will shift you in the correct direction. Now, let's deconstruct value in a tactical way so that we can take the three frames that I just gave and do even more with it. Here are the two steps. Very straightforward. Pick the right avatar. Do not try to make your unscalable expensive thing and then think about the person who is currently buying your thing for $100 and think, what would this $100 person be willing to spend $1,000 for? Do not think that. Likely, the person that's going to spend the $1,000 is a different person. So you have to think about that person, not the person underneath. Next, once you have this avatar, they have the money, they feel the pain, they're easy to reach, right? Then we have to think, how can we describe their pain more accurately than they can describe it themselves? And so the big hack, and this is also new with some of the AI stuff that's out there, is go into the books that people are buying in your niche, and then extract the reviews, and then get the quotes that are specific to their pain. And so one of the really interesting things about copying is that if you can articulate someone's problem better than they can, they will inherently believe that you can solve it. So this is when we're talking about the dream outcome. It's like, make sure we're talking about the right avatar, about what they really want in the way that resonates with them specifically. Because pain and persuasion only exist in the specific, never the vague. And if you do this successfully, their pain and your description of their pain can be a better motivator of persuasion and action than a greater promise. So how do we then reverse engineer what someone actually wants? They don't really want your time, they want to buy an outcome. Now why is one-on-one a valuable vehicle? Because the perceived likelihood of achievement when you do something one-on-one in an unscalable way actually goes through the roof. So if I had a meal plan that I gave you as a PDF, or I said, I will talk to you one-on-one every day, the outcome is still I want to lose weight. But the likelihood that they're going to get there is going to be significantly higher. The likelihood, the ease, how easy it is for them is going to go up. And all of these components play with one another. So that's the outcome side.