Build, Don't Buy

Alex Hormozi believes that building businesses from within is more effective than acquiring them outright.

Key Points:

• Building vs. Buying:

  • More effective at growing businesses from within than acquiring new ones
  • Focus on operational improvements and strategic decision-making

• Value Creation:

  • Demonstrated ability to dramatically increase company value
  • Example: Grew a company from $2 million to $110 million in revenue over 4.5 years

• Operational Improvements:

  • Implement back-end systems to increase customer lifetime value
  • Expand team size and structure (e.g., from a handful of founders to 100 employees)
  • Add key leadership roles (CMO, CPO, controller)

• Strategic Decision Making:

  • Make big bets on new directions (e.g., adding software component to service business)
  • Allocate significant resources to potentially transformative initiatives

• Deal Structure:

  • Prefer majority stakes in businesses
  • Look for companies with at least $5-10 million in profit
  • Aim for meaningful ownership percentages (average 42% across portfolio)

• Focus on Cash Flow and Appreciation:

  • Balance between immediate cash flow and long-term appreciation potential
  • Some deals purely for cash flow, others for future value realization