The 5 Things I Look For Before Starting Any Business | Ep 967

Alex Hormozi shares five key advantages he prioritizes when evaluating or starting a business, based on his experience scaling companies to over $250 million in annual revenue. These traits—sticky, expensive, expansion, air, and unique—make growth easier and more profitable, even if a business has just one. He ranks them as an "S-tier" framework for spotting superior opportunities, emphasizing that few businesses hit all five, but improving along these continuums boosts any venture.

Sticky: Prioritize Revenue Retention

The top factor is "sticky," defined by revenue retention: how much revenue from last year's customers carries over to this year. Without it, you're stuck in constant sales mode, as Hormozi quotes John Paul DeJoria: aim for the resale business, not sales. Logo retention tracks customer count (rarely 100% due to structural churn like relocations or closures), while revenue retention can exceed 100% if remaining customers spend more, offsetting losses.

Key mechanism: Offer upsell paths, like a $9 to $99 membership tier, where even 10% upgrading covers 20% churn. Data from his platform School (managing hundreds of thousands of memberships) shows churn peaks at 20%+ in month one, 10% at month three, and another drop at month six; get customers to month six, and monthly churn falls to 2%. Focus interventions on the first three days and month three milestone.