The Harsh Truth About Building AI Businesses (Why Most Fail) | Alex Hormozi

AI implementation as an opportunity

• The speaker believes that AI implementation is a significant opportunity for businesses.

• He emphasizes the importance of focusing on solving specific problems and productizing AI solutions.

"There's a fortune to be made."

Background of the community and their goals

• The speaker discusses his community's focus on making AI business creation accessible for aspiring entrepreneurs.

• He mentions the mentorship of Josh, his business partner, and how they transitioned from marketing to AI development.

"Creating AI businesses as easily as possible."

Evolution of AI businesses

• The speaker explains that the concept of AI businesses has evolved from gimmicks and glitches to more substantial and sustainable ventures.

• He highlights the need for entrepreneurs to build real businesses based on AI technology.

"The actual opportunity for entrepreneurs to build real businesses."

Building AI automation agency

• The speaker shares their framework for building an AI automation agency.

• The agency focuses on targeting specific niches and providing a specific deliverable using low-code tools.

"Focus on one niche and one specific deliverable."

Selling the outcome and value of AI

• The speaker stresses the importance of selling the outcome and value of AI rather than emphasizing the technology itself.

• He mentions quoting accurate and real-time financial updates as an example.

"Sell the outcome, AI is irrelevant for sales."

Challenges in selling emerging tech

• The speaker acknowledges that selling emerging tech can be challenging due to its novelty and potential concerns.

• He suggests focusing on the outcome and how it can benefit the customers instead of overwhelming them with technical details.

"Anything new and unproven can scare them away."

Evaluating AI businesses at acquisition.com

• The speaker mentions that they receive many AI businesses for evaluation.

• He asks what stands out to the speaker when evaluating these businesses.

"What's making you jump?"

The importance of selling the outcome

• The speaker reiterates the importance of selling the outcome, rather than AI itself, when acquiring businesses.

• He emphasizes that AI is only relevant for clickbait or marketing purposes, not for sales.

"Sell the outcome, AI is irrelevant for sales."

The value of AI businesses

• The speaker mentions the value of AI businesses that are brought to them at acquisition.com.

"What's making them jump out at you?"

"There's a fortune to be made."

"The actual opportunity for entrepreneurs to build real businesses."

"Sell the outcome, AI is irrelevant for sales."

"Anything new and unproven can scare them away."

"What's making them jump out at you?"

Commonalities of successful AI businesses

• Majority of VA businesses are not real AI

• They are built on chat and CPT

• Lack of business acumen in founders

• Normal rules of business apply

"The vast majority of VA businesses I look at are not real AI. They are built on chat and CPT, which is fine, but let's not claim that we're creating agents."

Advice for entering the AI business world

• Look at an industry or avatar you understand well

• Having industry experience is an advantage

• Find a specific problem to solve

• Get extremely specific in targeting your market

"If you want to get into this world, look at an industry or avatar that you understand well. Having industry experience is a great baseline of background knowledge. Find a specific problem that you can solve well."

Importance of partnerships in AI businesses

• Normal rules of business partnerships apply

• Seek partners with specific knowledge you don't have

"In AI businesses, normal rules of business partnerships apply. Seek partners who have the specific knowledge you don't have. This strengthens your overall product and value proposition."

Determining which problem to solve in an industry

• Value created times ease of implementation

• Consider number of potential customers, gross profit per customer, and operational drag

"When figuring out which problem to solve in an industry, consider the value created times the ease of implementation. Look at the number of potential customers, gross profit per customer, and the operational drag associated with the solution."

Importance of a good product in AI businesses

• A product must work

• Marketing and advertising only accelerate awareness of the product

• Narrowing down the problem makes it easier to do it well

"In AI businesses, the product must work. Marketing and advertising only accelerate awareness. Narrowing down the problem makes it easier to do it well."

Scaling and Narrowing Focus

• It can be harder to scale if you have a narrow focus in the beginning, but it becomes easier once you find your niche.

• Generalists may face operational drag and be more people-heavy, while narrow/niche audiences may struggle with on-demand generation but have better margins and scalability.

"So it's just picking where you want your pain. A generalist is going to have tons of operational drag, very people-heavy. The narrow or niche audience is going to have a harder time on demand gen, but the margins are going to be better and it'll scale better" .

Factors Impacting Scale

• The ability to scale and the challenges faced depend on the solution being provided.

• A super narrow focus may lead to lead generation issues, while a wide focus may result in delivery issues.

• Balancing different variables and identifying constraints is key to maximizing throughput.

"Will be dependent on the solution that's being provided. So like you'll have leads issues if you're super narrow, you'll have delivery issues if you're super wide, in terms of like where's the constraint. And so it's really just balancing those different variables so that you can create the most throughput in the business" .

Keeping Promises to Prospects

• In building an AI business, the most crucial factor for success is the ability to deliver on the promises made to prospects.

• The quality of the solution and pain points associated with its implementation determine how well the promise is fulfilled.

"All of those are dependent on the one big thing which is like, can you keep the promise that you're making to the prospect? If you do it well, like if you actually like the problem I said if you could just actually automate the collection of membership dues for gym or for any, you know, whatever using AI, everyone would sign up for it. It's just how well do you solve that promise and how painful using the value equation, how painful do you make it for a business to actually get it implemented" .

Importance of Development Resources

• In a service business, the quality of the people providing the service is equivalent to the product itself.

• Well-compensated and skilled developers are key to building a successful AI business.

• Having a technical co-founder who can vet and attract talent is crucial.

"If you're in a service business, the quality of the people that you use to provide the service is the product and so those people usually want to be compensated well because if they are really good then the places that they're coming from will want to pay more to keep them, and so you have to give them a great place to work and a financial incentive or some upside that they get exposed to that they wouldn't otherwise. You need a technical co-founder, somebody who has a real stake in making sure that the people are coming in are actually good, not that you're checking a box and saying hey I have 14 people on my development team because anybody in the true high-tech world knows that one amazing developer is more valuable than 100 B developers" .

Leveraging Resources and Network

• Building a network and leveraging the expertise of others can help mitigate the challenges of hiring skilled developers without in-depth knowledge.

• Networking can help identify brilliant individuals to interview or consult with.

• Conducting tests and providing evidence of one's own skills and success can help attract top talent.

"But it's all going to be about how skilled that person is because ideally if they were as good as you are at marketing, then you guys would probably have a really successful business. That's where leveraging somebody who might not want to work for you but you do think is brilliant to at least interview or double-check on how good they are, is really valuable. That's where building a network becomes important" .

"From your perspective, that's like the hardest part of business -- hiring people who are really good at something without knowing the in-depth knowledge. And that's where like leveraging somebody who might not want to work for you that you do think is brilliant to at least interview or double-check on how good they are is very valuable" .

Incorporating Relaxed Attention as an Entrepreneur

• As an entrepreneur, it is important to incorporate relaxed attention into your life in order to come up with new ideas and be more productive.

• Minimize the amount of meetings to create more time for targeted conversations and gathering valuable information.

• Schedule your day in a way that allows for maximum free time, as it can lead to better ideas and productivity.

"Having more free time allows me to come up with better ideas."