| name | hormozi-cfa |
| description | WHAT: Alex Hormozi's Customer Financed Acquisition framework — using LTGP, CAC, and Payback Period to make customers finance your growth. From $100M Lost Chapters.
WHEN: When applying hormozi cfa knowledge |
Hormozi Cfa
hormozi-cfa
Core Principle
"If customers pay you fast enough, you can eliminate cash as a bottleneck to grow."
The key insight: Instead of using loans or investors, use your customers to finance your growth. When 30 days of gross profit from a customer exceeds what you paid to acquire them, you can recycle that money to get more customers infinitely.
The Three Levers of CFA
| Lever | What It Affects | The Goal |
|---|
| 1. CAC | Cost to Acquire Customers | Lower = more customers per dollar |
| 2. LTGP | Lifetime Gross Profit | Higher = customers worth more |
| 3. Payback Period | How fast you get money back | Shorter = faster you can reinvest |
The Three Metrics
CAC: Cost to Acquire a Customer
Formula:
CAC = (Ad Spend + Payroll + Software + Commissions) / Number of New Customers
Example (Outreach):
- Email software: $200/month
- Cold emailer: $3,000/month
- 8 sales at $100 commission each
- CAC = ($3,000 + $200 + $800) / 8 = $500/customer
Example (Content):
- 2 media team members: $10,000/month
- 10 new customers
- $100 commission per sale
- CAC = ($10,000 + $1,000) / 10 = $1,100/customer
Example (Paid Ads):
- Media buyer: $4,000/month
- Ad spend: $20,000/month
- Software: $1,000/month
- 10 sales at $1,000 commission each
- CAC = ($4,000 + $20,000 + $1,000 + $10,000) / 10 = $3,500/customer
LTGP: Lifetime Gross Profit
Formula:
LTGP = Gross Profit per Transaction × Number of Transactions
For Recurring Revenue:
LTGP = Gross Profit per Customer / Churn Rate
Gross Profit Example:
- Product sells for $100
- Costs $20 to make/ship
- Gross Profit = $100 - $20 = $80
- Gross Margin = 80%
Service Example:
- 10 clients at $3,000/month
- 1 rep handles 10 clients, costs $6,000/month
- Revenue: $30,000
- Gross Profit = $30,000 - $6,000 = $24,000
- Per customer: $2,400
Payback Period (PPD)
Definition: How long until GP from a customer exceeds what you spent to acquire them.
Example:
- CAC = $100
- Monthly GP per customer = $50
- PPD = 2 months (break even at month 2)
The Three Levels of CFA
CFA Level 1: CAC > 30-Day GP
- You make less in 30 days than acquisition costs
- Need outside capital (loans, savings)
- This is where most businesses stay
CFA Level 2: CAC = 30-Day GP
- You break even within 30 days
- Credit card becomes your advertising budget
- You can recycle money but can't scale fast
CFA Level 3: GP > 2× CAC in 30 Days (Target)
- You make 2x what you spent within 30 days
- Customers pay for themselves AND fund the next customers
- This is how you eliminate cash as a bottleneck
"In my first year of GymLaunch, we got $100 back in profit for every $1 we spent. Yes, 100x."
The Compounding Effect
When GP > 2× CAC, your business grows exponentially:
Month 1: 1 customer
Month 2: 3 customers (each pays for 2 more)
Month 3: 7 customers
Month 4: 15 customers
Month 5: 31 customers
Month 6: 63 customers
Month 7: 127 customers
Month 8: 256 customers
Month 9: 511 customers
Month 10: 1,023 customers
Month 11: 2,047 customers
Month 12: 4,095 customers
You only pay for the first customer. The rest are financed by customers.
The 30-Day Cash Concept
30-Day Cash = Gross Profit from a customer in first 30 days
Why 30 days matters:
- Credit cards offer 30-day interest-free financing
- If 30-day GP > CAC, you can use credit to acquire
- By the time the bill is due, customers have paid it off
The Loop:
Day 0: Charge CAC on credit card to acquire customer
Day 1-30: Customer pays, you deliver, gross profit accumulates
Day 30: Pay off credit card balance with gross profit
Day 31: New cycle begins with zero debt
Result: Free customers forever.
The Value Grid (Offer Stacking)
Use this framework to visualize and maximize LTGP:
┌─────────────┬─────────────┬─────────────┬─────────────┐
│ Prospects │ Trial 1 │ Trial 2 │ Total │
├─────────────┼─────────────┼─────────────┼─────────────┤
│ 10 │ 8 │ 3 │ Revenue │
│ │ ($75/each) │ ($200/each) │ = $600 │
└─────────────┴─────────────┴─────────────┴─────────────┘
30-Day Cash = $75
CAC = $12 (for 10 prospects to get 10 trials)
The Goal: Stack offers to increase 30-day cash per customer.
Real Example:
- Before stacking: $75/customer
- After stacking (with upsells): $1,763/customer
- Result: 23x increase in revenue per lead
Why LTGP is the Arms Race
"The business that makes its customer the most valuable wins."
Why:
- Higher LTGP = higher CAC you can afford
- Higher CAC = you can outbid competitors on ads
- Outbid competitors = you own the marketplace
Example:
- Your LTGP: $10,000
- Competitor's LTGP: $1,000
- You can spend 10x more to acquire customers
- You can literally starve them out
Action Steps
Calculate Your Current State
- Calculate CAC — by channel (outreach, content, paid ads)
- Calculate LTGP — for each product/service
- Calculate PPD — how fast does customer pay back CAC
Identify Which Lever to Pull
| If CAC is... | Focus On |
|---|
| Too high | Lower CAC through better targeting/offers |
| Already low | Increase LTGP through upsells |
| If LTGP is... | Focus On |
|---|
| Too low | Add upsells, continuity, increase price |
| Already high | Focus on lowering CAC |
| If PPD is... | Focus On |
|---|
| Too long | Increase 30-day cash (deposit, payment plan) |
| Already short | Scale what's working |
The Progression Path
1. Make your first sale (any offer)
2. Add upsells to increase LTGP
3. Add continuity to increase LTGP further
4. Reduce CAC through testing/optimization
5. Reach CFA Level 2 (break even in 30 days)
6. Reach CFA Level 3 (2x CAC in 30 days)
7. Scale — customers finance growth
Key Quotes
"A dollar today is worth more than a dollar tomorrow."
"You can only get CAC to zero, but LTGP can go infinitely high."
"This is how you achieve forced viral growth — your customers pay for your new customers."
Key Questions for CFA
/prompts:
- "What's my current CAC by channel? (Outreach, content, paid ads)"
- "What's my LTGP for each product/service?"
- "What's my payback period? How many months until break even?"
- "Am I at CFA Level 1, 2, or 3?"
- "Which lever should I pull first? CAC, LTGP, or PPD?"
- "What's my 30-day cash per customer?"
- "How can I stack offers to increase 30-day cash?"
- "What's the minimum LTGP I need to reach CFA Level 3?"
Source
From $100M Lost Chapters by Alex Hormozi, Chapter: "Customer Financed Acquisition"
Core concepts:
- The three levers: CAC, LTGP, PPD
- The three levels of CFA
- The 30-day cash concept
- Compounding through customer-financed growth
- The value grid for offer stacking
Transcript source: ~/Downloads/100MLostChapters.txt (Docker: /home/GOD/100MLostChapters.txt)
Related Skills
hormozi-money-models — The four types of offers (Attraction, Upsell, Downsell, Continuity)hormozi-attract-offers — How to generate leads with premium/free/discount offershormozi-offer-stacking — How to stack offers to maximize LTGPhormozi-lead-generation — Getting customers efficiently
