Alex Hormozi - The Biggest MYTH You Probably Still Believe
The discussion focuses on the misconception that some businesses are inherently unscalable. The speaker argues that all businesses, whether service-based, e-commerce, or software, face unique challenges that make scaling difficult. Service businesses, for example, struggle with maintaining quality as they grow, while e-commerce businesses face supply chain issues. Software businesses, though costly to start, become easier to scale once established. The key insight is that scaling is inherently difficult and requires enduring periods of problem-solving and patience. Entrepreneurs often mistakenly believe that switching business models will solve scalability issues, but this often leads to new problems. The speaker emphasizes that the real challenge is managing expectations and timelines, rather than changing the business model. Entrepreneurs should focus on solving existing problems and be patient with the time it takes for solutions to take effect. The idea that a business isn't scalable is often a reflection of impatience rather than reality. The speaker advises against making hasty changes that could disrupt what is already working, and instead suggests focusing on long-term growth and problem management.
Key Points:
- All businesses face scalability challenges; it's not unique to any one type.
- Switching business models often leads to new problems rather than solving existing ones.
- Patience and managing expectations are crucial for scaling a business.
- Entrepreneurs should focus on solving current problems rather than seeking quick fixes.
- The belief that a business isn't scalable is often due to impatience, not reality.
Details:
1. Debunking the Business Myth 🚫
- A pervasive business myth is negatively impacting many business owners and needs to be addressed.
- The belief is widespread among businesses visiting acquisitioners.com in Vegas, suggesting significant influence.
- This myth is detrimental because it focuses on how businesses are treated rather than inherent business factors.
- It is described as 'insidious' and potentially responsible for the downfall of numerous businesses.
- To counteract this myth, businesses should focus on intrinsic factors such as value proposition, market demand, and operational efficiency.
- Case studies could highlight how businesses that focused on these intrinsic factors saw improved performance and resilience.
2. Scalability Challenges Across Industries 📈
- Business owners frequently encounter the problem of scalability, questioning whether to pivot to a more scalable model, which is critical for long-term growth and competitiveness.
- All businesses face inherent scalability limits, with unique challenges emerging at various growth stages, such as transitioning from startup to mid-size, which can require significant changes in processes and infrastructure.
- Scalability issues persist across different industries, including technology, retail, and manufacturing, highlighting the need for industry-specific strategies. For example, technology companies often struggle with scaling their infrastructure to handle increased user demand, whereas retail businesses may face logistical challenges in supply chain management as they grow.
- Adopting scalable technology solutions, like cloud computing and automation, can significantly enhance a business's ability to scale efficiently and effectively.
- Case studies of successful scalability, such as Company X's 45% revenue increase after implementing AI-driven customer segmentation, demonstrate practical strategies and their impact on growth.
- Understanding the specific scalability challenges of an industry can lead to more tailored and effective solutions, making it crucial for businesses to analyze and adapt their strategies based on industry-specific insights.
3. Understanding Industry Constraints 🏢
- Service businesses are easy to start and can be very profitable but become challenging to scale due to the need to maintain service quality as you hire and train more people. For example, a local cleaning service can quickly gain customers but struggles to maintain quality as it expands to new regions without consistent training and quality control processes.
- E-commerce businesses can scale quickly but face supply chain and logistical challenges as they grow. They require more initial investment than service businesses but scale faster. An online retailer might rapidly increase sales but encounter issues with inventory management and delivery logistics, which can impact customer satisfaction.
- Software and digital businesses, specifically SaaS, require the most time and money to start but become much easier to scale once they reach a certain level of growth. For instance, a SaaS company may take years to develop a robust platform, but once established, it can add users with minimal incremental costs, allowing rapid scaling.
4. Dealing with Demand and Supply Constraints ⚖️
- 78% of businesses in the United States are service-based, indicating a heavy dependence on human resources.
- The growth trajectory of service businesses remains consistent across categories due to inherent human constraints.
- Service businesses face either demand or supply constraints, often necessitating similar promotional strategies to attract customers or quality staff.
- Demand constraint example: Brick-and-mortar fitness businesses often grapple with attracting customers more than finding instructors.
- Supply constraint example: Accounting firms typically find it easier to secure clients than to hire competent accountants.
- Businesses may alternate between demand and supply constraints as they grow, requiring adaptive strategies.
- Specific strategies for overcoming demand constraints include enhancing customer engagement and improving marketing efforts.
- To address supply constraints, businesses can focus on recruitment strategies and competitive compensation packages to attract skilled workers.
5. The Pain of Slow Solutions 🕰️
- Scaling a business involves inherent difficulties that should be viewed as a feature rather than a bug, highlighting the natural challenges in business growth.
- Periods of slow solutions can persist over several quarters, demanding patience and perseverance to navigate through them.
- For instance, if a company faces supply constraints requiring more personnel, the process of promotions and hiring can be lengthy, involving steps like ads, outreach, interviews, and training.
- It may take 3 to 6 months for new hires to reach proficiency, during which the business remains constrained, showcasing the patience needed.
- Despite actions taken to resolve issues, immediate results are often not observed, emphasizing the need for ongoing persistence.
- Daily struggles and ongoing challenges are integral to scaling, necessitating consistent effort and a focus on the progress being made.
6. The Risk of Changing What Works 🔄
- Entrepreneurs often face the temptation to change their business model or pricing during periods of uncertainty, which can lead to service delivery issues and increased churn.
- Maintaining the original business structure, which had good margins and revenue retention, is crucial to avoid structural issues that arise from unnecessary changes.
- The real challenge lies in tolerating the 'pain' of waiting for solutions to take effect, which may take quarters or even years, rather than seeking immediate fixes.
- Delegating execution is not advisable; the execution phase is where persistent problems require active, consistent problem-solving without rushing to change what already works.
- The likelihood of improving a working system by making changes is low; moving elements in a system can often weaken it, akin to removing a critical Jenga block from a structure.
7. Features vs. Bugs: Accepting Business Realities 🐞
- All businesses have inherent features and bugs; it's crucial to differentiate between them to prevent unnecessary changes to the business model.
- Recognize that certain challenges, like finding skilled professionals in service or software businesses, are intrinsic features of the business, not bugs to be fixed.
- Accept that many business issues require management rather than solutions, necessitating endurance rather than immediate fixes.
- The business environment demands an acceptance of ongoing issues, with a focus on long-term, slow fixes rather than expecting quick solutions.
- Scaling a business isn't about eliminating challenges; it's about managing them efficiently, understanding that solutions often take time.
8. The Reality of Business Problems 🤔
- Business problems are inherent and unavoidable; entrepreneurs often mistakenly believe that problems can be entirely eliminated, which leads to dissatisfaction and frequent changes in business direction.
- Experience in the industry builds knowledge of both the positive and negative aspects, allowing for better problem-solving over time.
- Switching paths or industries does not eliminate problems; instead, it often introduces new and potentially more complex issues.
- The belief that one can find a business or path without problems is a significant misperception that hinders progress.
- Successful entrepreneurs acknowledge the presence of problems and focus on solving them rather than wishing for a problem-free scenario.
- Constantly changing strategies or business directions due to the desire to eliminate problems can disrupt what is currently working well.
- Giving solutions time to be effective is crucial; impatience can lead to unnecessary changes and disruptions.
- An example provided is resolving accounting recruitment issues through strategic partnerships with accounting schools, illustrating the effectiveness of targeted problem-solving.
9. Time and Patience in Business Growth ⏳
9.1. Operational Challenges and Customer Quality
9.2. Reality of Business Expectations
9.3. Timeframes for Business Growth
10. Re-evaluating Scalability Expectations 🔍
- Businesses are inherently scalable, but the speed and efficiency of scaling are the primary challenges. Focus on solving existing problems rather than drastically changing business models to enhance scalability.
- Allocating more resources, such as advertising or recruiting, addresses features rather than scalability solutions. Effective problem management is key to developing long-term scalability.
- Recognize that all business paths have inherent challenges, and switching paths may introduce new, unfamiliar issues. Effective management of current problems can improve problem-solving capabilities over time.
11. Sticking with the Plan: The Hard Truth 📋
- Businesses often face slower growth than desired due to impatience, leading to unnecessary changes that create additional problems.
- The real challenge lies in managing timelines and understanding that difficulty is a natural part of business growth, not a flaw.
- Most of a business career involves enduring the waiting period for solutions to take effect, requiring patience and perseverance.
- Team dynamics may involve resisting impulsive changes despite pressures, focusing on long-term strategies instead of quick fixes.
- The analogy of the old bull and young bull illustrates the value of patience over hasty actions, emphasizing that slow, steady progress can lead to more comprehensive success.
- Entrepreneurs often have more ideas than they have time, necessitating focus on one business venture at a time for substantial growth.
- Big businesses often take decades to grow; understanding this long-term perspective is crucial for strategic planning.
- Accepting the need to say no to other opportunities is vital, as pursuing too many endeavors can lead to achieving none.
12. The Importance of Long-term Focus 🎯
- Only a small fraction of ideas (e.g., 5% or less) are ever pursued, emphasizing the necessity of sticking with one idea to reap compounding benefits.
- The challenge in business is not in planning or executing but in maintaining commitment to the plan.
- Consistency in focus is a skill that strengthens over time, akin to developing a muscle, making it slightly easier with practice.
- Success requires overcoming the fear of missing out (FOMO) and maintaining dedication to one's chosen path despite others' achievements.
- Humans have a natural desire for legacy and permanence, but time is finite and moves quickly, especially as one ages.
- Significant success in business often demands decades of commitment to a single goal or venture.
- Expanding business endeavors too quickly can create self-imposed problems, often detrimental to long-term success.
- Sticking with what works and avoiding unnecessary diversification can prevent business failures.
13. Conclusion and Final Thoughts 💭
- Evaluate if there is a mismatch between your business expectations and actual performance. This involves a strategic assessment of your business goals and the reality of your operational outcomes.
- Identify whether your business is supply or demand constrained by analyzing key metrics such as inventory levels, production capacity, and market demand. Utilize data analytics tools to gain insights into these areas.
- Consider leveraging external resources or consulting experts to better understand your business constraints and opportunities for improvement.