The Game with Alex Hormozi - My Micro-Scaling Cycle | Ep 760

Episode Date: October 18, 2024

Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Welcome back to the sixth in our little mini series of Audio First Podcasts. Today, I'm going to be talking about scale. So we go over stages of scaling to business at a very high level. I'm going to talk about the micro level of scaling, which is the scaling cycle, which is something that I've recently discovered that I love a lot. I'm applying it all over the business. I'm also applying it to this podcast right now. And then the nano level of scaling, which is basically how do we see the variables

that influence the outputs that get us more of what we want? And so what's the process of actually getting better? I did come up with a little process that I think could be really helpful because I've been trying to think through, because I'm working on this massive project that you guys will find out about in a few months. It's so good. It's both a lot of work and awesome and you guys will like it. Scale. So what I realized is that you have these macro transitions that a company has to go through.

And that's what I'm going to be releasing you guys in a few months in excruciating details so you know what it takes to get from each level of the business. And in thinking through that, I've seen a lot of different scaling frameworks in the past. Many of them were useful to a degree. And almost all of them and myself included when I've done frameworks like this, I kind of say like these are the phases of growth. And I usually do it to revenue, right? At this revenue, this revenue, this revenue, this revenue. The problem is it's very different between businesses what it looks like. And so what ends up happening is like when you go through a scaling framework and you're listening to someone else going through it, they tend to, myself included,

just describe what it was like at each stage for them. And so basically, if you have a different category of business, then the revenue, like basically what the company looks like at each level of revenue is just very different. And so I remember going through one scaling firm work earlier on in my career that was like, okay, I'm like really far on this category. Like we have a super developed media team, but a really underdeveloped, you know, finance function. Like, you know what I mean? And so like, it was basically like, here's how these departments scale over time. And they just arbitrarily drew lines and said it's going to be like this, right? Instead, I've been thinking about scaling basically purely as a function of headcount because the structure of how humans need to be

organized is going to be far less different. Like your first five employees, the communication cadence that you have with first five, whether you're building software, you're building, you know, like, you know, whatever, Instagram is sold for a billion dollars and had 13 employees. Well, he would look at my quote scaling framework and be like, well, this is horseshit. And he would be right. most of the time, the person who's delivering the scaling framework, if you just overlay, this is what it looked like for them to scale their business, then it far more useful for you to understand it, but less valid across different types of businesses. And so I wanted to come about the scaling framework, and this is what has been a tremendous amount of work, that goes

by headcount. And that's a project I'm going to be releasing. But there's a micro thing that I want to talk to you guys about today, which is a microscaling framework. And so that's a macro scaling That's how the organization, how communication, how people are organized, the functions of the business that must emerge at each level of headcount. Like, for example, you're probably not going to get rolling out benefits when you have one employee. It's unlikely. Now, you might, but it's probably unlikely. You're probably not going to be worried about legal compliance and comprehensive, you know, risk mitigation when you have five employees. It's just not really what you're considering. But you will probably need to get a payroll system in place. Right.

And so there are things that have to occur. Now, if you have 13 employees or your 22 employees in your WhatsApp and you're doing a gazillion dollars a year, again, it would feel like it wouldn't apply. But if you then only looked at headcount, then all of that stuff would probably be applicable to you. So kind of interesting, far more valid. Now, the microscaling framework is basically a framework that it takes to make anything bigger. And this scaling framework is actually a cycle, not linear, it's a circle. And it happens again and again and again and again independent of the department or function you were working on.

It goes like this. S-C-A-L-E, right? It's a nice acronym. So S stands for start. Like, until you start, nothing happens. So you can't scale something you haven't started. So there's S. have to begin. Then you have C, which is you have to compound. You have to do more of that thing.

Right. So you start the thing and then you do more of it. Right. So that's the C. We compounded. Then we A, which is augment, which is we do it better. So first we start, then we do more, then we do better. And once we have done a lot and we've gotten pretty good from doing a lot, then we L, we look for leverage. We look for consistency. We look for reliability in a system. And so that's the first four steps. And once you have leverage, you have a leverage, you have a a checklist, you have somebody else who can reproduce results. You're producing the results on a consistent basis. Then you go to E, which is expand. So basically, you go back to the beginning and you start anew, you expand an new territory, you expand a new channel, you start

a new process, whatever it is. And so that is the four slash five part cycle of scaling. And so let's walk through how this would work in, let's say you're starting making content on Instagram. Okay, so you start making posts. Great. S. Now you compound that. You do more posts. Got it. From the more post, you augment. You do better. You make better posts.

Then you understand what makes something better. Because to get better, you have to understand what the differences are from just doing what you were doing before. Then you make it reliable so that you can get consistent production of Instagram content that reliably gets you a certain amount of views. Then you expand. And so then you say, okay, well, now we're going to try TikTok. And we're going to start S. And then we're going to do more compound. Then we're going to augment A, do better.

Then we're going to L, leverage. We're going to get more out of what we do by making it consistent. And then E, we're going to expand. Expand can also be back to doing more, or the expansion can be something new. You can say, hey, we've mastered being good enough at making one YouTube video a week. We're going to expand to doing more, right? And so that little micro cycle pretty much applies to everything. So let's say you have a customer service department.

So first, you are the one doing the customer service because you are the business owner. And then you do more customer service because you get more customers. And then you get better at doing customer service because you have done more of it. And then you can systematize it, L, get leverage, so that somebody else can do it for you. And then you expand. You hire the next person, right? And so this scaling framework actually took a really long time to build out to make sure that it was as crisp and as tight as possible. But it pretty much gives you the progression of every department, of every form.

function that has to occur within the larger scaling phases that occur in business. And so wherever you're at, I would just ask yourself, where am I on the cycle? And you should be able to identify, am I starting, am I compounding, am I augmenting? Am I making it better? Am I leveraging? Am I figuring out how to make it reliable? Am I making it repeatable? Consistency?

Or am I at the point where we have this thing like clockwork and now we just need to do, we basically need to run the cycle again and expand? So we always start with volume, right, compounding, doing more because more begets better. And better is where we need to end up. And better is great as long as it's consistent, which is why that's the next thing, right? You have home runs and then not home runs, then home runs, and then not home runs. So the only thing better than a home run is hitting home runs all the time. And so it should follow logically that that's the path that you do, but you don't know how

to get good unless you do a lot of it. And so the fundamental process of getting good for whatever you do, is that you do a lot of volume, then you look at the top performers, because no matter what you do, if you fire an arrow 10 times to hit a target, and one of the arrows, unless they all hit the exact same spot,

which would be really tough, one arrow will be closer to the bull's eye than the others. And then you just look at the film footage, what did I do differently with this one than I did from the other ones? And then you say, great, next time I'm trying to do as much of that as I did and less of the other stuff. And then you fire another 10,

and then hopefully they should be closer than the grouping that you had before. And then you say, okay, what was the closest one here? Great, what did I do that time? And so that process of improvement, by the way, is free from life. You don't have to buy it with money,

but you do buy it with time. So I guess it isn't free, but you don't have to buy it with money. And it is reliable. And it is always true. Meaning a lot of people will make claims of what is or what isn't, but what will always be true is the data.

And so this is the close, this way to approximate truth that I've had for acquiring skills for making things better is doing a lot of it, especially when I don't know what I'm doing. I just do as much as I can. And then I look at that top performers and try and do what I did there. And I think where skill comes in is that over time, your attention to detail becomes super important. Because where it gets troublesome is where you cannot differentiate what you did differently between your top 10% and your bottom 10%. And so then your objective should be, how can I observe the differences better? What other variables am I not considering? Because those details are the key to skill. Here's what

gets really interesting. Once you understand the details, they also give you more ways to win, which makes the doing of more, more enjoyable because you know more progress markers along the way. And so fundamentally that is what separates a master from a novice, is that a novice only has the output to determine whether or not they were good. An expert or a master can see a hundred small things within the thing so they can see, oh, I actually got a 92 out of 100. Now next time I'm going to try to get 93. And so they have more ways to progress because they have more things to measure. And so in the beginning, you do more so that you can identify the variables to make a judgment on your performance. And I think that's kind of the nano level of scale.

So you have your overarching stages that occur within a business. You have the micro cycle of scale that happens over and over repeatedly. And then the nano level is in order to progress between the micro cycle of SCA-L-E, is that you have to know what makes something better so that you can make a checklist to make it consistent, so that you can then obviously expand to the next thing. I think if there's ever been a gift, for those of you who say, you know, who have people around you your life who tell you that you are obsessed, it's usually because they just don't know

what excellence looks like, and you have to be obsessed. And it's usually just a word that they used to describe someone who's good. And so I just wouldn't take it as an insult. It's like, of course, I spend more time on this than you because I care more about it, and it contributes to my life. I would just challenge you, and I actually use this as a great litmus test for when I'm hiring,

is that you can see someone's skill by the quantity and quality of metrics they track around a given task. And so if someone says, hey, I can help you with your sales team and you say, cool, what are you going to do? And they're like, well, I'm just going to, we're going to sell hard. It's like, yeah, well, cool, but what metrics you're going to track? And then the 201 level of that is, okay, these are the metrics you track. If this goes up, what do you do? What behavior does it influence? So one is you have to know what variables exist.

The next is what actions it takes to influence those variables. You can think about that for skill when you're hiring somebody, but also skill for you when you're trying to learn anything. And so that's been really helpful for me as a frame to teach my team things is like, hey, these are the variables, and these are how you change these variables. And if you want these variables to go up or change in this way, this is what you have to do. And it makes it much easier for you to get people to get the same results if you tell them what to do to move the variables. And so for you, when you're trying to figure out your ads, look at the ads. Look at the best ads you ran. Why is it different? And answering that question will unlock so much more growth than trying to find

the newest hack. And that works just as well for customer's success. Why are these ones 10 out of 10s? Why are these five stars? It works just as well for people who bring referrals in. It's like, okay, what happened for this person that they brought a referral versus others? Now, part of it might be that this type of person has a network. Okay, well, that might be a variable that I need to consider. So when I'm bringing customers in, I might say, hey, these people have networks. Okay, well, then we're going to do these extra things that'll increase the likely that they become viral customers for us. And so again, all of this is about data. All of this is about knowledge. And if all of that sounds like work, welcome to welcome to scaling.

That was top of mind for me because I've been working really deeply on phases of an organization as it scales so that everyone else can hopefully not have to take a really long time to progress through the stages, as sometimes it felt for me along the way. Oh, by the way, micro. So we started this new little mini thing, S compound. I immediately just did more because I knew I was going to need more data. So right now I'm in the A step of this of augmented. which is that I need feedback loops to say if this is the right direction or not,

and what separates good podcasts from bad? And so for me, when I looked back at my data, were the podcasts that grew my listenership. It was podcasts that were more unscripted, more top of mind. And so I'm trying to check off more of those boxes. And if this confirms, because I have switched from it, if it goes back to growing this way, then I will know that is a variable that I can repeat on my checklist, L.

And then once I check that box, then I can go to E, which is expand, and then I can advertise my podcast because I know that I've done these things. Yeah, this is the sixth in the series of audio first podcasts of Diary of Alex Shemose. But basically top of my stuff that I'm actually thinking about in the business today right now. And if you like this stuff better than kind of like, I would say note heavy content that's, I would say like the air has been sucked out of the content. Like there's no gaps. Obviously, that's been super, you know, successful for me across different platforms.

I am still learning podcasts, to be honest with you guys. Yeah, I'm just trying to figure it out. So if this was helpful, tell me, tag me, share people the thing. And if you do that, then I will know from the stats that you enjoy this. And if not, then you can tell me it sucks and not share it and not tag me and I will stop doing it. Otherwise, keep slang.