The Game with Alex Hormozi - The Only 2 Real Things Restraining Business Growth | Ep 325

Episode Date: August 26, 2021

We need to be reminded more than we need to be taught. Today, Alex (@AlexHormozi) talks about the 2 root causes of why there might be some constraints in your business’ growth and how the theory of constraint can play a big role in its improvement.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 on his path from $100M to $1B in net worth.Timestamps:(1:21) - Enter saturated marketplace with unique product offerings.(3:20) - Assess business saturation: market reach and growth potential.(5:10) - Focus on one product solving a major marketplace problem.(6:41) - Improve business by prioritizing problem-solving strategies.(8:21) - Reframe problems with "How do I..." mindset for solutions.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

We need to be reminded more than we need to be taught. That is a saying that we have in my world. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. I had a business owner reach out yesterday who was doing about $550,000 a month, and they were crying for us to become an Acquisition.com portfolio company. And the conversation was really interesting.

And so I thought I would share it with you. So we hopped on the call and within the first minute or, to you know after saying hey how's it going etc he's like yeah you know I had a bunch of clinics and then COVID hit we took everything to telehealth and then our profit exploded and it's been awesome I was like well that's great and he's like so what I'm thinking about doing is helping starting a new business to help physicians improve their their medical practices and I was just like huh he was like yeah because you know you did this thing with gym owners and you kind of licensed your model out I kind of want to do the same

thing with with with physicians and I sat there and I was like this is going to be a really interesting conversation and so after him going you know giving his reasoning behind this I was like well I have no interest in that business at all and I was like let me tell you why I was like first off you want to enter a new market sorry an established marketplace that is incredibly saturated the the the value proposition that you have is not based on like a ton of personal experience right you have a handful of examples. It's also not that unique. There's plenty of other people who do this same thing. And so you want to enter a space you've never been in before, have a new acquisition system, a value

proposition that's not defined. It's incredibly saturated and there's nothing new. And I was like, I have no interest in this business. And he was like, huh. And I was like, but what I am more interested in is, why don't you want to take the thing that's making you $550,000 a month that you grew in two years and just take that to $5 million a month? Like, why aren't you doing that? And so he was like, well, honestly, I kind of got stuck and I didn't know how to how to grow it from from here. And so it was it was such a nice point because there was a pause and you could almost like hear him saying it to himself and hearing him say it out loud. I was like, so let me ask you this. If we could go from 550,000 a month to, you know, to tripling your your amount of customers

you have and going to one and a half million a month, I was like, would you still be interested in doing this whole medical thing, you know, this other thing that you were telling me about earlier were trying to teach metaphysicians. And he was like, oh, no, of course not. I would just want to do this thing. And I was like, okay, so to be clear, let me restate this, because you got stuck in this existing business, you thought the solution would be,

I will start another business. Huh. Not a good deductive reasoning pattern, right? And this is obviously a very smart individual, right? And I say this because all of us, right? I do this. I do this all the time, right? And this is going to be a repeated theme because it needs to be repeated, right?

We need to be reminded more than we need to be taught. That is a saying that we have in my world, and I will pass it on to you guys, Mosey Nation. We need to be reminded more than we need to be taught. Do the boring work. Repeat successful actions. And so if he's gotten to this point or if you've gotten to a point in your business and it has plateaued, the question is, has it plateaued because this is true, like I have the only reason a business should plateau that is reasonable, that is not your fault, is that you have reached the total addressable market.

in you have saturated the total market of that thing. So for example, if you were selling dog food and every dog within this, you know, maybe you sell a specific type of niche of poodle food, right, you've gotten, you know, 70% of poodle owners to buy your food. And you can't grow any more beyond that, right? Well, that would be reasonable, but then you'd obviously just do a different type of dog, right? You'd hop verticals, right? So there's not even a reason. But it would be the only potentially rational reason would be that your market has changed. So a different example is a friend of mine owns a company that does newspaper advertising. All right.

So they actually help newspapers translate their advertisements into digital products, which is pretty cool. So they are able to sell a whole, like basically a whole new ad product to small businesses who want to buy ads, right? Which is, by the way, how newspapers make money. And so he could not grow his business because newspapers have shrunk by 25% year over year, which is 25% compounding the wrong direction. And he's been in that business for like 10 years. So now the market size is literally like 5% of what he used to be 10 years ago. And so as a result of that, he was growing at an inverse rate to the shrinkage of the industry, right?

And so he got to a point where he couldn't grow anymore than just basically servicing the ones that are still alive. and then as they fell, so did his business, right? And so that is the only logical reason that a business can plateau that is not in your control. And unless you're selling new newspapers, which you're probably not, the reason is much simpler, which is you just don't know how. And I'll tell you a different story that I had, and then I'll wrap this up at the end. So I was having a different conversation with a woman who was doing, I think, $4 million a year. And she was selling info products that were weight loss, so like weight loss, so like programs,

and ebooks and things like that, which is cool, right? She's a big following, all that kind of stuff. And we got, I did a podcast with her. And after we got off the podcast, she was like, yeah, so these are my plans. I'm going to be doing like an apparel line and a supplement line and a cream line and whatever, right? And I just kind of sat there and I was like,

well, I think that's a terrible idea. She was like, she just looked at me across there. She was like, yeah, I think it's a terrible idea. She was like, oh. And I was like, why don't you just take the thing that's making you $4 million and make it make you $10 million. Why don't you do that? And the answer is the same as the first answer. I just don't know how. And I was like, right, well, why don't we solve that problem and then not create a new business? Why don't we just put

all of our effort in solving that problem? And so I'm a big believer, and this is the piece that I want to share with you, Mosy Nation, is that I'm a big believer in the theory of constraints, which means that a system will grow until it is constrained, right? It has a constraint, and then once you remove the constraint, it'll continue to grow. until it reaches another constraint. And so most people are always curious, or many people ask me, hey, Alex, how did you achieve quote so much

in, quote, such little time or at such a young age? And I say all that in quotes because so much could be in young age, whatever. But I'm saying, I'm just, I'm paraphrasing, right? And I think that one of the things that we have done well is prioritizing what problems to solve. And that is understanding the prioritization of problems. And realizing that there is,

really only typically one or two things that are constraining our growth. And by definition, there'd really only be one thing that's the constraint until we reach another thing that might be beginning to constrain us, but isn't the true constraint yet. Real quick, guys, if you can think about how you found this podcast, somebody probably tweeted it, told you about it, shared it on Instagram or something like that. The only way this grows is through word of mouth. And so I don't run ads. I don't do sponsorships. I don't sell anything. My only ask is that you continue to pay it forward to whoever showed you or however you found out about this podcast that you do the exact same thing. So if it was a review, if it was a post, if you do that, it would mean the world to me

and you'll throw some good karma out there for another entrepreneur. Right. I'll tell you a third story. So I had a conversation with a young business owner who was doing about $150,000 a month. And within, you know, a little bit of time, I was able to see that the issue that he had was that he hadn't scaled a sales team, right? That was the issues, that he couldn't scale sales. and we had, there was a zillion things that he could do to improve his business. He could increase his life number of profit. He could change his pricing model. I think there were some things on his messaging that were off.

But at the end of the day, the thing that he hadn't done was that he hadn't scaled a sales team. And so we ended up circling back two weeks later and he was like, hey, you know, I want to know how I can like get the most out of this, this phone call with you. And I was like, well, have you scaled the sales team yet? He was like, no. And I was like, well, then we don't really have anything to talk about. Because there's nothing else that matters right now besides this. And it took like two or three reinforcements of that message until he was like, you're really not going to tell anything else.

I was like, no, because it doesn't matter. It doesn't matter. That's not the constraint right now. Sure, you could improve your pricing. Sure, you could do these other things. But the thing that is stopping this business from growing is that you do not have a skilled sales team. And you don't have that skill. So let's phrase the deficiency as a question, which is how do I learn?

how to recruit, manage, and train a sales team. Right? And to the first business owner, the question that I said, who was doing the 550 a month, who was during the clinics, I was like, the question is,

how do I scale acquisition? And he had a product that was, it's not allowed to be marketed on Facebook and things like that. So he had to do alternative methods. And I was like, so the question is, how do I acquire more customers than I already am from a different channel that I'm allowed to?

When we phrased the question, like that, then they become problems that we can solve, right? Rather than, I don't know what to do, therefore I will just start another business, which so many times is the entrepreneurial solution, and it's because it feels good. And we think that somehow, when we start another business, it's going to somehow grow. But the reality is, and this is what I have found over and over again, is that the businesses will grow to the level of incompetence of the entrepreneur. So if you're a $4 million entrepreneur, the next business will be a $4 million business. It doesn't matter what it is, because that is your level, that is your skill set, right? That is, there's, there's,

that is dictated by your beliefs, your traits, and your skills. And unless you change one of those things when you start the next business, you will be capped at that. And the other reality is that how many publicly traded companies do you know have two, or how many CEOs of publicly traded companies? Do you know that are CEOs of two companies? CEOs, not founders. Elon Musk is the only exception.

But he's the founder. He's not the one who's running. He's not the operator of those companies, all right? He's literally only one, right? And he's also a genius and literally like the smartest human being a lot. But most of us are not Elon Musk. If we're on YouTube right now, we're probably both not Elon Musk. All right. Maybe we can agree on that.

All right. And so the point of this is that you can't be CEO of two things. It's hard enough to be in one business. Business alone is hard enough, right? Why make it more difficult and three times as complex by adding more variables in? And so I think what most business owners, most entrepreneurs can do right now is simply ask the question, and this is usually what I'll start, any conversation that I have with an entrepreneur who's reaching out for something, right, or one of the portfolio company CEOs, is I'll just

ask the question, which is, whatever the run rate is at the moment, let's say it's a million a month, I'm like, what's stopping us from being at $5 million a month? What's stopping us? And until we can clearly answer that question, there's nothing else we need to do. And when we ask better questions, we get better answers, right? Why am I not growing is different than why am I not doing it extra million dollars a month? What is stopping us from doing that? And if we can get crystal clear on that, then we can find the constraint and then we can remove the constraint because then we can put all of our effort towards that singular problem. And that, in my opinion, is how you scale companies quickly. It appears fast from the outside, but from the inside, it feels

manageable and clear because we're all focused on the one problem that we're solving at this moment, which might be in the beginning, we need to increase our sales team. And then once we've increased our sales team, we might say, hey, you know, we've increased a sales team, but they're not all performing the same level. So it's like, okay, we need to have better onboarding and training for the sales team. Okay, we need to do that. Okay, that's the next problem that we'll solve. We need to have consistency in this process. Okay, now we're doing that, but now we're not getting enough leads. Okay, now we'll put all of our focus here, right? And so each time, there's going to be a constraint, and we just have to focus our attention towards the constraint. And then in so doing, we will

debottle neck and we will naturally grow to the next level. And so that has been one of the more more valuable lessons that I've had. And I will tell you that there are a lot of entrepreneurs who are listening to this. You right now, it might be you. So I might be talking to you right now, is that you think that you need to start another business or another product line because you were stuck at a current level and somehow think that this new product line or new business is going to solve the problem and it is not.

All right. So if you like this, Mozy Nation, my name is Alex Formozy. I own Acquisition.com. You can go there for free trainings, all free, no opt and required, etc. Hit subscribe if you liked it and I'll see you guys the next video. Bye.