Effective Resource Allocation and Prioritization

From: alexhormozi

Alex Hormozi shares 13 years of business lessons and “brutal business truths” to provide actionable insights for entrepreneurs [00:00:08]. These truths focus on strategic decision-making, prioritization, and effective resource allocation for sustainable growth and profitability.

Sell to the Wealthy First

A key strategy is to initially sell to affluent individuals until sufficient capital is accumulated to serve a broader market [00:00:15]. Selling to the “middle” market often leads to being “killed” due to intense competition and lower margins [00:00:20].

“You can either do a lot of good for a small amount of people or a little good for a large amount of people. And I will tell you personally it’s way hard to do a little good for a lot of people than a lot of good for a small amount of people.” [00:00:24]

• Tesla’s Model: Tesla began by exclusively selling high-priced vehicles like the Roadster ($250,000) to wealthy individuals before gradually moving down-market with more affordable models [00:00:36].
• Volume vs. Value: Selling to the masses (volume) necessitates building vast infrastructure and winning on efficiency, as seen with companies like Walmart and Amazon [00:01:06]. These companies are built for volume and win on efficiency, with a culture of frugality [00:01:17].
• Solving “Rich People Problems”: Wealthy clients are willing to pay more in an absolute sense for lower relative value, providing higher profit margins that allow businesses to over-deliver and build a strong foundation without needing extensive infrastructure [00:02:23]. They prioritize time savings over cost savings [00:08:53].
• Personal Application: Alex’s company, Acquisition.com, operates as a premium brand, doing one or two deals a year to make very rich people wealthier [00:05:53]. In contrast, School.com, a platform for creators, required five years and millions of dollars of development, losing money to offer absurd value to a mass market starting out in business [00:06:23].

You Lack Priorities, Not Information

Often, business challenges stem from a lack of clear priorities rather than a deficit of information [00:08:58]. Strategy is the prioritization and allocation of limited resources (time, money, people) against unlimited options [00:10:13].

• Case Study: Entrepreneur with 56 Companies: An entrepreneur making $10 million across 56 companies was advised to focus solely on his largest venture, which contributed half the revenue. By eliminating distractions and focusing resources, he was able to significantly grow that single business [00:09:08].
• Defining the Problem: Many entrepreneurs seek unique insights when they haven’t even defined their goal or the specific problem they are trying to solve [00:10:38].
  • Media Company Example: A media company with 40 million subscribers wanted to optimize their Standard Operating Procedures (SOPs) for monetization. The core problem, however, was that they had no product to sell [00:11:09]. They were trying to optimize something that wasn’t the primary constraint.
  • Sales Guy Example: A sales professional focused on improving his closing framework despite having a 40% close rate, indicating that sales was not the main bottleneck in his business [00:12:44]. He was prioritizing a comfortable problem rather than the actual constraint, such as lead generation or capacity.
• Business as a Body: A business, like a body, needs balance. While individual contributors should double down on their strengths, the business as a whole will only be as strong as its weakest link [00:13:41].

Standards and Talent

• Low Standards, Stupid Rules: If a company needs to enforce “stupid rules” (e.g., don’t watch Netflix during calls), it indicates low standards and hiring of less capable individuals [00:26:07].
• Raising the Bar: Every new hire should raise the average bar of the team they join [00:27:08]. Companies naturally tend to dilute talent if not actively controlled [00:27:28].
• Hiring Smart: To find the right talent, extensively interview many candidates. Treat the interview process as an educational opportunity to understand the role and what “good” looks like [00:17:09].
  • Questions to Ask:
    1. What metrics do you measure in your role? Look for quantity and quality of metrics [00:18:21].
    2. How does what you do make the business money? Every function should tie to revenue or profit, directly or indirectly [00:19:54].
• Peter Principle: People tend to advance to their level of incompetence [00:31:38]. Promoting a good salesperson to a bad sales manager exemplifies this [00:31:44].
• Hard Conversations: Growth often lies on the other side of difficult conversations, such as reassigning or letting go of underperforming team members, even if they are well-liked or long-tenured [00:29:54]. Framing it as an investment in their learning and development can help [00:31:02].
• Value of Talent: Investing in high-level talent is a significant arbitrage opportunity in business [00:34:47]. A top-tier employee (“A++ player”) costing 50-70% more can yield 5-10x the output of a “B player,” leading to a far better return [00:35:16].

Get Better, Not Just Bigger

“If you want to get bigger, get better. Better leads to growth, bigger leads to bloat.” [00:29:28]

• Chick-fil-A vs. Boston Market: Chick-fil-A prioritized “better not bigger,” growing responsibly and focusing on product and experience [00:36:36]. Boston Market, driven by valuations and rapid expansion, grew quickly but ultimately diluted its talent and failed [00:37:12]. Missionaries (believing in the product) win in the long term over mercenaries (driven by money) [00:37:59].
• Elon Musk’s Approach: When entering a new market, aim to be an “order of magnitude better” than existing solutions [00:39:33]. Elon didn’t pursue a chocolate business because he couldn’t find a way to make it 10x better [00:40:06].
• Tactical Improvement: Identify one specific thing in each business function that can be improved with high confidence (e.g., reduce lead response time from 30 to 5 minutes) [00:41:17]. This improvement should be built upon, not swapped out, creating a checklist of “golden BBs” that lead to outsized returns [00:41:43].
• Growth as a Lagging Indicator: Growth is an outcome, not an input [00:42:41]. Focusing on “growth for growth’s sake” leads to distraction and companies being spread thin [00:43:43]. If the core product isn’t exceptional, growth only exposes its mediocrity [01:25:28].

Time Management and Productivity: Protect Your Focus

Entrepreneurs often get distracted by non-essential tasks, leading to feeling busy but unproductive [00:43:56].

• Let Fires Burn: Most “urgent” matters are not existential threats to the business [00:44:14]. Allowing minor issues to persist allows focus on critical, high-leverage work [00:46:58].
• Prioritize Time: Block out the first 4-6 hours of the day for uninterrupted work on the highest-leverage tasks [00:47:10].
  • The One Thing: Focus on “the one thing that if it were true, all of my other problems would go away” [00:47:31].
• Saying No: Be comfortable saying no to meetings or requests that don’t align with your core priorities [00:48:20]. Strategically pushing out commitments with a “socially acceptable” reason (e.g., “I’m not taking meetings until after my book launches”) can be effective [00:49:30].

Know Your Money-Making System’s Inputs & Outputs

To scale, understand the smallest, most actionable inputs and outputs of your money-making system [01:03:33].

• “Why Can’t We 10x This?”: Asking this question quickly reveals the business’s fundamental constraints [01:03:51].
  • Example: Ad Scaling: If ads can’t scale, it could be due to poor ad quality, limited market size, or inability to handle increased demand (sales, operations) [01:05:08]. Breaking down ad creation into micro-steps (pre-work, remaking best ads, generating new ideas) ensures consistent quality and allows for accountability [01:05:30].
  • Example: Sales Team Scaling: To scale a sales team, quantify the actions needed (e.g., X number of LinkedIn reach-outs to hire Y number of people) [01:07:00]. The ability to execute at a high volume (e.g., 200 interviews in 7 days) distinguishes high-level entrepreneurs [01:09:49].

Stop Looking for Hacks, Focus on Quality

Avoid jumping from short-term “hacks” or trends, as they lead to instability [01:10:21]. Instead, focus on the fundamental objectives of platforms (e.g., YouTube wants clicks and watch time) [01:10:56].

• Quality Over Quantity (Eventually): Early on, quantity helps teach the work required for quality. Over time, making exceptional content yields disproportionately higher returns (e.g., 20% better video can get 5x the views) [01:12:04].
• Value Per Second: People desire “value per second,” not just “seconds of value.” Distill information to its most concrete, high-impact form [01:13:22].
• “Coats of Paint”: Quality comes from repeated iterations, like applying multiple coats of paint to a surface. Each review pass focuses on a specific aspect (punctuation, data, spelling, content flow) [01:14:37].
• Document Processes: Documenting processes for creating quality enables consistency and easier onboarding of new team members, ultimately allowing the founder to replace themselves while maintaining standards [01:17:22].

The Most Valuable Asset: Brand

Brand takes a long time to build but is the most valuable asset, enabling insane returns on advertising, pricing above market, and customer loyalty [01:14:14].

• Building Association: Branding is creating a positive association between something people know and something they don’t know (your business) [01:52:55].
• Three Levels of Brand Influence:
  1. What you say/show: Controllable marketing and content [00:53:15].
  2. What other people say: Referrals, word-of-mouth [00:53:31].
  3. Customer experience: The strongest influence, directly shapes opinions and future behavior [00:54:24].
• Price as a Lever: Price is the strongest lever on profit. A strong brand allows charging a significant premium above commodity prices, leading to higher margins and increased unit sales [00:56:33].
• Long-Term Investment: Brand building is like a long-term investment that compounds over time, eventually yielding returns that direct response advertising alone cannot match [00:58:28].
• Competitive Moat: A strong brand creates a competitive moat, leading to customer stickiness (e.g., Apple users rarely switch) [00:59:59].

The Big Obvious Problem

The biggest problem is often the one that’s avoided because it challenges the entrepreneur’s ego [01:22:31].

“The magic you’re looking for is the work in the work you’re avoiding.” [01:23:17]

• Be Your Own Customer: Many business owners haven’t recently experienced their own product or service [01:22:56]. The core offering itself (e.g., food in a restaurant, effectiveness of a workout) is often the root issue, not peripheral details like SEO [01:23:37].
• Peloton’s Litmus Test: Peloton’s founders aimed to make their workouts so exceptional that customers would immediately tell others about the experience [01:24:05]. This level of quality drives organic growth.
• Self-Deception: Many entrepreneurs lie to themselves about the quality of their product or service because confronting its insufficiency is frightening [01:25:04]. This leads to scattering focus on minor issues instead of the core problem.
• Strategic Growth: When a product is mediocre, it’s better to limit exposure. Only add “gasoline” (marketing and scale) when the product is exceptional and already growing through word-of-mouth [01:25:31]. Alex’s investment in School.com came when it was already growing organically with zero marketing [01:26:29].

Periods of Wealth Creation: Back the Truck Up

Wealth is often created in distinct periods where significant opportunities arise, allowing entrepreneurs to “back the truck up” and go “all in” [01:28:05].

• Gym Arbitrage: His first gym business saw a 30:1 return on advertising because Facebook ads were wildly underpriced [01:27:34].
• Gym Launch Arbitrage: Gym Launch achieved a 100:1 return in its first year, partly because the product (the 30:1 gym model) was so effective that clients immediately saw results and generated word-of-mouth referrals [01:28:23]. In niche or local markets, word-of-mouth becomes a powerful driver, leading to absurd returns and making it feel like “printing money” [01:29:07].
• Talent as Arbitrage: The value arbitrage on talent often increases with the level of compensation. A $50,000employeemightyielda5xreturn,a$300,000 employee a 14x return, and a $1 million employee a 50x return [01:22:04]. Talent is the most underrated money-making arbitrage opportunity in business [01:22:21].
• Mission Alignment: To attract top talent, a business must have a mission that aligns with what high-level professionals find meaningful [01:18:19]. Elon Musk’s companies are all framed around “saving the world,” which attracts highly motivated individuals [01:20:10].

[01:29:39]