From: alexhormozi
Entrepreneurship should prioritize getting “better” rather than solely focusing on getting “rich” [00:00:00]. “Getting rich” is an outcome, while “getting better” is an input [00:00:07]. Many entrepreneurs are excessively focused on outputs, leading to scattered efforts in an attempt to drive up numbers [00:00:10]. The real objective should be to do the work that inherently creates wealth [00:00:17].
The Problem with Chasing Sales
Most businesses, about 95%, are caught in what’s termed the “selling business” [00:00:45]. This means their primary growth strategy is to continuously sell more units or acquire more customers [00:00:38]. John Paul DeJoria advised against being in the selling business [00:00:31]. Such businesses are constantly struggling for leads and trying to figure out where their next customer will come from [00:00:47].
If a business relies solely on acquiring more customers through advertising and marketing, it becomes a perpetual cycle of needing to “reload all your sales again” starting from zero each month [00:01:17], [00:01:40]. This approach sacrifices long-term growth for short-term gains [00:01:13].
The “Holes in Your Bucket” Metaphor
Small business owners often ask how to scale, but they’re doing it “the wrong way” [00:00:26]. Instead of focusing on acquiring more leads, they should address the “holes in their bucket” [00:01:56], meaning underlying issues causing customer churn or dissatisfaction. Pouring more water (leads) into a leaky bucket (poor product/service) is futile [00:01:59].
Many businesses don’t realize they need more leads precisely because they have so many holes in their bucket [00:02:24]. If you’re stuck at the same level, you must investigate why people aren’t buying again or referring friends [00:04:50].
The Power of Product Quality and Delivery
The key to sustainable growth is to create something people don’t stop buying [00:02:27]. This doesn’t necessarily require a recurring business model, but rather a product or service so good that people immediately tell their friends about it [00:02:34].
“The only way to grow your business is to advertise more… unless you’re supremely good at advertising… but the thing is… the next month you have to reload all of your sales again. You have to start at zero again, and that sucks.” [00:01:17]
The initial “offer” might get customers in the door, but how well a business delivers on that offer is what secures repeat business and referrals [00:03:07]. This aligns with the concept of better over new for business growth [00:00:00].
The Cookie Business Example
A friend started a cookie business by first traveling the country to learn from top bakers [00:03:16]. He then spent a year baking a new dozen cookies every day, numbering the batches, and getting feedback from tasters [00:03:39]. This intensive process, focused on refining the product, allowed him to identify the “hundred tiny details” that make a perfect cookie [00:04:14]. When he finally opened, he had a smashing success because he had already generated leads and, more importantly, perfected his product [00:04:02]. This illustrates importance of focusing on process over outcomes [00:00:07].
Delayed Gratification and Compounding Value
Improving product quality is a form of delayed gratification [00:06:18]. Unlike sales improvements, which yield immediate revenue jumps, product improvements have a delayed but significant impact [00:06:25]. This deliberate focus on getting the product right, rather than rushing to scale, is key for long-term business health [00:06:00].
The ultimate reason for poor growth is often not a lack of leads, but a product that “sucks” [00:07:07]. While there is an unlimited amount of traffic across various media, businesses cannot afford these leads if their product doesn’t retain customers and generate referrals [00:06:45].
Building a Strong Brand Through Delivery
A strong brand is built by consistently delivering on promises [00:11:14]. The brand acts as a reinforcing loop: you make a promise, keep it, and then those satisfied customers tell others, which in turn decreases your customer acquisition cost (CAC) [00:12:40].
Businesses that constantly change their offers every six months often do so because they fail to deliver on their initial promises [00:11:30]. They lack the skill of product delivery, team management, and consistency [00:11:55]. This leads to a degraded reputation and negative word-of-mouth [00:12:07], where ads become less effective and CAC increases faster than market rates [00:12:50].
“Your conversion rate decreases over time, you complain that ads aren’t working, when in reality all of this is the Invisible Hand of your product sucking.” [00:13:39]
In contrast, big companies succeed because they’ve won the “long game,” which is the Customer Lifetime Value (LTV) game [00:08:08]. They can spend more to acquire a customer because they know how valuable that customer becomes over time due to repeat purchases and referrals driven by product quality [00:08:18]. This also results in the ability to charge higher prices for the same product, as perceived value increases and risk decreases for the customer [00:14:49].
Focusing on the “Unscalable” Work
The initial phase of a business should focus on learning, not earning [02:04:00]. This means obsessing over the customer experience to ensure no one leaves [02:18:00]. While competitors chase cheaper leads and “hacky Instagram things,” a business focused on product excellence can grow consistently simply by retaining customers and acquiring new ones who compound through referrals [02:37:00].
Entrepreneurship is more a “battle of wills than it is a battle of intellect” [02:11:00]. It requires the willingness to delay gratification and persevere through failures to get the product right [02:16:00]. This willingness is the key difference between small and large businesses [02:24:00].
Identifying Activation Points
To improve a product, businesses should use data to identify “activation points” or “retention points” [02:32:00]. This involves:
- Regression Analysis: Looking at cohorts of customers who don’t cancel to find common variables that occurred in their experience [02:37:00].
- Onboarding Focus: Driving the onboarding process towards these identified activation points [02:40:00]. For example, if achieving an SEO sale quickly prevents cancellations, focus onboarding on expediting that first sale [02:46:00].
This focus on deeply understanding what makes customers stay and then consistently delivering that experience is the highest leverage activity for a business [02:40:00]. Every customer receives the product, so improving it once yields disproportionate returns compared to constant marketing [02:43:00]. This strategy contributes to overall strategies for business growth and improvement and strategies for maximizing business profits.
“The compounding vehicle in the business for most businesses is the quality of their product.” [02:23:00]
The success of companies like Facebook, which focused on user activation, or Apple, which consistently delivers on product promises, highlights the power of this approach [02:11:00], [01:40:00]. This ensures a business remains valuable and continues to compound its growth, rather than being limited to the sales and marketing efforts of the previous month [02:17:00].