From: alexhormozi

Successful business growth hinges on identifying and effectively addressing the core limitations that hinder progress. This involves strategic prioritization and a keen understanding of what truly drives value.

The Problem: Understanding Growth Gaps

Many individuals in business aspire to significantly increase their income, often envisioning a “magic wand” scenario where they can make as much money as they desire per month [00:00:23]. However, a significant gap often exists between current earnings and desired financial goals [00:00:47].

This gap can manifest in two primary scenarios:

  1. Anxiety from too many options: Feeling stressed or overwhelmed by the sheer number of possible actions to take, unsure which path is best [00:01:30]. This indicates a lack of strategy [00:02:31].
  2. Hopelessness from no options: Not knowing what to do at all, feeling lost or hopeless because there’s no clear starting point [00:01:44]. This suggests a lack of choices or ignorance about the topic [00:02:06]. Recognizing this means the problem is solvable by finding a clear path [00:02:11].

Defining “Strategy” for Growth

Strategy, often considered a “fluffy” and amorphous word, can be simply defined as prioritization [00:02:53]. It means figuring out what will yield the “most bang for the buck” [00:03:03].

More formally, strategy is how one chooses to allocate limited resources against unlimited options [00:03:08]. The most costly elements in business are often the “unknown unknowns”—the options not even considered [00:03:37]. Being strategic allows a business to get more for each step, allocating time, money, and energy into the fewest moves that maximize return [00:04:06].

Strategic Repositioning

A company acquired found that 85% of businesses churned within 2-3 months, while 15% paid the most and stayed the longest [00:04:32]. A strategic decision was made to stop selling to the 85% and instead cater only to the top 15%, niching down the messaging and 10x-ing the price [00:04:47]. This approach led to selling more units than before and 10x-ing the company [00:05:36]. This demonstrates how strategy for business growth and improvement focuses on maximizing return per unit of effort [00:05:53].

The Theory of Constraints: Finding the Bottleneck

Every business has a constraint—one thing limiting its growth [00:08:31]. If a business is not growing as fast as desired, despite long hours, it indicates that efforts are being spent on the wrong things because the constraint hasn’t been properly identified [00:08:48].

Media Company Constraint

A large media company with over 40 million subscribers believed their constraint was needing a better media machine [00:09:14]. However, their primary monetization was AdSense, an inefficient method [00:09:35]. The real constraint was not having a product to sell [00:09:53]. Improving their product-selling capability from 0 to 20 would likely yield 10 times more money than perfecting their already strong media production [00:10:06].

To identify a business constraint, a helpful question to ask is: “Why can’t we 10x this business?” [00:10:42]. The answer often reveals the core problem.

Key Objectives for Business Growth

When considering any objective or activity for a company, it must map to one of three core goals [00:11:29]:

  1. More Customers: How will this activity acquire new customers? [00:11:36]
  2. Increased Lifetime Gross Profit (LTV): How will this activity make existing customers worth more? [00:11:43]
  3. Decreased Risk / Increased Enterprise Value: How will this activity reduce the risk of future business disruption and increase the overall value of the business? [00:11:52]

Any activity that doesn’t align with these three objectives should be discarded [00:20:11].

The Power of Leverage and Scaling in Business Growth

Leverage is key to significant financial gains. Income maximization is less impactful than asset value appreciation [00:13:29]. True wealth is built from owning assets, not from the work one does [00:13:43].

Valuing Businesses Based on Owner Involvement

Consider two businesses, both with 2 million in bottom-line profit [00:12:25].

  • Business A: Run by a single owner who handles all day-to-day operations with “minions” who simply follow instructions [00:12:35]. If this owner dies, the business dies [00:12:43].
  • Business B: Has a team that runs the entire operation, allowing the owner to make 10-20 million) because it is transferable and not reliant on a single individual [00:13:03]. An increase in profit from 3 million in Business B adds $10 million to the owner’s net worth [00:13:18].

For many businesses, the biggest lever for growth and scaling strategies is addressing current talent issues and confronting discomfort [00:15:52].

Addressing Talent Constraints

Many small businesses are not valuable because they are essentially the owner with a few helpers [00:13:52]. Building a valuable asset requires transitioning from personal execution to building a team [00:13:59].

The key difference between small and big businesses is the number of “A-players” they have [00:14:27]. Small business owners often settle for mediocre employees due to a lower tolerance for discomfort in confronting poor performance [00:15:45]. This “mediocre person” on the team can consume 25% of one’s bandwidth [00:15:30].

Confronting Discomfort

Have the direct conversations you often have about an underperforming employee behind their back directly to their face [00:17:31]. This often results in either a significant improvement (1 in 5 times) or a clear path to elegantly exit them from the business (4 in 5 times) [00:18:10]. This ability to have hard conversations is crucial for challenges and lessons in scaling business operations and prevents staying “poor” [00:17:19].

Prioritizing Growth Activities: More, Better, New

When implementing effective business frameworks for growth, activities should be prioritized using the “More, Better, New” framework [00:23:40]:

  1. More: First, ask why the current successful activities cannot be done “more” [00:23:54]. This often involves doubling down on proven methods [00:25:38].
  2. Better: If “more” is limited, then ask how current activities can be done “better” without investing new resources [00:24:04] (e.g., calling leads faster, improving scripts) [00:26:08].
  3. New: Only after exhausting “more” and “better” should new initiatives be considered [00:24:15]. Many small businesses make the mistake of constantly chasing “new shiny things” before optimizing existing ones, leading to short-term efforts that are quickly abandoned [00:24:39].

The Danger of "New"

The desire to 10x in 90 days and constantly chasing silver bullets is detrimental [00:26:28]. Sustainable growth comes from “100 golden BB’s” – consistently improving lots of little things over time [00:26:37]. An exceptional business is built by consistently doing the “should do” tasks that are already known, not by seeking shortcuts [00:27:52]. The “rush” to find a new shortcut ultimately hinders progress [00:28:00].

Prioritize “should-do” tasks by ordering them by impact and ease [00:29:05]. Tackle high-impact, easy tasks first [00:29:22].

Focusing on Product Excellence

A common, yet often overlooked, constraint is the quality of the core product or service [00:30:45]. Many business owners, due to ego, assume their product is exceptional [00:30:51]. However, if a business struggles with lead generation, it often indicates a fundamental issue with the product itself or the customer experience [00:31:01].

The "Sandwich Sucks" Analogy

If the core product (“sandwich”) is “terrible,” investing in marketing to bring in more customers will only reveal that mediocrity to a wider audience [00:33:32]. Instead, focus on making the product exceptional. This generates compounding growth through word-of-mouth and referrals [00:32:03].

Compounding growth from an excellent product means customers market it for you, requiring more work upfront but less long-term effort [00:32:38]. This requires a willingness to delay gratification [00:32:48].

For brick-and-mortar businesses, a critical focus should be on Lifetime Gross Profit (LTV) [00:34:41]. Businesses that can spend the most on marketing are often those with high LTV, as they print cash on the backend [00:34:57]. If customers don’t stay, marketing efforts will be wasted [00:34:30].

The "New Marketing Trick" Fallacy

Constantly seeking new marketing tricks or hacks is a diversion from solving the root issue of product quality and customer retention [00:35:20].

Operationalizing Growth: Inputs to Outputs

Success often comes from boiling everything down to an inputs-to-outputs equation [00:41:31]. To achieve different outcomes, one must change the activities performed [00:38:59].

Eight Ways to Get Customers (and Leverage Others)

There are fundamentally only eight ways to get customers, broken down into two categories:

1. Direct Action (You do it) [00:42:40]:

  • Warm Outreach: Reaching out to existing contacts or leads with whom you have a relationship [00:42:45].
  • Cold Outreach: Reaching out to new, unsolicited contacts [00:42:49].
  • Paid Ads: Running advertisements on various platforms [00:42:54].
  • Content: Creating and distributing valuable content (e.g., videos, articles) [00:42:59].

These four actions can be quantified by a “rule of 100”: spending $100 a day on ads, doing 100 cold outreaches, 100 warm outreaches, or 100 minutes of content daily [00:43:44]. Doing more of these activities leads to more leads and also improves skill through practice [00:43:54].

2. Leverage Other People (OP) [00:44:24]: These four types of people can perform the direct actions on your behalf, providing leverage:

  • Customers: Who can refer new people (e.g., through word-of-mouth) [00:44:27].
  • Affiliates: Other businesses or individuals who send you customers [00:44:29].
  • Employees: Who perform marketing and sales activities [00:44:32].
  • Agencies: External companies specializing in marketing activities [00:44:39].

To get these “other people” to work for you, you must first apply the direct actions (warm outreach, cold outreach, paid ads, content) to them [00:45:10].

Scaling Local Brands: The Importance of Unit Economics

For local businesses looking to scale, understanding the unit economics of each facility is crucial for key business strategies for growth [00:46:48]. This includes:

  • Cost to Open a Facility: The initial investment required [00:46:50].
  • Bottom Line Profit Per Facility: The annual profit generated by each location [00:46:57].

A high cash-on-cash return (e.g., 100% annually) is desirable [00:47:06]. To achieve significant business growth strategies and challenges, businesses should aim for higher profit margins per facility (e.g., 500k) and focus on making operations highly efficient with minimal operational drag (e.g., reducing staff from six to three) [00:47:31].

Scaling Through Simplification

The most successful franchisors simplify their model drastically for scaling, focusing on minimal square footage and operational efficiency rather than ego-driven features [00:48:07].

The enduring success of a business relies on fixing the backend: ensuring it can thrive even without constant new customer acquisition [00:49:17]. This “boring work” of optimizing margins and operations is often overlooked in favor of seeking marketing solutions [00:50:31]. Incremental improvements in profit margins (e.g., 1% per month) can lead to a scalable and investable business within a year [00:51:17].

Ultimately, many businesses serve “mediocre sandwiches”—products or services that are acceptable to the customer but provide terrible returns for the investor [00:52:07]. Spending time to “eat your own sandwich” will reveal what needs fixing, enabling long-term scalability [00:52:10].