Scaling the unscalable in business

From: alexhormozi

The concept of scaling the unscalable emphasizes that while a business activity might seem impossible to expand, it’s often a “skill deficiency” rather than a fundamental limitation [00:01:38]. This approach can lead to significant financial gains by leveraging activities often dismissed as too labor-intensive or inefficient for growth [00:00:01].

The Misconception of Unscalability

Many entrepreneurs mistakenly believe that an activity is unscalable if they cannot immediately envision its expansion to a massive scale, such as $100 million a year [00:00:40], [00:02:37]. This mindset often prevents them from starting small, focusing on immediate profitability, and gaining crucial insights [00:02:41]. The perception of unscalability often stems from a lack of context and resources [00:03:00].

Skill Deficiency, Not Physics

The idea that something is unscalable is often rooted in a lack of skill or knowledge on how to expand it, not a physical impossibility [00:01:38]. For instance, service-based businesses like fitness coaching might seem unscalable because they require people, but they scale through culture and training [00:01:16].

The Value of “Unscalable” Work

Engaging in seemingly “unscalable” tasks, especially early in a business’s life, offers significant advantages:

Deep Customer Learning

Direct engagement with customers, even for low-ticket items, provides invaluable insights [00:05:31]. This “learning” is often more critical than immediate “earning” [00:05:37]. By talking to customers, businesses can:

• Learn their pain points [00:05:40].
• Identify effective messaging and “hooks” [00:05:42].
• Alter products and offers for higher conversion rates [00:05:46].
• Discover what customers value most and least about a product or service [00:05:51]. Two “magic questions” to ask customers are:
  1. “If I were to eliminate all features except for one, what would it be?” [00:06:02]
  2. “If I were to eliminate one thing from my entire feature set and it changed nothing about your life, which one would it be?” [00:06:19]
• Solve marketing and product problems [00:06:45].
• Increase customer retention and referrals [00:07:02].

Examples of “Unscalable” Activities

• Handwritten Cards: Andy Frisella of 1st Phorm started by writing handwritten cards to every customer, a practice that continues today through a systematized process [00:03:41].
• 1-on-1 Calls: Hopping on calls with customers, even for low-value sales, provides direct feedback and builds foundational sales skills [00:04:47], [00:05:33]. The speaker, for example, made 4,000+ 1-on-1 sales closes for his gyms [00:07:39].
• Personalized Outreach: Sending personalized voice notes, videos, or iMessages from personal phones, rather than automated texts, creates a stronger connection and higher response rates [00:12:25].

The Entrepreneurial Journey as Education

Entrepreneurship is a continuous journey of educating oneself on the customer and their problems [00:12:16]. Performing “unscalable” tasks fast-tracks this education by providing direct market feedback [00:08:25].

From Unscalable to Scalable: A Progression

The path to scaling involves a deliberate progression from highly personal, labor-intensive methods to more leveraged ones:

1. 1-on-1: Start with direct, individual interactions [00:07:22].
2. Semi-Private: Transition to small groups (e.g., 1-on-6) to increase output while maintaining a close experience [00:07:27].
3. Group Onboarding: Scale further to larger groups (e.g., 1-on-20, 1-on-30), which can lead to over $100 million in annual revenue [00:08:52].

As the business progresses, the knowledge gained from 1-on-1 interactions allows for the creation of standardized presentations and Standard Operating Procedures (SOPs) [00:09:24]. These can then be used to teach others to perform the same tasks, effectively scaling the once “unscalable” activity [00:09:46].

Business Debt: Financial vs. Management

Every business incurs debt [00:10:28].

• Financial Debt: Venture-backed companies incur financial debt to hire talent upfront [00:10:41].
• Management Debt: Businesses that cannot afford to pay high market rates for talent incur management debt. This means the founder or early team members must perform the jobs of multiple people, which makes activities seem “unscalable” [00:10:56]. This period of intense work is a “swamp” that must be navigated to achieve significant growth [00:10:59].

The Small Business Advantage

Small businesses (defined as under $10 million in revenue) have a unique advantage: they can do things that large corporations (like Apple or Microsoft) cannot easily scale [00:14:35]. This competitive edge lies in their ability to perform highly efficient, personalized, and initially “unscalable” actions per lead or opportunity [00:14:47], [00:14:56].

Frameworks for Scaling

To further understand and apply the principles of scaling, two frameworks are useful:

1. The Sales to Fulfillment Continuum

This continuum posits that, generally, the easier something is to sell, the harder it is to fulfill, and vice-versa [00:15:46]. The main exception is technology [00:15:50].

• Easy to Sell / Hard to Fulfill: Promises like “I’ll do everything for you” (e.g., done-for-you services) are easy to sell but challenging to deliver comprehensively [00:16:01].
• Hard to Sell / Easy to Fulfill: Offerings that require the customer to “do it all yourself” are difficult to sell but simple to deliver [00:16:08].

2. The Done-For-You, Done-With-You, Do-It-Yourself Pyramid

This framework suggests a “Tesla Model” approach to launching products or services, starting at the top of the pyramid and moving downwards [00:16:52]:

• Done-For-You (Top of Pyramid):

  • Description: The most expensive, high-touch service where the provider handles everything [00:16:56].
  • Advantages: Very easy to sell initially, maximizes revenue per customer, delivers the highest results, sets up downstream expansion, and is where initial SOPs and product components are developed [00:17:27]. It has the least “operational drag” due to fewer customers [00:19:50].
  • Challenge: More difficult to scale [00:17:14].

• Done-With-You (Middle Layer):

  • Description: A consulting relationship where the provider helps the customer do it themselves [00:18:09].
  • Advantages: Leverages the SOPs from the Done-For-You phase, allows for a fractional charge of the Done-For-You price, and enables serving a larger customer base [00:18:02], [00:19:04].

• Do-It-Yourself (Bottom Layer):

  • Description: Providing customers with all the SOPs and resources to execute on their own [00:19:22].
  • Advantages: The lowest price point, allowing for the broadest reach [00:19:24].

This top-down approach is preferred because it builds strong branding, price anchors the most expensive service, and ensures the highest results with the best customers first [00:18:32]. As the business moves down the pyramid, sales skills improve, and messaging refines due to continuous customer interaction [00:20:06].

Ultimately, the message is to “get busy” by doing the “unscalable” work, learning from customers, and building systems that will eventually allow for scale. This initial, intense effort is key to overcoming early challenges and lessons in scaling a business and transitioning from being “broke” to being “busy” and profitable [00:12:14], [00:20:16].