Why Most Businesses Stall After $3M | Ep 860

In this episode, Alex (@AlexHormozi) shares the 5 biggest lessons he learned after passing $250M in revenue, covering everything from why constant changes hurt performance, to how virality is overrated, and why “rush” might be your biggest threat. 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 and will learn on his path from $100M to $1B in net worth. Wanna scale your business? Click here. Follow Alex Hormozi’s Socials: LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition Mentioned in this episode: Get access to the free $100M Scaling Roadmap at www.acquisition.com/roadmap

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Hormozi?

  To do more work, but you have to in order to grow. So either you work overtime or you bring someone else in to work overtime, or you do both, which is what I recommend. And that means it's going to be hard, which is why most people stay stuck.

• 0:16Alex Hormozi?

  I wanted to make a video about five business lessons that I just learned costing 250 million in 2024. And I wanted to make this because like, I think at all levels, you're always growing. Like when I was at $1 million a year, you know, I, I had a certain amount of lessons that I had to learn. And then it gets to 10 million, there are certain lessons I had to learn. 100 million, there's certain lessons I had to learn. This last year, there's five lessons that are, I would say new, but would have applied kind of retroactively to all stages of business growth for me. So the first one was the cost of change. And so it's like, what does that, what does that really mean? So it was the first time that I've actually quantified, how much does changing something in the business actually cost? So if you would imagine a straight line, right? It's saying, okay, this is normal business activity, right? Straight line is going across.

• 1:01Alex Hormozi?

  Now let's imagine we want to change something, right? So that's like our normal revenue. But then we decide, you know what? I'm going to change something in the business. So what ends up happening is this little line kind of dips down. And I've estimated just for my kind of like, this is again, there's no science behind this, just my estimate, that I get about a 20% decrease in effectiveness across any function that I'm going to change, especially if it's manual. Now, if you split us a headline, that's different. But if you're like, hey, we're changing our onboarding process or we're changing our sales process, or we're changing our outbound process, or we're changing our, something that people are involved with, we tend to get a decrease immediately of 20% in a performance. All right, which is pretty significant. As soon as I realized that we had almost this guaranteed cost of change, which is about 20%, I was able to quantify what things were worth doing.

• 1:47Alex Hormozi?

  Because if you're anything like me, I have like this big list of stuff where I'm like, man, we should need to improve this. We need to improve this, we need to improve this. And I have all these ideas of things that I think that don't improve it. But when I actually am honest with myself and I think, huh, how much is number one going to actually improve the business? If I say, well, I think it maybe get us a 5% improvement. Well, if I have a guaranteed 20% decrease or decrement in performance, and I have a 5% Incremental increase in performance. Do I want to take a 20% guaranteed loss to have a potential for a 5% gain? Probably not. And so what's ended up happening is that there's all these little 5% improvements that I think could happen. But there's only like one or two 20, 30, 50% plus improvements I think we can do in the business.

• 2:31Alex Hormozi?

  Some of these things I just choose to never do. And I'll try not to say explicit here, but this is what I, what reminds me of this concept, which is that some shit stays fucked. You just have to accept that the business will not be perfect, but your chase of perfection will actually make your current business worse. Because you're constantly changing things, but let me, let me spell this out one more level. So let's say you have your 20% loss. Now let's say you do something that is good. You start going up, right? 20% loss to start going back up. But what happens if you at the same time say, oh, well, now I'm going to start changing something else? Basically, you incur this permanent 20% decrease because you're always changing something. So you're always 20% below where you should be in the business. 20% is a lot.

• 3:13Alex Hormozi?

  Oftentimes in the business, my business has done exceptionally well, and I just let them breathe. Because here's the other part that no one tells you. If you change nothing, you get about a 5% guaranteed improvement. Think how crazy that is. If you change nothing, you just, up, up, up, up, up, up, 5%. You can book it. Think about GDP. Partially, some people are like, oh, that must be in relation to education, which in the US it certainly isn't. It could be in relation to technology in terms of GDP improvement, or it could be an increase because of population, which in the US, there's no population increase or not really. For me, I just kind of see that across all businesses, that if you just let people do stuff, they just get better at it. Right? People get more efficient at it. I'll leave you one tactical framework that you can kind of use to think through this, which is, this is actually from the investing world that I borrowed as an entrepreneur, which is called ICE.

• 3:58Alex Hormozi?

  All right, and so it's an acronym. I stands for impact, which is like, how big? That's that 20%, that's that 50%. How big of an impact do I think this is going to make on the business, right? If I had to make, like, if this works, it's going to do this. The second is, well, how confident am I that it's going to work? That's the C, which is, what's my confidence level? So I've got this big thing with low confidence, or this medium thing with high confidence. I'll probably take medium with high confidence. And then the third is ease, which is going to come into a combination of how many resources are we going to have to deploy to do this? And also, what's the timeline that we're going to have to do this on? Impact, confidence, ease. And so we actually do this. Like, I have this massive sheet that it's called growth, and I have it in all caps. This is how I like, how I get my ADD out, is I put it all on this list,

• 4:43Alex Hormozi?

  which would probably be the second big tactic, is that I have every big idea that I want to try, and I have to like, get it out and spell it out and say all the things that I want to do, and I just put it somewhere. Because the team can't handle the amount of ideas that I have, and probably your team can't either. You have to just like, scratch that itch in some way. I do it by documenting, so I don't forget it. And then whenever the team has more bandwidth, I go back to that list and I'm like, "All right, let's order this. Which one has the highest impact? Which one do we think is going to work? Which one's going to be the easiest?" We tabulate those together and we're like, "Okay, this is the one that we're going to try. This one we know has a 30% shot or 50% chance increase." That's basically thing number one, and it has, I've tried to teach this down our portfolio, and also what we do at acquisition.com, is that you just need to be willing

• 5:28Alex Hormozi?

  to leave some things not perfect, so that the business can incur as few guaranteed costs of change. And when you are going to make a change, make sure it's worth it. So so far, number one, we cover the cost of change, right? So this is making sure that you are only taking bets that have 20% or higher upside to be worth the guaranteed cost that you're going to incur. And the framework that I use is ICE, Impact, Confidence, Ease. All right, so that's number one. So the second thing is, I used to have this idea about the virality of products. So I've talked a lot about referrals, I've talked a lot about word of mouth, and I still obviously believe in that. But I would say that I've had this big pendulum swing in the very beginning of my career, you know, and especially if you're, you know, sub a million, you've just got to promote, right?

• 6:13Alex Hormozi?

  You've just got to let people know about your stuff. No one knows you exist, you got to advertise, right? You got to learn how to sell. Cool, that's zero to a million, no questions asked, that's what it is. Now, to expand beyond that, I was like, "Okay, well, we kind of pendulum swing back to like, we got to, we got to make it super viral, right? Word of mouth is, you know, the best way To grow a business. But I've thought more and more about this. And I think that it's a, it's an it depends answer. Now, there are some products that you want for sure to have people who buy and then buy again. That you want them to, you know, reoccur with you as in like if I buy Coca-Cola product. I might buy, you know, a can today and I might buy a can at a restaurant later this week. And so it's like, am I on a subscription? No, but I buy again and again and again. Right? Or you have, you know, your internet, which you just never cancel out of, right? Either those are things that are recurring, they have high revenue retention.

• 6:57Alex Hormozi?

  But that is different than virality. Right? That's very different. So on one level you have, does it stick? On the other level, you have, do people share it with other people? This is the nuance of understanding that's kind of shifted for me this year, which is that some companies, like especially B2B, there's sometimes disincentives for a customer to bring in a competitor of theirs. Right? If you service two types of similar businesses. They have a literally a disincentive to tell people about it. Like they don't want anyone to know how you're helping them in whatever way. Right? So that's kind of like thing number one. So it's like you have like a negative pressure on word of mouth. The second issue is that not, even if you didn't have negative pressure word of mouth, there has to be some sort of density in terms of the frequency of communication

• 7:42Alex Hormozi?

  that your customers have with other potential customers. So if I've got a guy who runs a metal shop that specializes in aerotech, for that guy to have very frequent communication with other aerotech companies that might use my software, my internal, my internal tech, or whatever it is that I, that I help them with. Why is he going to be talking to competitors? And if he is talking to competitors, like why would he want to share all my stuff? You can understand why sometimes it's not about word of mouth. And this is just a nuance of understanding that I would think is kind of my belief set is broken. Cause I was very hardcore and like everything can grow on word of mouth, period. That's just not always the case. The gold standard should absolutely be revenue retention. Bar none, full stop. And I can say that with absolute confidence, no matter what business you're in.

• 8:24Alex Hormozi?

  If you're B2B, you're B2C, you want to be able to get recurring or reoccurring revenue. But the virality typically is going to be more on the consumer side. So if you have a really good soda, you as a customer is not like, oh, I don't want to tell my friend that this soda is really good. Yeah, I've got this shirt, it finally fits me. Cool, well, do I know other guys who are built more like me? Yes. Do I have high frequency of communication with them, at least digitally? Yes, okay, cool. So I'm going to have, there's some viral kind of coefficient there that goes in. And that applies to also consumer brands that are not tech. I want to be really clear about that. Like for those of you who have, you know, the drop shipping, e-commerce, retail products, it's like you still absolutely need to have word of mouth that grows the business. There are just some businesses that are just never going to have that. And for everybody, you want to retain. So that was lesson number two.

• 9:08Alex Hormozi?

  From a tactical perspective for that lesson, the big thing I would just want to measure is what percentage of customers did I have at the beginning of this year that 12 months later are still buying for me? That's the metric that we look at. We have 100 customers at the beginning of the year. And at the end of the year, 50 of those people are still buying. So this is, you know, day zero or, you know, Jan. 1, whatever, Jan. 1. And then December 31. How many of them are still buying? If I have 50 versus the 100, then I have 50% revenue retention. Now, you can have logo retention, which is a second nuance of this. Logo retention is of the 100 customers, do I have 50 customers? Or did I go from 100 customers to 25 customers? But those 25 customers really like me and they now spend twice as much.

• 9:52Alex Hormozi?

  So that's the difference between revenue retention and logo retention. For me, we look at revenue retention because that's what we care about. It's like, okay, if we just know that these 50, now that they're in, are just going to keep paying and potentially even growing between 50 to 100 next year, this is a monster business. This is what we look at and we obsess over in any business that we invest in. Number two is making sure that the highest priority for the business is going to be revenue retention, not necessarily virality, because not all products are meant to be viral. But if you are in a business that is consumer focused or something that doesn't have, one, a disincentive to share and a high frequency of interactions between your customers with one another, people who have basically high overlap, so they talk to lots of people who could potentially buy our product.

• 10:35Alex Hormozi?

  If these two things are, you have a high disincentive and you have low frequency. Then you're just not going to have virality in the product and you don't have to worry about it. But if you do, then obviously you want to have both. Number three, I've been very obsessed with the concept of LTV to CAC. I've talked about it a lot, which is basically how much does it cost you to customer? Versus how much money you get from that customer over the lifespan, specifically in gross profit, not lifetime revenue. Now, the reason I like to always delineate this and I say LTGP, which is a mouthful, is because most of the literature that exists on LTV, so lifetime value for a customer, how much they pay you in gross profit over time, is typically written in the software world and software tends to be virtually 100% gross margins in most businesses. Many businesses look at that literature and then say, oh, well, let me just say someone stays with me for 10 months.

• 11:20Alex Hormozi?

  They pay a hundred dollars a month, therefore my lifetime value is a thousand dollars. Well, that's only true if you sell information, media or software, something that has zero incremental cost. But a lot of businesses don't have that. If you sell chocolate chip cookies and the cookies cost you $20 for each of those hundred dollar shipments. I mean, these are expensive cookies, but let's just go with it. So this costs you 20 bucks for every hundred dollar shipment. Your lifetime value is not a thousand dollars. So we have our hundred bucks, right? Times 10 months, that's the revenue. What we're looking at is $80 because we have to take out the 20 in cost, times the 10 months, which actually equals $800, which is our real lifetime gross profit,

• 12:04Alex Hormozi?

  which in the business world, sometimes people refer to as CLV or LTV. They all more or less mean the same thing, which is how much money are you going to get from the customer? Now, I put this as a frame for the big lesson that I had, which is in the software world, the big rule of thumb is three to one. That's the big rule of thumb. I actually, now having worked with a lot of different businesses and invested in different businesses, I think there's nuance to it. So let me explain. This is actually pretty cool. So there's three components to a business that I think influenced that number. So you have the attraction component, which is the advertising, how are we advertising? How are we getting people in? How are we letting them know? How are we generating leads? Then we have the conversion, whatever your sales motion is, right? Sales. And then finally, you've got delivery, right? Or fulfillment.

• 12:48Alex Hormozi?

  How are we going to get people whatever they, whatever they chose to pay for? Right? So if we have these kind of three functions, the extent to which you need to have high LTV to CAC is predicated on how manual each of these processes is. So let me explain. If you have paid ads, which I would consider very high leverage and very like one person could run a gazillion dollars of paid ads, high leverage. Cool. That's number one. If we had a conversion process that's through a checkout page, so it's automated, then that's going to be something else that's going to give us leverage. Okay? And then third is let's say that we have software as our backend that has unlimited, like we have no supply limitations, there's no logistics limitations, and pretty much it just works.

• 13:29Alex Hormozi?

  If you're in one of those businesses, then you absolutely can be at three to one LTV to CAC over long haul. Fine, you can even be at, you know, 1.5 to one. I mean, it wouldn't be ideal, but depending on the size and scale, you could still make money doing it. You put a hundred dollars in, get 150 back, do it over and over again. If that's only true for them, what is it for a construction business? What is it for a plumbing company? What is it for an e-commerce business? The other extreme, man, so I'm going to just paint the extremes and you can kind of understand the middle. If I had, instead of paid ads, I had manual outbound.

• 14:02Alex Hormozi?

  So outreach, or whatever you want to call it, outreach, reaching out to people one-on-one with a team. And then from a conversion process, I've got one-on-one sales. And then from a delivery process, I've got, call it, you know, concierge, one-on-one, or even many-to-one services. Then I'm going to want an LTV to CAC ratio that's going to reflect that. For me, if I had a business like this, and this is going to shock some of you, but just bear with me, I'm going to want this thing to be like 20 to one or more. Now, some of you guys are like, there's no way, it's impossible. I would say I've made the material, the vast majority of the material wealth in my life at 30 to one or a higher. And I've done it multiple times. And during those periods of time is when a lot of the, basically the wealth that I've

• 14:47Alex Hormozi?

  accumulated has come in. But in the times in between, instead of trying to scale something that's at, you know, five to one or eight to one, I'm just going to continue to tinker. I'm going to start, I'm going to stick with my one location, I'm going to keep working on the model and just keep tinkering with it until eventually we get the economics that we need in order to scale. What if I'm, you know, I'm doing paid ads, we do one-on-one sales, and we sell, you know, media or information or something like that? Then it's like, then you're going to be somewhere in between. Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Leila and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all eight functions of the business.

• 15:31Alex Hormozi?

  So you've got marketing, you've got sales, you've got product, you've got customer success, you've got IT, you've got recruiting, HR, you've got finance. And we show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you get to the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com/roadmap. R-O-A-D map, roadmap.

• 16:08Alex Hormozi?

  But I have, this is my rule of thumb, is that the three to one only matters at the companies that have 100% scale, 100% leverage across all three components here. If you have manual cost all three, you're going to be at, I would at least want to be at 20 to one. I shoot for 30 plus. A lot of people can't even believe that. Fine. So, you know, fit it to whatever your goals are. I really do believe that you can just keep tinkering with the business, keep tinkering in the offer and find a way to get it so that you can have a huge discrepancy between these two numbers. Because that's what allows you to scale. If you want to scale a business that's more manual, which if some of you guys are listening, 78% of business in America are service-based businesses, so this applies to you. As you go into colder and colder markets, you will convert a smaller percentage of customers. These are customers who are less likely to purchase from you, but you have a bigger pool of people. So that's kind of the trade-off.

• 16:53Alex Hormozi?

  But when you go to those colder and colder markets, smaller percentage convert, meaning it costs you more to get those customers. Basically, you sell more people, you're going to have more infrastructure that has to get built into business. So you have layers of management that will start costing you and not necessarily always be alpha. There can be value additive. With these two things that are working against you, you have to have this very large discrepancy between what it costs you to get a customer and what you're going to make from that customer in order to weather that storm and allow you to kind of grow into that show. You can almost like grow into your LWD CAC, which is kind of how I think about it. So if you're Thinking about this for you, number one, know what your true LTV to CAC is and make sure you're doing off gross profit, not off of revenue. And then number two, if you want to scale, make sure that your LTV to CAC ratio is appropriate

• 17:36Alex Hormozi?

  for the level of leverage that you have within your existing business across all three functions. So you might be wondering, why doesn't the ratio still cover it for a super manual business versus a business that's entirely automated? The main reason is lumpiness. You have to bring people in for outbound that are not going to be proficient. So you're going to incur the cost of new SDRs that either aren't going to work out at all or aren't going to work out in the beginning and then eventually going to work out. So you have to incur that cost. But imagine incurring that cost and then also incurring the cost of new salespeople who are actually going to be trying to convert those prospects and they're going to suck and they're going to lose opportunities. And so you're going to be paying them while they literally close fewer sales for you. So you lose twice. And then also sometimes you spend all this money and time to get them hopefully to be proficient and then they aren't. So they just lost you money three different ways.

• 18:23Alex Hormozi?

  Real quick, guys, thank you, thank you, thank you. You guys are awesome. This podcast continues to grow. We had our highest month ever last month, which is huge. And we don't run ads to grow the show. It's just you guys. It's just you guys. And so if this podcast has provided you value, if you could text it to a friend or you could send it on Slack or share it on your Instagram, that is how this podcast grows and that is why I continue to make them. It's because of you guys. So thank you, guys, first and foremost. And if you have it in your heart, if there's somebody who could use this, then please send it. Lots of love. Enjoy the rest of the pod.

• 18:54Alex Hormozi?

  The third component of this is the delivery piece, which is like, okay, I'm going to have to onboard and hire all of these other people. And if you have anything that's like higher expertise, then forget about it. It's going to take even longer for you to both find these people and then also to train these people up. But again, recruiting itself can be a super expensive task, like there's recruiting firms and it usually costs you 25, sometimes 30% of their first year pay. And if you're paying someone $300,000 a year, it's like you're going to pay 80 grand just to get somebody, let alone hope that they're proficient and you still have all this onboarding. So you have this lumpiness of people that aren't going to be effective. And if you're at three to one, boom, you're done. Like it's, there's no, like that. Three to one disappears real fast. It's like you have this lumpiness of like, okay, boom, we got these new SDRs in.

• 19:38Alex Hormozi?

  Crap, okay, like now this is coming back up, but then this starts growing down. So now, like, we start at 20 to one or 30 to one, but it's like, we kind of, it's more like a wave. Like, it, it undulates with the efficiency of the business and how stable it is as you're scaling. And the faster you're scaling, the more inefficient it's going to be. So that's why you need to have as much as you can in terms of LTV to CAC. It's padding. The third piece here is that we just went over it, LTV to CAC. One, we want to make sure that we're doing this off of gross profit, not revenue. And secondarily, we want to make sure that if we are highly leveraged, then we can be at three to one. But if we're low leveraged, we want to be at 20 plus, you know, 21 or higher. And again, this sounds crazy and unrealistic for a lot of people. I get it. Fine, at the very least be at 15 to one.

• 20:22Alex Hormozi?

  Please, for the love of God, I promise you it's possible. You just have to work on it longer than you expect. Which brings us to number four. Let's dive into it. Number four, I've thought, I've, I've said a lot about this, which is that the one to three million area is a huge swamp. Right? We call it the swamp, at least at Equus.com. And why is one to three million so hard? Now, we've, we've noticed that it's hard, but we were like, why is that range hard? Now, for those of you who are like, this is not real for me. I'm just trying to make my first $10,000 a month. Just keep listening, because believe it or not, some of these things will apply to you. So if you're at one to three million dollars, why is this one of the hardest periods? Because usually from zero to a million, you can usually do it with like you and two, three people. It's not that hard for you to keep track of the team. You can usually run very high margins, especially if you're a sole proprietor.

• 21:07Alex Hormozi?

  You're basically just selling your time, which is fine, right? You don't need to obsess about your passive income before you max out your active income. Good idea. By the way, a lot of billionaires, very high active income, FYI. Anyways, as you're scaling up, that first, you know, 500, 800, sometimes a million dollars a year is actually, in some ways, somewhere more profitable than the next two, three, four million. Because you have to install this level of infrastructure, because you're like, I just can't do it anymore. Now, you can always just keep jacking prices and that's fine, and I'm a big advocate of that. But if you're like, no, I think this is the price that I want to service at, and I want to do more volume, then you're gonna have to put in more infrastructure. But this is the math that I just realized is why. So hard. So let's say you've got a $2 million business. You're right in the middle of the swamp. Okay. And you probably noticed anecdotally for those who were kind of like in this business world.

• 21:51Alex Hormozi?

  There's a lot of people in the one to three million dollar range, like a ton, ton of businesses. To be fair, doesn't mean they're making one to three million dollars in profit, which means they're doing one to three million in revenue. Big difference. All right. But let's say we've got a $2 million business. Okay. And let's say that they're doing 20% margins. All right. So they're doing $400,000 per year in EBITDA profit. Okay. So we have $400,000 here. Now, here's the shtick. At this point, for the business to evolve, for the business to level up, the entrepreneur typically has what I would consider an impossible choice. You have to choose one of two things, and sometimes the option is both, which is path one. You say, I need more help. Instead of getting more help, I'm just going to work even more.

• 22:35Alex Hormozi?

  I'm going to go from, you know, 12 hours a day to working 16 hours a day. I'm going to stop taking weekends off and I'm going to basically get through this hump. So I can push my way to $10 million a year, which you can do. It is hard. Or I'm going to bring in somebody who's going to help me get there. And I'm going to maintain a relatively long schedule, but still, you know, not the same as working 16 hours, seven days a week. Those are the kind of the two impossible choices, which is like other person. Here's the tough part. If you have $400,000 in profit that's left over. If you want to bring in a stud who's going to really help you there, you're probably going to be looking at $250,000 per year in all in comp, kind of at a minimum to bring somebody who's a real star into the business.

• 23:18Alex Hormozi?

  Let's look at that in comparison to what the profit is for this business. You're looking at risking more than half of your income on one person with the hopes that it's going to work out. But what happens when this person comes in and then they aren't that good? They don't expand your capacity. It's like, well, shoot, I just lost half my profit for a year. And then I'm still not further along. This is why this is the swamp. And I, I've just spent a lot of time thinking about that because I was like, why is one to three million dollars so hard? You need the help, but you don't have the money to afford the help. And so you either just got to go overdrive and go nutso mode, right? Or you make a huge bet proportional to what you have in terms of net profit to bring this person in.

• 23:58Alex Hormozi?

  And that's why it's so hard. And so if you're in the swamp right now, my encouragement to you is this. I have almost always been the like, I'm gonna go into overdrive and I'm gonna hire the person because the idea is what if I just do things that are more unscalable, but still generate higher profits for the business so that I can afford to take two or three shots with somebody else who's coming into the business, knowing that I'm not gonna get it out of the park on the first shot. I mean, if I do, I'm stoked, but I wanna win either way. And so either I'm gonna win with more profit faster or less profit slower, but I wanna make sure that I'm guaranteed to win. I kind of do this as a plus scenario. And then the fourth thing we just covered is why one to three million is the hardest.

• 24:43Alex Hormozi?

  And the main thing is, is cash flow and time. You don't have the time and you don't have the cash flow to do more work, but you have to in order to grow. So either you work overtime or you bring someone else in to work overtime, or you do both, which is what I recommend. And that means it's going to be hard, which is why most people stay stuck. So that's number four. Number five. So 2024 was probably the first year that I didn't have FOMO. So fear of missing out. It is the hardest part of business is staying focused. It's the hardest part. The reason you hear Bezos talk about it, you hear Zuck talk about it, you hear Jobs talk about it, you hear Elon talk about it, like you have to be incredibly focused on what the points of greatest leverage are in the business. The reason that this was

• 25:28Alex Hormozi?

  a big lesson for me, not the focus part, I obviously talked about that, but I was like, why, why was this year different? Why was this the first year where I didn't have FOMO? It's actually because the idea of rush is where the fear of missing out comes from. It's the arbitrary timeline that I set for myself that I just grabbed from thin air and then I measure myself against this thing that I made up to make myself miserable at all times from whatever success I'm achieving. In thinking about that, I have coined the term for myself, which is that rush is imaginary. It's made up. It's completely made up. There's only one caveat that I'll make to this, which is, and if this is you, you probably already know. If you have a business that has a tremendous network effect and there's a very small amount of people,

• 26:12Alex Hormozi?

  even a big amount of people in that network that you're trying to gather towards, then yes, it's likely that you have a winner take all business model. And in which case you've probably already raised a ton of money and you're probably trying to aggressively grow to capture that network so that eventually you can turn something into a profitable business. Fine. For everybody else who's not running a tech platform that's trying to build a network effect of some sort, you don't need to rush. There was Ani, actually I don't think her, her, her episodes come out yet, but anyways, I'm going to give you a sneak peek. So I was talking to Ani Trong and she has, she has nail salons. Okay. And so she has one core nail salon that worked really well. And then she decided to partner with other people doing like three or four other nail salons. And the biggest issue she has for growing right now is that her partnerships are kind of a mess.

• 26:57Alex Hormozi?

  I'll just put it that way. Why did you do these partnerships? She said, because if I had more locations, I'd make more money. And I said, why didn't you just make more money with your existing location, save up the cash? And then open a second location, all for yourself? The thing that I kept trying to tease out of her is I was like, she was just in a rush. Like that was the reason. She was just in a rush. There's no actual reason for have three or four other different random partnerships with each of these locations. And the thing is, is that some of you guys are, you do this. There was a guy who was here at our headquarters yesterday. He has a TikTok shop management thing, right? Where he just like helps people start their, their TikTok shops for e-commerce businesses. And then he was like, but I also have this brand that I started on my own using TikTok shop and it's doing really, really well.

• 27:39Alex Hormozi?

  But I also want to start investing in it. I'm like, dude, what's the rush? And so the counter action, like how do you, how do you counter the rush? How do you counter the rush? And I think the way that I have countered the rush is to look at the people who have the ultimate version of my business. Who are the people who are 20 years ahead of me? What do their businesses look like? And what's interesting about this is that the vast majority of them have one massive business. And in seeing that, I was like, huh, almost none of them have multiple massive businesses they started. Elon is of Of course, the one exception that everybody wants to bring up, right? For people who haven't just generated a hundred billion dollars in a year. If you, if you haven't done that yet, then maybe consider every other person on the Forbes list that just did one thing for the entirety of their career.

• 28:24Alex Hormozi?

  And it's like, Basis has Blue Origin. Yeah, after thirty five years of Amazon, you've got Mr. Panda, still doing it. It's like, but wait, he owns, he owns the Cosmo. Yeah, but he also did that after forty five years of Panda Express and Panda Express is still his cash cow. Okay, I've got this restaurant, it's working well, so I'm thinking about starting this agency, right, for, to help restaurants. It's like, dude, what is the ultimate version of this look like? The ultimate version of this look like, either you go all in and you build an enterprise agency that only works with very large restaurant chains, and those tend to be sticky and those tend to be valuable businesses. But if you're like, well, I'm only dealing with small SMB restaurant owners for my agency, show me one, one agency that serves SMBs in that thousand, fifteen hundred, maybe

• 29:07Alex Hormozi?

  two thousand dollar a month mark, who has a hundred million dollar plus business, even just like revenue, just show me one. Why doesn't it happen? Because it's a bad model. Every single agency goes up market and they serve enterprise and this become really big. Look at Ogilvy, look at Vayner, right? Like, look at NP Digital. All of these are massive, massive companies that only service really the Fortune 500. Why? Because they're sticky. Because if you have volatile customers, you have a volatile business. If you have a volatile business, you're not going to be able to weather the storms. If you can't weather the storms, you're not going to last long. If you don't last long, you're not going to get big. How do you counteract the idea of rushing? You have to look at the end state of the business. What is the ultimate version of my restaurant look like? It might be two thousand locations nationwide.

• 29:51Alex Hormozi?

  What is the ultimate version of my agency look like? It might be Ogilvy and Mathers, right? It might be, we're doing five billion dollars a year and let's look at the number one person in the space. If, what is the ultimate version of my lawn care business look like? Maybe it's a franchise, maybe it's you privately hold it. But no matter what it is, it's probably not three different businesses that you're trying to say, start all at the same time because you're in a rush. Because the thing is, is that rush is what guarantees you're never going to get big. And I'm saying this because this is something that has plagued me my whole career. And so it's just this last year was the first year that I didn't have FOMO. And I was like, why is that? And I just think that I've just failed and messed it up enough times to be like, I just have to stick with one thing. And here's the fucked up part about this.

• 30:34Alex Hormozi?

  You have to accept that you, you can't sleep with every girl. We can't date every guy, whatever, you know, whatever your, your, your preference is. The point is our life is so limited. It's just so, we just don't have that many, we don't have that much time. If you want to do big stuff, you just don't have that much time. Because of that, it's like, you just have to accept the fact you just gotta pick. And you could have had four other timelines where you could have done each of these other things all the way to their extreme. But the likely that you're gonna do all four of those to the extreme, when you start all four of them at the same time is zero. It's not gonna happen. The first, business is built on hard choices. Business is built on the amount of no's that you're able to make. If you can't say no at the beginning of like, I'm not gonna just pick one of these paths.

• 31:17Alex Hormozi?

  Right? One of my favorite little definitions of deciding comes from the Latin decidera, which means to cut off. Like if you want to decide, you have to cut off, you have to eliminate things. If you have three different paths or four different things that you're considering, pick for the love of God. And the reason and the thing is, is that you have made up some number because some person you know makes a certain amount of money or some person you know thinks that this amount of revenue was cool. And so you're like, well, I want to be cool, so I want to hit that amount of revenue. And because you don't know how to grow the business you're in, you only know how to get to a hundred thousand a year. You only know how to get to a million dollars a year, only know how to get to three million dollars a year. Then your way of growing is doing more three million dollar businesses. When the reality is that you have to confront, why is my three million dollar business not a 10 million dollar business?

• 32:00Alex Hormozi?

  And you have to figure out that problem. That is the hard work. I talked to a lady yesterday, she was stuck at a million dollars a year for 10 years. I, I said, why haven't you gone to, to, to three million dollars a year? Like what's, what stopped you? Cause she had a very clear model. I was like, why don't you just double how much you're doing? And she was like, well, it's, it's a pain. And I was like, oh, cause it's hard. Cause it's hard. She's like, no, no, it's not cause it's hard. And I was like, well, then why haven't you done it? She's like, well, it's just like, it's just like, it's inconvenient and there's like, it's more, it's more time allotment and all this stuff. And I was like, yeah, that sounds like hard. It sounds like hard. It's hard for us to hear that we're not willing to do hard things because the hard changes. So the hard is constant, but the nature of it changes. Just like suffering as a human being is constant. It's not going to go away. There's nothing wrong with you because you're suffering while you're in business.

• 32:44Alex Hormozi?

  It's just that the nature of the suffering changes. In the beginning, no one knows you exist and that's tough because you feel ignored and irrelevant. And then you start to let people know about your stuff. And then as soon as that happens, you have a different kind of heart, which is that no one wants to give you money. And then all of a sudden, people start giving you money. And then what happens? Then people start complaining because your thing's not that good. But all of these things are hard. And so we have this idea that it's this Rocky cutscene that we're going to be, we're going to be fighting. It's like, we gotta just keep gritting through it. But it's like, no, we are so equipped to save our egos that we will come up with a hundred ways that our hard is not hard. It's different because we're special, right? But the reality is hard morphs. That's what makes people get stuck is because they learn how to conquer one hard, but not the next kind of hard.

• 33:26Alex Hormozi?

  I think that a lot of the hardness is, is sometimes learning to say no. It's learning to focus. That's the hard part. It's not getting punched in the face. It's, it's being willing to let one of your children die, to let the other one live. We get the Sophie's Choice. We actually do have to do that in business all the time. And so you have to accept that there is a life in the future that you will not be able to live. And it's actually, it's honestly, it's acceptance. And it's, this has just been a really, a really good lesson for me. Which is like, there are opportunities that I think I could crush and I think they're amazing. And you know what? I'm never going to be able to do them because I still have the one that I'm working on right now. And I have to continue to say yes to this. And by saying yes to this, I have to say no to everything else.

• 34:09Alex Hormozi?

  These have been the five big business lessons that I've kind of learned more recently. And I thought you might enjoy them.