Throwback: Finding Constrictions In Your Business Will Lead To Growth | Ep 547

In this throwback episode, Alex (@AlexHormozi) talks about the mistake he’s been doing with his company for two years that made him lose millions of dollars, how he was able to spot the problem, and how taking a step back to find the problem will help you see if your system is maximized to its fullest potential. 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?

  Welcome back to the game. Today's episode talks about a business that I actually saw lost millions of dollars due to one thing, which was not understanding the true constraint of their business. And so, inside, I'll talk about a huge recruiting mistake that they made because they weren't focusing on the right constraint within their talent pipeline, which is something a lot of people don't talk about. Then I'll outline something called the Quad Marketing Calendar, which is actually a super old concept of mine that I don't talk about nearly enough. And I think about, I think about way more than I talk about, so I think you'll enjoy it. And then finally, a proper talent acquisition funnel and how it should work in parallel to a customer acquisition funnel from lead generation, lead nurturer, interviews, onboarding, the same concept, just applied to getting talent.

• 0:42Alex Hormozi?

  I was sitting in my quarterly leadership meeting where everyone had flown into Vegas for two days to talk about the next quarter and our goals for the company. And I stood there and I was listening to what they were saying and I wanted to light my head on fire. What transpired next was a problem solving process that I want to share with you because it unlocked 10 million to 12 million dollars in annual revenue for us that we had not been able to unlock for two quarters because of one simple misdiagnosed problem. And so, the purpose of this is to hopefully get you to, one, avoid making that mistake, but two, be able to use this framework so that you can solve the right problems in your business. So, inside of our quarterly meeting, for two quarters in a row, my sales manager set

• 1:26Alex Hormozi?

  the goal that they wanted to add six more outbound reps. Two quarters in a row. Quarter came, quarter left. Quarter came, quarter left. This is the third time that I'd been hearing them make this goal. And everyone was nodding their heads and writing them down and it seemed like everything was hunky dory. And I stopped and I was like, guys, we've had this goal for, for two quarters. Why do we expect it to be any different this time? To set the same goal and nothing's going to happen. And for context, the reason I said 10 to 12 million is because every outbound rep generates about $2 million a year in revenue for my business. And so, for me to have six more reps is about $12 million. So, I'm not just pulling that out of nowhere, that's where it comes from. Back to the story. I asked him, I was like, why weren't you able to do this? He's like, well, you know, we lost a couple reps this last quarter, even though we hired

• 2:11Alex Hormozi?

  some new ones and we pretty much have the same amount as we, we had before. And I was like, and is that what happened the quarter before that too? He's like, well, yeah. I was like, then how are you going to solve this problem? He's like, um, I don't know. And then it hit me, I had been driving this guy and putting my pressure on this guy when he was not the constraint of the system. Let me explain. In every system, you have potential and you have constraints. Most entrepreneurs spend all their time trying to add potential to their business, thinking that they are solving the constraint. But we will always grow, any system will grow, up to its constraint and no further. And so, right now, your business has a constraint. You have to identify it.

• 2:51Alex Hormozi?

  And what makes macro speed happen is not, is not the frenziness and the frenetic energy, it's knowing which problems to solve in what order. And the example I'm going to give you is showing you exactly why that didn't happen for one of my companies for this specific channel we were marketing on, which is outbound. Had we identified this problem two quarters ago, we would have added 10 million to our top line for this year, which we won't have. So instead, we're going to get one quarter's worth of that, so maybe add 2 million or 2.5 million to top line when we should have added 10 or 12 because of this one problem. And from the outside, people are going to say, "Oh, well, it's because of X, Y, and Z, but they didn't diagnose the root problem. Do you know what it was? I'll tell you." So, I then turned to my HR director and I said, "How many, how many people are you sending the sales manager per week?"

• 3:36Alex Hormozi?

  She was like, "Well, I send him about one qualified candidate a week." And I was like, "Okay, how many interviews does it take you to send one qualified candidate?" She says, "It takes five." I was like, "Okay, manager, how many of these final interviews does it take for you to get one person hired?" And he was like, "Four." And I was like, "So it takes us 20 people that we got to get through to get one new outbound rep?" He was like, "Yeah." I was like, "Okay, now, given the churn that we had in the last quarter and two quarters, because just FYI for everybody, frontline positions in general tend to churn more than manager and leadership positions, just the name of the game." And I was like, "Okay, so what is our churn in that position?" He was like, "It's about 20% a quarter." I was like, "Okay, understood. Now, simple math here. If we have 10 people who are working outbound, that's not the number, but let's just say

• 4:21Alex Hormozi?

  it's 10, and we lose 20%, then it means we're losing 2 people a quarter. If right now, the process that you have gets us one new outbound rep per month and we're losing 2 a quarter, that means we would net one new person per quarter. That is going to be very short of our goal of 6. So what do we need to do? We need to fix the actual hiring process in order to meet the goal."

• 4:45Alex Hormozi?

  Moshe Nation, real quick, if you are a business owner that has a big old business and wants to get to a much bigger business, going to 50, $100 million plus, we would love to talk to you. And if you like that and would like to hear more about it, go to acquisition.com. You can apply anywhere on the page and talk to one of our team and see if we can help you get there.

• 5:05Alex Hormozi?

  And so what we did was we actually asked the HR director, I said, why are we doing these one-on-one? She's like, well, I thought we had to do that. Miscommunication, right? It's all it was, it's a miscommunication. So we don't need that for this position. What she now did, the solution to this problem was that she's setting up, she's still running the ads, she's still organizing the interviews, but she set them all up for the sales manager to do group interviews. And now he can do five group interviews for one hour per week. And now he can pick one or two of those people and get them onboarded quickly. And he can start hiring, he will be able to hit his goal in that way. And so the reason I tell the story is because I just missed out on a bunch of revenue that I should have been able to make because we were solving the wrong problem.

• 5:48Alex Hormozi?

  All of the focus was on the sales manager and who he was bringing in and how he was training them, rather than, because that wasn't the constraint of the system, rather than what is the acquisition process for talent? And so I'll give you a framework that I wrote down somewhere that I'll probably share in another, but it's something called the quad marketing calendar. Most people have no marketing calendar. Smart people have one or two marketing calendars. So the first marketing calendar, and you can draw this, you know what? I'll do it for you right now. All right, so the quad marketing calendar looks like this. Here you've got internal and you've got external. So here you have employees and you've got prospects. Internally, which is this way, you should be marketing to your employees

• 6:32Alex Hormozi?

  so that you tell them about the vision and about the mission, about why you do what you do. This has to happen all the time so that people continue to want to work for you. Internally to your prospects, which are now customers over here, you need to continue to market them to get them to buy again and again, right? We need to keep them to keep buying.

• 6:53Alex Hormozi?

  Over here in external, for prospects, you need to get people to become customers. So we're marketing externally. Most people understand this one. This is the one that most people do. Most people don't do this one. Most people definitely don't do this one. And I'll tell you the one that people miss the most. This one. Is that they don't have an acquisition process for getting new talent. So just like you run ads, generate leads, nurture leads, set appointments, sell, fulfill. You should be able to run ads for new employees. You should be generating leads. You should be working those leads. You should be setting interviews, which are sales.

• 7:36Alex Hormozi?

  You make job offers, just like you make normal offers. And then the onboarding experience that you have for a customer is the onboarding experience that you have in parallel with an employee. And then, just like you continue to ascend and resell your customers, you ascend and continue to manage your employees. These are parallel processes that happen in every business and most people don't know about it. And you heard about it here first. At the world's best YouTube channel in the world, the handsomest and most sickly now Rona written YouTuber out there. And this is called the Quad Marketing Calendar. And it was because we were missing this framework.

• 8:17Alex Hormozi?

  My HR director did not understand this framework that we lost out on $10 to $12 million revenue. And I don't want you to do that. All right. And so the reason I made this is so that you can recognize which of these four in the Quad Marketing Calendar you are not using, so that you can shore up that part of your business and ultimately scale it and make all of your wildest dreams come true.

• 8:49Alex Hormozi?

  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. 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, you've got 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 personally. To you, so it's about 30 ish pages for each of the stages. Once you answer 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,

• 9:33Alex Hormozi?

  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.