Finding The Constriction In Your Business Will Lead To Growth Ep 348

Summary Notes


In his podcast, Alex Hormozi discusses the critical realization that led to unlocking $10-12 million in annual revenue for his company, He recounts a leadership meeting where the repetitive failure to meet the goal of hiring additional outbound reps was challenged, leading to the discovery of a misdiagnosed constraint within the hiring process. By shifting from individual to group interviews, the company resolved the bottleneck, emphasizing the importance of identifying and addressing the correct constraints to facilitate growth. Hormozi also introduces the "quad marketing calendar," a framework for internal and external marketing to employees and prospects, underscoring the parallel processes of customer and employee acquisition and management as essential for scaling a business.

Summary Notes

Introduction to the Business Game

  • The podcast episode starts with an overview of its themes: customer acquisition, revenue maximization, customer retention, and lessons from business failures.
  • The host, Alex Ramosi, introduces the main objectives of the podcast.

"Welcome to the game, where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe."

The quote sets the stage for the podcast, outlining the core focus areas of customer acquisition, monetization, retention, and learning from past mistakes. It also serves as an invitation for the audience to engage with the content.

Alex Ramosi's Business and Revenue Growth

  • Alex Ramosi shares a personal anecdote from his leadership meeting.
  • He expresses frustration with repeated goals not being met.
  • Ramosi introduces his company,, and its financial success.
  • He explains his motivation for making videos is to help others avoid being broke.

"So if you guys don't know my name, my name is Alex Ramosi. I own It's a portfolio of companies who do about $85 million a year. The reason I make these videos is because a lot of people are broke, and I don't want you to be one of them."

This quote introduces Alex Ramosi and his business,, highlighting its success while also stating his altruistic motive for sharing his knowledge through the videos.

Identifying and Solving Business Problems

  • Ramosi details a specific problem-solving instance that led to significant revenue growth.
  • He emphasizes the importance of correctly diagnosing business problems.
  • Ramosi provides a framework for solving the right problems to avoid making mistakes and unlock potential revenue.

"What transpired next was a problem-solving process that I want to share with you because it unlocked 10 million to $12 million in annual revenue for us that we had not been able to unlock for two quarters because of one simple misdiagnosed problem."

The quote explains the impact of proper problem-solving, where Ramosi attributes a significant revenue increase to the correct identification and resolution of an issue within his company.

The Issue with Outbound Sales Rep Goals

  • Ramosi recounts his company's recurring goal of adding six outbound reps.
  • He challenges the team on why the goal was not met previously.
  • The importance of setting realistic and achievable goals is highlighted.
  • Ramosi quantifies the revenue each rep could generate, tying it to the company's overall financial goals.

"And so for me to have six more reps is about $12 million. I'm not just pulling that out of nowhere. That's where it comes from."

This quote demonstrates Ramosi's analytical approach to goal setting, showing how he calculates the potential revenue impact of adding sales representatives to his team.

Understanding System Constraints

  • Entrepreneurs often focus on adding potential to their business instead of addressing the actual constraints.
  • Growth is limited to the system's constraints, and identifying these is crucial for progress.
  • Solving problems in the correct order is key to achieving macro speed and significant growth.
  • Misdiagnosing the root problem can lead to underperformance and missed opportunities.

"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."

This quote highlights the common mistake entrepreneurs make by focusing on potential rather than constraints, which limits the growth of their business.

"But we will always grow. Any system will grow up to its constraint and no further."

Alex Ramosi emphasizes that growth is inherently limited by the constraints of the system, not by the potential that entrepreneurs try to add.

"And so right now, your business has a constraint. You have to identify it."

The importance of identifying the business constraint is underscored as the first step towards overcoming growth limitations.

"It's knowing which problems to solve in what order."

Alex Ramosi points out that strategic problem-solving in the right sequence is essential for business acceleration.

Diagnosing the Root Problem

  • Alex Ramosi shares a personal anecdote to illustrate the consequences of not diagnosing the root problem.
  • A failure in identifying the constraint earlier led to a significant loss in potential revenue for one of his companies.
  • External perceptions often misinterpret the reasons for a business's underperformance.

"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."

This quote details a missed opportunity to add revenue due to a delayed identification of a constraint in the marketing channel.

"But they didn't diagnose the root problem."

Alex Ramosi criticizes the common oversight of not correctly identifying the underlying issues that hinder business growth.

The Hiring Bottleneck

  • Alex Ramosi identifies a hiring bottleneck as the constraint in his anecdote.
  • The hiring process was inefficient, requiring too many interviews to hire a single outbound representative.
  • High churn rates in frontline positions exacerbated the hiring issue.

"So I then turned to my HR director, and I said, how many people are you sending the sales manager per week? She was like, well, I sent him about one qualified candidate a week."

This quote reveals the rate at which qualified candidates were being presented to the sales manager, indicating a potential bottleneck.

"And I was like, okay, how many interviews does it take you to send one qualified candidate? He said, it takes five."

Alex Ramosi uncovers the inefficiency in the hiring process, where multiple interviews are needed for a single qualified candidate.

"Manager, how many of these final interviews does it take for you to get one person hired? And he was like, four."

The quote highlights the further inefficiency at the final interview stage, requiring several interviews to result in a hire.

"It takes us 20 people that we got to get through to get one new outbound rep."

This calculation by Alex Ramosi summarizes the hiring bottleneck, showing the high number of interviews needed for a single hire.

"Just FYI for everybody, frontline positions in general tend to churn more than manager and leadership positions. Just this name of the game."

The quote provides context on industry norms regarding churn rates, which affects the hiring process and was a part of the constraint.

"So what is our churn in that position? He was like, it's about 20% a quarter."

Alex Ramosi quantifies the churn rate, which is a significant factor in the hiring constraint and impacts the overall efficiency of the outbound team.

Staff Retention and Recruitment Challenges

  • Alex Ramosi discusses the issue of staff turnover and recruitment in a hypothetical outbound team.
  • Losing 20% of a team that hypothetically has ten members results in losing two people quarterly.
  • If the current hiring process only yields one new outbound rep per month, the net gain is one person per quarter.
  • This hiring rate falls short of the target goal of six new hires per quarter.
  • The solution involves fixing the hiring process to meet the recruitment goals.

"If we have ten people who are working outbound, that's not the number, but let's just say it's ten and we lose 20%, then it means we're losing two people a quarter." "If right now, the process that you have gets us one new outbound rep per month and we're losing two a quarter, that means we would net one new person per quarter."

The quotes explain the math behind the staff turnover and recruitment rates, highlighting the problem of not meeting the hiring goals with the current process.

Enhancing Content Accessibility and Engagement

  • Alex Ramosi invites listeners to check out the video version of the podcast on his YouTube channel.
  • He mentions that the video format includes additional effects, visuals, and graphs to enhance understanding and engagement.
  • The content is available for free and is an alternative option for those who prefer visual learning.

"If you ever want to have the video version of this, which usually has more effects, more visuals, more graphs, drawn out stuff, sometimes it can help hit the brain centers in different ways."

This quote suggests that the video version of the podcast could cater to different learning styles and preferences, potentially improving the audience's retention and understanding of the content.

Streamlining the Hiring Process

  • Alex Ramosi identifies a miscommunication in the hiring process as the root cause of the recruitment issue.
  • The HR director initially conducted one-on-one interviews, which was inefficient for the position in question.
  • The solution was to switch to group interviews, allowing the sales manager to conduct five group interviews weekly and onboard new hires more quickly.
  • This change in the hiring process aimed to meet the recruitment goals and address the previously unidentified constraint in the system.

"And so what we did was we actually, I asked the HR director, I said, why are we doing these one on one?...So we don't need that for this position." "What she now did, the solution to this problem was that she's setting interviews."

The quotes describe the conversation with the HR director that led to the realization of the inefficiency in the hiring process and the subsequent implementation of group interviews to expedite hiring.

Framework for Marketing Calendars

  • Alex Ramosi introduces the concept of the quad marketing calendar as a strategic framework.
  • He notes that most people do not have a marketing calendar, while smart marketers may have one or two.
  • The quad marketing calendar is a tool that Alex plans to elaborate on in a future video.

"And so I'll give you a framework that I wrote down somewhere that I'll probably share in another video, but it's something called the quad marketing calendar."

This quote teases a future discussion about the quad marketing calendar, indicating its importance in strategic marketing and planning. Alex suggests that this framework is a more advanced approach compared to the lack of or minimal use of marketing calendars by others.

Internal Marketing to Employees

  • Importance of marketing the company's vision and mission to employees.
  • Continual reinforcement of why employees should want to work for the company.

This way, you should be marketing to your employees 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.

This quote emphasizes the need for constant communication with employees about the company's vision, mission, and purpose to maintain their engagement and loyalty.

Marketing to Current Customers

  • The necessity of ongoing marketing efforts to existing customers to encourage repeat business.
  • Keeping customers engaged and purchasing is a key part of a successful business strategy.

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.

This quote highlights the importance of not just acquiring customers but also retaining them through continuous marketing efforts to ensure they remain active purchasers.

External Marketing for Prospects

  • The common understanding that businesses need to market to external prospects.
  • The goal is to convert prospects into customers.

In external for prospects, you need to get people to become customers. So we're marketing externally.

This quote outlines the well-known concept of external marketing, which is aimed at attracting new customers to the business.

Acquisition Process for New Talent

  • The overlooked importance of having a structured process for talent acquisition.
  • The parallel between customer acquisition and employee acquisition processes.
  • The impact of not having this process on the company's revenue.

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.

This quote identifies a common gap in many business strategies, which is the lack of a systematic approach to hiring new employees, akin to how businesses approach customer acquisition.

So just like you run ads, generate leads, nurture leads, set appointments, sell, fulfill, you should be able to run ads for new employees.

The quote draws a direct comparison between the stages of customer acquisition and the steps that should be taken in recruiting new employees, suggesting that the latter should be treated with similar strategic importance.

You should be generating leads. You should be working those leads. You should be setting interviews, which are sales. You make job offers just like you make normal offers.

This quote further details the process of talent acquisition, likening each step to the corresponding stage in the customer sales funnel.

And then the onboarding experience that you have for a customer is the onboarding experience that you have in parallel with an employee.

The quote compares the onboarding experience for customers and employees, suggesting that the process should be of comparable quality and thoroughness.

And then, just like you continue to ascend and resell your customers, you ascend and continue to manage your employees.

The quote emphasizes the ongoing nature of both customer and employee relationships, where both require continuous management and development.

Impact of the Quad Marketing Calendar

  • Introduction of the "Quad bargain calendar" as a framework.
  • The financial repercussions of not understanding this framework.
  • Encouragement to identify and strengthen weak areas in the business using this concept.

And this is called the Quad bargain calendar. And it was because we were missing this framework. My HR director did not understand this framework that we lost out on ten to $12 million revenue.

This quote introduces the "Quad bargain calendar" and illustrates the significant revenue loss that can result from not utilizing such a framework in business operations.

Closing Remarks

  • Alex Ramosi's intention behind sharing the video content.
  • The goal for viewers to recognize and improve upon the areas they may be neglecting in their business.

And so the reason I made this video 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.

This quote explains the motivational purpose behind the video: to help viewers identify weaknesses in their business strategies and to provide a tool to address them for greater success.

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