The Don't Be Cute Approach & Scaling Your Business (on BiggerPockets) Pt. 1 Aug '22 Ep 498

In this episode of the Bigger Pockets podcast, host Alex Hormozi shares his entrepreneurial journey from management consultant to multimillion-dollar business owner. Starting with a single gym and sleeping on the floor, Hormozi's grit and knack for rapid scaling saw him open multiple locations, perform gym turnarounds, and eventually sell his ventures for millions. His approach to business centers on simplicity, focusing on high cash flow service businesses, and leveraging a core theme of working more to achieve more, avoiding the "gobbledygook" of productivity hacks. Hormozi emphasizes the importance of customer value, data tracking, and strategic scaling across revenue milestones. He candidly discusses hiring as a critical skill, advocating for buying talent over building it, and the necessity of recruiting individuals who can drive the business independently. Hormozi's insights on entrepreneurship are direct, practical, and derived from extensive experience and failures, likening business growth to increasing leverage and the strategic relinquishment of control.

• Most businesses are often centered around a single founder who is the driving force.
• These businesses are not truly businesses but rather "leveraged jobs" due to their reliance on the founder.
• The removal of the founder often leads to the collapse of such businesses.

"It's usually one founder that's breathing life into this thing with lots of little helpers. It's a genius with a thousand hands. And of course, if you remove the genius, there's nothing, right? And that's most businesses. And most businesses aren't worth anything because they're not businesses. They're leveraged jobs."

The quote emphasizes the critical role of the founder in many businesses and how their absence can lead to the business's failure, illustrating the fragile nature of such enterprises.

• Alex Hormozi's background includes being a management consultant and doing defense contracting.
• His dissatisfaction with his job in Baltimore led him to move West and start a gym.
• Hormozi's success with gyms led to helping other gym owners and eventually selling his gyms and moving into a licensing model.
• His business ventures expanded to include a supplement company and a software company, both of which were sold for significant sums.
• Acquisition.com is his current holding company, specializing in high cash flow service businesses.

"I was a management consultant, went to Vanderbilt, graduated, did defense contracting for two years. Really didn't like it. Got my top secret clearances."

This quote provides a brief background on Alex Hormozi's early career and education, setting the stage for his entrepreneurial journey.

• Hormozi's approach to business involved taking on larger and more complex problems, leading to scalable solutions.
• His ventures were synergistic, leveraging his expertise in one area to succeed in another.
• Despite the success, Hormozi acknowledges he would do things differently if given the chance, indicating a learning curve in his business strategy.

"Yeah, I definitely did a whole bunch of things that I probably wouldn't do again and probably wouldn't have done it necessarily in that order, et cetera. A lot of things were more difficult than they should have been, but, yes, that was 100%. They were synergistic in nature."

The quote reflects on Hormozi's business decisions, acknowledging both the synergies he created and the challenges he faced, showing a reflective and growth-oriented mindset.

• Hormozi is recognized for his practical, well-thought-out business advice, derived from experience and overcoming failures.
• The comparison to a Gracie discussing jiu-jitsu suggests a high level of expertise and practical knowledge in his field.

"You are an incredibly intelligent man, and I'm not saying that to butter you up. I'm just saying I take a lot of what you say. It's not fluff. It is very practical, well thought out, the type of advice you only get from trying and failing a lot, and then figuring out, okay, this is what actually works."

This quote praises Hormozi for his intelligence and the practicality of his business advice, highlighting the value of learning through failure.

• Alex Hormozi met his wife, Layla, on a dating app.
• Hormozi's relationship with his wife played a significant role in his business, as she helped him with a crucial business deal.
• The discussion about his personal life provides insight into the human aspect of entrepreneurship and the importance of relationships.

"Alex and Layla Hormozi met on a dating app."

This simple quote confirms how Hormozi met his wife, which is relevant to understanding the personal side of his life and its impact on his business decisions.

• Hormozi invested a substantial amount of money for advice and mentorship from Grant Cardone.
• The value he received from these calls was significant and helped him in areas like organic branding.

"I spent $135,000 for [...] I got more than that in value very easily. I got that more than that from the first phone call."

The quote reveals Hormozi's willingness to invest heavily in mentorship and the immense value he gained from it, emphasizing the importance of seeking expertise.

• Hormozi emails himself his failures to remember the lessons learned.
• This practice contributes to humility and continuous improvement.

"No, 100%. That's how I remembered the lessons."

This quote shows Hormozi's method of documenting failures to ensure he learns from them, highlighting a strategy for personal and professional growth.

• Hormozi's morning routine does not include comfort activities like a hot sauna or ice bath.
• Instead, he focuses on work and productivity, starting his day with coffee and immediately getting to work.

"No, I wake up, I drink a cup of coffee and I work my morning."

The quote provides insight into Hormozi's disciplined morning routine and his focus on productivity over comfort or trendy practices.

• The conversation begins with a critique of popular business maxims and personal productivity habits.
• The idea that certain routines like ice baths, waking up early, or wearing specific clothes are essential for success is questioned.
• The effectiveness of these habits is debated in relation to the nature of one's work and competitive environment.
• It's acknowledged that while some practices may be beneficial in certain contexts, they aren't universally advantageous.

ed better than admitting I don't pick out clothes. I was like, how many of us have been repeating this as this business maximum? That's super. And he's like, yeah, I made the whole thing up.

The quote illustrates the skepticism around business maxims and the revelation that some are fabricated without a basis in actual effectiveness.

• Speaker A criticizes the advice of self-help gurus which include a variety of morning routines and productivity hacks.
• The argument is made that these activities consume time without contributing to actual productive work.
• First principles thinking is applied to strip down productivity to its core: doing more work.
• The notion that the ability to work is trainable and that many pre-work rituals are unnecessary crutches is presented.

I think it's a big pile of gobbledygook, man. I mean, the amount of stuff that is espoused by the TikTok gurus of wealth and finance is insanity.

This quote is a direct dismissal of the complex routines promoted by some influencers as ineffective and a waste of valuable time.

• A story is shared to emphasize the importance of sticking to fundamentals rather than getting "cute" with complicated strategies.
• The conversation moves to diets, highlighting that the key to weight loss is a simple calorie deficit rather than complicated diet plans.
• A mentor's advice is recounted, using football as a metaphor to focus on simple, effective strategies instead of overcomplicated plans.

Don't be cute. Right? He was like, he was from Long island. He's like, you know, when I used to play backyard football.

The quote emphasizes the message of simplicity and sticking to fundamentals, using the metaphor of playing football to illustrate this point.

• A theory is proposed that people are vulnerable to gurus offering expensive courses as shortcuts to wealth because they don't want to do the necessary work.
• The discussion touches on the human tendencies of laziness and greed and the refusal to accept simple truths.
• The deceptive nature of selling systems and diets is criticized, contrasting it with the honest approach of learning through experience and hard work.

Our audience is particularly susceptible to these gurus that say, I will teach you how to make a million dollars by taking my $100,000 course.

This quote reflects on the susceptibility of certain audiences to the allure of quick success as promised by gurus, highlighting a problem in the self-help industry.

• The importance of data tracking for customer success is discussed, with a focus on activation points that predict customer retention and ascension.
• Marketing messages are crafted based on observed data rather than empty promises, providing customers with actionable information.
• The conversation underscores the value of focusing on customer outcomes and using data to develop marketing strategies and claims.

It definitely wasn't a new opportunity. We were just like, so one of the things that we call it database marketing, but when we work with a portfolio company, especially if they're in the education space, one of the first systems that we implement is data tracking on customer success.

The quote explains the approach of using data to track customer success, which enables the creation of more accurate and substantiated marketing claims.

• The conversation transitions to the topic of scaling a business, with Speaker A breaking down the process from reaching six figures to multiple millions.
• To reach six figures, the formula of selling one product to one avatar through one channel is presented.
• Scaling to seven figures involves doing those three things reliably and consistently, with a focus on predictable metrics for customer acquisition.
• At the three million dollar mark, building out a core team is essential, and the common mistake of getting "cute" with marketing is cautioned against.

To get started, you have to sell something to someone. That's it. Literally, that's all. One Avatar, one product, one channel.

This quote simplifies the initial step for business growth, emphasizing the focus on a single product, customer type, and marketing channel to reach six figures.

• Speaker A discusses the specific challenges that businesses face when they reach around three million dollars in revenue.
• The temptation to complicate marketing strategies is identified as a pitfall at this stage.
• The importance of sticking to what has been proven to work is reiterated, with the reminder to avoid getting distracted by new, unproven tactics.

The problems that come up at three ish are that people start getting cute, right? And they start saying, and here's what's difficult, is that you get reinforced on the fact that the more you market, the more you sell, the more money you make, right?

This quote highlights the issue of overcomplicating strategies at a critical growth phase and the need to stay grounded in what has been effective.

• The primary goal in the early phase of a business is to establish product-market fit.
• Finding a profitable acquisition channel is crucial during the initial stage.
• A common mistake is changing objectives too early, focusing on sales and marketing before establishing the foundation.

"The objective of the first phase of business, which for me is like zero to three, is just to demonstrate product market fit and an acquisition channel that is profitable."

The quote emphasizes the importance of proving that a product meets market needs and that there is a cost-effective way to acquire customers before scaling up.

• After establishing product-market fit, the focus should shift to increasing the lifetime value (LTV) of each customer.
• Improving customer experience is a key part of this phase.
• Implementing data tracking helps in understanding and enhancing customer value.
• Developing additional products or services can lead to more profitable scaling.

"To increasing lifetime value per customer. So this is improving the customer experience."

This quote indicates that once a business has proven its initial concept, it should work on enhancing the overall customer experience to increase the value derived from each customer.

• As a business scales, maintaining high margins can be challenging.
• Sometimes, scaling requires stepping back to address issues with the product, service, infrastructure, and personnel.
• Effective scaling often happens naturally after these foundational elements are improved.

"And then once we fix that stuff, then honestly, going from three to ten usually almost happens on its own."

Alex Hormozi suggests that fixing fundamental issues within a business can lead to natural growth without the need for aggressive expansion efforts.

• At this stage, businesses should focus on "more, better, new" strategies for acquisition.
• This includes maximizing current methods, optimizing conversions, and exploring new channels for customer acquisition.
• The six channels mentioned are: own lists, cold outbound, content, paid ads, affiliates, and referrals.
• The choice of a new channel should align with the company's existing skills and capabilities.

"So we do more what we're currently doing until we max that out, and then we do better of what we're currently doing."

Alex Hormozi outlines a growth strategy that involves first maximizing current methods before seeking improvements and then adding new channels for customer acquisition.

• Around the $30 million mark, founders often feel constrained and unable to drive the business alone.
• The business's success becomes less about the founder's direct efforts and more about the team.
• Recruiting experienced individuals and offering competitive compensation becomes essential for further growth.

"And so this is where employee compensation and recruiting become paramount to getting to the next level."

This quote from Alex Hormozi highlights the importance of attracting and compensating top talent to drive the business forward as it scales beyond certain revenue milestones.

• Understanding the customer avatar and selecting the right marketing channel is critical for the first million in revenue.
• There are three variables to consider when choosing a marketing channel: method, platform, and media.
• The entrepreneur should focus on one channel that combines these variables effectively to convert strangers into customers.

"So you pick one channel, which is all those things together, which is just a fancy word for a pathway for a stranger to become a customer, right?"

The quote explains the concept of a "channel" as a comprehensive approach that includes the method, platform, and media for turning potential customers into actual customers.

• Entrepreneurship can be lonely at different stages, with unique challenges at each level.
• The type of business and the volume of sales required to reach a million dollars can influence the degree of loneliness.
• As businesses grow, the nature of competition and the entrepreneur's perspective on it evolve.

"I think in the beginning it's a lot harder because you're really competitive against other people rather than being competitive against yourself."

Alex Hormozi reflects on how the competitive nature of early-stage entrepreneurship can contribute to feelings of isolation, which change over time as the business and the entrepreneur mature.

• It can be difficult to find peers who understand the unique challenges faced at different business stages.
• Alex Hormozi advocates for alternative education and values connections made within these communities.
• Sharing experiences with others who have similar business backgrounds can provide support and reduce the sense of isolation.

"It's lonely because there's just not that many people that I can talk to who are dealing with the same things."

The quote captures the isolation felt when entrepreneurs reach a level of success where fewer peers can relate to their specific challenges, highlighting the need for a supportive community.

• Guru businesses are essentially education businesses that have proliferated due to unmet demands in the formal education system.
• The demand for skills that generate income is high, and social media has amplified the belief that financial success is attainable.
• The intention differentiates a scam from a legitimate educational offering; well-intentioned educators may lack teaching skills.
• Alex Hormozi emphasizes the importance of education and shares his approach to learning from others by offering value first.

"And fundamentally, guru businesses are just education businesses, and they are sprout all over the place because the demand is unmet by the formal education system, and the demand is for skills that make money and people are not getting them."

This quote highlights the gap in the formal education system that guru businesses are filling by teaching income-generating skills.

"I think that the difference between a scam and somebody who is trying to deliver is intention."

Alex Hormozi suggests that the underlying intentions of educators determine the legitimacy of their offerings, distinguishing scams from genuine efforts.

• Alex Hormozi gained knowledge by offering his skills to others and asking for help in return.
• He believes in providing upfront value to potential mentors, which often leads to reciprocation and further opportunities.
• Hormozi's proactive approach to networking and skill-sharing earned him recognition in a mastermind group despite being new to internet marketing.

"And so my first mastermind, I was a part of. I got voted member of the year with, like, 100 Internet marketers. And I was an Internet marketer because I didn't know anything about Internet marketing, which is ridiculous."

This quote illustrates Hormozi's success in a mastermind group through his willingness to contribute and learn, despite initially lacking knowledge in internet marketing.

• Entrepreneurs must learn to delegate tasks as their business scales, which involves hiring skilled individuals.
• A common limiting belief is thinking no one else can perform a task as well as the entrepreneur themselves.
• The process of scaling involves relinquishing control and using leverage to trade time for increased revenue.

"The entire conversation of scaling and entrepreneurship about two things, control and leverage."

Alex Hormozi discusses the importance of balancing control and leverage when scaling a business, emphasizing the need to delegate and trust others.

• Hiring the right people is a critical challenge for entrepreneurs.
• Effective hiring involves understanding business needs and placing people who can fulfill those needs.
• Hormozi advocates for hiring based on track record and objective measures of talent, rather than subjective biases.

"The reason that things are not happening is because the people are not doing the things."

This quote underscores the importance of having the right people in place to ensure business success.

"Everyone thinks they're a good judge of character until they get judged by the people they hire."

Leila Hormozi's quote, shared by Alex, reflects on the common misconception of one's ability to judge character, which is often revealed through the quality of their hires.

• Initially, entrepreneurs must be generalists, but as they grow, they should focus on hiring specialists.
• The growth journey of an entrepreneur involves continuous learning and a shift from doing all tasks to strategic delegation.
• Hiring experienced individuals who can solve specific problems is key to scaling a business effectively.

"And so the whole concept of moving up in entrepreneurship is trading your time for increasing amounts of money."

Hormozi explains the entrepreneurial progression of leveraging one's time more effectively for greater financial returns.

"If you're not learning from the person that you're supposed to hire to take the job from you, then they're going to work as a subset of your knowledge because you know more than them."

This quote highlights the importance of hiring individuals from whom the entrepreneur can learn, ensuring that the new hire brings additional expertise to the business.