My Business Isn’t Growing. What Do I Fix? | Ep 931
In this episode of The Game, Alex Hormozi addresses common obstacles that prevent businesses from scaling successfully. He examines how issues like inadequate talent acquisition, pricing strategies, and over-reliance on single products can lead to stagnation, while explaining why temporary performance dips are a natural part of implementing necessary changes.
The episode covers practical strategies for business growth, including the balance between paid advertising and organic growth, the importance of consistent messaging over constant novelty in content strategy, and the value of dominating local markets before expansion. Hormozi also explores how proprietary technology and vertical integration can help businesses maintain competitive advantages and strong profit margins in their respective markets.
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1-Page Summary
Overcoming Challenges to Business Growth and Scaling
Alex Hormozi explores the challenges business owners face when scaling their enterprises and offers strategic solutions for overcoming stagnation. He emphasizes that while any significant change typically results in a temporary 20% performance decrease, avoiding necessary changes leads to prolonged struggles.
Hormozi identifies several key challenges, including focus issues, over-expansion without adequate talent, pricing concerns, and single-product reliance. He suggests that strategic pricing and packaging are crucial first steps to generating cash flow, which can then be invested in advertising and data collection.
Strategies For Customer/Audience Acquisition and Retention
In discussing content strategy, Hormozi emphasizes the value of consistent messaging over constant novelty. He points to Dave Ramsey's approach of providing consistent financial advice for 35 years as an example of successful content strategy, noting that audiences benefit from seeing key messages presented in different contexts.
Regarding paid advertising, Hormozi suggests it can grow a business three to five times off baseline, but warns that selling to cold audiences requires different strategies than warm audiences. He advocates for a balanced approach combining paid advertising with organic growth strategies, emphasizing the importance of robust tracking and optimization for return on investment.
Case Studies and Industry-Specific Insights
Through various case studies, Hormozi advises businesses to dominate their local markets before expanding. He discusses the importance of "monopolistic levers" to increase business value by outperforming competition in existing markets before pursuing new territories.
On the topic of proprietary technology, Hormozi emphasizes its role in maintaining competitive advantage. He encourages businesses to consider vertical integration, such as owning manufacturing processes, when it protects core competitive edges. Through examples of specialized software and manufacturing equipment, he illustrates how proprietary technology can contribute to strong profit margins and market dominance.
1-Page Summary
Additional Materials
Counterarguments
- While significant change can lead to a temporary performance decrease, the extent of the impact can vary widely depending on the nature of the change, the industry, and how well the change is managed.
- Some businesses may experience prolonged success without major changes if they operate in a stable environment or have a strong market fit.
- Overcoming focus issues may not solely rely on internal factors; sometimes market conditions or external disruptions can force a business to pivot or diversify.
- Strategic pricing and packaging might not be the first step for some businesses, especially if the product or service requires significant market education or development.
- Advertising and data collection are important, but not all businesses can afford to invest heavily in these areas, especially in the early stages or in certain industries.
- Consistent messaging is valuable, but some markets are driven by innovation and novelty, which can necessitate a balance between consistency and freshness.
- The effectiveness of paid advertising varies greatly across industries and target demographics, and it may not always result in a three to five times growth.
- Organic growth strategies can sometimes be more effective than paid advertising, depending on the business model and market conditions.
- Robust tracking and optimization require resources and expertise that may not be available to all businesses, particularly small enterprises.
- Dominating local markets is a sound strategy, but some businesses may find more success or opportunity by targeting niche markets or going global from the outset.
- The use of "monopolistic levers" to outperform competition may not be feasible or ethical in all industries, especially those with strict antitrust regulations.
- Proprietary technology can be a competitive advantage, but it can also be a significant investment risk if the technology becomes obsolete or fails to meet market needs.
- Vertical integration can protect competitive edges, but it can also lead to increased complexity and reduced focus on a company's core competencies.
- Relying on proprietary technology for profit margins and market dominance assumes that competitors cannot quickly replicate or innovate around the technology.
Actionables
- You can anticipate and mitigate the impact of change by setting aside a "change fund." Create a savings account specifically for times when you're implementing significant changes in your life or business. This fund can help you manage the expected 20% performance dip by covering unexpected costs or allowing you to take risks without immediate financial pressure.
- Develop a "challenge journal" to proactively address growth obstacles. Start a journal where you document potential focus issues, over-expansion risks, and pricing concerns. For each challenge, brainstorm solutions or preventative measures. Regularly review and update your journal to stay ahead of these challenges as you grow your business or personal projects.
- Create a "local impact project" to strengthen your presence in your community. Choose a local issue or charity and develop a small campaign or event to support it. This will help you understand and engage with your local market, building a strong foundation before considering wider expansion. The project could range from a community cleanup to a fundraiser for a local school, allowing you to connect with potential customers or supporters in your area.
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Overcoming Challenges to Business Growth and Scaling
Alex Hormozi delves into the common challenges business owners face when pursuing growth, and he suggests strategies to overcome stagnation and scale successful enterprises.
Businesses Face Short-Term Pain vs. Long-Term Struggle Dilemma
Business owners often hesitate to change their strategies, leading them to face a dilemma between enduring short-term pain and a prolonged, less intense struggle. Hormozi emphasizes that not making a decision can lead to stagnation. He acknowledges the "cost of change," noting that any change results in a temporary 20% decrease in performance before any gains.
Challenges: Focus Issues, Over-Expansion, Pricing Concerns, Single-Product Reliance, Unclear Market, Insufficient Data
Hormozi outlines several challenges, such as over-expansion without a sufficiently talented team or sustainable business model, which might inhibit the opening of new locations. An example given is a physical therapy clinic that's busy but not profitable due to over-generous revenue sharing with therapists.
Businesses often underprice their services, and while raising prices might mean losing customers, not doing so can prevent profitability. Single-product businesses may consider starting new businesses rather than expanding product lines as margins shrink over time.
In trying to cater to everyone, businesses can struggle with an unclear market; focusing and customizing services might cause short-term financial loss. The challenge extends to gathering data for sound business decision-making, which is difficult when resources are devoted to fighting short-term fires instead.
Tackling Challenges Demands Tough Decisions Over the Status Quo
An audience member named Colton mentions the difficulty in managing aspects of a business that includes tattoos, continuing education, and coaching. Hormozi stresses the importance of focusing on gross operating margins for every product line to ensure profitability and achieve tax efficiency.
Businesses Must Make Short-Term Sacrifices For Long-Term Growth
Hormozi says that strategic pricing and packaging are the first steps to freeing up cash flow, which should then be allocated to advertising. This funds data collection and attribution, leading to increased content cadence—essential for thought leadership.
Hormozi outlines a roadmap for scaling, covering common problems at each level of ...
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Overcoming Challenges to Business Growth and Scaling
Additional Materials
Clarifications
- Gross operating margin is a financial metric that shows the percentage of revenue that exceeds the cost of goods sold. It indicates how efficiently a company is producing its core products or services. Monitoring gross operating margins helps businesses understand their profitability at a fundamental level. Maintaining healthy gross operating margins is crucial for sustainable growth and financial stability.
- Strategic pricing and packaging involve setting prices and bundling products in a way that maximizes revenue and profitability while also creating opportunities to invest in advertising and data collection to drive business growth. By carefully structuring pricing strategies and product offerings, businesses can generate more cash flow that can be reinvested into marketing efforts, enabling them to gather valuable data on customer behavior and preferences for informed decision-making. This approach aims to strike a balance between generating immediate revenue and investing in long-term strategies for sustainable growth and success.
- Content cadence for thought leadership is the consistent and strategic publishing of content to establish authority and influence in a particular industry or niche. By maintaining a regular schedule of high-quality content creation, businesses can engage their audience, build trust, and position themselves as experts in their field. This approach helps to keep the brand top-of-mind for consumers and can lead to increased visibility, credibility, and ultimately, business growth.
- Shifting focus from revenue growth to net income growth involves prioritizing profitability over sheer sales numbers. This strategy aims to increase the amount of money a business retains after deducting all expenses. By concentrating on net income growth, businesses can ensure sustainable financial health and long-term viability. This approach may involve optimizing costs, improving operational efficiency, and making strategic decisions that enhance the bottom line.
- A 30% net margin target for profitability means that for every dollar earned in revenue, the business ...
Counterarguments
- While focusing on net income growth is important, it's also critical to balance this with investments in innovation and customer acquisition, which might not immediately contribute to net income but are essential for long-term sustainability.
- The suggestion to endure a 20% decrease in performance during change might not be feasible for all businesses, especially those operating with thin margins or in highly competitive markets.
- The idea of making short-term sacrifices might not account for the potential risks and uncertainties involved, which could lead to long-term consequences if not managed properly.
- Overcoming focus issues by narrowing down services could lead to missed opportunities in markets where diversification is key to resilience and risk management.
- The recommendation to build a larger brand for ease of sale may not align with the goals or values of all business owners, some of whom may prioritize maintaining a personal touch or niche market over scalability.
- The roadmap for scaling provided might not be universally applicable, as different industries and markets may require unique strategies and approaches.
- The emphasis on strategic pricing and packaging as the first steps to free up cash flow might oversimplify the complexities involved in pricing strategies and their impact on customer perception a ...
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Strategies For Customer/Audience Acquisition and Retention
Alex Hormozi and audience participants share insights on creating engaging content, strategic partnerships, and the role of paid advertising in expanding business reach. Hormozi emphasizes the importance of repeat messaging and educational content, insights into influencer collaborations, and the necessity of tracking and optimizing paid advertising for a balanced growth strategy.
Effective Content Should Focus On Valuable Reminders and Educational Material, Not Just Novelty
Repeating Core Messages Enhances Audience Value
Audience member #4 and Alex Hormozi discuss the significance of educational content, which allows audiences to return to it time and again. Hormozi underscores the importance of reminding the audience of core messages. Rather than constantly seeking novelty in content, he points out that audiences benefit from seeing key messages reiterated in different contexts, acting as valuable reminders. He uses Dave Ramsey’s approach of providing consistent financial advice over 35 years as an example, where Ramsey's value lies in applying familiar advice to unique situations.
Strategic Partnerships and Influencer Collaborations Require Careful Selection to Grow an Audience
Businesses Should Highlight Unique Value In Their Marketing
Ricky, another audience member, is interested in strategies for doubling his business, such as employing a brand manager. Ricky’s business, which operates heavily in the CrossFit space, has secured Austin Hatfield, a highly likely podium finisher at the CrossFit Games, as their primary influencer. Alex Hormozi suggests illustrating the unique value of his service through before and after scenarios, where his service results in lower costs through effective negotiations with landlords.
Paid Advertising Is Effective With Robust Tracking and Optimization For ROI
Balance Aggressive Ad Growth With a Strong Organic Foundation
Paid advertising, according to Hormozi, can provide a significant short-term boost to businesses that have solely relied on organic growth if they have the delivery and fulfillment capability to handle the increase. He mentions that advertising can grow a business three to five times off of a baseline but cautions that selling to a cold audience differs from selling to a warm audience, n ...
Here’s what you’ll find in our full summary
Strategies For Customer/Audience Acquisition and Retention
Additional Materials
Counterarguments
- While repeating core messages can enhance audience value, there is a risk of message fatigue where the audience may disengage if they perceive the content as repetitive and not providing new value.
- Strategic partnerships and influencer collaborations, while potentially beneficial, can also dilute a brand's message if not aligned properly or if the influencer's audience does not resonate with the brand's core values.
- Highlighting unique value in marketing is important, but it must be balanced with authenticity. Overemphasis on marketing can lead to skepticism if the actual product or service does not live up to the marketing claims.
- Paid advertising, even with robust tracking, can sometimes lead to a focus on vanity metrics that do not necessarily translate into long-term business health or customer loyalty.
- Aggressive ad growth can sometimes overshadow the importance of product development and customer service, which are crucial for long-term retention and brand reputation.
- Selling to a cold audience with paid advertising can be less effective than organic growth strategies, as paid advertising may attract less engaged customers.
- Attribution tracking is complex and can sometimes give an incomplete picture of customer behavior, especially with multi-touch attribution across different platforms and devices.
- The input-output equation for business growth is not always clear or linear, especially in dynamic markets or industries with longer sales cycles.
- Organic growth strategies can be s ...
Actionables
- You can create a content calendar that includes regular posts about your core values or mission to reinforce your message. For example, if you run a small eco-friendly business, you might post weekly tips on sustainable living, recycling, and how your products contribute to a greener planet. This not only educates your audience but also keeps your core message at the forefront.
- Consider starting a referral program where your current customers can partner with you to spread the word about your business. Offer incentives for every new customer they bring in. This strategy leverages your existing audience to grow your customer base organically, similar to influencer collaborations but on a more personal level.
- Experiment with a small budget for paid social media ads targeting a specific interest group that aligns wit ...
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Case Studies and Industry-Specific Insights
Alex Hormozi offers crucial business insights for niche industries by focusing on unique growth opportunities and constraints, as well as the strategic role of proprietary technology.
Niche Industry Businesses: Unique Growth Opportunities and Constraints
Dominate Local Markets Before Expanding
Hormozi interacts with a chiropractor experiencing stagnation in profit growth and seeking to expand from their primary location. Hormozi questions whether the chiropractor's current space is at capacity before considering further expansion. The chiropractor is advised to dominate the local market before looking beyond, due to the ease of building trust and implementing simpler sales funnels, which can be effective even at high price points.
An unidentified speaker recounts the success of their specialized practice in Texas, expressing the desire to expand while remaining cautious about the potential complications of doing so. They deliberate on the revenue benefits versus the complications of moving into Oklahoma, citing their established relationship with a prominent client in both Texas and Oklahoma.
The conversation extends into a broader strategy where Alex Hormozi stresses the importance of increasing market share in the local market, employing "monopolistic levers" to increase business value by edging out competition before moving to new markets.
Another case involves a business moving strategically from the Seattle market to a larger Phoenix market after establishing itself locally. This move underlines the careful consideration businesses must undertake before expanding into new territories.
Proprietary Technology/Equipment: Assess Costs and Exclusivity for Competitive Advantage
In-house Manufacturing Protects Core Competitive Edge Through Vertical Integration
Hormozi discusses integrating consumables into a business model for enhancing long-term customer value and retention, which can be related to maintaining a competitive edge via proprietary offerings.
The importance of proprietary technology is underscored when an audience member broaches the topic of a machine assembled by their partner, which is essential to their production process. Hormozi points out that thorough ...
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Case Studies and Industry-Specific Insights
Additional Materials
Clarifications
- "Monopolistic levers" typically refer to strategies or tactics used by a business to gain a dominant position in a market, allowing them to control prices, supply, and competition to a certain extent. These levers can include factors like unique technology, strong branding, exclusive partnerships, or regulatory advantages that help a company establish a near-monopoly or a significant competitive edge within a specific industry or market segment. By effectively utilizing these levers, a business can enhance its market power and profitability while potentially limiting the influence of competitors. Understanding and leveraging monopolistic levers strategically can be crucial for businesses aiming to solidify their market position and sustain long-term success.
- Vertical integration is when a company controls different stages of production or distribution of a product. It involves owning or controlling suppliers, distributors, or retail locations. This strategy can help secure resources, streamline operations, and potentially reduce costs. It contrasts with horizontal integration, where a company acquires or merges with similar businesses at the same stage of production.
- Consumables are goods that are meant to be used up or disposed of after a certain period, in contrast to durable goods that last longer. They are items that are regularly consumed or depleted, such as office supplies like paper, pens, and ink cartridges. Companies may offer durable goods at lower prices to encourage the purchase of consumables that are needed for their use. Examples of consumables include toner cartridges for printers, which are used up and need to be replaced.
- Proprietary technology typically refers to unique tools, systems, or software developed by a company that are not widely available to others. This technology is often protected by patents, copyrights, ...
Counterarguments
- Dominating local markets before expanding might not be feasible for all businesses, especially if the local market is saturated or too small to support significant growth.
- Simpler sales funnels and high price points may not be effective in all local markets, particularly if there is a high level of competition or if the market is price-sensitive.
- Employing "monopolistic levers" to increase market share could potentially raise regulatory concerns or ethical issues related to anti-competitive practices.
- Expanding into new territories can sometimes be a strategic move to diversify risk, and waiting to dominate a local market could mean missing out on opportunities elsewhere.
- Vertical integration, such as owning manufacturing facilities, can lead to increased overhead and complexity, which might not be suitable for all businesses, especially smaller ones with limited resources.
- Relying too heavily on proprietary technology can be risky if the technology becomes obsolete, is bypassed by competitors, or if the business ...
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