Why Saying Your Business Isn't Scalable Is the Wrong Diagnosis | Ep 987

Many entrepreneurs believe that switching business models will unlock rapid growth, but the scalability of any venture is always subject to limitations. While digital products and software can scale dramatically, most businesses in the United States remain service-based and are shaped by their own inherent constraints.

Scalability in Business Models Exists On a Spectrum

Service Businesses Start Easily and Profitably, but Scaling Is Harder Due to Managing Human Quality

Service businesses, which account for 78% of U.S. companies, are typically easy to start and can be highly profitable. The model relies on hiring humans to do things for other humans: for example, a fitness studio recruiting trainers to work with clients. As these businesses grow, however, they become harder—not impossible, but more difficult—to scale quickly. This challenge stems from maintaining quality as more new employees are brought in, who usually require extra training to meet company standards.

E-Commerce Businesses Cost More Than Service Businesses to Start but Scale Faster Despite Supply Chain and Logistical Obstacles

E-commerce businesses sit at the midpoint of the scalability spectrum. They cost more to start than service businesses and are somewhat slower to launch. Yet as sales increase, they can scale faster than traditional services. The primary obstacles these businesses face are supply chain and logistical challenges that emerge at greater volumes.

Software and SaaS Businesses Require Significant Initial Investment, but Become Easier to Operate Than Service or E-Commerce Models Once Scaled

Software and SaaS businesses exist at the far end of the spectrum. These require the most time and capital investment to build and launch. However, once such a digital business achieves scale, it operates far more easily and flexibly than service or e-commerce models because software can be distributed instantly with little marginal cost and without concerns about human quality management or physical logistics.

Service Switching Won't Boost Growth: Reliance on Human Execution Persists

Most U.S. Businesses (78%) Are Service-Based, Making It Illogical to Abandon Functional Models

Despite the allure of switching models, most U.S. businesses are service-based. The idea of abandoning a working service business purely for the sake of pursuing a supposedly more scalable model is often misguided. Entrepreneurs are tempted by novel opportunities, but the fundamental nature of service work—reliance on humans—remains unchanged no matter the specific service being offered.

Service Constraints: Demand or Supply Limits Persist Despite Service Type Switch

Switching from one service business to another rarely changes the underlying growth challenge. Service enterprises, regardless of type, tend to be persistently constrained by human factors. Whether it’s a demand constraint (struggling to find customers) or a supply constraint (struggling to find skilled workers), these issues persist across service verticals.

Service Businesses Share Core Sol ...

Building and scaling a business is filled with periods where meaningful action is underway, yet visible results lag far behind. Entrepreneurs repeatedly find themselves solving critical constraints only to face drawn-out periods with little apparent progress, testing their patience and resilience.

Constraint Recognition and Solution Implementation: Initial Period of Pain Without Immediate Relief

Entrepreneur Supply-Constrained, Recruitment Doesn't Change Constraint

Alex Hormozi explains that when an entrepreneur recognizes they are supply constrained—unable to take on more customers due to a lack of staff such as accountants, HVAC workers, or technicians—the natural step is to hire. The entrepreneur responds by advertising open positions, networking, conducting interviews, and ultimately making job offers. Despite these efforts, this entire process does not immediately change the constraint; for some time, the business remains just as constrained as before.

New Hires Need More Training Time, Leading To Ongoing Constraints Despite Hiring Solution Implementation

After the new hires accept their offers, a further delay sets in. Trainees must be brought up to speed, and some inevitably fall short, requiring rehiring or additional training. Even the best candidates take three to six months to ramp up to full productivity. During all these months, the entrepreneur’s actions have not yet translated into relief; operations are still limited by the original constraint while the groundwork for improvement is quietly being laid.

Psychological Burden of Slow Problem-Solving: Entrepreneurs Expect Immediate Results, Business Solutions Are Delayed

Entrepreneurs Feeling Constraint and Frustration

Hormozi describes the torturous feeling this produces. The entrepreneur knows they are taking the right steps—having both recognized the constraint and put solutions in motion—but the constraint, and the associated pains, stubbornly persist. Every day, for as long as half a year or more, the sense of “having this problem and needing to do something about it” gnaws at them, despite the reality that progress is happening behind the scenes.

Team Members Keep Complaining About the Constraint and Its Consequences, Reinforcing the Entrepreneur's Feeling That Nothing Is Being Done, Even Though Meaningful Work to Solve the Problem Is Underway

Compounding the frustration, team members remain affected by the ongoing constraint and continue to ...

Entrepreneurs often undermine their own successful business models while waiting for solutions to constraints by making unnecessary, disruptive changes. Alex Hormozi explains how impatience and a desire for more action can prompt damaging modifications in delivery, pricing, and offerings, which subvert what was once a profitable, stable model.

During Waiting Periods, Entrepreneurs Destructively Change Profitable Models, Falsely Believing More Action Speeds Results

Entrepreneurs, driven by the anxiety of waiting for existing solutions to take effect, begin to tinker with their business. Hormozi observes that, during these periods, they frequently alter elements of their model—such as changing the price or the product/service—and convince themselves these changes are necessary for progress.

Entrepreneurs Modify Delivery By Reducing Quality to Lessen Constraints, Degrading Service and Increasing Churn

One common modification is expanding the scope of deliverables in an attempt to alleviate bottlenecks. For instance, an entrepreneur might increase the client load from 10 to 20 accounts per manager. While this appears to increase capacity, it actually reduces quality of delivery, resulting in dissatisfied customers and elevated churn rates, introducing a new structural problem into the business.

Entrepreneurs Alter Pricing and Offerings, Undermining the Profitable Business Model

At the same time, these entrepreneurs often adjust their pricing or offerings, disrupting a previously optimized business structure. Such unnecessary changes—made in the belief that tweaking prices or product specs will fix short-term constraints—detract from what was an efficient, profitable system.

Self-Sabotage Turns a Profitable, Stable Business Into one With Lower Revenue and Higher Churn

Hormozi points out that before these changes, the business typically had sound margins and retention: customers paid regularly and the company generated stable profits. The impulse to fix a perceived bottleneck by reworking elements that already function well ends up "breaking the business" instead of bolstering it, resulting in declining revenue and increased customer turnover.

Original Model Had Good Margins and Revenue, but Constraints Destroyed This Strength

These destructive changes, born out of impatience or a fear of standing still, dismantle the core strengths—reliable margins and ongoing revenue—that originally defined the business.

Entrepreneurs Remove a Brick From a Strong Building, Hoping to Strengthen It Elsewhere, Despite the Brick's Maximum Value at Its Original Location

Hormozi uses a vivid metaphor: a building made of bricks represents the business. One could relocate any single brick to countless locations, but only in its precise place does the brick support the s ...

Alex Hormozi emphasizes that many challenges in business are not problems that can be permanently solved but are instead inherent features that must be managed. He argues that entrepreneurs often misinterpret ongoing challenges as indications that their business model is broken, when, in fact, these are simply unavoidable aspects of running certain types of businesses.

Many Business Problems Seen As Flaws Are Permanent Features

Hormozi illustrates that service businesses, for example, will always face the challenge of finding, hiring, and managing good people. This is not a flaw or a temporary obstacle, but a permanent feature built into the very nature of the business. Switching to a different model will not eliminate the need to manage people, because “people’s the business.” The requirement to continuously find and manage talent is an integral, enduring condition of the service industry.

Similarly, software companies face the perpetual challenge of recruiting skilled, often expensive, developers. This people-management challenge persists even if the business model changes. The overhead associated with securing and retaining quality talent is a fundamental characteristic for both service and software businesses. It is impossible to truly “fix” these facets—they are ongoing responsibilities.

Businesses Have Features and Bugs; Critical Skill: Discerning Core Features From Problems

Hormozi makes a clear distinction between “features” and “bugs” in business. Bugs represent temporary, solvable problems; features are ongoing overhead that require continual management and investment. Scaling a business and acquiring talent are examples of challenges that will never be completely resolved—they are intrinsic to the process and must be regularly addressed.

The key skill for entrepreneurs is being able to discern what is a core feature of the business versus what is a bug. Some hurdles are fixable, but many aspects of running a company are issues that ...

Entrepreneurship demands a high threshold for pain and discomfort. Alex Hormozi emphasizes that entrepreneurs must accept—and even embrace—persistent flaws, mistakes, and unresolved problems while simultaneously maintaining faith in their ability to deliver solutions.

Building a Business Demands Tolerance For Problems and Failures While Staying Confident in Solutions

The journey of building a business is much less about glory moments or dramatic "grind" montages, and far more about enduring ongoing adversity. Entrepreneurs are often confronted by their teams with fires that need putting out: churn rising, critical mistakes, missing key personnel. Hormozi describes the necessity of looking team members in the eye and calmly stating, “We’re already working on it. It’s in progress,” even when pressured to panic or take drastic action. The real test is proving capable of persisting through discomfort rather than seeking quick, impulsive fixes.

Entrepreneurs Must Face Their Teams Amidst Rising Churn, Mistakes, and Problems, Calmly Communicating That Endurance—Not Panic—Is Needed

Entrepreneurs routinely face heightened churn and operational mistakes that can’t be immediately remedied. They must communicate stability and measured persistence, even as the temptation to act hastily arises. Hormozi notes that there are moments when it feels like you have to "just sit there and watch it burn," resisting the urge to implement premature changes and focusing instead on steady, ongoing problem-solving.

Embracing Discomfort and Resisting Hasty Changes Is More Difficult Than Product Development or Marketing

Withstanding the pain of unresolved issues, while actively seeking and waiting on solutions, is often far more taxing than developing products or executing marketing strategies. Hormozi asserts that letting discomfort sit is sometimes the most difficult part of entrepreneurship.

The Entrepreneurial Archetype Demands Discomfort With Flaws but Also Discipline to Tolerate Them Until Solutions Mature

Entrepreneurs are, by their nature, unwilling to accept flaws as permanent. However, discipline is equally required: to tolerate these imperfections as solutions are put in motion and to resist the urge to disrupt systems that do work, even imperfectly.

Internal Contradiction For Entrepreneurs

This internal contradiction—never being comfortable with flaws, yet practicing the discipline to tolerate them—defines the entrepreneurial mindset. As Hormozi points out, entrepreneurs experience "unrelenting problems" in which solutions are either still maturing or micro-problems arise daily, requiring continuous, steady engagement without destroying what already f ...