Maximizing Effort The Leverage You've Been Missing (with Dan Henry) Pt.1 June ‘22 Ep 516

In this insightful discussion, the speakers, including Alex Hormozi, delve into the misconceptions and underestimations entrepreneurs often have regarding the effort required for success in both fitness and business. Alex emphasizes the disparity between perceived and actual effort, drawing parallels between the relentless pursuit of muscle growth and the rigorous demands of business growth. He shares anecdotes from his early business ventures to illustrate the scale of action necessary, highlighting that exponential effort often yields results. Furthermore, Alex and the guests explore the critical importance of data tracking, the need to focus on customer acquisition and value, and the pivotal role of effective product marketing. They also touch on the challenges of leadership, the artistry in entrepreneurship, and the power of positive word-of-mouth, underscoring the idea that true passion for one's business is a key differentiator in achieving monumental success.

• There is a significant disconnect between the perceived and actual effort required to achieve desired outcomes.
• People often underestimate the volume of work needed by a large margin, sometimes by as much as 50 times.
• Speaker A emphasizes that to be successful, one must be prepared to invest a considerably higher level of effort than initially assumed.

"There's usually this massive gap between what people think is required to get the outcome versus what is. And they're like, what if I double? It's like, dude, it's not even ten x. A lot of times it's like 50 x the amount of volume."

This quote highlights the common underestimation of the effort needed to achieve goals, whether in fitness or business. The speaker is pointing out that simply doubling efforts is far from sufficient; a much greater increase is often necessary.

• Training volume and business efforts, such as marketing and sales, require significant scaling to see results.
• Speaker B's personal experience with increasing workout sets demonstrates rapid improvement when the volume of effort is increased.
• Speaker A draws parallels between high-volume training and business practices, suggesting that substantial effort is necessary in both areas to succeed.

"I started literally doing calves set. Ten sets of calves every single day, as well as shrugs. And lo and behold, it's only been like a week and a half and I can literally see them growing."

This quote illustrates the concept that increasing the volume of effort in physical training can lead to visible results in a short period, which is used as an analogy for business efforts.

• Speaker A shares a story about marketing flyers, where his initial effort was dwarfed by the successful approach of a more experienced business owner.
• The story exemplifies the need for extensive testing and scaling in marketing efforts to achieve significant results.
• The concept of test size and scaling is crucial for understanding how to drive business effectively.

"And he was doing 5000. So he was doing 150,000 flyers a month to drive business into his small business. And I was here jerking off about 300, you know what I mean?"

This quote conveys a realization that the speaker's initial marketing efforts were insufficient compared to the successful strategies of others, which involved much larger scales of distribution.

• Consistent and high-volume content creation is essential for business growth, especially in advertising.
• Speaker A criticizes the lackluster effort in content creation by one of their portfolio companies, highlighting the need for much higher output.
• The story underscores the importance of understanding the scale of content production required for successful advertising.

"I was like, dude, we would do like 40, you know what I mean? Like, minimum. And when we were at full swing, because right now, for us, cold calls on the gym on side is now like 75% of the business."

The speaker is explaining that the content output of the portfolio company was far below what is typically necessary for growth, indicating that what may seem like a significant effort to some is actually minimal in the context of successful business practices.

• Speaker B questions whether societal changes have led to a decrease in work ethic and acceptance of the effort needed for success.
• Speaker A suggests that work ethic is cyclical and tied to generational experiences, referencing a pattern where societal hardship leads to stronger people and vice versa.
• The discussion touches on the resilience of humans and the potential for increased effort when faced with no other choice.

"And so I think that we're in the hard people built. We're at soft times built soft people stage right now. And I think that we will have another hard time, and it will build more hard people."

Speaker A is positing that society is currently in a phase where the relative ease of times has led to a softer generation, but he anticipates that upcoming challenges will necessitate and foster a return to a stronger work ethic.

• Speaker B raises the issue of effort being invested in the wrong areas, which can hinder progress despite hard work.
• Speaker A's personal example of a modest workspace despite significant business success illustrates prioritizing efficiency and practicality over appearances.
• The conversation highlights the importance of focusing effort on what truly drives business growth rather than on superficial signs of success.

"But, dude, most people, they have this big office with this nice views and this over the top stuff, and maybe they have, like, crazy..."

This quote, though cut off, suggests that many people focus on the trappings of success, such as luxurious offices, rather than on the core activities that actually build a successful business.

• Speaker A emphasizes a focus on functionality over minimalism.
• Speaker A's approach involves meticulous selection of personal items, such as tank tops and shoes, to find the most functional options for their lifestyle.
• The approach is about identifying what is necessary and eliminating the superfluous, leading to a more efficient and streamlined life.
• Speaker A uses the example of wearing the same type of clothing and choosing Crocs for their versatility to illustrate this point.

"I would say it's form over function, just because I think it can look similar, but I think it's a shade different." "For this tank top, this particular white tank top that I wear, I bought 40 different brands, and I tried different sizes on so that I could find the right white tank top for me." "I figured out I can work out on them. So I was like, great."

The quotes explain that Speaker A's approach is not about minimalism for its own sake but about finding the most functional and efficient solutions for their needs. The reference to buying 40 different tank tops and trying out various barefoot shoes until settling on Crocs demonstrates a process of elimination to find what works best for them.

• Speaker A believes that the utility of content is more important than high production quality.
• They argue that even with poor video quality, if the content is useful, it will be effective.
• The focus is on the function of the content and whether it serves the intended purpose, rather than on aesthetic considerations.
• Speaker A suggests that a higher quantity of valuable content can be more beneficial than fewer, higher-quality productions if the latter requires more effort and reduces overall output.

"I think the YouTube video stuff works even though the quality is poor because the stuff is useful for people." "If I do one third the videos and they're prettier, will I get the same output as three times the videos that are kind of quick and dirty?"

Speaker A argues that the value of content lies in its usefulness, not its production quality. They propose that producing more content, even if it's not as polished, can be more effective than producing less content with higher production value.

• Speaker A believes that the majority of value comes from content rather than aesthetics.
• They criticize the common disproportionate focus on production aesthetics over content quality.
• Speaker A advocates for appropriate allocation of focus, suggesting that content should be the primary concern.

"I think there is some benefit to it. I just think it is less benefit than people give proportional to their focus." "I think if you allocate the focus appropriately, then you'll get the outsized outcomes."

Speaker A emphasizes that while aesthetics have some benefit, content is significantly more important and should receive the majority of an entrepreneur's focus to achieve greater success.

• Speaker A discusses the importance of identifying and focusing on variables that have the most influence on outcomes.
• They suggest that many people waste effort on ineffective tasks and that working more is not always the solution.
• The concept of leverage is described as the key to moving fast in life and business.
• Speaker A urges listeners to focus on effective actions rather than busywork.

"Move fastest in life are the ones who employ the most leverage." "It's that fundamentally what you are working on is not effective."

Speaker A's quotes highlight the importance of leveraging key variables to achieve efficient and impactful results. They suggest that focusing on effective actions is crucial for success, rather than just being busy with tasks that do not significantly contribute to one's goals.

• Speaker A outlines the primary ways to grow a business: acquiring more customers and increasing customer value.
• They emphasize the importance of focusing on these two aspects during business planning and strategic meetings.
• Speaker A explains the stages of business growth and the shift from customer acquisition to customer retention and increasing lifetime value (LTV) for sustainable growth.

"Number one is you can get more customers. Number two is you can make them worth more." "So everything flows down from that equation at the top." "How do I retain these people? How do I get them to never leave? How do I extend the LTV per customer so that even if I sold the same amount, my business continues to grow, right?"

Speaker A's quotes convey the fundamental principles of business growth: acquiring customers and increasing their value. They stress the importance of customer retention and maximizing LTV as a strategy for sustainable expansion.

• Speaker A criticizes the focus on aggressive marketing without building valuable business assets.
• They warn that reliance on media arbitrage for customer acquisition is unsustainable and can lead to business failure.
• Speaker A advises building a stable base of customers and focusing on their retention to create a valuable and lasting business.

"You will become rich doing that if you just want to market a lot, but you will not become wealthy because you will not build assets that are valuable." "It becomes untenable for them to acquire the amount of customers that they were. And then overnight they disappear, you know what I mean?"

Speaker A's quotes highlight the dangers of prioritizing short-term marketing gains over the long-term value of customer retention and satisfaction. They suggest that a focus on building a solid customer base is essential for lasting wealth and business stability.

• Customer retention is essential for business sustainability.
• A strong customer base that consistently pays for a product or service provides the gross profit margin needed to withstand business challenges.

"Customers that continue to pay you because they like the thing that you're doing, it gives you the gross profit margin to then weather those storms and."

The quote emphasizes the importance of having a loyal customer base that appreciates the product or service, as it creates a financial buffer (gross profit margin) to help the business survive tough times.

• Diversification is a strategy to build resilience.
• Companies should look into expanding their channels once they have a stable customer base and sufficient gross profit margin.

"Then build other channels. Got it?"

This quote suggests that after establishing a solid foundation with a loyal customer base and good profit margins, the next step is to diversify and expand into other channels.

• The number of companies in a portfolio can indicate the level of experience and breadth of involvement in business management.
• Speaker A and Leila have partial ownership in three companies and fully own eight others, totaling eleven portfolio companies.

"We have eight, so eight companies."

Speaker C confirms the number of companies they fully own, which, combined with the three partially owned companies, brings the total to eleven.

• Entrepreneurs often exhibit patterns in their approach to business, which can lead to common mistakes.
• Product-driven entrepreneurs may neglect acquisition strategies, while promotion-driven entrepreneurs might have issues with backend processes.
• Most companies have poor data tracking, which affects decision-making.

"Can you expand on what are those repeated patterns? Or what's the first thing you usually change that you just consistently see?"

Speaker B is inquiring about the recurring issues that Speaker A encounters with portfolio companies, looking for insights into common patterns and initial changes made to address them.

• Entrepreneurs can be categorized as either product-driven or promotion-driven.
• Product-driven entrepreneurs focus on the product itself, while promotion-driven entrepreneurs focus on marketing and sales strategies.

"There are product driven entrepreneurs and there are promotion driven entrepreneurs, and then the best ones can do both."

Speaker A describes the two main types of entrepreneurs, highlighting that while some are specialized, the most successful ones are proficient in both product development and promotion.

• Analyzing a business involves identifying its weaknesses, akin to filling bullet holes in a Mona Lisa painting.
• Strategies are tailored to each business's unique issues to transform it into a successful enterprise.

"Like, imagine you have a Mona Lisa painting. That's the embodiment of like a 50 or 100 million dollar business. And then we've got whatever their current business looks like, which is Mona Lisa that has like gunshot and bullet holes all over it."

Speaker A uses the analogy of repairing a damaged masterpiece to explain how they approach fixing the various issues within a business to reach its full potential.

• Accurate and consolidated data tracking is crucial for informed decision-making.
• Many companies lack proper metrics on customer lifetime value and acquisition, leading to ineffective strategies.

"So getting the right data in place. Second one, and this is probably pretty universal, is that the talent at that stage is low."

Speaker A emphasizes the necessity of having the right data and talent to make strategic decisions and build a successful business.

• Developing mid-level leadership is critical for business growth.
• Talent issues often involve either upskilling existing team members or hiring new ones to fill leadership roles.

"And so what's required at that point is that we need to have the first true mid level leaders as kind of like directors and managers that need to get put into place."

This quote from Speaker A highlights the need to establish a layer of mid-level management to support the growth and scaling of a business.

• Figuring out the best ways to monetize a business is a key area of expertise.
• This may involve reconfiguring pricing strategies, product offerings, or creating continuity programs to increase customer lifetime value.

"And then there's usually some sort of, this is one that's not necessarily a problem, but what we're really good at is figuring out the best ways to monetize businesses."

Speaker A discusses their proficiency in optimizing business models to enhance the monetization of a company's products or services.

• Sometimes, key roles in a business may need to be reassigned or eliminated to improve performance.
• Assessing whether existing team members are suitable for their roles or if new hires are needed is part of the restructuring process.

"A third and less than half the time. So in that range, we also have to fire a bunch of key people, or I would say, like, they're key roles in the business, but they are actually sabotaging the business."

Speaker A explains that part of improving a business may involve making difficult decisions about personnel changes, including firing or reassigning individuals who are not contributing positively to the company's success.

• The title of CEO can be an ego-driven attachment for some founders.
• Recognizing one's strengths and weaknesses is crucial for determining the most suitable role within a company.

"But a lot of times people's egos cannot take that. And the thing is, it's always like, what does the business require?"

Speaker A discusses the challenge founders face when they need to step down from the CEO role due to their limitations, emphasizing that business needs should come before personal ego.

• The best professionals view their work as an art form, whether it's product development, operations, or marketing.
• Passion for one's work is essential for success, as it drives excellence and competitiveness.

"The best people see whatever they do as art."

Speaker A and Speaker B agree that viewing business activities as art can lead to a more passionate and successful approach to work.

• Speaker A emphasizes the importance of knowing various business metrics beyond the common ones like CPM, CTR, CPI, etc.
• Understanding less commonly tracked metrics such as TTV, CHS, NPS, churn, activation points, and CRC is critical.
• Speaker A challenges workshop attendees on their knowledge of these metrics.

What's your TTV? What's your CHS? What's your NPS? What's your churn? What's your activation points? What are CRC?

Speaker A is questioning the audience's knowledge of various metrics that are essential for evaluating the success of a product or service.

• Speaker B contends that many entrepreneurs are not as competent as they believe.
• Entrepreneurs often operate under false pretenses, lacking understanding of their business's actual performance.
• Speaker B advises entrepreneurs to focus on data and metrics rather than feelings.

Most entrepreneurs are full of shit. And even if they're like, no, I mean, look, I'll just say this, okay? I've personally worked with, and I've worked with tons of entrepreneurs, one of the biggest things is online coaches, course creators, even agencies.

Speaker B expresses a blunt assessment of entrepreneurs, suggesting that many lack genuine understanding and competence in their business ventures.

• Speaker A discusses the concept of ignorance as a major threat to entrepreneurs.
• The "tax of ignorance" is described as the cost of not knowing how to be successful.
• Speaker A stresses the importance of learning from those who are more successful to reduce this "tax."

It's costing you a million dollars a year, every year. You don't know how to make a million dollars.

Speaker A introduces the idea that not knowing how to achieve financial success effectively costs an individual a significant amount of money each year.

• Speaker A talks about the importance of progress on the path to success.
• The compounding effect of time is highlighted as a crucial factor in growth and achievement.
• The conversation touches on the changing world and the need to adapt.

You might be on the right path as long as you are making progress.

Speaker A suggests that as long as an entrepreneur is making progress, they may be on the correct path to success, highlighting the significance of continual progress.

• Speaker B challenges the notion that one must personally like someone to learn from them.
• Speaker A and C agree that personal feelings towards an individual should not prevent learning from them.

You don't need to like someone to learn from them.

Speaker A agrees with Speaker B's assertion that personal liking is not a prerequisite for learning valuable lessons from others.

• Speaker A claims that the reason many business owners remain small-scale is due to a lack of skill in various business aspects.
• The discussion includes the idea that opportunity selection is also a skill.

Most small business owners suck. And that is why they are small business owners, because they are so bad at virtually all aspects of business that that's why they are small, right?

Speaker A provides a candid opinion on why many small business owners do not scale up, attributing it to a lack of skill across different business areas.

• Speaker A references Naval's quote about the hierarchy of sales, marketing, and product development.
• A good product should ideally grow through word of mouth, which is the only acquisition channel with a quadratic nature.

You only do sales or good at selling because you don't know how to market, and you only market because you don't know how to build product.

Speaker A cites Naval to illustrate the idea that the ultimate goal should be to create a product of such high quality that it markets itself through word of mouth.

• Speaker A discusses the power of word of mouth in business, whether it be positive, neutral, or negative.
• The conversation addresses how negative word of mouth can actively harm a business, while positive word of mouth can significantly lower customer acquisition costs.

Word of mouth 100% completely exists. It's just working against you.

Speaker A asserts the existence and significance of word of mouth in the digital age, emphasizing its impact on businesses both positively and negatively.