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

**Alex Hormozi** (0:00)
I want to talk about a business myth that needs to die. It's something that so many business owners believe. And someone is playing what it is, how it's applied to thousands of businesses that have come to our headquarters here at acquisers.com in Vegas, and how it's likely holding you back. And it's one of the most insidious beliefs, and I think it might be the one that ends the most businesses, and the crazy part is it has nothing to do with the business and everything to do about how you treat it. Now, I've had the same problem come up again and again that I felt the need to make this for you, which is my business isn't scalable, or shouldn't I switch my business to something that's more scalable? Again, I might gouge my own eyes out. But the reason that I'm so annoyed by it is that basically every business has limits to scalability, and there are different problems that occur at different times. Now, I wanna talk about this within two different contexts. One is industry context, second is more unlike the demand and supply side. But I'm gonna break this down in a lot of different ways. So right off the bat, if you have a service business, for example, you hire humans to do things for other humans, then that is a business that's very easy to start, can be very profitable, and then over time can become a little bit more difficult, not impossible, just more difficult to scale quickly because maintaining quality of service when you have other humans doing things and you're bringing them in and they don't know anything and you have to train them, becomes more challenging. If we had a kind of the middle of the path there, you've got like an e-commerce business, which you can start relatively quickly, but as you scale up, you can scale up quickly, but some of the issues become supply chain and logistical problems, right? So I'd say that's kind of like in the middle, right?
It's a little bit slower to start, it costs a little bit more money to start. It does scale faster than traditional service does, but you're still going to run into some problems. Now, all the way on the kind of extreme side, you've got the software digital type businesses. Now, these businesses are typically, when I say digital, I mean SaaS software, not digital products like e-books and courses, things like that. These businesses cost the most amount of time to start, the most amount of money to start, but once you achieve scale, they become significantly easier relative to the others. And so I get this question of like, I don't think my business is that scalable all the time, when in reality, it's just harder to scale. And so the thing is, is that switching from one service business to another service business in terms of overall category is not likely to dramatically change your growth trajectory at all. You're still likely going to be constrained by humans, most businesses are, I'm going to say this again, 78% of businesses in the United States are service-based businesses. Like, this is reality. And the reason that this is so annoying to me is that people will come and want to break their businesses, they won't want to abandon their businesses, because they think that the woman in the red dress, they think this other new thing somehow doesn't have the same characteristics of a people-based business. Now, within that category, let's say we have a service business, you can have demand-constrained service businesses, that's supply-constrained service businesses. Each business has problems. And the crazy part is, is that the problems are actually kind of similar. So let me explain. So if you have a demand-constrained service business, so you have a brick-and-mortar fitness business, you're gonna be demand-constrained. As in, it's gonna be harder to find people when to work out than it is to find people who wanna teach people to work out. Finding trainers and fitness enthusiasts, not that hard. Finding people who actually want to come in the gym and get excited and sign up for a service package or something like that, much more difficult.
On the flip side, if you have an accounting firm, getting people to do their accounting, everyone has to do their accounting, but getting competent and high quality accountants becomes the issue. Now, how do you solve each of those problems? You promote fundamentally. You promote to get new customers. You promote to get new accountants. It's the same problem. You just have it on the back end of the business or the front end of the business. And some businesses alternate between whether supply or demand is constrained if you kind of grow at the same rate. So you alternate back and forth. But fundamentally, and this is why I think this is so important, you're going to struggle in one way or the other. And the way that you will solve it in either of the situations is going to be through promotion of some sort. And so the reason that I bring this up is that, said differently, my business isn't scalable means it's hard and I want it to be easy. And can you just tell me that it's going to be easy? And it's not. And so difficulty is a feature, not a bug of scaling a business. It is something that comes with scaling a business. And the reason I think this is so important is that there are periods of time and sometimes those periods are not weeks, but they are quarters, many quarters in a row where you have to sit with a problem, as in you see the fire and it's in your living room and you have to just let it burn. So let me explain what I mean by this. There will be problems that occur in the business.