In this tactical episode of The Game, Alex (@AlexHormozi) explains why changing too much too fast kills growth. He unpacks the 20% drop rule, the ICE framework, and how sometimes the most scalable move is doing less.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast, you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth.Wanna scale your business? Click here.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | AcquisitionMentioned in this episode:Get access to the free $100M Scaling Roadmap at www.acquisition.com/roadmap
Chapter 1: What is the 20% drop rule?
And it's really, really hard, which is this, there's a lot of things that you can do to grow the business. You have a lot of ideas that you're coming off on. And so let's imagine that this line represents your current revenue level. Whenever you make a change in the business, my estimation is that we see about a 20% decrease in revenue as a result of a change, especially if it's a manual change.
We're changing a sales process. We're changing a customer service process, something that involves humans. We're changing something that they're doing. We'll typically see a 20% decrease guaranteed simply because of the cost of change. But once I kind of like realized this, it changed what things I decided to choose to change to begin with.
Meaning there are probably 100 things that you have on those notes and each of them you're like, this could give me 5% more, this give me 10% more, this give me whatever. If I know them and have a 20% guaranteed cost, that whether it works or not, I'm going to have this happen. It changes what things I'm willing to take a bet on.
And so for me, my kind of minimum litmus test for this is I need to see at least a 20% bump or believe I can see a 20% bump from any implementation that I'm going to run, or I'm not going to take the guaranteed 20% loss.
And so part of this comes into something called ICE, which is kind of an investor terminology, but basically of impact, confidence, how likely, like how big of a difference is it going to make? How likely is that to happen? And then you've got ease, which is basically the value equation without speed.
And so if we're looking at any of the implementation that you're thinking about putting in the business, I'd be like, okay, how big of an impact do I think this could have? How likely do I think this is to occur? And then how fast and how easy do I think I can make it happen? And so typically we'll organize it in that way.
And you'll probably figure out pretty quickly, if I were to implement two things at once, what do you think would happen, right? And so you'd have two negative 20% decreases. And so the end result of like basically taking this ideology to its natural extreme means that you basically can't change that many things in the business and expect it to grow.
And so that end result for me has been, and I'm going to be crude on purpose, is that some shit stays fucked. And so there's a lot of things that I would love to do to improve this experience for everyone here. I've got a list many pages long. But every time I do implement a change, it negatively impacts the next group because it was a change.
Now, the next one after that, it starts to recover and come back up because the team learns whatever that process was. They get better at it. And then maybe the one after that, it goes even higher. And that's great. And so what happens is I've gotten addicted to not changing things.
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Chapter 2: How can the ICE framework help prioritize changes?
And it just works a little bit better because most people like to make their jobs easier. And so they tend to just do it a little bit better. That's what specialization of labor is all about. And so I would encourage you that when you have this list, that you're going to have for your one, two, and three that you're going to go home with.
Think about ice when you're putting that together and make sure that you're going to make your biggest swing worth it. If you have a change that can get 2x the business, then yeah, take the 20% dip, no question. But there are some changes that just aren't good enough to be even worth the guaranteed cost. Does that make sense?
This took me a really long time to understand and is almost like I would say like a stepbrother to the focus on the macro scale of business model focus. Let's not start a second business, which probably a third of you have. But even within the business, it's staying focused on keeping the main thing, the main thing. And the hard part is, is it's hard.
Because the thing that's often limiting you in the business are hard problems. New things are easy problems because you can always just whip something up and promote it and make money. But the hard problem is like, okay, I can't scale past this current level because I need to recruit like three really niche employees. Well, you're going to have to do it either way.
And so you might as well just confront the hard that's in front of you. And so being able to spell that out to myself and be like, this is the hard, the hard is the not knowing how to do this thing. And I have to figure it out and not knowing where to find these people, but I'm going to have to figure it out. And so it's like taking all that energy where you're like, I don't know how to do this.
So I'm just going to do the thing I know how to do, which is,
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Chapter 3: Why might doing less be more scalable?
i say this and i see like all the smiles like and like nods in the audience right now but you have to keep fighting that muscle because in a lot of ways it's almost like an addiction for entrepreneurship it's like we like to do new things and also like addiction you just have to fight it every day this is just because a lot of you guys are going to be implementing some of the things that you walk away from here i just want to make sure number one that the few things that you choose to do that they're absolutely worth it and that many of the things on that list i'd rather you just forget about because after you do the first three things
all the pieces on the board are going to change. You're gonna have new resources, new problems. And number, you know, five, four, five, six, seven, eight might not be, like once you do one through three, number four might not be number one. You'll have another thing that'll be number one that you didn't even think about, which is why I'm not super obsessed with very long-term planning.
So I thought this might be a good timer before we get into this as a good way of thinking through this. And this is like, I wish I could transfer this to you because this is probably from a skill perspective, one of the things that has made me the most money. is basically just saying, I'm not going to do new things.
And if I'm going to do it, it better be worth it because I'm going to pay a price immediately with my team being confused, feeling whiplash, saying, what is this thing? I didn't feel like it was communicated well. It doesn't matter how well you communicate. It's not communicated well enough because they don't just immediately know it. Okay, cool. Let's do Q&As. All right. So you had 107,000.
150.
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Chapter 4: What are the consequences of constant changes in business?
150. Excuse me. You want to get to a million. Yeah. And your biggest issue is hiring.
Yeah.
What do you sell?
I sell content. So. Content. Yeah. So we do videos like marketing materials for real estate agents looking to market their personal brands and properties.
Okay. So personal branding for them. Correct.
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Chapter 5: How should entrepreneurs approach hard problems?
Okay. Got it.
So what stops you from doing a lot more of that?
So I'm a young entrepreneur and I basically based my own brand off of being a young entrepreneur. My.
And now you're just going to be a middle young white guy. So my business partner. I assume you know what you're dealing with because like when I came up, I started making a lot of money at like 26, 27 and they're like, Alex is so young. And now I'm just like 36 and no one really gives a fuck. Yeah. Sorry. Keep going.
The only problem is like clients find out my real age and I use my, I technically use my age as a leverage to what I sell. So social media, I grew up with social media. So, you know, I know social media better than six year old agents do. Okay. So my constraint, what's up? What's the issue? Just the pitch is wrong. No, people don't trust necessarily older people in my business.
We based our brand off of being young. All right. So, you know, young. Yes. But when I hire someone like a new shooter or a director of operations, who's 25 and above, they don't necessarily. Yeah. They don't necessarily. I want to say too is boomers.
Yeah. Yeah. Boomers. Boomers. So, but what are you, what are you saying though? Like it's, it's more of a trust issue with clientele. It's like totally in your head, man. Really? Yeah. A hundred percent. You care. No one else cares. You even think they're old. Hey, I don't think that I don't think they're old. Like you a little bit. Cause you're bringing it up. Right. So like, like no one cares.
Did you guys care that Jacob Hopkins is 22 at the same time? We have people who are in their late thirties and forties. People just care about how good you are. So like people care about your age for the two seconds before you open your mouth.
And then as soon as you open your mouth, all of it's like, that's like the, the, the, the absolute thinnest surface level of judgment that someone will make in general, younger people know less than older people in general.
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Chapter 6: What strategies can improve business growth?
But there are also Mark Zuckerberg, who's a billionaire at 21. So there's obviously people who know more at a younger age. So you just have to demonstrate expertise.
Okay. Can I follow up with another question? So on a scaling aspect, we have a lot of realtors, you know, asking us in different areas like Texas, California to come produce the work out there because our content is kind of one of one. It's different and it's providing a lot of value.
I'm looking at it as more of like a 1099, you know, contracting videographers and teaching them, you know, in that state or region to shoot that kind of property. Okay. But I'm also looking at it as kind of like a franchise. What would you do in that situation?
For a franchise to be something that you'd really want, it's simply you're gonna have some sort of like franchising is just a model for raising money. And you dilute selling the most expensive version of it, which is that you're going to give all of the upside away except for a small royalty. And you're going to do a huge amount of the work.
And so in your business, you don't require really any capital to expand. Right. So we wouldn't franchise. So that doesn't make sense. If you wanted to have revenue retention for these people who are in different markets, I can see two different ways that you could do it. Well, really three.
So one is they fly to you and then you just book, you do like one day of recording and you get 90 days or six months worth of content for them. And I think that would be a very strong value profit. And you can probably charge 25 grand for that. That's number one. The other way is that you could fly out. You can fly somebody out to do that. That's the second version.
Also still charging a lot of money. The third way is you can, I guess, find people, basically run ads locally to find videographers to go capture the footage and then do what? Edit centrally?
We have a team in-house to edit. And we're still like the shots, like learning the correct shots for us to edit.
So you edit centrally, they capture locally, right? So I think I would just consider...
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Chapter 7: How to effectively scale content creation?
No, I understand why you review so many products, but there's so many more products to review. Specifically, why is this not scalable? Why can't you review 500 products a month?
I can. I think that's a possibility. It would be like figuring out if the business model is going to be served towards brands because that is the driver of the business at 75% of the revenue. Or if I'm approaching it from the wrong way and I'm just like, I should just double down on like long form YouTube because I haven't even posted a long form YouTube video.
But you get paid on the short form that they probably repurpose as ads.
Yeah, they run ads behind it. So they usually are paying for like the usage rights behind that. So it is a possibility. And then another thing is just me getting in my head about creating a bunch of me's who is just doing the same thing because it's basically like a formula because I'm not tied.
You do a lot of faceless though.
Yeah, that makes sense.
I mean, yeah, it's just like I do 50 and I do majority faceless. Why can't we do 500? I mean, do you run good margins?
Yeah, we have 80% margins. Right. Yeah. Let's do more of that. Two more? Yeah. Sweet. Cool. Thank you.
This was a good talk.
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Chapter 8: What are the best practices for organic content creation?
Okay.
That help?
All right. That helps. Thank you.
easy all right yes sir alex my name is jean-paul and i sell healthcare listing services for doctors i guess i work with pi attorneys personal injury attorneys and so i'm what i'm trying to figure out like i'm trying to figure out my bottlenecks in the business i think one of the biggest ones is that a lot of work with personal injury attorneys
So my clients, my paying clients are physicians, like healthcare providers.
Okay.
Okay. And then the reason why they hire us is because we're trying to get leads from personal injury lawyers. Uh-huh. For like car accidents, slip and falls.
So when someone slips and falls, then they need to get repaired. As a repairman.
Yeah, kind of.
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