Podcast Summary: "The Top 1% Do These Things Different Than You | Ep 872"

Podcast Information:

• Title: The Game with Alex Hormozi
• Host: Alex Hormozi
• Episode: The Top 1% Do These Things Different Than You | Ep 872
• Release Date: April 18, 2025

Introduction

In Episode 872 of "The Game with Alex Hormozi," entrepreneur and business magnate Alex Hormozi delves deep into the distinguishing habits and strategies that set the top 1% of business owners apart from the rest. Drawing from his extensive experience running Acquisition.com—a portfolio encompassing companies that generate hundreds of millions in annual revenue—Hormozi uncovers pivotal insights into scaling businesses from the ground up to the billion-dollar mark. This episode is a comprehensive guide for entrepreneurs feeling stagnant, emphasizing the necessity of evolving strategies to ascend to the next business tier.

Understanding the Real Business Behind the Scenes

Hormozi opens by challenging a common misconception among business owners: the belief that the roadblocks to scaling are due to a lack of intelligence or skill. Instead, he posits that the top 1% succeed not because they are inherently smarter, but because they approach their businesses differently.

"The top 1% of business owners aren't smarter than you. They do things differently."
— Alex Hormozi [00:00]

He emphasizes that the strategies that propelled a business from $0 to $100K or $100K to $1M may not suffice for scaling beyond that. Entrepreneurs often find themselves stuck because they continue to apply outdated methods that no longer drive growth.

First Example: The Fitness Industry

Hormozi shares his initial foray into the fitness industry, where his perception of the business contrasted sharply with reality. Initially believing that success hinged on creating effective workout programs, he quickly realized that the true challenges lay in sales, marketing, and operational efficiency.

"I thought I was going to be in the scientific fitness business, when in reality, I was in the sales and marketing business."
— Alex Hormozi [00:02:30]

Key Takeaways:

• Sales and Marketing are Paramount: The primary challenge wasn't the fitness programs but attracting and retaining customers.
• Churn Rates: High customer turnover is a significant issue in gyms, necessitating robust acquisition systems to maintain a steady inflow of new members.
• Learning from the Best: Observing and emulating strategies from top-tier fitness businesses revealed that success is largely driven by sales mechanization and effective management.

Second Example: The Supplements Business

Transitioning to the supplements industry, Hormozi encountered another mismatch between his initial understanding and the business's true nature. He initially believed that the quality of the product was the cornerstone of success, partnering with Dr. Kashi, a renowned biochemist, to create superior supplements.

"The business I thought I was in was about making a great product. But it was actually about brand and distribution."
— Alex Hormozi [00:10:45]

Key Takeaways:

• Brand Over Product: In a saturated market where many suppliers offer similar ingredients, brand differentiation becomes crucial.
• Distribution Channels: Effective distribution strategies are as vital as the product itself to ensure widespread availability and brand recognition.
• Customer Perception: Factors like taste and brand image can be more influential in purchasing decisions than product efficacy alone.

Third Example: The Software Company

Hormozi’s venture into the software sector further illuminated the importance of aligning business perceptions with reality. Believing that marketing and sales were the primary drivers, he underestimated the critical role of product quality and technical proficiency.

"I thought I was in the marketing and sales business once again, but I was actually in the product business."
— Alex Hormozi [00:18:20]

Key Takeaways:

• Product Excellence: A software product must not only solve a problem but do so intuitively and efficiently to retain users.
• Technical Expertise: Without a strong technical foundation or a competent co-founder, building a successful software product is exceedingly difficult.
• Outsourcing Pitfalls: Relying on outsourced development teams can lead to misaligned incentives and escalating costs, hindering profitability.

Identifying the True Nature of Your Business

A recurring theme in Hormozi's narrative is the necessity for entrepreneurs to "zoom out" and accurately identify the core aspects of their business. By understanding the fundamental drivers—whether they are sales, marketing, product quality, or distribution—business owners can address the right challenges to foster growth.

"One of the easiest ways to identify what business you're really in is to zoom all the way out to the people who are already 100 steps ahead of you."
— Alex Hormozi [00:04:15]

The Big Hairy Problems (BHP)

Hormozi introduces the concept of "Big Hairy Problems" (BHP) that every business faces. These are the most significant challenges that, when addressed, can unlock exponential growth. Identifying and solving BHPs is crucial for moving from one growth stage to the next.

"Every business has a big hairy problem."
— Alex Hormozi [00:47:00]

Examples and Strategies:

1. Plumbing Businesses:

   • BHP: Difficulty in recruiting skilled plumbers.
   • Strategy: Develop a robust talent acquisition system, such as enhanced referral programs or paid advertising targeted at potential employees.

2. Media Companies (YouTubers):

   • BHP: Ineffective monetization despite high viewership.
   • Strategy: Shift focus from merely increasing content output to developing clear and effective monetization strategies, such as diversified sponsorships or premium content offerings.

Investment Philosophy and Deal-Making

In the latter part of the episode, Hormozi shares his insights into investing, contrasting his initial understanding of high-volume deal-making with the realization that quality trumps quantity. He underscores the importance of being selective and recognizing that a single exceptional deal can overshadow numerous mediocre ones.

"The business I thought I was in was high volume discount deals. The business I was really in was learning how to say no at a much higher velocity."
— Alex Hormozi [00:32:50]

Key Takeaways:

• Quality Over Quantity: Focusing on high-potential investments rather than spreading resources thin across numerous deals.
• Selective Acquisition: Understanding when to decline deals that do not align with the strategic vision of the portfolio.
• Enterprise Value: Emphasizing incremental value additions through strategic problem-solving to enhance overall portfolio performance.

Entrepreneurial Mindset: Push vs. Pivot

Hormozi distinguishes between "good hard" and "bad hard" problems, advising entrepreneurs on when to persist ("push") and when to change direction ("pivot").

"Good hard is when you iterate and push through because there's a solution. Bad hard is when your underlying assumptions are proven incorrect, and you need to pivot."
— Alex Hormozi [00:55:30]

Definitions:

• Good Hard: Challenges that are difficult but solvable through persistence and iteration (e.g., optimizing ad campaigns).
• Bad Hard: Fundamental issues where the initial assumptions about the business are flawed, necessitating a strategic pivot (e.g., targeting a dying industry).

Frustration Tolerance and Persistence

A significant portion of the episode is dedicated to cultivating a high tolerance for frustration and embracing persistence. Hormozi likens entrepreneurship to "staring into the abyss and eating glass," highlighting the relentless nature of overcoming business challenges.

"If you want to make a million dollars, you must endure a million dollars of pain."
— Alex Hormozi [01:05:00]

Practical Tools and Resources

Hormozi introduces the "$100 Million Scaling Roadmap," a tool designed to help entrepreneurs identify their current business stage, recognize constraints, and strategize for the next level of growth. This resource is available for free at Acquisition.com and includes tailored reports based on business inputs.

Notable Quotes

1. On Business Differentiation:

   "The top 1% of business owners aren't smarter than you. They do things differently."
   — Alex Hormozi [00:00]

2. On Identifying True Business Nature:

   "One of the easiest ways to identify what business you're really in is to zoom all the way out to the people who are already 100 steps ahead of you."
   — Alex Hormozi [00:04:15]

3. On Big Hairy Problems:

   "Every business has a big hairy problem."
   — Alex Hormozi [00:47:00]

4. On Investment Strategy:

   "The business I thought I was in was high volume discount deals. The business I was really in was learning how to say no at a much higher velocity."
   — Alex Hormozi [00:32:50]

5. On Persistence in Entrepreneurship:

   "If you want to make a million dollars, you must endure a million dollars of pain."
   — Alex Hormozi [01:05:00]

Conclusions and Takeaways

Alex Hormozi's Episode 872 serves as a masterclass in entrepreneurial strategy and mindset. The key lessons include:

• Accurately Define Your Business: Understand the core operations that truly drive your business, whether it's sales, marketing, product development, or distribution.

• Identify and Solve Big Hairy Problems: Focus on the most significant challenges that, when addressed, can propel your business to unprecedented growth.

• Embrace Persistence: Cultivate a high frustration tolerance and view setbacks as investments towards increasing your enterprise value.

• Strategic Investment and Deal-Making: Prioritize quality over quantity in investments, recognizing that a single exceptional deal can significantly enhance your portfolio.

• Push vs. Pivot: Differentiate between solvable challenges and fundamental business flaws to determine whether to persevere or change direction.

• Leverage Resources: Utilize tools like the $100 Million Scaling Roadmap to gain clarity on your business stage and strategize effectively.

For entrepreneurs striving to elevate their businesses, Hormozi's insights provide a comprehensive framework for identifying true business drivers, addressing critical challenges, and fostering sustainable growth. By shifting focus from superficial operations to fundamental business mechanics, entrepreneurs can unlock the strategies that separate the top 1% from the rest.

Visit Acquisition.com to access the free $100 Million Scaling Roadmap and propel your business to the next level.