Podcast Summary: The Game w/ Alex Hormozi Episode: Unscalable Value → Scalable Growth | Ep 785
Release Date: November 1, 2024
Host: Alex Hormozi

Introduction to Scalable Value

In Episode 785 of The Game with Alex Hormozi, entrepreneur and business strategist Alex Hormozi delves into the concepts of Unscalable Value and Scalable Growth. He challenges conventional business practices by arguing that many entrepreneurs mistakenly prioritize scalability over the intrinsic value of their offerings. Hormozi emphasizes the importance of establishing a valuable foundation before scaling, drawing from his extensive experience building gyms and scaling them to a billion-dollar net worth.

Key Quote:

"Scale should honestly be completely removed from your vocabulary, especially if you're starting out." [02:15]

The Value Equation

Hormozi introduces his Value Equation, a framework he developed during his gym days to dissect what makes any product or service valuable. The equation comprises four variables:

1. Dream Outcome: The ultimate result the customer desires.
2. Perceived Likelihood of Achievement: How probable the customer believes the outcome is.
3. Time: The speed at which the outcome is achieved.
4. Effort and Sacrifice: The amount of work or resources the customer must invest.

By optimizing these variables, businesses can create offerings that are inherently valuable to their customers.

Key Quote:

"If you provide unscalable one-on-one attention to somebody, a prospect, the likelihood that they get what they want because it's one on one goes way up." [12:30]

Unscalable Value: The Foundation for Growth

Hormozi critiques the tendency of entrepreneurs to "put the cart before the horse" by focusing on scaling their businesses prematurely. He argues that without first ensuring the value of the product or service, scaling efforts are futile and often counterproductive.

Gym Anecdote: High Revenue Through Unscalable Efforts

Drawing from his experience running gyms, Hormozi shares a powerful anecdote:

• Personalized One-on-Ones: He conducted 48 one-on-one nutrition consultations in a single day, significantly increasing his average revenue per member compared to competitors who opted for automated sales pitches.

• Outcome: Despite the exhausting process, this unscalable method resulted in five times more revenue per customer due to the personalized value delivered.

Key Quote:

"I had higher average revenue per member than anybody else in all the gym groups that I was in." [10:45]

The Importance of Repetition and Feedback Loops

Hormozi highlights how performing repetitive, unscalable tasks can lead to mastery and rapid improvement. The consistent engagement allowed him to refine his sales techniques, receive immediate feedback, and enhance his overall business acumen.

Notable Insight:

• Skill Enhancement: Through repetition, Hormozi not only increased sales but also developed superior sales skills that became a competitive advantage.

Key Quote:

"That repetition is also what made me so good at sales." [13:10]

Case Study: Scaling Workshops and Automation Pitfalls

Hormozi discusses a case where a business owner attempted to scale by automating their successful event strategy:

• Initial Success: The business owner had a lucrative event generating a million dollars.

• Attempted Scaling: By automating the event through recordings and digital means, the return on ad spend (ROAS) significantly declined.

• Hormozi's Advice: Instead of automating, he suggested increasing the frequency of the high-value events, potentially scaling revenue tenfold despite the increased workload.

Key Quote:

"Why don't you do one every month? And he's like, man, it would just be a lot of work. And I was like, well, you have to make $10 million." [09:50]

Leveraging Unscalable Value for Premium Pricing

Hormozi emphasizes that unscalable efforts enable businesses to charge premium prices. This premium pricing not only increases revenue but also provides the resources needed to eventually scale the most valuable components of the business.

Strategic Approach:

1. Offer High-Value, Unscalable Services: Provide personalized, intensive services to a select group of customers.
2. Generate Premium Revenue: Charge significantly higher prices for the unparalleled value delivered.
3. Invest in Scalability: Use the additional revenue to automate or scale less critical aspects of the business, maintaining focus on the high-value components.

Key Quote:

"You can charge significantly more, you have premium price. You can get way more profit from doing that." [14:10]

Creating Irresistible Lead Magnets Through Unscalable Value

Hormozi advises against relying solely on scalable lead magnets like PDFs. Instead, he advocates for offering substantial, personalized value that resonates deeply with the target audience.

Practical Examples:

• Personal Time Investment: Offering free one-on-one consultations or project improvements.
• Quality Over Quantity: Focusing efforts on highly qualified prospects to maximize conversion rates and gather valuable feedback.

Key Quote:

"If your lead magnet isn't that good, consider adding more unscalable value, consider adding more personal touch." [15:05]

Reverse Engineering and the Trim and Stack Process

To effectively scale, Hormozi suggests reverse engineering high-value offers. Start with an extreme, unscalable version of your product or service and then methodically trim and stack components to identify what can be scaled without diminishing the core value.

Example:

• Extreme Offer: Fly to a client's location to provide personalized services.
• Trimming Costs: Optimize travel and time logistics to reduce expenses without compromising value.
• Scaling Strategy: Automate or delegate less critical tasks, preserving the high-value personal interactions.

Key Quote:

"Reverse engineer from what is absolutely insane and then trim down." [16:00]

The Tesla Model: A Blueprint for Scaling

Drawing parallels with Elon Musk's Tesla strategy, Hormozi illustrates how starting with a high-end, unscalable product can build brand credibility and propel future scalable products.

Tesla's Approach:

1. Roadster: Launched an expensive, limited-production vehicle.
2. Model S: Introduced a more affordable luxury sedan.
3. Model 3 & Y: Expanded to mass-market segments.

Application:

• Build Prestige First: Offer a premium product to establish a strong brand.
• Gradual Scaling: Introduce scalable, lower-cost versions that inherit the brand's credibility.

Key Quote:

"If you only take on customers that pay you $25,000 a year, then when you do come out with a more scalable version, there is a reason for it that makes sense." [15:50]

Actionable Steps for Entrepreneurs

Hormozi concludes with a parting question to inspire entrepreneurs to rethink their value and scaling strategies:

1. Identify Your Ideal Offer: Think of the most insane, high-value offer your most qualified customers would eagerly accept.
2. Calculate Costs: Determine the time and financial investment required to deliver this offer.
3. Choose Your Path:
   • Option A: Charge a premium price for the high-value offer.
   • Option B: Offer it for free but only to the most qualified prospects.

Final Insight:
By starting with unscalable value, businesses can unlock significant revenue and insights that facilitate smarter, more effective scaling strategies.

Key Quote:

"There's unbelievable amounts of money that are just sitting, waiting for you." [17:45]

Conclusion

In this episode, Alex Hormozi effectively argues that unscalable value is not only foundational for business success but also a powerful lever for scalable growth. By prioritizing value over scalability, entrepreneurs can build strong customer relationships, charge premium prices, and gain the insights necessary to scale intelligently. Hormozi's real-world examples and actionable advice provide a compelling roadmap for business owners seeking sustainable and profitable growth.

Notable Quotes with Timestamps:

• "Scale should honestly be completely removed from your vocabulary, especially if you're starting out." [02:15]
• "I had higher average revenue per member than anybody else in all the gym groups that I was in." [10:45]
• "That repetition is also what made me so good at sales." [13:10]
• "Why don't you do one every month? And he's like, man, it would just be a lot of work. And I was like, well, you have to make $10 million." [09:50]
• "You can charge significantly more, you have premium price. You can get way more profit from doing that." [14:10]
• "If your lead magnet isn't that good, consider adding more unscalable value, consider adding more personal touch." [15:05]
• "Reverse engineer from what is absolutely insane and then trim down." [16:00]
• "If you only take on customers that pay you $25,000 a year, then when you do come out with a more scalable version, there is a reason for it that makes sense." [15:50]
• "There's unbelievable amounts of money that are just sitting, waiting for you." [17:45]

Note: This summary excludes the promotional segments starting at [16:23], focusing solely on the substantive content of the episode.