Shownotes Transcript
Hey guys, welcome back to the game. Today I have a little bit of a heater slash rant. Direct to cam, direct to pod, OG style. This one has been very top of mind for me and I think this might be a re-listen for a bunch of you. I think it's gonna hit home.
What's going on, everyone? Welcome back to our... I think six months ago might have been the last time I did one of these, but it is a thirsty Thursday, a thirst trap Thursday, if you will, if the thirst trap is obviously my dashing good looks, but more importantly, a business concept that I feel needs talking to. And I think that I can make this relevant for just about every business owner watching this. So we have these...
In our advisory practice, we just started last year. We invite some business owners out every so often to come out, kind of talk about their business, and then help them solve problems and grow, hopefully. Now, I've had the same problem come up again and again and again that I felt the need to make this for you, which is if I hear 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 want to talk about this within two different contexts. One is industry context. And the second is more on like the demand and supply side. But I'm going to break this down 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 kind of like 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 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 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 eBooks 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 services 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, which most businesses are. I'm going to say this again. 78% of businesses in the United States are service-based businesses. This is reality. And the
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 and 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 going to be demand-constrained, as in it's going to be harder to find people who want to work out than it is to find people who want to teach people to work out, right? 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, right? On the flip side, if
If you have an accounting firm, getting people to do their accounting, everyone kind of 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. 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 you
Some businesses have alternate between whether supply or demand 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. Let's say that you're supply constrained, and you need to bring new people in. Okay? So...
Once you decide, okay, I can't handle more customers because I have to hire more accounts, I have to hire more HVAC people, I have to hire more technicians at my auto shop, whatever it is. As soon as you make that decision, you see that clearly, you start the promotional cycle. So you start kicking off ads, you start doing some outreach, you start hitting up your network, and then you start some interviews, start some screening, and then maybe you find a
one or two people, and then you interview them, and then maybe you give them a job offer. And then once you give them a job offer, you have to get them trained up and be proficient. And you might lose some of them because they're not as good as you thought they were. And other ones are good, but it still takes three or six months for them to scale up. And so all of a sudden, remember this, what the feeling's going to be like. You decided and you realized that you were supply constrained. You went out and you did something about it. Good for you. But once you start going out and doing something about it, what happens? Nothing.
The business is still constrained. And so you just suffer day in and day out while you try and solve this problem. And here's the nasty part. Let's say that six months from now, but remember six months is 180 days of every day you wake up and you're like, I have this problem. I should do something about it. And then you have to remind yourself, I am doing something about it. But the thing is, is that your team is still going to be struggling. They're still going to be complaining. You might still be complaining and you're
The thing is, is your brain, your monkey brain is going to be like, we should do something about this. But you are doing something about it. It's just that the thing you're doing about it isn't going to solve it today. And the likelihood is that, and this is where, this is where it gets nasty. This is where, this is where the real problems happen. This is why this is such an important video. During that waiting period is when the vast majority of entrepreneurs fuck with shit.
So they change their model. They change their price. They try and change. They're like, well, what if we change our deliverable to, you know, it's 20 people per account instead of 10 or 5. And that way we can keep selling. But then all of a sudden your service delivery drops and your churn goes up. And now you have a structural issue within the business. Whereas when you had the business that you had before this, without changing it, you had good margins and good revenue retention. Meaning like you kept making money and people kept paying. Good. And so you take something that's really good and be
And because you have a constraint on the system, you break the business while you're waiting for your solution that you already started on to kick in. This is the tangible of pain tolerance. So a lot of people like to think about like the Rocky cut scene and things like that. Like, oh, I'm in business. It's the grind. The grind is oftentimes realizing there's a problem, beginning to try and solve it, and then having to live with that problem for not weeks or months, but quarters and sometimes years.
And so the reason I'm bringing this up is that then the next thing that you start thinking is, well, you know what? Maybe I'll outsource this problem to somebody else. I'm going to delegate this away. Sam Altman had this really good bit that I saw on Instagram the other day. He's the founder of OpenAI if you don't know who he is. And he said, you can't
delegate the execution because the idea and even the product or service oftentimes, though exciting, is not the hard part. That's like the 10% of the business. I mean, it's fun. You have lots of iterations, lots of changing, but then once you have it and people are buying it and they like it and you make money at the end of the month, the 90% of everything else is the actual execution. It's the doing this.
And the doingness is the part where you have unrelenting problems that either you are actively solving and have not seen the fruits of your labor, or you're just solving the micro problems that happen every day. And all the while, you have to resist the urge to break the thing that actually works that you spent all of this other time getting all these iterations, getting punched in the face to find the thing that actually worked. And the likelihood that when you change the thing that actually works to something that's not that thing, and that that other thing is going to work better than the first thing is low.
And that's the crazy part. Think about this from a hypothetical perspective. If I have a building, right? I've got bricks all along each of the walls to create the building, right? There are unlimited places that those bricks could be in the physical world. They could be in China. You know, like I'm saying, like if I had a thousand bricks, brick number 999 could be in its exact place where it needs to be for the building, or it could be in unlimited other places. But only in one of those locations is it
serving the purpose of keeping the building upright. And so oftentimes when we move bricks, what we're doing is the likelihood that the move that we have is going to take that brick from something that already works in the building to improving the strength of the building versus just being a Jenga block that we remove, we put on the side, we just put it across the street. And then we think that it's going to improve the building when in fact, the likelihood that when we change something that works, that it works better, it's usually significantly lower.
I want to dovetail into kind of a third bigger idea here, which is features and bugs. And I referenced it a little bit earlier, but I want to hit on it really hard. And to use the words of my late great CFO, Suzanne, she said, all businesses have shit. All businesses have features and bugs. But I think one of the big mistakes is that founders believe that the feature is a bug when it really isn't.
And so if you have, let's say, a service business, then you're going to be like, man, it's hard to find good people. I should change my business model. Well, people's the business.
That's a feature. That's something that comes standard with the business. You're never going to eliminate it. It's going to be part of it. If you were like, man, I am a software company, then guess what the problem that you're going to have is? Finding good software developers. They're really hard to find and they're really expensive. And so you're going to still have to manage those people. Now, of course, there are problems in business that you can solve. It's just that
There's a lot of business problems that you manage rather than solve. You never get through them. It's just like basically this pain of business. It's just overhead. It's just something that you have to keep paying. Understanding this took me a very long time and you must do the hard thing and
And a lot of the hard thing is basically withstanding the pain of knowing that there were mistakes occurring in the business. There's churn that's going up, and if we had these people, we wouldn't have this churn. But I can't change the business because I'm actively getting those people. So you just have to sit there and watch it burn. You have to be okay with the flaws. And it will drive you insane because as a person, you need to be the type of person who's not okay with flaws. But you have to be willing to deal with the flaws as they exist because you are already actively solving them.
And you have to look at your team in the face and be like, yep, heard. And they're like, there's all these fires. You're like, yep, understood. What are we going to do about it? Right now, we're already working on it. Well, why isn't it done yet? It's in progress. What, what? It's in progress. Well, shouldn't we do this in the meantime? No, we're just going to continue. We're going to endure. We're going to persist. We're going to deal. And I think that season...
is the part that is the hard part. And the thing is, is that season is literally never ending because once you, you, you find your mechanics, you find your accountants, you find the software developers who are going to help you with your business, whatever it is, right? As soon as you find those people, guess what happens? Something else will break and you'll have a
Some things that are fast fixes and you'll fix those fast, but some fixes are slow fixes. And the slow fixes are the one that are going to be the vast majority of your business career because the fast fixes are only there for a small period of time because you deal with the pain, you see the solution, you solve it, done, over. But then as soon as you go fast, fast, fast, slow, then you just got to stick with that slow one until it's solved. This is what makes it hard. And it's not that your business isn't scalable. It's that you want scaling to be easier.
And that's the issue. Your business isn't broken. You don't need to change the business. You need to deal with the fact that solutions take time and that this might just be a feature of the business you're in. Now, part of you might think, well, if this is a feature of the business that I'm in, I don't want to have this business. I don't want to have this business. Okay. Well, let's walk through that. So hypothetically, if you were very good at solving that problem, would that be a problem that you'd be more okay with dealing with? Maybe. Maybe.
And if you're considering an alternative path, you should also consider the alternative problems, right? You're like, well, I want to do something else. Okay, tell me all the things that suck about that path, because I promise there are things that suck about that path. And then the follow-up question to that is, are you better equipped to solve those problems? Now, in the hypothetical world, you always think you're better equipped to solve those problems, but oftentimes you've never even solved them before. And maybe the problems you think that are there are not actually the real problems. The real problems are much deeper and more nefarious than the ones you're currently dealing with.
And so I think that there's something so deep about the saying, the devil you know, right? It's like the business is the devil you know. And you've maybe been doing this for a year or two years or five years or 10 years, however long you've been in your industry, 20 years. The thing is, is the longer you've been in industry, the more you've mapped the system, right? The more you've mapped the terrain. You understand the good and you understand the bad and you understand what to do about the bad. And so fundamentally...
problems will not end. And I think this is like, it's almost like a human problem that exists with entrepreneurs is that they want problems to stop and they will never stop. They will never stop. You're wishing for something that does not exist. And in so doing, you are consistently changing things about the business that is working.
It's probably the same thing for people who hop from relationship to relationship. Is they want to think, I want to find a relationship that has no problems. It's not going to happen. You're not going to find it. But the biggest problem of all is that you think that there shouldn't be problems. Hey guys, real quick. This podcast only grows from word of mouth, quite literally. There's no other way to grow a podcast than word of mouth. If there's some element of this that you think somebody else should hear or would be relevant to them, it would mean the world to me if you shared this via text, via Instagram, via DM, via whatever way you like to share stuff with the people you love. Thank you.
You have a problem with your problems and that problem is solvable. You decide that there isn't a problem with having problems. You accept that having problems is a fact of life. It's a fact of business. It's a fact of wherever you're trying to go. Like find me $100 million, $10 million, million dollar, billion dollar entrepreneur who says I got here and there were no problems. In fact, today I have actually solved all of my problems. It doesn't happen.
And so we have this demand, we have this wish, and that wish is the actual biggest problem in your business because it's the thing that's causing you to break the thing that's working. And this is where you need to give time time. You need to give solutions time to breathe and you need to give solutions time to work.
As always, once the solution actually happens, play it out. Let's say that we finally fixed our accounting recruiting problems. We now have lots of accountants. We've created a whole school for accounting. We made 20 partnerships with different accounting schools. And now we have this. We have guys banging down the door being like, man, I would love to work for you.
What's your problem now? Well, you know what? Now that I've got all these accountants, I've got all these guys with empty calendars. I have so much more capacity. I'm overpaying in payroll because I got all these guys, but I need to get more customers. And so what do you do? You start marketing more, but now the customers are coming because you're trying to fill slots. You're lowering your bar. You're taking worse quality customers. Now your churn becomes an issue, right? And your margins start going down because you can't charge these people as much. And you've already taken on more fixed costs because you started hiring all these people. Uh-huh.
Is this sounding familiar? These are sounding like business problems because wouldn't it be convenient if that accountant would say, hey, I will wait here patiently until you have acquired 20 accounts of appropriate size and then and only then will I choose to come on board. And at that moment, you can collect their revenue and all of these customers will say, you know what? I will wait in line until you get 19 more customers just like me.
And then all at once, we will start working with this new account that you're bringing in so that your payroll and your revenue can match. Wouldn't that be nice? It'd also be nice if this table was made of gold or diamonds. Be sweeter if it were diamond or adamantium, even cooler, but very unlikely.
Hey guys, this podcast continues to grow, which is insane. And it's amazing. And it's only because of one person. And that's you. You who's listening to this, you might think you're just, you know, like a dot on a map or on some data sheet or something. But the fact that you guys every day share it and post it and text it to friends, put it in your Slack groups for work. That's how this podcast grows. And so it means the world to me. And if you think that this podcast would provide value to somebody else, if you'd share it, it would mean a lot to me. So thank you so much.
And so if you want to be in the wishing game, then maybe entrepreneurship isn't the right path for you. But if you want to live in the real world, you have to accept that there will be problems and there will be things and they typically revolve around one core issue, which is the delta between your expectations around time. So let me explain what I mean by this. The problem isn't your expectations of the business. Your problem is the timeline of those expectations.
If you want to change the world, you absolutely can. I believe that wholeheartedly. I think any one person, any one man, any one woman can change the world. I believe that. But not tomorrow. It will probably take time. It will take infrastructure. It will take help. It will take a movement. It will take many other people helping you along the way. And that does not happen overnight. Like there's the saying, Rome wasn't built in a day. And it's true. It wasn't. And so...
Now, I'll give you a realistic timeline, I think, that I work on, which is I work in decades. And the reason I choose that number is that you can go from new idea to massive global company in about 10 years. You look at zero to a Microsoft, which they IPO'd at about seven years, right? You look at like, obviously, open AIs, we saw their very rapid growth, but they're also, they worked since like 2017. And now they're what, like eight years in?
So again, seven years, six years, I, I run a little higher because you know, I don't think I'm, I'm Elon Musk. Uh, and maybe you don't think you are either. And if you're politically charged about it, pick a different entrepreneur, whatever the point is.
The rush you have is imaginary. It's not real. It's in your head. You've made it up to get to where, by when, why. Maybe the fact that you think you have to double this year is the reason you'll never double over the next five years because you keep trying to cut corners. You can't build it right. And because you don't build it right, you don't get the right people in on the front end. You don't get the right people in on the back end.
You get the wrong talent. You get the wrong customers. You keep churning this up because of arbitrary, arbitrary, completely made up lines that you draw on the sand and say, this must occur. You can have the business you want, just not by the time that you want it. And so I don't think you need to change your dreams. I think you need to change your timelines.
And so the idea that your business isn't scalable is actually, yet again, in relation to speed. Of course it's scalable. It's just not as scalable. It doesn't scale as fast as you'd like it to. And what part of this can we change? The as you'd like it to. That part you can change. Now, of course, you could advertise more. You could try and hire a bigger recruiting team within the constraints of your business, given the resources you have. Sure, of course, you can allocate more resources, but you're not going to solve it. These are features. And so I think a lot of people are wishing for a business that has no difficulty.
And if you find it, let me know. But I've yet to see it and I've looked at a lot of businesses. And so I say this because many of you probably, one, don't need to change your business. You probably need to keep doing the business you're on. Number two, the business you're on is probably...
Scalable. All businesses are scalable. It's just how hard is it to scale? And when we translate hard into what problems must I solve in order to scale it? And what are the alternative problems to this path that I would have to encounter if I didn't follow this path, which you'll find are often also equally difficult. And probably you're less equipped to solve them because you've never solved them before.
And so the idea is I want no problem, but really you're only trading problems. And so when you're thinking about, I want this to not be this way, think about what problems you'd rather have. There's a big pile of problems in the middle of the table. All the business owners are tossing them in, in the middle. And it's like, you got to throw your cards in, your problems in, you got to pick somebody else's. When you look at everybody else's like, ah, I don't know. I don't know if I would pick them up. And the thing is, the longer you deal with your problems, the better you get at dealing with them.
Kind of like the longer you've dated somebody, you're like, I kind of know how to deal with this person. I know how to deal with their crazy, right? And over time, they kind of know how to deal with your crazy. So your business probably isn't broken. It's probably just not growing as fast as you want because you are demanding that it grow faster, but you're in so doing trying to break things about your business that were making it work in order to get it to not work so that you no longer have that problem and you create another problem. And now you have two problems to solve. Your timelines are the biggest issue in the business.
And the fact that it is hard is a feature, not a bug. And the vast majority of your business career will be spent waiting in painful tolerance of the solutions that you are implementing to kick in.
And you have to deal with the lashings of life while that's happening and look at everyone in the team in the eyes and say, we are working on it. And they're going to be like, well, why don't we change this? And you have to look at them and say, no. And they're going to say, but there's this fire. And you're like, yeah, but if we do your thing, then we're going to have another fire. And we're also going to incur the cost of change between both scenarios, which I'd rather just have pain one rather than pain two and cost of change pain, pain three.
And so what it is, it's erratic. It's frenetic energy. It's the feeling like you must do something. And if you do have that energy and you're like, man, I got to do something about it, go to what you're actually trying to do with the solution and try and promote yourself. Go take some of the interviews yourself. Try and speed up the cycles there. By all means, try and speed it up. You're just not going to eliminate it. These will be features. These will be things that you live with. And I'll leave you with one thought. There's an old saying, an old bull and a young bull, and they see a bunch of pretty cows at the bottom of a hill.
And so the young bull is looking at the old bull and he's like, hey, let's chase. Let's go run down there and and see if we can catch one to procreate with. And the old bull is like, no, that's a terrible idea. And he's like, why? He's like, well, because if we charge down there, he's like, they're all going to scatter. And the young bull's like, yeah, but I'm going to I'm going to take this. You know, we'll each get one. He's like, yeah, but if we if we walk down the hill slowly, he's like, we can procreate with them all.
And I've said, I try to make that PG. Well, how does this relate to the business? Does this mean that if I take my time, I can pursue every single entrepreneurial endeavor? I actually think that within the context of entrepreneurship, it's backwards. You're never going to sleep with all the women. You can't. There are so many businesses that exist. And the reason for that, and you have more ideas than you have time. There's a fixed cost that we must accept that it will likely take. If you really want to go big,
It's going to like, look at the biggest businesses. They're 20, 30, 40 years old. And you're like, well, I'm, I'm 30 now. It's like, right. That means until you're 70, one thing, you just keep growing it. And so what does that, what does that mean downstream? It means that there are opportunities, not just some opportunities, but all other opportunities besides the one that you're currently working on, you will have to say no to.
Think about that reality. Let it settle with you because you have to come to peace with it. And the fact that you haven't come to peace with it is why you keep wanting to pursue all of these things. But by pursuing all of them, you will get none of them. You're not going to start every business. You're not even going to start every great idea you have. You're not even going to start 20% of the great ideas you have. 10%, 5%, 1 out of 20, 1 out of 100. You're going to have one idea per
And then you're going to have to keep sticking with it because that's where all the gains come in. It comes in the compounding. It comes in the sticking with it, right? The hard part about the plan isn't thinking about the plan or doing the plan. It's sticking with the plan. That's the hard part of the plan. And believe me, in the frustration that I'm having, the reason I'm like almost shouting like this is because I'm shouting at me. I'm not shouting at you. I'm shouting at me because it's so hard.
Like this is what's hard. It's the hard because it's a muscle you're not used to. It's a skill that you have to learn. It's a trait you have to flex over and over and over again. And I will say this, the more you say no, the better you get at it. It never goes away how hard it is, but it just gets a little bit easier. It just gets a little bit easier with time. And eventually, I think you'll know that you will have appropriately flexed that muscle when you can have no FOMO.
If you can hear that someone else is doing great and be like, that's amazing for them. I know my game. I've been doing this for six years. I've been doing this for eight years. I'm going to keep doing my game. And I think a lot of it is that we have this desire for permanence. We have this desire for legacy. We have this desire to live forever. When outside of Brian Johnson, no one else is really talking about that.
And up until this point, the death rate on humans is 100%. The likelihood of forgetting of a human's life is also close to 100%. And of the people who are remembered, they're not remembered by the people they know. They're remembered by people they don't know. And by the way, they're dead. And so we have this desire. And I think it just comes into direct conflict with the idea that we just live finite lives.
Time moves faster than you think. And the younger you are, the less you realize it. The older you are, the more you start to be like, man, that was pretty quick. You only have a couple, a couple big bullets in you. You got a couple decades, you know, or couples too. So a few. You have three, four, maybe seasons. And if you really want to go big and something starts working, then you're going to do that thing for 30 or 40 years. And so like the idea of like, oh, I'm going to own all these companies. Like,
You can have divisions within a business if it makes sense, but most of the time it doesn't. Most of the time you could start this other thing or you could just do more of the things already working. Why isn't it happening faster? Because you're demanding that it happen faster, but there's nothing wrong with your inherent business. You're saying the problem is a problem that you created. Basically, you just take reality, you move the line of expectations and you say there's a problem. And I see more businesses ruined because of that than just about anything else.
You could make it work if you just stuck with it and you stopped thinking that there's something wrong with your business and maybe look at the fact there might be something wrong with your expectations. Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast.
Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you've got customer success, you've got IT, you've got recruiting, you've got HR, you've got finance. And we show the problems that emerge at every level of scale
and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com forward slash roadmap, R-O-A-D, roadmap, roadmap.