Unlocking Business Growth: Identifying Your True Industry and Overcoming Key Obstacles

Understanding Your True Business

Many entrepreneurs find themselves stuck because they fail to recognize the actual business they're operating in. What got you from zero to $100,000 or from $100,000 to $1 million won't necessarily get you to the next level. You're likely focusing on something that was once crucial but is no longer relevant.

The Fitness Industry Example

When I first entered the fitness industry, I thought my focus would be on designing workouts and structuring training programs. However, I quickly realized the biggest challenge was getting people through the door and keeping them as members. Suddenly, I found myself in the sales and marketing business rather than the scientific fitness business I had envisioned.

The Supplement Industry Revelation

Later, when I ventured into the supplement business, I believed creating the most effective product with the best ingredients was key. I partnered with a brilliant biochemist to develop top-notch formulations. However, I soon discovered that the supplement industry is primarily about branding and distribution. The harsh reality is that if a supplement truly works, it's often illegal in the United States. Most customers care more about taste and feeling cool when consuming the product than about the scientific research behind it.

The Software Company Misconception

My first software company taught me another valuable lesson. I thought my marketing and sales skills would be enough to succeed. While it was relatively easy to sell software that promised to solve problems, the real challenge came when users logged in and found that the product either didn't address their issues or created new ones. I realized I was actually in the product business, not just marketing and sales, and I lacked the necessary skills in coding, UX, and design.

Identifying the Real Business You're In

To figure out what business you're really in, look at those who are 100 steps ahead of you, not just one or two. People slightly ahead might still be lost, but those at the top have likely figured out something you haven't.

The Gym Business Reality

Looking at successful gym chains, it's clear they're primarily in the sales and marketing business. They've mastered the art of getting people through the door and have general managers focused on meeting membership quotas. The fitness aspect is secondary to their ability to attract and retain customers.

The Importance of Interruption Marketing

In the fitness industry, people rarely wake up deciding to join a gym. They need to be interrupted by ads or approached directly. This interruption reminds them of their fitness goals or dissatisfaction with their current shape. Successful gym businesses have mechanized this process of customer acquisition.

The Retention Challenge

Another crucial aspect of the gym business is understanding that most people don't stick with their memberships. The business model relies on a high churn rate, with only a small percentage of hardcore users actually using the facilities regularly. This reality necessitates a constant influx of new members to maintain profitability.

Overcoming the Big Hairy Problem

Every business has a significant challenge that needs to be addressed to reach the next level. This "big hairy problem" often requires a completely different skill set than what got you to your current position.

The M&A Example

I once spoke with someone in the mergers and acquisitions world who was buying plumbing businesses. His main limitation was finding good plumbers. I introduced him to the concept of the cost of acquiring talent relative to the lifetime gross profit per employee. This shift in perspective helped him realize he needed to focus on talent acquisition rather than customer acquisition.

The Media Company Dilemma

In another instance, I consulted with a large media company that was struggling to increase profits despite having millions of weekly impressions. They were focusing on optimizing their content creation process, which was already highly efficient. The real issue was their lack of a clear monetization strategy. By shifting their focus to developing effective monetization methods, they could potentially see significant growth.

The Importance of Confronting the Real Issue

Entrepreneurs often avoid addressing the core problem in their business because it's uncomfortable or they don't know how to solve it. Instead, they focus on areas they're familiar with or enjoy working on. This avoidance can lead to stagnation or the temptation to start a new venture rather than solving the existing challenge.

The Mental Trick for Problem-Solving

To motivate yourself to tackle difficult problems, consider the potential value of solving them. For example, if solving a particular issue could increase your business's value by $57 million, wouldn't you be willing to do it for a fraction of that amount? This perspective can help you push through the discomfort and uncertainty of addressing challenging problems.

Push or Pivot: Knowing When to Persist or Change Direction

Understanding the difference between "good hard" and "bad hard" is crucial for entrepreneurs. Good hard involves iterating and pushing through challenges when your underlying assumptions are correct. Bad hard is when your fundamental assumptions are proven wrong, and you need to pivot.

The Good Kind of Hard

When you're facing difficulties but your basic assumptions hold true, it's often worth pushing through. For example, if you're struggling to make TikTok ads work for your B2B accounting service, but you know accountants are on the platform, it's worth continuing to iterate and improve your approach.

The Bad Kind of Hard

If your underlying assumptions are proven incorrect, it's time to pivot. For instance, if you're trying to digitize newspaper ads, but the newspaper industry is rapidly declining, you may need to reconsider your entire business model.

The Reality of Entrepreneurship

Entrepreneurs are paid to solve big, hairy problems. The bigger and hairier the problem, the potentially bigger the payoff. It's important to remember that what feels impossible might just be difficult, and difficulty is what creates value in business.

The Scalability Myth

Many entrepreneurs believe their current business isn't scalable or can't reach the size they desire. However, with the right approach and persistence, most businesses can achieve significant growth. It's often not the business that's limited, but the entrepreneur's ability to scale it.

The Long-Term Perspective

Building a successful business takes time. Many of the companies we consider overnight successes have actually been operating for decades. Subway, for example, is 59 years old, while Panda Express has been around for 42 years. Success often requires a long-term commitment and the willingness to push through challenges for extended periods.

Increasing Your Frustration Tolerance

Successful entrepreneurs often have a high frustration tolerance, allowing them to persist through multiple iterations and failures before achieving success. This tolerance is built through experience and the reinforcement of eventual success after repeated attempts.

The Investment Mindset

View challenges and setbacks as investments in your business's future. For example, spending $100,000 over six months to develop a new customer acquisition channel might seem risky, but if it has the potential to double your revenue and add $15 million in enterprise value, it's a worthwhile investment.

Conclusion: Embracing the Entrepreneurial Journey

Entrepreneurship is about enduring challenges and solving unique problems. By identifying the true nature of your business, confronting the big hairy problems, and persistently working towards solutions, you can unlock significant growth and value.

Remember that the grass isn't always greener on the other side. Instead of jumping ship when faced with difficulties, focus on making progress and breaking through the walls in your current business. The payoff is on the other side of these challenges, and that's what makes entrepreneurship worthwhile.

By applying these concepts and maintaining a long-term perspective, you can overcome the obstacles holding you back and take your business to the next level of success.

Article created from: https://www.youtube.com/watch?v=q9OmYf_IlQ0