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What one thing if it were true about my business would change everything of all these other things

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that are on my to-do list? If I were able to accomplish all of them, would it be as big as me

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just doing that one thing? Welcome back to the game. Today I have a special fun episode

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about making more money. So there's a common theme on the game. And so today I want to talk about

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the difference between optimization and orders of magnitude, aka step function increases in a

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business. I think that this may be one of the most impactful shifts in thinking that I've had

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as an entrepreneur and one that I would at least encourage adopting. First off, what is the

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difference between these two things before I even get into that? Real quick, why does this matter?

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If we think about the function of every entrepreneur as the person who prioritizes the resources

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of the business, then you are the person who's saying what gets invested in? What are we allocating

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time towards so that we can get the best return? And I talk a lot about the difference between

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doing more, doing better, doing new. And so fundamentally, whatever you're going to do is going

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to fall within one of those three buckets. Are we going to do something better? Are we doing what

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we're currently doing a little bit better? Little optimizations? Are we going to do some, you know,

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just straight up do more of it? Are we going to do something new? You might think that this whole

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optimization versus step function is going to be new versus better. And that's actually not the

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direction that's going to go ahead. I bring this up because I see business owners come out to

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our headquarters. This is, you know, companies that are either, you know, just coming to a workshop

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that we have or companies that we're looking at investing in or both. When I talk to the founders,

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the prenal question is like, what do I need to do to scale or what, like, what's the,

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what's the next thing that I've got to look at? What's so interesting about that question is that

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there's unlimited potential options that you can take in order to grow a business, right? Like,

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if I, no matter who you are, if I increase your lead conversion rate by 10%, then pretty much

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everything grows, right? Obviously notwithstanding some sort of constraint on delivery, which would

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then prevent you from, you know, capitalizing on that. That 10% increase in lead flow or you don't

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have enough sales guides to handle it. So yes, the theory of constraints still reign supreme.

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But under the assumption that you can fix those downstream impacts, you would be able to see that

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improvement increase throughput. So for example, if you had excess capacity or let's say your sales

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guys were not at 100% utilization, they're at 70. A 10% increase in leads would be swallowed up by

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the sales guys and they would, you know, make more sales and provided you had enough delivery

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capacity and you're not at 100% on your call of customer success, then you'd be able to swallow up

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or realize that increase as well, right? And so it would follow. I want to be clear, I'm a big fan

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of conversion rate optimization in general. That means, you know, split testing headlines and offers

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and price points like all of these things are things that we regularly do. I'll briefly explain

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the kind of like the mathematical structure between the two in terms of making the decision, but then

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I'll transition into the optimization versus order of magnitude component. I think it's good to have

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this as kind of the foundation for that for the next piece. If we think about more as the lowest

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risk adjuster return thing to do because you already know it works, you're simply adding more will

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typically just also do more for you. The problem is that it's not fun, it's very boring, but it is

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also the reality of a lot of businesses and once something works, there's let's say you try 20 things

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to get something to work. You're trying something new as your 21st thing has a likelihood of

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failing that's about the same as the 19 out of 20 that you did before. And I'll give you a real

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word example of this. So at school, we bit, you know, we run split tests on the on the sales page

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that converts free trials, you know, pretty regularly. And so from the first version of the test,

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you know, the first version we launched with to beat that control, we ran 16 different split tests.

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Here's the funny thing. 14 of them failed as in like the control beat it, right? And the thing

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is is that the better things get the more a change from that thing that works, the more likely it

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is that that thing will not be an improvement. And so I just find that as a very interesting and

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also to be fair, there's typically decreasing incremental return for the improvements, right? You

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can only go to 100% right hypothetically back to more versus better. There is an actual way to

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figure out whether you should do more versus better. And then I'll get into optimization versus

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orders of magnitude. The simple example I like to use is if you have one sales guy in your business

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and that's it, go and let's say that person has some level of control over demand,

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just keeping the example simple. Then if you double the sales team, which going from one to

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then you would figuratively double the revenue of the business, assuming there's no other constraints,

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right? Okay, that's straightforward. If you have two things that you could consider doing,

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like you could take effort to, you know, train that one guy that you have better,

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that guy might get a, you know, 10% or 20% increase in conversion rate based on his ability to

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close better, right? When you have that straight up example difference of like, okay, I can hire

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somebody on board and train them and double my revenue, which would be a more solution,

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or I can take the one guy I have and get him increases close rate by 20% a better solution,

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which also includes training, which of these yields me the best returns for my time. Well,

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it makes sense in this instance to do the more. It makes sense to go from one to two, you double your,

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you double your three, but even if the next guy is 50% as good as the existing sales guy,

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you'll still get a 50% increase in absolute return, right? So this is just like just basic

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brass tax. I'm going here. And if you're like, man, but what about the situation? That's not the point

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of this example. Now, when you have 20 sales guys, if I do that optimization of training all these guys,

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and I get a 20% lift, it would be the equivalent of hiring four more people onto my sales team.

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We go from 20 to 24. The question then follows, okay, is the effort of getting a 20% improvement in

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sales equal to the effort of recruiting, hiring, training, onboarding four more new guys? It may

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or may not be, but this is fundamentally the paradigm, released the decision making framework that

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you can use to say, okay, should I do more? Should I do better? If your sales team in general is a

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little bit low, because you have let's say a bunch of new guys on the team, then it would make sense

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to just let's prune the tree, let's squeeze what we have, let's increase, let's get it more

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concentrated instead of deluding down. And then let's focus on better. But the thing is that what

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appears to be these like random flip of coin decisions really aren't, you should be able to think,

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okay, and there's this lovely framework around this. I can't remember if I've said this in a

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podcast lately, but there's a framework in the product world that's rice, which is reach,

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impact, confidence, and expense, which is fundamentally, how many people does this affect?

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How much does it affect them? What's the confidence of that? And then how much does it cost me?

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It's fundamentally what this really teases at is risk adjusted return. What we put in here is how much

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do I expect to increase my sales team? And how likely is that? And how much will it cost me?

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I mean, fundamentally, those are the questions that we're asking. And so let's say your sales team

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is crushing it and they're at 50% conversion. The likelihood of going from 50 to 60 to get a 20% lift

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is probably low. Now, if the team is at 10%, then the likelihood of going from 10 to 20 or 10 to 30

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even would be pretty high. So you might be able to triple your sales with the existing team by going

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from 10 to 30, whereas tripling the head count of the team might be significantly more effort. And so

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the risk you just returned would say, yes, let's do more of the better. Not too confusing. Do the better

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solution rather than do the more solution right now. Okay. So that's kind of the basis of this

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foundation. What I'm talking about between more better. Okay. Now, where does optimization versus

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orders of magnitude come into play? I remember hearing this years ago and a guy that is very wealthy

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said this thing. And I remember thinking about it a lot. And then I was like, I understand where he's

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coming from. And he said, zero is a scam. So conversion optimizations a scam. And so obviously,

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I'm somebody who really loves, you know, I'm very data driven and I love to just see through put

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through funnels and things like that. And so I thought to myself, well, that doesn't make a lot

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of sense because I have generated tremendous amounts of profits and revenue as a result of

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conversion optimization. So I thought a bit of more because that guy is very successful. So I thought

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I thought about more. And I was like, hmm, his point was, hey, why don't we ask the question,

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what would it take to a hundred X, the amount of people who see the page rather than how do we get

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10% more out of the page we have? And I think that's really what I wanted to hit on today,

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which is a lot of times I see smaller businesses, sometimes even middle-sized businesses,

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get obsessed. And it's less with the big ones. And I think it's because of this shift in thinking,

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which is why I'm making this podcast. In the beginning, everyone wants to be incredibly efficient.

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And that's good. It's good to want to be efficient. But what happens is we start to get obsessed

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with like squeezing every last dropout rather than thinking, why don't we just get more fruit

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to squeeze juice out of? And so I'll see people just spend, honestly, sometimes like a year,

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like I had a guy recently say, hey, I think I should optimize the front end that I have from my

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business. He was getting 17 to one. Were there things that he could probably do to improve it?

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Yeah, they're actually where he just found a cool niche in it. It's working out really well for

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right? But the thing is it's like that was not the constraint of the business. The point is

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he probably would have been better served by just being like, cool, how do I get four times

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more traffic in this page or five times more traffic in this page? And the reason I bring this up

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is that oftentimes beyond a certain point, there are incremental diminishing incremental returns,

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meaning you get less every single improvement you get again, because you have a hypothetical

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extreme of 100%, right? And that's the thing with optimization is that there's only 100%.

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You can't get above that. But you can 100 x traffic. You cannot 100 x conversion,

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unless you're conversions at 1%. In reality, if you have a Shopify page, for example,

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selling e-commerce products, you're not going to go from 2% conversion on your page to 50%.

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It's just not going to happen. You're not going to get a 25 x improvement in conversion.

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But you can, and here's the cool part, you can get 100 x increase or 25 x increase in traffic.

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Because listen, at the end of the day, you can spend all of your time trying to optimize

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your tax situation and get your taxes down to 0% making $40,000 a year.

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But sometimes it just makes more sense to ask the question, what would it take for me to make $40

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million a year and solve that instead and say, the hell with it? And I just had an entrepreneur

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friend actually reach out to me saying, hey, you were right. And I was like, about what? I probably

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hadn't spoken too many years. He was like, about the tax thing. And I was like, what do you mean?

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He said, well, I just spent the last like six months deep diving and all this tax stuff.

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And I realized that if I spent that same amount of time and attention just growing the business,

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I would have made more money than I'm going to save in taxes. And I was like, yeah, duh.

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And so this is again, one of those little optimization versus order of magnitude changes.

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Like, what would make my tax bill irrelevant to me? Like, I'm a set that I pay, you know,

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30% on my $100,000 a year. So I keep 70 and I have to pay 30. Okay. Well, then what would it

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take for me to make a million dollars a year or 10 million dollars a year? And then solving that,

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you might be like, you know, I wouldn't even care about paying 37% on 10 million if I could make 10.

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The questions that we ask, we have to be so careful because we will actually solve them.

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Oftentimes, we spend a lot of our lives solving questions that aren't worth answering.

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This is really what I wanted to hit on. Am I thinking around decisions when it comes to,

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where do I want to invest the team's time, effort, et cetera, has more often been, what's that one

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thing that I can do that if I accomplish that one thing, it's so significant that the remainder

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of my objectives became irrelevant. They shrink into irrelevance. If I got a hundred times the

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traffic to acquisition.com, I wouldn't care about CRO because I would have more than I could

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already handle kind of already do to be fair. It's because of kind of this thinking process,

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which is like, if I, and the thing is that within every business, there is that one thing.

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There's always that one thing. The tricky part is that sometimes that one thing isn't on your

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to-do list. And that's why I think in my opinion, strategy is such a valuable thing to have,

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which is sometimes the best move is one that's not on the board, is one that's not on your to-do list

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right now. And so when you struggle to prioritize things within your to-do list, it might just be that

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all of them are, because not wrong in that, like, they won't grow the business. It's just that none of

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them is an order of magnitude change. And to be clear, I'm not saying if to do something new in order

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to get that. Now, that is more common that if you're going to get an order of magnitude that comes

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from a new thing, but I would say, where do I want my order of magnitude bets to be? Order of

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magnitude bets are typically, for me, not going to be something that's done what I would call

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in funnel, meaning like, once we have a click from wherever the source is going to be, whether it's

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an email that's outbound or DM or an ad or content, you have some click, you have some engagement

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that occurs, right? Everything from that point going forward is all conversion optimization.

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Putting something brand brand new in there, unless you have like, it's unlikely that the change,

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which will have a guaranteed cost, will net a big improvement on an existing control, meaning

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something that already works. And so I more often than not save my order of magnitude changes

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for things that are, I would say, media driven or product driven. Okay, so I'll zoom out here.

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Media driven, meaning if I take a big bet, there's a possibility that I can 10X clicks. That's

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something that's doable. It's achievable. And there's tons of demonstrations of that product.

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If you have, let's say, a thousand dollar thing and then you decide to charge a hundred thousand

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dollars for something and you have obviously the ability to deliver on something like that,

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you can have a 20X increase in revenue. Absolutely. Where you need the conversion and optimization

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is to unlock more media that can create a stepwise function increase. It's like, okay,

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well, how do you thread the needle here? If I have, let's say, any commerce store, for me to

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see I wrote this thing to get a 5X improvement unlikely. Now, in reality, I might be able to get

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a double by improving, you know, four or five steps that occur in the process of being better

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follow up. Maybe a call team that calls all the abandoned cards, some sort of scarcity or

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great bonus or seasonal thing that I do on a regular basis, like all of these things that add

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together a bunch of protests on the landing page, whatever. Add payment options. All of these

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things will have add points. But that unlocking of LTV of lifetime value might be the thing that

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might allow me to 5X, my advertising. And this is where it's like, wait, I thought you said,

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well, yes, welcome to business. There's many variables and therefore many variables must be

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studied. But the point is, is that when I look at a lot of businesses, they, especially if you're,

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if your growth has been, I would call it slow-ish. And if you're in a small business, I would say

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anything below 20% is slow-ish. And again, like, I just tend to be a aggressive when it comes to

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growth. But if you're in that, you might not benefit from trying to do more optimization.

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You might benefit from just finding some big thing, big move, big brand association, big giveaway.

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This is where offer changes, by the way, the purple book that I have 100 million offers.

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That is, I would say, more of a step function. That is an order of magnitude change that occurs

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in many businesses. And it is strategic in that it will force you to prioritize against all

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resources in the business because it will affect all functions. It's going to affect pricing.

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It's going to affect, so it affects finance, it affects delivery, it affects advertising, it affects

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sales, it affects everything, the offer itself. If we're thinking about this list of unlimited

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things that we can do in the business and you are in a position where you have not grown much lately,

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unless your ability to spend money to get customers has been the limitation of the business,

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in which case, maybe having a conversion rate optimization look at three or six-month period where

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you just aggressively test three or four things at a time per week to get to kind of squeak out a

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lot of these improvements. Once you get to a certain level, you really need to shift because

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the thing is, this is where one of those, well, got you, here's not going to get you there,

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which I don't really like as general sayings, but in this instance, it would apply,

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which is that maybe you have already done a lot of testing on the process, the landing pages,

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the copy, et cetera, follow-up. So you might just need to be like, what's that big thing

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that's going to make 10 times more people or 50 times more people see my stuff? Or what's that

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one thing that's 50 times more expensive or has 50 times the LTV that I can sell to a large

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percentage of my customers? Typically within the box, within the pipeline of the business,

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you will have the little optimizations. But the big orders of magnitude usually come at the front

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or the back. It's either something that's very big in media or it's product-driven service,

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you know, a new service line, a new product line that you roll out that then creates these kind

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of step-functioning creases in the business, which then obviously circles back to the front,

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allows you to spend more, and then you can scale, right? And I feel like this bears some weight

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because I probably, I tend to be the type of person who I love optimization. Like, you know,

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it's just a, I like, I just love seeing these little improvements. I got a little 10% there,

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we got a little 6% there, we got a little, we got a little 25% there, that was a big one, right?

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I love seeing those because it's these nice fast wins, these fast feedback cycles. But what's

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interesting is that we get addicted to these fast feedback cycles and sometimes that makes us

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blind to that one big change that makes all of those, those little improvements irrelevant.

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If Mr. Beast, for example, decides to launch another product, is it the one thing that matters

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most, which is his massive audience in brand that will dictate the success, or how optimize the pages?

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Probably just the big brand and audience in media that he has command of that he can generate

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towards that. This is my one takeaway for anyone who's listening to this, and this is the question

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that I would ask. What one thing, if it were true about my business, would change everything?

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Really think about it, and sometimes think about it from a product perspective, think about it from

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media perspective, sometimes it's technology perspective, but typically it's going to be media

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or product. After answering that question, what one thing if it were true would change everything

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about my business, or take my business to make it 10 times bigger, or make it 100 times bigger,

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if you like to be more specific. And so then the follow-up question to that, if once you have

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that answer of all these other things that are on my to-do list, if I were able to accomplish all

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of them, would it be as big as me just doing that one thing? And if the answer is no,

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then it would be logical, although contrary to allocate zero more attention towards that big bucket

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of list of things that you could potentially do that would give you that incremental improvement,

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that optimization improvement, and put all of your effort and focus on getting that one thing

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to become reality. The more I have thought this way in my entrepreneurial career,

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the more step-functioning increases in wealth I've been able to experience for myself,

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and obviously across the portfolio companies that we own. And so this is yet to get a strategy

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conversation, but the reason I talk about this so much and to be fair, this is probably because

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this is where a lot of my day is spent, is trying to think of the highest leverage decision or move

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that we can make within a business where we're going to bet all of our resources. And where this

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gets very interesting is that if you have, say, a big list of things that you could potentially

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consider doing, right? There are resources that are required to do all of those things.

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The big mistake is the fallacy of thinking that you can accomplish all of these concurrently.

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You can't. You just can't. You think you can, but it's been very well documented switching

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tasks going back and forth between things, kills productivity. And for some reason,

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we think that in a company because there's more people that that doesn't apply. But the resources

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of the entire company can still be dedicated towards one thing. And so this is kind of like human

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systems versus machine systems. And so if a business by and large still is to this day at least,

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very comprised of humans, let's say that there's five things that would change the game for us.

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One of those five is more important than the others. And if you can't figure that out,

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then you're not doing your job. There is one thing that's more important or as a higher likely

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creative success that has a bigger impact. If that thing is number one,

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then it would follow to say, Hey, let's direct all of our resources towards accomplishing this one

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thing. And then as a fun bonus, once we accomplish that thing, we can go on to the next thing. Now,

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this then gets confusing because some of these other things might be screaming hot problems.

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But if we have a how much this is going to impact the business, then if that's screaming hot

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problem is really, you know, threading the existential, the existence of the business,

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then that becomes number one. And then once you do that, then you can do the fun thing, right?

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And so what happens is when you create the when you put these things in sequence, what I have found

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happens is that the level of urgency that the entire team takes to accomplish that one thing

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goes up tenfold. And so you can in a very real way do five things sequentially faster than you can

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do five things at once, which seems obvious when you think about it for yourself. But for some reason,

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when we think about our companies, we don't think that way. And so this has again been a change in

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thinking for me in terms of how we get things done in acquisition.com and how we can move quickly.

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And also, obviously, how that translates in terms of big priorities for the portfolio companies.

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I feel like this is a, I want to say, I don't know if mistake is the right word, but like

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it's an inefficient utilization of resources that I see that's very common, especially amongst

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low and mid-size founders. And to give you context here, I'd say low and mid-size. So it's like

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low would be, you know, sub three million and then mid-size would be like maybe sub 20 million

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just to give context, maybe 50. This is just one of those things that

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it seemed important enough to make a specific podcast about. And so I will repeat the final question

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one more time, which is what one thing, if it were true, would change everything about our business.

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And then what resources are required to just make that one thing occur. And if we use those

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resources to do all the smaller tasks, if those do not amount to as much as that one big thing,

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then it is logical, although controversial, to just put all of your resources on that one thing

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to make it true. So with that being said, I hope this at least gives you something to ponder on

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your way to work or while you're at the gym about your business. And if you work for a business,

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then I would say it's a really good exercise to walk through and also demonstrate to leadership

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how you think strategically. Or you can also think about this also within the function of the

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business. Like what one thing, if it were true, would change the finest part of it. What one

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thing, if it were true, would change the IT department. What one thing, if it were true, would change

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our people strategy in terms of attracting talent. What one thing, if it were true, would change

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our product or our marketing? You get the idea. With that being said, have an amazing day,

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amazing week. Keep rocking and rolling in a collection of your dreams. Bye!