← Build with Leila Hormozi
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Today I want to share with you seven million dollar lessons that I wish I had known earlier that are responsible for building our multiple nine figure portfolio and all the eight figure companies within it. The first lesson is that people work harder for leaders they love over leaders they fear. When I got a job fresh out of college, I actually packed up my car and I drove across the country and I got a job at 24 Hour Fitness. I had graduated from exercise science. I had a degree and understood like how to help people lose weight, how to teach people how to work out, but I didn't understand business, I didn't know marketing or sales. As soon as I got a job at 24 Hour Fitness, what I realized was I actually needed to learn marketing and sales. I think that one of the main reasons that I was able to succeed is because I actually was really lucky to have this great boss. His name was Mike. Mike always asked me how I was feeling. Mike always would stay extra hours to help me train. He was always there to be like, dude, you just gotta try again. Like this is part of the game, like this is normal. You're not a failure. He was always able to be a positive source of reinforcement for me. And I. And I don't even think I realized how lucky I was to have found him until he's like, hey, I've actually got to go start a new location. And so we're bringing in somebody else. And I'll never forget the day that not Mike came in the first meeting he had with our team. And by the way, we were number one in the region. We were overperforming. And he said, no more of this. We better post some numbers this week or else y' all are fired. It was just so not received by the team that was there. You know, we're all high performers, we all want to win. We were all already posting great numbers. It felt very punishing. You know, the first thought that I have when somebody talks to me like that is I was like, I'll just leave. Everybody else happened to share that same mentality. And so guess what happened? Everybody over time stopped selling people because they knew they were going to take their personal training businesses elsewhere. He continued to threaten us more and more with what he was going to do. I remember specifically telling me that he was going to run me over with his truck and light me on fire. That was a fun one. And as that happened, Slowly, top performer. 1, 2, 3, 4, all leave, myself included. What you saw happen was that that team that was number one in the region and Overperforming went to being in the bottom 30th percentile. And the only change that was made was that they brought in a leader who led with fear rather than the leader who had led with positive reinforcement. And that was a hallmark of my career because I thought to myself, I never want to be that. You know, if I have this responsibility to lead people, I don't want to abuse it and to treat them badly and put them in a sense of fear. What people don't see is they say, okay, well, Layla, tell me the hard how much money did it make you? How can you say it's a million dollar lesson? Well, if you look at most organizations and how many people churn out because they have such a terrible culture, because people are in so much fear, the only reason they're staying at the job is because of how much you pay them, right? And so then, one, you have to continue to pay people more and more and more if you want to be able to keep them. And then two, even with that, people are still going to leave once they can get paid more somewhere else because they're in a constant state of fear. And because they're in a constant state of fear, even though you're paying them more than you would have to if you were using positive reinforcement, you're not getting the most out of them because they're constantly stressed. You're accessing, no discretionary effort. And so it's all these hidden costs that people don't see that cause the company to take on this extra burden. When you lead that way, how do you actually deploy leading? With positive reinforcement rather than fear, you will reward behaviors that you want rather than punishing behaviors that you don't want. Think of it like this. If a dog jumps on the couch, do you swat the dog to get off the couch, or do you reward the dog for staying on the carpet? It's a very small nuance, right? But the issue is that if you swat the dog and then he jumps off the couch, then in your presence, the dog will stay on the carpet, but every time you leave, he will jump on the couch again. And that is exactly what happens when you lead with fear. When the threat is there, AKA the boss, people adhere to the rules, but the moment the boss is gone, they don't. And so I like to say, like, if you want to see what your culture is really made of, see what people do when you're not around. So there's two ways you can do this. If you want to lead with positive reinforcement, rather than punishment, which is either remove something that is already a negative to them or add in something that is a positive. For example, removing a negative would be a relief to somebody. So if somebody is overperforming at work and you have a hybrid culture and say that you require people to be in the office three days a week, a relief or reward might be because you are overperforming. You only have to come in one day a week. Now, on the other side, the more obvious one is that you reward or you give something for something someone does. So it could be that a salesperson is over performing and so you want to reward them with a two day vacation, you know, two days off that you plan, you give them a cruise, whatever it might be. I actually tend to talk a lot about adding in something that's a positive, but what I actually like to do the most is removing something that's a negative. Because I think that most people, the quality of their lives and their work lives continues to get better as things that are prohibiting them from performing and from being excited and happy at work are removed. And then after you've removed a lot of those things, adding on more things makes sense to further reinforce how serious this is. Every time you lose an employee, you're paying anywhere from 90 to 200% of their annual salary when you lose them. Some of the things that factor into this would be how much it costs to onboard somebody, train somebody, and then something that we call time to productivity, which is that you will be employing somebody when you hire them for a period of time and they will not have been doing the job yet because they're not trained up. And so all of those factors, including the time that other people on the team spend training someone, factor in to why it costs so much to replace somebody. The second million dollar lesson is that people need to be reminded more than they need to be taught. And I don't think that I really understood how important this was in business until there was a quarter where our sales team was underperforming. And this was, I want to say, four and a half years ago when we owned gym launch Q1 is traditionally the best time for fitness sales. It's like it was January and we're looking at the numbers and I was like, holy crap, you know, we're not selling anything more than we normally would. And then I looked at the percentages across the team and I was like, man, the close rate has actually dropped. So then I started thinking, I'm like, maybe we're not tracking the right KPI's you know, maybe we need to go over objections. Like I said, you know what, this isn't my job. We've got sales manager. So I'm gonna go sit on the sales meeting and I'm gonna go shadow and watch. And as I sat on the sales meeting, I realized it wasn't people didn't know the script. It wasn't that people were veering off the script. There was no enthusiasm on the team. And what enthusiasm translates to in a sales team is conviction. Remember I got off and I asked the sales manager, I said, when's the last time that you told them the impact the product has on our customers? And I remember he was like, I don't talk about that. And I was like, holy. Of course what I did the next day was like I said, let's get a meeting together. I'm just going to give them like a pump up meeting. I'm going to remind them of how much impact they have on these people's lives when they sell them into this product. Because if you're just getting on the phone all day and all you're doing is trying to help people make a decision that's really hard for them to make, you know, they're giving you all these objections all day, every day. If you're not seeing what happens on the other side, then you're only seeing this and you have no idea what happens after. The way that I do this is I have a framework that I've developed called the three Rs, which is remind, resell and reinforce. Remind, remind them of the results we are delivering. So I was like, hey, guys, wanted to remind you of all the things that we're doing on the back end, all the initiatives, all of the work that everybody's doing to improve the product, improve the customer experience, and all of these results that we're getting for people. And so the first thing I did was show them the pipeline for our product as well as the customer journey and all the things that happen after the sale. Now, the second thing I did is I resold them. Why what they do is so important. I got the stats of the average client's return in the first 30 days and I showed it to them. I said, here's the average. The average person makes not just their reinvestment back, but their reinvestment plus 50% in the first 30 days. Do you guys feel good when you hear that? And they were like, holy, Is that really what they return us? And I was like, oh, my God, yes. It's been that for forever. And then the, the third piece to the equation is I reinforce this, which is all I'm doing right now is I'm telling people. I got together all the testimonials from the last quarter of all the clients and all the before and afters of their stats and I put a presentation together and I went through 10 slides and on those slides all it had was testimonials, positive comments, the ROI of what people got in the program. You know what happened after I did that? They sold triple the units the next day than any other day for the quarter prior. And it continued to trend upward. And then we crushed Q1. And it wasn't because I was like, oh, I've got to rewrite the script, I've got to fix this sales flow, I've got to change the lead nurture. Because that's always where people want to look. They want to say let me go tweak things. It's like level up one. Oh my gosh. Have we reminded them of what we really do here? Have we been casting the vision? Have we been telling them of how much we impact customers lives? Because that is why people wake up every morning. That's what keeps people excited to sell something at every point in time. Employees in your company are going to forget the impact they have and it's your job as either their boss or the CEO of the company to remind them of the impact. The third million dollar lesson is that you can beat everybody if you simply meet expectations of the customer. There was a time when I remember we got our quarterly report and we, we had rolled out a new program in gym launch. And I got the report and I looked and though we were making more sales, our churn had spiked. And it was specifically, it was our churn in the first three weeks of the customer journey. I was like, how could that be? Like what is going on? You know, we changed it so that people could get wins faster. I thought to myself, well gosh, I have to figure out what's going on here. So I'm going to go watch some of the sales calls and I'm going to go watch some of the onboarding calls. The expectations of the customer were much higher than the reality of what was being delivered. And the reason for that was that things had changed. Right? Like I said, we launched a new product but the sales team remained in the dark about how that changed the customer journey. And so they were setting the expectations that we would have had with the old product. But then selling people into this new product, people were oversold and they were sold on something that actually was just completely incorrect. And so I got the team together and I said, cool. So here's what we're going to do. We're going to do something called a game tape review. Now, a game tape review is usually something you do in sales, but I've seen it work really well across marketing, sales, and customer success because it can help bridge the gap of all of them. So the framework I call the game tape review framework, it's the four R's. Okay? So it's record, rewatch, respond, and redirect. So I'll break each of those down. So the first piece is, what you want to do is you want to record all of your sales calls, all of your onboarding calls, and all of your consultation or coaching calls. Or it could be ongoing support calls. The second piece is that one time per week you re watch one of those calls with all of the teams. Week one, you're going to watch a sales call with the marketing team, the sales team, and the CS team. Week two, you're gonna watch an onboarding call with the marketing team, with the sales team, with the customer success team. Like, what are the core touch points you have with the customer? Those are what you're gonna cycle through in the recordings. And you're gonna have all of those teams watch one time per week for 60 to 90 minutes. And then you're going to respond to it with this. You're going to write down the wins of it, right? So every department writes down what was great about this call. And then you write down areas of opportunity, meaning where is there an opportunity either in this call or in my department in response to this call to improve. So I'll give you what happened with ours. So we watched the sales calls, and the first thing that our customer success team said is they go, oh, gosh, if I had known that was you were saying on sales calls, I would have never onboarded them this way. And then we watched an onboarding call and the sales team said, I didn't even know we did half these things. This would make my pitch so much easier if I just knew we actually did these things I didn't even know we did. So I was just kind of going with the flow. And so what you see is that people start to see all of these departments more holistically. They start to see the customer as a shared responsibility rather than, I am in charge of sales, I am in charge of customer success, I am in charge of marketing. And so the fourth piece to this framework is redirect. You're going to get a lot of feedback from a lot of the departments. And what you want to do is that each department has one takeaway every time you do it. One action item, not three, not four, not five. You constrain them. It's good to have more. But you say, cool, I love that you have five ideas. I want you to pick one that you're going to implement from this. And if you do that every week, imagine how much better the team's going to get. That framework alone didn't just improve our close rate and improve our onboarding and improve our lifetime value. That improved our entire team. It took them to the next level. And if you can get your team from working in silos, which creates mismatched expectations for customers, to working together where they can meet the expectations of the customers, you can be everybody. The fourth million dollar lesson is that scared people hide problems. I'll never forget the day I was just on my computer working and I got an email from my director of finance. And the email said, hey, I made some miscalculations and didn't realize that taxes aren't due in September. We actually need to pay them Monday. The total right now is $9 million. And so I guess you're going to have to move some stuff around, let me know how it goes and keep me in the loop. And I about my pants. So I was like, what the. Even just like moving $9 million from all the bank accounts into one is going to take more than a business day. I mean, not to mention I didn't know that we owed $9 million. I was really taken aback by this event and really took time to reflect and say, like, why did this person not tell me that they thought this might be an issue? What I came to find out was that this person had actually known of this sooner, but they were scared to tell their boss. And so what they did is they avoided addressing the issue as long as possible until the very last minute because they finally had to. That incident is what really led me to developing a 360 feedback loop. Essentially, what you want to do is make sure that at any point in time with somebody in the company, there's four sources of feedback you can get about that person. Most companies say, cool, I want the manager to get feedback about their direct reports. But in reality, you can have the manager give feedback about a person, you can have their peers give feedback about this person, you can have people below them give feedback about this person, and you can have Clients give feedback about this person. I have found that if you're able to gain all those perspectives, what it lets you do and allows you to have is a holistic perspective of that person's performance and how they're perceived within the team. Because you can see the common thread throughout all of the feedback you get. And you can also see if there's any anomalies that are outlined. The nice thing about this is if you're able to do it on a, I would say, like quarterly basis, then you can catch problems while they're small. And so the goal of this is to make sure that if people are feeling scared, you can figure that out and then you can change it quickly. You could use like a job form or a WUHU form or something like that that you can just throw together. There's a lot of softwares that you can use too. Like you could use Lattice, you could use Culture amp, you know, there's Office Vibe. All of those are ones that can help facilitate the feedback so there's not so much administrative work behind it. The fifth lesson is that every new teammate is a chance to break status quo. So here's what I mean by that. I was onboarding a new marketing manager. This person came in and I'll never forget, we were on a meeting and I said, hey, just be noting down observations. We had a meeting and I pinged him and said, like, what'd you think of the meeting? And he pinged me back and he said, I don't even know why we have it. And I thought to myself, I was like, what do you mean? And then it was like I was pulled out of the matrix. When I looked at it, I up leveled and I said, like, what did we get done in that meeting? Like, if I was a new person coming to this company and I was on this meeting, would I be like, why the are we. Like, why the are they wasting my time? And I looked at it, I was like, I would think that this is a waste of time. And then I thought to myself, I was like, well, why did this meeting used to be so good and what has happened? And I went back and I started looking at, okay, here's what happened. We changed the structure here. This person came in, this person went to another meet, and now this has changed with the company, which makes this meeting irrelevant. And so I said, you are completely right. I think this meeting has become irrelevant over time and we actually need to do this instead. Do you think that would make sense? He was like, yeah, that would be amazing. And so then I said, you know what I'd love is if you could pull together a document and I, what I'd love you to do is just notate everything and then once you've been here for 60 days, I want you to turn it into me so I can look at it and then I want to go over it together. And what I've found from doing this exercise is that it is invaluable as somebody who runs a company and even as somebody who runs a department to get feedback from people who have no context. You're so involved in everything that all you see is the trees, whereas they're able to see the forest. And so what I've implemented for people is that what I say is a 60 day observations, which is four questions that I ask somebody to answer. And so usually what I have them do is they take notes for the 60 days and there's certain things I'm going to ask based on their role that I'd like them to take notes on and then I have them answer these four questions. The questions are, what is working well here? What doesn't make sense to you? What activities seem to drive ROI and what activities slow us down? Honestly, this is something I do all the time. I recently did it, I had somebody come in in a leadership position, I asked them to give the observations and they gave observations. And I was like, holy, I've got to change a lot of stuff. And it's not because I don't know what I'm doing, but it's because we get into habits and then we don't realize that at some point and with a company that is new and growing, it happens probably on a every couple months basis. The activities that we did to drive value for a quarter change and then for the next quarter, those activities actually slow us down and don't drive value. They're actually operational drag. It's a great way to get feedback from people so that you can pull yourself out of the content and gain context on like, does this even matter? Should we even be doing this? The sixth million dollar lesson I had is that as soon as you stop selling customers, you start selling your team. So in the beginning when we started gym launch, I remember when I hired the sales manager and then it was like very quickly my time freed up, somebody else was managing the team, other people were selling customers and. And I thought to myself, what could I do that would be higher value than what I was just doing? And I was having a conversation with an entrepreneur, they were worth probably like Half a billion. And at this point, you know, I'm new into my career and I have all open ears. And I'm telling him, you know, well, now that I've stopped selling customers and stopped managing the sales team, it's performing just as well. You know, I'm not really sure what I should be doing. And I remember he looked at me and he was like, layla, you don't sell customers anymore. You sell teammates. I was like, interesting. Just like you market and sell customers, you also market and sell employees. But you're selling people different things here. You're selling people a product that's going to help improve their life here. You're selling people a job that will help them achieve their goals. And that was when I realized also that all the frameworks that we use in a sales department can be used with building a team. Actually, there was one that Alex wrote in his first book. That was the first framework I think ever was created for our sales department, which we called the closer framework. And I actually took that framework and applied it to the hiring and recruiting process. And that framework was literally the word closer, which is clarify the why. Label the problem you solve. Overview the pain, sell the vacation of where you will go. Explain away the concerns and reinforce the decision with proof. So a lot of people hear that and they think about selling customers and I think about selling employees on the vision of the company. And what that looks like is clarifying the why. Why did you apply to work here? Why do you want this job? Why are you looking for a job? Why do you want to leave your current job? Labeling the problem you solve, Amazing. So here's what we do here, and here's how we do things differently than other organizations. A lot of organizations lead with fear and they like to micromanage. People like to. We like to lead with autonomy. We like to give people freedom, and we try really hard to lead with praise rather than punishment. I'm sure you know what it's like to show up to work and feel anxious and stressed every day. I used to feel like that too, which is why I'd like to build a company that we don't do that. Sell the vacation of where you go. You're coming into this position. Here's where the company is going. Here's where your position could look within that greater vision of the company. Is that what you want for yourself? Explain away the concerns. Oh, I'm concerned. Just like I'm not going to be able to have work life balance because, you know, we work from home. Okay. Well, here's the things that we do here. You know, you can put up your slack away message on your calendar. We ask you to put what your working hours are so somebody can go check and make sure that they can see what your working hours are. We don't expect you to respond out of this workout. So there's always things that you can explain. And then lastly is reinforce the decision with proof. Have people talk to other people that are already on the team. The last lesson, lesson seven is if you want to win in business, you need an equally strong talent funnel to match your client acquisition funnel. So when we were first growing gym launch, I remember that when we finally got product market fit, the calendars continued to fill up to the point where like myself and our salespeople could literally not do anything else in the day. I was looking at, well, where's the next bottleneck of the business going to be? And what I realized was that deal flow or client acquisition flow was not the problem. But the problem was, holy crap, who's going to keep servicing these clients? Because the five people we had on the team were not nearly enough for the rate that we were getting people into the Just like we understood how to generate leads, nurture those leads and sell those leads, we needed to learn how to generate applications, nurture the talent flow and interview people well enough to get them on the team. And so the moment that I realized that Alex and I established this framework where we realized that Alex was going to handle the external funnel while Layla handles the internal funnel. Because if you have two equally strong funnels, then you can grow a business without heading up against one of those constraints. Because what happens for a lot of businesses is they really hone in on the client acquisition and then what happens is they start to see everything's going really well. It's amazing. All stuff. And then all of a sudden one day they look and they're like oh my gosh, the churn is getting really high. Ah, the testimonials. There's lots of them. As we grow, things start to get worse. Yes. Because we have not scaled the infrastructure of the company. 80% of companies internal strategy does not accurately support their go to market strategy or customer acquisition strategy. The 20% of businesses that don't do have a strategy tend to make 30% more profit than those that don't. And so a lot of people would say, okay, well Layla, how do I do that then? Well, I would say if I were trying to improve something in a business, I would probably increase the amount of measurement on that area. So, for example, if you want to improve sales, you want to make sure you're measuring all the right metrics, right? Okay, how many leads do we have? How many are qualified, how many get booked a call, how many of those calls are qualified, how many then move to second call, how many then move to close on the same side. If you want to get really good at having a talent acquisition funnel, right, where you can acquire talent to help grow your business, then you want to look at the number of applications, the number of screen candidates, the number of qualified candidates, the number of candidates get to a first interview, second interview, third interview, the number of offers that you present, the time to fill a hire, and the quality of that hire. And so a lot of people don't have one of these sides of these funnels. And. And so quality drops on either end as the business gets bigger. But if you're able to assign ownership of each funnel to different people and then put equal amounts of attention and tracking there, then you can scale these at the same time without quality dropping. I hope these seven lessons were valuable for you. Honestly, if I had known these lessons prior to starting a business, I just wouldn't have been so stressed.