← Build with Leila Hormozi
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What's up guys? Welcome back to Build. And today I am answering your business specific questions. So what I actually did is I had polled my audience on Instagram and I basically said like, give me the top questions that you have about business and I'm going to make a podcast on it. And so this is me live reading through those questions, answering them with whatever comes up and is top of mind as an answer to these questions. So let's get started. Okay, what traits to look for in people when building your finance team? Interesting. So my experience in building out a finance team is. So what I actually did is I had polled my audience on Instagram and I basically said like, give me the top questions that you have about business and I'm going to make a podcast on it. And so this is me live reading through those questions, answering them with whatever comes up in his top of mind as an answer to these questions. So let's get started. Okay, what traits to look for in people when building your finance team? Interesting. So my experience in building out a finance team is there's a few things. So one, most businesses don't need a very large finance team. Finance has a lot of leverage because a lot of the times you're doing the P and L, you're safeguarding the company, you're putting procedures and processes into place. But most companies, you know, you don't have a 50 person finance team. And so that being said, when I'm looking for somebody, I'm not looking for somebody who's like a ladder climber, who's like, how am I going to move up in the company? And I'm going to want to take on more and do all. It's like you actually in that department specifically don't really want that because you know, most of the time, even in my companies that did multiple hundreds of millions, you know, there's like five, maybe at most 10 people in finance. And that's like with you know, AR and AP included in there. And so if you don't include like ar, which is collections and delinquent payments, then it could even be less than that. You know, I know a lot of finance teams for very large organizations that are like two or three people. It's just like a highly leveraged department. And so I'm not looking for somebody who's like, I really want growth and to move up. And do you want to grow in your role? Yes. And we want to invest in your skills, but trying to continue to move up, that's not really the department for that. So that's the first thing I would say. The second thing is that when you're looking for traits. Honesty, honesty, honesty, trust, trust, trust. You know, if somebody's going to be handling money and have access to those things, there's really a huge element of needing somebody who obviously that you can trust. And that's first and foremost. You have to be able to trust them with your money. You have to be able to trust that they're going to do right by you. You have to trust that they make sound financial decisions, and you also have to trust that they're going to be honest and keep things that need to be confidential. Confidential. You know, people in your finance team, they see how much everyone's paid, what you pay for bonuses, you know, what you run through the business as expenses. And so if those people don't have discretion, then that can be detrimental for your business. Not because you make bad decisions or you have anything to hide, but because information like that given out without any context, like, o, do you know how much this person's paid versus this person? Did you know this department makes this much versus this one? It's like without context, those things can turn into gossip and they cannot be seen in a good light. And so you want people to have discretion. They're going to keep things to themselves. They're not going to tell people everything and every little number in the business if it's not beneficial or if it's not presented properly. So looking for people who are honest, looking for people who can use discretion and looking for people that you trust. They really can't do their job unless you completely trust them. And so that's why I think that that's such an important piece of it, is you just have to, I mean, like, I've never brought somebody in the finance and been like, you're going to earn your way into the bank account. It's like, no, you have to give that to them pretty much from day one. And you need to be doing vetting on the interview process to allow those people to operate in there. And so, you know, for the most part, my best finance teams, very logical, very trustworthy, usually a little bit more reserved, a little less vocal, a little more keep to themselves. They're a little bit more introverted. And I think that whether the work creates people like that or people like that are attracted to that kind of work, I do think that's usually like, the personality that you see in a finance team is that people are a little bit more introverted. They probably like working by themselves. That's probably why they're attracted to that kind of department. Now, I'd say as you go up and you look at leaders, you know, if you have a controller, you have a VP of finance, you have a cfo, those people are going to have more influence, leadership, cross departmental collaboration skills, like, they're going to have better communication skills in general, because that's needed for those roles. And so usually those people are a little bit more extroverted, but the people who are doing the crunching the numbers every day, building the spreadsheets, building the projections like, they typically are a little bit more introverted. And I don't think that's a bad thing because I think that if you're extroverted and then you go and are working on spreadsheets all day, you're probably not stoked. Next question. My business makes me unhappy. Do I keep going? Man, that's such a tough question to answer because honestly, I can't tell you the amount of times that my business has, quote, made me unhappy. It's giving a lot of power to your business to say it can make you happy or unhappy. I think it can cause you a pain in the ass or not. It can cause stress. Yes, but can it like make you happy or unhappy? No. I don't give anyone or anything outside of myself that power. But if it's causing you a lot of stress, a lot of frustration and all of these other negative emotions. And so because of that, you're like, do I want to keep doing this? I would say that a lot of people give up too soon. You know, the first couple years in pretty much every business, I've had fucking suck. So, like, I don't really know what to tell people when they're like, you know, I'm 18 months in. I'm just, I'm like, yeah, sometimes it takes three years. Like, this is not for everybody. It's not for everybody, guys. It's really, it's really not. I like to say, like, I'm really good at feeling bad. I want my goals really badly. And so I've learned to associate not always feeling good and feeling uncomfortable and feeling stressed with me achieving my goals. And until you bridge that gap, being really successful is be fucking hard for you because it requires a lot of sacrifice, it requires a lot of uncomfortable experiences, and it requires a lot of stress that you have to learn to manage. And so I have a rule for myself. If I think something's making me unhappy before I decide if I need to get rid of it, leave it. End it, whatever it might be. I need to learn how to be happy with it in my presence. Okay? So this is a rule that I actually got from one of my friends. Gosh, it must have been five years ago. Which is like, if you think that your marriage is making you unhappy, get happy before you leave your marriage. If you think that your friend is making you unhappy, get happy before you end that friendship. If you think your business is making you unhappy, get happy before you end your business. I challenge you to figure out how to be, quote, happy while maintaining your business. Because what you will find is that a lot of the times it's not a thing outside of us, but our perspective of it. Right now, I will say second to that, aside from changing your perspective, is just expectations. Sometimes I think that people are, quote, unhappy. I don't even. I'll be honest, I don't talk about happiness much at all because I just don't. I don't focus on it. Like, I. I don't even think about, like, am I happy or am I not happy? I'm just like, I notice it when it occurs. It's never my goal. And I think actually because of that, it occurs a lot more often for me. But I think a lot of the times, the reason people aren't happy in business is because they have these really wild expectations of what it should be like. And it's funny because even half the time when I'm making content like this, I'm like, man, I start to even think, like, am I one of the only ones that. I mean, I, like, I've done this many times. I work with all these entrepreneurs. Like, do people really not understand yet that, like, it's really fucking hard and, like, your business probably isn't going to make you happy. It's probably going to add a lot of stress to your life. Most of the time, everything's 50. 50. It gives you, like, 50% good shit and 50% bad shit. And so, like, same with the business. Like, yes. Will you get more money? Yes. But you'll have more pain in the ass, too. Like, now you've got employees. Now you've got, you know, vendors. Now you've got customers. Now you've got. You have all these things you got to deal with. Yes, you have more money and more freedom, but you have all these other things too. You know, I would just say, like, with everything in life, nothing's going to make you happy. I remember when I was 28 and I realized, like, oh, my gosh, I have $100 million. That's crazy. And I'm 28. And, you know, probably about eight years before that, somebody told me, they're like, you know, money doesn't make you happy. And my internal dialogue was always like, yeah, but I'd like to find out, like, you all tell me that money is not going to make me happy. Like, I'm going to go try and make a fuck ton of money, and then I'm going to let you know what I think. And I remember sitting there in that moment when I realized how much money I had, and I was like, wow, it really doesn't make me happy. In fact, I think that the happiest I ever was when I had the least amount of responsibility in my life. You know, when I was like a teenager or I was, I think the summer between my junior and senior year in high school, I was really happy because I had no job that summer and I had no responsibilities. And that felt good. I felt super happy. Now, was I growing? Was I achieving goals? Like, probably not, but I was happy. I will just put that out there for everyone, which is like, it's not your business, it's not your money, it's not your work's responsibility to make you happy. I also would say, just expect a lot of things to feel worse than you think they're going to, and that will help set you up for success. Because a lot of people quit because they think it's gonna feel better than it actually feels. And the reality is building a business, doing something worthwhile, achieving hard goals, like, they never feel good. Do you follow intuition or logic in business? And how do you distinguish the difference? Interesting question. So a lot of people ask me, that's probably because I say, fuck your mood, follow the plan. Now, this is what I actually ask people when they say, do you follow your intuition or logic? Or a lot of people ask me, like, do you follow your intuition or gut? And I'm like, can you even define what those are? And people like, you should follow your gut. I'm like, well, what the fuck is my gut, you think? My stomach. I've got ibs, so that's not a good idea. But really, like, follow your intuition or logic. Those are clearly different in that, like, there is logic, like first principles, thinking, does this make sense versus do I think this makes sense? Do I feel like this makes sense? I think those are how I differentiate intuition versus logic. Now, if I were to really boil down, what do we really think intuition is? I actually think that intuition is. You are recalling on past Experiences that you've had similar situations, and you're deriving principles or conclusions from that past experience, but that past experience was so long ago, or you're. It's so far back in your memory that you can't really recall the exact experience. You just need know or feel like you have dealt with this before. And so there's been a lot of studies on this as to, like, what is intuition? And it's typically that it's like pattern recognition. We just don't really know how to recall where it's coming from. I think it's useful to take into consideration your intuition in things, right? So I'll give an example of that, which is me and Alex are considering doing deals with people. There's been multiple times where, like, there's somebody who wants to do a deal with us. Maybe it's a real estate deal, maybe it's a business deal, whatever it might be. And I'm like, dude, you just feel like this guy's like a complete fucking snake. And he's like, why? And I'm like, you know, he reminds me of these three people who they were all fucking snakes. And he's like, really? I'm like, yeah. And it's like, I can't even tell you guys how often those people actually end up in jail. Like, we have truly avoided every, you know, fraudulent person because of my intuition. Now, why is that? That's because early on in business, I met a lot of people who were like that. And I noticed they have similar personality traits, they have similar characteristics, they have similar ways of presenting themselves. And so I've been able to learn what that kind of person looks like. And essentially what I think it is is, like, people who lie. Like, what are the traits of people who lie a lot. And they cover things up and they're, you know, not forthright with the truth. I would say that it's a combination of quote, following your intuition and logic for the most part. I use first principles to think through everything, which is just. Does this make sense? Screw what everyone else is doing. Screw how the world says needs to do this thing. What makes the most sense for how to accomplish my goals based on what I know to be true about the world? Right. It's actually why when we start acquisition.com, everyone's like, oh, what private equity firms are you studying? And I was like, none. And they're like, well, why would you study none? Like, well, I think a lot of them probably do it in a way that, like, I could figure out a way to do it better. But if I know how they do it, I'm just going to be thinking about that as my reference point. And I actually would like to do something new and innovative and different. And so I don't really want a strong reference point point. And so I think a lot of people would do really well if they followed that first principles, logical thinking. Next question. How do you choose a business partner? That's a really great question. I will say this as a question Back to Anonymous. 1, 2, 3. Why do you need a business partner? A lot of people are just scared to do things on their own. They're scared to do things on their own, and they actually need employees. But instead they say, oh, I think I need a business partner. And so my question is, why bring in a business partner? Now, this doesn't mean I think it's a bad idea. I think it's fantastic to have the right partner. Obviously, I'm married to mine, but a lot of people haphazardly think through who should be my business partner. And it's not because they actually need the business partner to make it work, but it's because they're lonely. They're lonely. They don't know how to hire the person. They don't know how to find an employee. And so they figure, oh, I guess I've got to get a business partner. And so the first question I'd ask back is like, okay, what skills are you looking for this person to have? And could you hire those skills in an employee? Because if you could hire those skills for, you know, $100,000 a year or even $50,000 a year, then why are you giving away half your business to bring in a partner? It's a really important thing to think about. Now, I'd say second to that is when you're choosing a business partner, you really have to think through three things, which is, do you share the same mission and vision? Do you have shared values, and do you have shared interests? If you have those three things, I think that it makes for a fantastic business partnership. With the caveat of this. Do you have complementary skill sets that make it easier for each of you to achieve your mission and vision with each other? Okay, so, like, if you look at Alex and myself, obviously we're married, but that's not why we're business partners. We were actually business partners before we got married. We have complimentary skill sets, yet we have shared values and shared interests. Right? And so we both abide by the same values. We both want to get to the same Destination. And we have a lot of the same things we're interested in on the way there, but we have different skills. And I will say actually that in the beginning, I think we had more similar skills because I came from a sales background. Alex came from a sales marketing background. I was actually learning a lot of marketing when I met him, and it made more sense for us to split our skills. And so I really took on, you know, leading the team, learning all of the operations, leadership, strategic planning, you know, all of those things really, like the role of CEO. And he really took on, like the role of understanding how to make it rain. Now, I think we both could have done the opposite too, and we almost did in a business that we started before this. But we said, like, we need to make sure that we hone in on the things that we think that we would have an advantage in. You know, that kind of set us off on the right foot to now we have completely complimentary skill sets. I can be really good at what I do, and he can be really good at what he does because we get to focus on it. Right? And so you want a partner that allows you to focus on the things that you're really good at, and they can focus on the things that you're really not good at. And so you want to make sure that you have complimentary skill sets. At the end of the day, though, like, what I think you really need to ask yourself, is being partners with this person going to make it easier or harder for me to achieve my goals? So basically, like, is it worth the trade off? Right. And so I think that asking yourself that question is really important. And then there's also making sure that you're not overcompensating for a problem that basically, are you putting a cast on a cut by getting a business partner instead of just needing an employee? These are the two common things that I see. And so I just like, I would ask you to pause and think through that before you select a business partner, especially if you don't have one right now. Next question. What are my thoughts on a low margin business? Less than 20%. You know, when you have a really low margin business, I would say this, which is if your goal is to have a lifestyle business, it probably doesn't make a lot of sense that you start a low margin business. Because if the whole goal is to take the money to then spend more time with your friends and family and doing other things that you love, then you probably want a business that has high margins so you get more bang for your buck. If your goal is to build something that you can sell one day and that is easier to run without you in it, then having a lower margin business can have advantages. There's a lot of low margin businesses that are like manufacturing low margin businesses that are physical products and they take a long time to increase those margins. Sometimes in the beginning with businesses like that, you might start at like 20%, but over time, with economics of scale, you can get to somewhere like 35 or 40%. And so some businesses start off low and as they grow, you can actually increase that margin by renegotiating, you know, the deals and the prices that you have with vendors, by efficiency of your workforce, by simply getting more recurring customers and increasing their lifetime value. That's if you're in it for the long haul and probably building an enterprise rather than like a lifestyle business. I'll be honest, personally, I'm not a huge fan of low margin only because of one thing. I don't like feeling like there's not a lot of wiggle room because I'm going to make mistakes that is inevitable. And so I don't like knowing that there could be a month where if I make one kind of big mistake, I could just like go into the red. I don't really like that. That's probably why I've stayed away from a lot of physical products businesses. Now I did have a supplement business and that was also low margin and I did not like that. And it was the case where like, you know, you'd put all this work in and you know, you make millions and millions in revenue and then be like, wow, this is it. At the end of the month, like I made 20% of that. That's it just felt was not super incentivizing. So I don't think there's anything wrong with them, especially if you're looking to build a big enterprise to sell. I just think that if you want to make money and have a business that you can live off of, then it's maybe not the best business for you. And then last question here is, do you think doing business is for everyone? You know, I like to think that anyone can learn anything and I think that that's true. But I do think that everybody has a different ceiling in terms of like, I think that everybody has a ceiling in terms of like honestly, just natural born intelligence. And so I do think that there's some people who having a business might go beyond their natural skillset and their actual like baseline intelligence. You can change that over time. There's a lot of studies that show this, but I also think, like, you're kind of just like fighting an uphill battle, right? I would say second to that is that a lot of people, the current skills that they have, make it hard for them to do business. What do I mean by that? They might have really low stress management skills, they might have really low emotional regulation skills, they might have really low patience, they might have really bad people skills. And so those are things that I would say I would tackle before starting a business. I think business can be for everyone. I just don't think it's at every time in their life. I think that it makes a lot of sense to try and get a lot of these baseline skills to make it as easy as possible for you to win when you do enter the business arena. Because I will say business on its own is fucking hard. And so if you don't know basics of like, stress management, emotional regulation, communication, leadership, patience, it's going to be hard. I think that you would rather set yourself up to make it easier, not harder. Right? And so I think that's the first thing I would say. I would also just say that it's very difficult to do business if you seek to be comfortable all the time. So if your goal in life is to be happy and comfortable all the time, I just don't think business is necessarily the route to go. Like, I think that you could probably be more happy and comfortable in a job that you don't have to put a ton of discretionary effort into, that doesn't call you at 4am and doesn't quit on you at 12am in the morning. Whereas when you have a business, those things can happen. So there's obviously different kinds of businesses. Like, there's many nowadays that you can start where you don't have employees and you don't have interaction with customers. But I would just say those are ways of making money less than businesses. Right? So I'm really speaking to having a business where you have customers and you have employees. And I think that that requires a certain type of person. And if anything, like, you know, if you guys derive anything from my content, like, I don't do this because, oh, I want to make so much more money. Like, I can buy whatever the fuck I want right now. I do this because I want to build something epic and because I have a big vision that I want to fulfill and because I want to help make people's lives better while I'm here with this time on this earth. Why? Because what the fuck else am I going to do? It's not the most romantic reason, but it's the truth. And I don't like the bullshit. So, that being said, I hope that this episode was good for you guys. I hope you got some questions answered. I hope, if anything, you got a little nugget in there. And I will see you on the next one.