← Build with Leila Hormozi
Build with Leila Hormozi
How To Actually Build a Million Dollar Company | Spotify Video Exclusive
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I'm going to teach you four questions that can actually grow your business in 2024. The first question you want to ask yourself is gun to head. How would I make an extra 2 million, 10 million, $15 million in 2024? Gun to head frame. Now, before I get into what that means, let me tell you a little story. I was on a call with one of our portfolio companies. They're doing about 50 million a year right now. The goal was, how are we going to add 2 million in EBITDA? EBITDA is basically cash in your pocket to the business over the next year. And then people start talking about the best way that we could add 2 million EBITDA is what if we started a new product line? So to give you context, this business currently serve businesses that are usually doing anywhere from $300,000 a year to maybe like 1.5 or 2 million a year. And the goal was, okay, let's open up this new product line that can serve businesses that are doing anywhere between 20 to 30 million a year. And so everyone's sitting on the meeting and everyone's like, yeah, yeah, nodding their heads like that sounds like a great. Logically, yes. Like it's the same type of business. They're just a bigger business. It's an enterprise vers small businesses, so let's just go upstream. And so I sat there listening and the one thing that kept coming to mind for me was if I had a gun to my head, this wouldn't be the way that I would bet that I would make $2 million in profit this year. In fact, I started doing all the math. I'm like, currently, the resources we have in the company, the marketing, the sales, the product, the customer success, the finance, all supports SMB customers. And now we're saying, hey, easy, let's just go after the enterprise clients we've been turning away. Well, has anyone thought through how long is it going to take to be able to learn how to attract those enterprise customers? How long is it going to take to train and hire a sales team that can sell enterprise customers? How long is it going to take to have a product that they tell their friends about? And how long is it going to take to have a team who knows how to support enterprise customers, which is completely different than a small business owner? And so when I laid this out in my head, I said to myself, if I had to back into how long each of those things are going to take, think about a new marketing campaign alone. That might take three or four months just on its Own. And then we've got to get the sales team hired, and then we've got to get them trained up, and that's probably going to take another eight weeks. All this time, what the hell are we actually selling? We don't even have a product. We actually have never worked with Enterprise before, so how do we even know what they want? The frame that I gave them is I said, if I had a gun to my head, the way I would make $2 million in EBITDA would not be by doing this. That if we did this, it would probably be eight to nine months before we even made a dollar. And. And that doesn't even take into account all of the costs that go into building the new marketing, building the new sales, hiring everybody up front, training the new team, not to mention the cost of split attention. Because if you've ever had a business where you've served two customers, it's a different business. The frame is, if you're trying to figure out this year, how am I going to make more money? Gun to head, if I had to make $2 million this year, what would I do? And what that does is that frame puts me in a state of mind of if I had to be damn sure bet on my life that I was gonna make $2 million, what would I do? It also happens to be that what you choose is usually something that is using existing resources, that is not a departure from your mission and not a departure from your strategy and is more additive than it is a departure. And so the cool thing is that you usually come up with a better plan. It just doesn't sound as cool. In fact, let's look at the P and L for the last 12 months, and where did we make the most money? And it happened to be that that business made a ton of money from two events that they hosted. And so I said, is there any reason why we've only done two? And then the response was, well, we've always just done two a year. And I was like, that's so interesting, because in those two months, you make four times as much profit as any other month. Is there a reason that we wouldn't do it every quarter, every month, every week? And they were all like, no, we've just never done it that way. And so I said, I think a great way that we could make 2 million in profit this year is let's just do four more events. We already know they work. We just need to do more of them. And it was like a light bulb went off for everyone in the room. In fact, the highest level executives all were like, yeah, you're right. And I was like, do you see how that would be so much easier than starting up this new product line? It will take a year. If the goal is to increase profit, do you need cash in the short term or the long term? Because option B over here, which is build out the enterprise level for clients, is something that is an investment. And it's probably going to take two years to significantly cash flow the business. Say you're making money by month nine. You're not even recouping your initial investment until like month 15. And that's if it works. I would say if your goal is to make money, then it's a bad strategy to do that because you're going to feel pressure to go faster because you're like, I need to make money, though. I need to make money. It's like, wait, that's. That's not how we do this right now. If we want to make money, what can we do more of that we're already doing successfully? Double down on your strengths. You're already doing something well in your business and you have things that are going really well, what you want to do. Sit down and write down, what are the top three things that I do in my business that are successful actions? And then how can you do more of those things to make more money in 2024? Everyone's always looking for complex answers because you think, oh, gosh, there's some silver bullet. There's not. Do more of what works, do less of what doesn't work. I think a lot of people continuously chase the fancy stuff because they haven't been in business long enough to realize that it truly is the basics. If somebody were to come here and see the things that we're doing with our portfolio companies, like, there's nothing crazy or we don't have some crazy algorithm for marketing and sales and product. And like, oh, yeah, you know, look at Alex's brand strategy. They've all been like. Like the way that he posted this, he was trying to put. I'm like, there he is. There's me on the Internet. What? No, he was like, tired and posted this thing. And like, people like her video, when she said this right here, it's because it's nlp. I'm like, I don't even know what NLP means. And so a lot of people are inexperienced attribute problems or success to something complicated, but it is actually the exact opposite. What people who are billionaires know is that simple scales, fancy Fails simple stuff done really well over and over. When you pour the gasoline on that, that's what grows a company. Fixating on complicated solutions. It's never going to work. You haven't yet seen what happens next. And so you just believe, Gosh, it seems like there has to be something easier than this. It has to get better, right? No, it doesn't. It just continues to be hard. But you get better at it and you acquire more skills, and then eventually you see, hey, I've just got to do the simple stuff, right? The second question is, how would we 15x this business in a year? This question is going to help you think in orders of magnitude rather than incremental improvement. So one of our portfolio companies, I was reviewing all the materials for our quarterly ahead of time. I was sitting there and I was reading it, and I just. I can feel when I'm uncomfortable. And I was reading it, I was like, uncomfortable reading it. I was like, something doesn't feel right. What's the evidence? What's actually happening? So I was staring at the monthly objectives, and then I realized that I wasn't looking at the monthly objectives. I was looking at the yearly objectives. And when I was looking at them from a monthly objective, I was like, we could do more. And then I realized that I was looking at the yearly objectives, and I was horrified. I was like, holy crap, this is it. I felt like I got hit with a ton of bricks. I was like, holy, this is not going to grow the company. You know, I thought that that was like, what we're going to do for a month, let alone a year. I'm like, how on earth would that take a year? When I had that realization, I was like, the issue is that we are thinking in terms of incremental improvements rather than orders of magnitude. With a lot of companies that are below 50 million in revenue, it doesn't help anybody to think in incremental improvements because it takes effort to maintain a company. It takes even more effort to grow a company. And so I was thinking to myself, how do I get this founder to see this? The same way I see it, I need to get us thinking in a different frame of mind. So I said, what would it take to 15x this business this year? Because here's the thing, most people can't even go to that level. You would need resources that you don't have today. You would need people that don't exist. You would outgrow your systems, which currently would absolutely break. What most people do when they hit that is they Say, oh, gosh, I don't think we can do that. Because, like, think of all the stuff I'd have to do. That's like what growing a company is. And so when I realized that, I was like, cool, so we're gonna write down everything it would take. And while we were doing this, it was really interesting because I could see the people on the team and the executive team was chiming in. They're like, oh, well, we couldn't do that because Sally, I don't think she has the skill. Right. We're going to need a new Sally. And then they're like, well, we couldn't do that because we would need to get on, like, Salesforce, right? So we're going to have. That's another. Another goal for the year. Get on Salesforce. And then they're like, wait, you know, if we're doing that, we would have to compensate our sales team to. Yes, so we're going to have to change the compensation of the sales team. It's like everything that people say that's why we couldn't grow the business. Those are the exact things that become the goals that help us grow the business. The issue is that what I was seeing happen to everyone on the call is that they're keeping themselves stuck in this frame of thinking very small. The whole time, they kept telling me why they couldn't do the thing, and I kept taking their objections and flipping them onto why we could do the thing. You just told me how to do it. You told me that system would break. So, in fact, what that means is we need a new system. If you can take your objections and flip them into a prescription for how to grow your business, this is what people who win do. They look at the constraint and they turn it into an opportunity to achieve their goals. So I'll give you a personal example of this. I just hit, like, 400k on Instagram. And so I was like, maybe this year we could figure out, like, how instead of getting to, like, 500k, like, how would it get to 600, 700k this year? And then I was like, you know, what I just realized is the same principles that I applied to business could be applied to content. So instead of saying, how am I going to get Layla from 400 to 600k this year? Which doesn't really excite me, what would it take to get Layla from 400k to 3 million this year? What would have to happen? And so it could put me in a completely different frame of mind. I was like, well, I would dedicate twice as much time to content. I would start up a new podcast show. I would write a book. I would work on content every day rather than one day a week. And so I started just listing out all the things that I would have to do to make that happen. The same principle that you can apply to business, like I just explained, that I can apply to content, like I just explained, can be applied to any area of your life. And I have seen that most of the time, setting a higher goal works, but how you manage your emotions around that goal and your expectations and the teams and how you react when you hit or don't hit a goal, I think is more important than if you're setting it higher or lower. And I think it puts you in a great frame. Because the likelihood that every time we say, hey, how am I going to 15x my business? How am I going to 6x my content? That we actually hit that exact 6x or 15x, I don't know. Right. I don't have, like, the math on that or the statistics. But what I do know is that you'll hit more than if you try to grow 20%. The third question is, what would it take? The moment that you ask yourself these questions, you're going to be thinking of all the reasons that this wouldn't work. And a lot of the times you can take the things that are the reasons why it can't work and turn them into things that you need to do to make it work. I want you to ask yourself, what would it take to 15x my business in 2024? And I want you to write down all the reasons you can't do it. And then what I want you to do is exactly what I just did. Turn those reasons into tasks to do to grow the business. And then you're going to look at it and say, well, gosh, you know, Layla, I don't know how to make a funnel that way, or I don't know how to migrate into that CRM. I don't know how to build a sales team of 30 people. Then you get to determine what skills do you need to acquire to grow the business to this degree, or does just somebody have to have. Somebody has to have the skill of doing these things. It doesn't mean it needs to be you. Every objection you have to growing your business can turn into a goal to grow it. Okay, so we were meeting with one of our portfolio companies, and the business does around 6 million a year in revenue. It's on the smaller side, and the Business was growing for three quarters and then this last quarter it is stagnated. And I was talking to the CEO, asking her, what did you do that caused it to stagnate? Essentially I could tell that she was so in the weeds because she told me about 60 different things that they did as to why it stagnated. And I was like, I'm pretty sure like your executive assistant, like not bringing you coffee didn't have anything to do with it stagnating. Nonetheless, what it told me is that she was very much in the weeds of the business and she was involved in absolutely everything. And that actually pointed to more of a problem itself, itself, which was for every solution that we would present. She just told me 16 ways why it wouldn't work. And so the frame that I flipped to her is I said, well, what would it take to make it work? And then she started listing out begrudgingly all of the things that she would need to do to make the business work. I would need a new marketing and sales leadership, probably demote my head of customer success. I think that I would have to bring in somebody to create a new product. I would have to implement a way more rigorous sales training program. She's like, but we don't have any of those things. And that is what keeps a lot of businesses stuck. They're constantly referencing what exists today as a reason for what cannot exist tomorrow. We've gone through what does it take to hit this revenue target? And then they list out everything it takes. I say, great, I'd love you to create an org chart that supports that one rule. No names on the org chart. And the org chart looks great most of the time. It's like, ah, that makes sense. We'll move maybe this or that. But like overall this makes a lot of sense. I think this would support our goals. And as I'm going through it and I'm asking questions, I can see their face getting more and more concerned. And I say like, what's wrong? Well, if this was the org chart, where would Sally be? But there's usually one to three people in an organization that because the founder so close to them, they put off making massive changes to grow their business because they're concerned about that one person. And what it does when you have no name org charts is it exposes to you that one, you are capable of hitting the goal. You do know how to put the organization together to hit that goal. But also on the third consequence of that is that you probably do have people changes that you have to Make. So all of the things that we just listed out that are reasons that the business could not hit that revenue target now become our goals for the year. This is the list of things we need to do to hit that revenue target. If we change these things, we upgrade these things, we add these people, then we are able to hit our targets. And so that's how you can use your natural inclination for negativity to your advantage. If you can flip it. And then these three questions lead you to thinking, okay, that all sounds great, Layla, but who's going to do it? And that's the last question, which is, who do you need to make this happen? When we had our business gym launch and we started a company called Allen within the business, it was not supposed to be a software company. In fact, we just wanted to integrate software into our existing business. I think a lot of people from the outside would say it was a big success. You know, essentially what we did is we used the profits from the existing business to help fund the creation of the software. And during that time, Alex oversaw the product and I oversaw the customer experience, the UX and all the rest of the supporting pieces as the product came to fruition. What I realized very quickly after I started learning more about software was that neither of us knew anything about software and we had done it all incorrectly. I realized that in order to grow the company to where I needed it to, we would have to undo a lot of the work that we had. And so I think that is why it was not as valuable of a company as it could have been, because we didn't build it right from the get go because we were not the right. Who's, you know, we'd started all these other companies ourselves. Why couldn't we do this one? Well, I didn't realize how big the knowledge gap was with one of our portfolio companies. When we asked ourselves, hey, the company's worth, let's say probably around 200 million today, if we wanted the company to be worth 500 million in three years, what kind of company would it have to be? What would it take? And then the answer to that was, it would have to be a tech enabled company. And so that means there is technology that helps facilitate part of the product or service that is valuable to the customer. When we decided that, the next natural question was, who do we need? Nobody here out of all the three founders has software experience. And so the first thing that we would need to do is if we wanted the best chance of success, gun to my head, who would I have to hire for to reach those goals. And so the first thing that we did is we built out the new org chart with the who's that we needed. Because we know that, hey, before we go and on our own, try and build a software company, which we've never done before, maybe we should just, you know, hire people who have. You will go through the three questions that I posed to you. You figured out what you need to do to grow the business and how to have an awesome 2024. But then you get stuck at this piece, which is you think that you need to do all of it. And the thing is that you don't need to do all of it, but you do need to assemble the team that does. Your job as the CEO is to assemble the team that is capable of doing these things. And so if you're trying to grow the business in a way that you have no experience, it would probably make sense to you that you would hire a consultant or a mentor or go to an event or purchase a course on that subject. What if you had your own in house subject matter expert of that thing rather than taking a course on how to build software? What if you just hired somebody to build a software and had them in your company and you just had access to them all day? It sounds simple, but that's how you do it. And that's how big companies get to where they are, because they have those resources internally rather than constantly grabbing externally and then trying to do it themselves. Great, Leila. So I need to hire a cto. How do I even know that a CTO is good? I apply the same principle to interviewing that I do to reading books. So if I'm trying to learn something that I've never learned before, I'm going to try and find the best books on the subject and read 10 of them and then take the common threads that I see throughout them. And then usually those common threads end up being like, those are sound principles that seem to be agreed upon by all people. I take that and I apply that same concept to interviewing. So I will interview 10 candidates and I will ask them how to solve these problems that they would be doing in their role. And then I take the common threads from their solutions and that is exactly what I use as the framework. So now I know what good looks like, because I've interviewed people enough times to see what are the common threads that they all say, what are the things that all of them are repeating. And then I use that to develop a rubric to which I can then put all of the candidates through to say who's A, A, A B or a C.