Transcript
Alex Hormozi (0:02)
You just want to find people who are absolutely unreal. And the litmus test that I have is that you feel this, like, desperation in your core when you talk to them. You're like, I have to have this person. It's not like, oh, I have this role. I guess this is the least bad of the 10 people I've talked to. I would encourage you if you're ever in that situation, this is the least bad. Just don't, just keep, keep looking. Very tactical, right? Yes. You got tactical questions. Okay, good. That was, that was the hope and the goal of how we structure it and what's interest thing is that the point that I think is most valuable because you guys are going to, you know, go home and, you know, you'll leave here and you'll probably open up a blank document or turn a blank page in your notes, whatever, whatever you do to take notes, and you'll have your pages and pages of stuff that you got from here. But the other blank document is going to be what am I actually going to do? And I just want to make sure that that page has the right three things on it. Because fundamentally you're not going to be able to do all the things that you learn here as much as you might want to. Right. And so fundamentally, the strategy of a business owner is prioritization, right? That's, that's what it means. And so we have to take limited resources, which is time, money, energy, the team that you have against unlimited opportunities or things that you could deploy it towards. And the people who move fastest in their businesses aren't the ones who necessarily do the most, the ones who get the most for the effort they do. And I think that, that, that process of thinking has helped us move faster. And what's interesting about that is there's so much leverage on knowledge. Like, there's so much leverage on knowledge. Like, if you could go back in time and help your young self out, how much faster could you get to retract? Like, it's almost laughable. And the thing is, is that you probably felt like you worked hard then and you probably feel like you work hard now, and there's a version of you that knows five years from now how much better you could be doing. And that's the value of knowing the right next move. So with that being said, I have the distinct pleasure of doing, answering questions a lot. And even within the portfolio, there's basically seven key problems that emerge consistently across businesses. And these are strategic problems. And the reason I think they're so nefarious or they keep people stuck for sometimes ever is that they are apparent conflicts, meaning they are rock and a hard place scenarios where both paths seem painful. And so then people just stay stuck because they don't know which one to choose. And so I have developed this little moniker for this as my way of remembering it. And I'll explain each of them briefly and then sir, as we come up, I'll be like, which one is it? So the first is serving too many avatars or being unclear on the person that you're selling to. So it's very common for in the early part of your career you accept, you know, you have person gets on the phone, they have credit card and pulse. Well, at least one of those things is required to complete the sale. And you say, sure, you have money and I will take it in exchange for whatever you want. At some point though, you realize that that isn't really a tenable way to run the business. And so the problem is the rock and hard place scenario is, well, I can stop saying yes to these people, but then that would mean that my short term sales would go down. But if I don't stop saying yes to these people, I will never grow this business because I have too many onesie twosies that I have to deliver on. So what do I do? Rock and hard place scenario. The next one is data, right? And so we touched on this briefly yesterday. But the speed of the business is gonna be based on the speed of the quality of the data, right? If you have higher quality data, if you literally knew what all the data in your business was at the snap of fingers, you'd be able to make a lot of decisions really quickly and you'd be able to move with a lot of certainty and conviction. And I think everyone here has probably had some decisions. You're kind of like you weren't super sure on, and because you weren't super sure on it, you kind of like slow dragged your feet. And the result of that is not only did you not execute it well, it also took forever. Whereas when you're like, oh, this is crystal clear, I know we need to do, you can get something done in a weekend. And the thing is, is that if you have that level of certainty, then that weekend can happen every two days and you can take what takes some businesses a year and do it in three or four weeks. Now the difficulty thing here is I need this data to make this decision, but it's going to cost me effort and time to get this data. And if I put that effort and time into getting this data, I'm going to lose money. The next one, this is what I call the best seller of this list is Bocus, right? It's the one that I probably talk about most often. And I think it's because it's the. It's probably, at least for me, it's been the one that I've struggled the most with. And it's also the most prevalent because the thing is that the more able you become, the more opportunities you can see. And so in the beginning, you have to. You, you struggle to say yes because you're so afraid, right? That's. Everyone starts, everyone's afraid to say yes. What if I fail? Et cetera, et cetera. You're here, so you've already gone past that. And so you got rewarded for saying yes in the beginning. And so then it just becomes this muscle that you flex more and more and more. But in the beginning you have to say lots of yeses or start saying yes because you're in kind of exploration mode. You're trying to figure it out. Once you start to get good, though, you have to flip that and it becomes exploitation mode, which is how to get as much as I possibly can of the thing that I currently have. And so to be really crude here, so I apologize to the women in the room, it only works one way, but you can understand it. You can't sleep with every woman. It's not going to happen. And it doesn't work. And so you have to choose. If you take the hypothetical extreme, you can't do it all. And so then you just work your way backwards until eventually you're like, okay, if I just did One thing for 45 years, do I think I'd win? Probably, no. But being real, like my, the guy who lives like he's my neighbor is the guy who owns Panda Express, right? Andrew Turner. And so he has sold chicken in a brick and mortar establishment for 45 years. Last year he took home 935 million in personal income. And he offset all of that against his real estate tax free. He did 3.7 billion. Top line in sales, 27% net margins in the business, owns the whole thing. 45 years. And so the thing is, is like a lot of, a lot of the conversations that we'll go over, people obsess about, am I in the right vehicle? But the thing that is by far the bigger predictor is how long you've been in the vehicle and that you've improved. And so you can't just be in the same vehicle for the whole time. Obviously, like, you could just have one restaurant for free five years too. But the idea is that you get better, right? But the focus is what allows the compounding to occur. And you never unlock the compounding when you're continuing to switch tasks and switch priorities. And I'll tell you that one of the big reasons that I think many of you are struggling with this focus is because your mission is only to make more money. Because the thing is, if making more money is the goal, you can't optimize anything against that because lots of things make money. It doesn't mean it's the right call. Over expansion. Okay, so this is the classic. And what's really interesting about an over over expansion is that it's actually shorthand for under talented. And that's a combination of you just being real and. Or your team. And so when you have your one location that's working, then you say, okay, I'm gonna open up, you know, my second location. A lot of times people get ahead of their skis. They only have one location. So good, I'm not in the business anymore. I'm on the business. But they're still working 16 hours a day, and they only have one location. So when you leave and start having to work 16 hours a day in the other location, you can't do 32 hours. So what you're doing over here, it's funny because it's like, oh, I'm not on the floor doing whatever it is that you do at your shop. And so you think, oh, because I'm not fixing cars, because I'm not cracking backs, because I'm not doing dental work. I own the business. It's like, no, you're CEO. You don't really own it yet. You still are employed by the business. And the business needs. Like, every one of these businesses needs a CEO. And if it's going to be you and both, then both are going to suffer. And so then what happens is you open the second location, and then your profit over here, which was your cash cow, goes down. And this one doesn't really get as high as the first one did because you were there for five years before you do your second one, and now you're here, and now you have twice the liability, but you're actually making the same money or less. And you're like, how the hell did this happen? But you're like, you know what the solution is? I should open a third. Because then this is clearly the model. But then you open the Third, and that is this, right? And I know that some of you are in that pool right now. And the thing is is there's nothing wrong with expanding. It's just expanding too fast relative to the IQ per square foot. Seriously, you just dilute it. So you have to increase IQ in order to increase the square footage to maintain the ratio. The next one is compensation. One of the most common mistakes that I would say business owners under 10 million a year make is that you're wildly miscompensating people all over the business. One, there's huge savings to accrue. But also sometimes you are. The thing that's limiting your expansion is that you're under talented. And you're under talented because you don't pay well enough. And so it's like if I have like another H Vac company comes to me and says I can't find technicians and I'm like, well, how much do you pay? And they're like, we pay market. And I'm like, no shit, go above the market. But that's more than we pay everybody else. And you're still profitable. But we wouldn't be profitable if we raised the raise your prices. But I can't because I'll lose customers. You just told me that you can't even take the business that you've got coming in the door pick. So compensation. Now I had a, I'll give you an example. I had a physical therapy studio that came and you know, lady said, I, I have my. We're, we're super booked, but we're not really profitable. But we're to full capacity, everyone loves us. I was like, okay, huh? She's like, Well, I give 50% of all revenue to my therapists. I was like, okay, do they like go market and sell you basically just like give them the just the area to crack backs or whatever it is that you do. She was like, oh no, we do the marketing and the sales and we do all the admin and everything. They just show up for the times that they crack backs. I was like, yeah, 50% of revenue. Now you're working on 50 just now you have rent, you've got payroll for everything else you've got marketing. It's like, yeah, no shit, you're not making any money, right? And so the issue there was that that was a structural issue. She could not out earn that. Cause even if she raised her prices, the compensation would go with it. And so compensating one, either too low or too high or incorrectly, all three of those scenarios and the reason it's a rock and hard place is that, well, what if I change my comp? I'll lose all my people, but if I don't change my comp, I'll lose my business. Rock and hard place. The next is underpriced. So that's just the classic. Actually the example I just gave, like, we're at full capacity and we're not making money. And let's assume that we weren't giving away 50% top line to, you know, something that was fixed. It's like, okay, raise the price. But if I raise my price, I'll lose my customers. But if you don't raise your price, you won't make money, which you already aren't making. Right? So being underpriced is one of them. And then finally, a single product. So I say these as, like, these are, say, some of the biggest common themes that I see. Single product being a guy who had a YouTube channel who sold how to speak English. That was his niche or whatever for Latin Americans. And he had done basically his. His sales were flat, but his margins were shrinking. And the main reason. And he was selling, I think, like 800 customers a month digitally. So between $20 and $800 of, like, language products. And he came and said, hey, I want to start a digital marketing agency because it'll be less competitive. I fought this guy for an hour. I'm not even shitting you. I fought him for an hour to try and. To try and, like, nail through his head. And he said this. And it was wild to me because I was like, what if we just, like, called those customers and sold them something else? He's like, no one's going to pay more than 800 for language services. And I was like, who here would pay more when you live in Latin America to be able to have access to the US Job market? Right? Of course you fucking would. Of course you would. And so he just had this belief that literally he was like. Instead of just like, challenging this belief, I believe this so hardcore that I'm willing to break this business that makes me a million dollars a year from my organic YouTube channel and then try and get into what I believe is less competitive and as silly as what that example sounds like. The amount of business owners that I see here who are also dealing with this, which is. It's a lot. And the reason that sounded silly is because maybe some of you have enough experience with social media marketing agencies to know that there's a dime a dozen of those. And so it's Incredibly competitive because the bar to enter is zero. It's an Internet connection and an iPhone. Right? And so anyways, I, I say all that to say when you have this idea of like, oh, I want to try this other thing. You also sound like that guy. You just don't know what you don't know yet, because no business is easy. You just don't know enough about it to know what's hard about it. And like, I would say that last year was the first year, and this is continuing to this year in my whole career where I didn't experience fomo. And I only realized it when I was like, huh, I haven't had fomo. This is weird. What's that like? And, and I remember because a buddy of mine did 50 million in personal income last quarter. It was Q4, so 2/4 ago, just trading from his laptop, trading crypto shit. And he told me, and I honestly was just like, dude, good for you, man. Look, I had zero old me would have been like, dude, how do I get on this? Like, what is he doing? I'm like, oh, turning on the computer, because this is how you turn computers on. And I was like, okay, so it's a, it's a candlestick monitor. Like, okay, so. So Ethereum is back, like, you know, like, trying to, trying to figure this. Like, I have no idea, right? That's not, that's not my hat. And to the same degree, he can't do what I do. And so it's just like, basically, the longer you play the game, the narrower you're going to get because you're going to get better at what you do. And the amount of time it took you to get where you're at now, it'll take that long to do something else. You just don't know enough about it. And that's why it looks so good. Now, if somebody were to come to you and say, hey, you're making money for everybody who is making money, if somebody came to you and said, hey, you make money doing your thing, I should do that. Many of you be like, nah, you don't want to do this. You think you want to do this. You don't want to do this, right? Because you know where all the bodies are buried. And the thing is, is that there are always bodies and they are always buried. And then they reach out of the ground and then just drag your soul with them. And you can only find out once you, you know, lie in that grave. We're really making this visual. But, yeah, with that being said, these Are the big seven. Some of you guys are experiencing one or more of these multiple weight class champions of, of growth sins. But with that, let's, let's kick off the Q and A and rock and roll. Now, I know you're doing 2.4 million. You saw outcomes to athletes. And the biggest problem that you think is stopping your growth, you'd like to get the 3 million is that you feel like you need to reposition your offer in some way. Shoot.