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Give me 26 minutes, and I'll Make You A Dangerous Entrepreneur — Transcript

by Leila Hormozi · 5,918 words · 850 segments · language en · Watch on YouTube

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0:00For the first 4 years in business, I
0:01barely made any [music] money to the
0:03point where I was about to lose
0:04absolutely everything that I had. And
0:06through that and a lot of trial and
0:08error during that time, I learned five
0:11very important [music] rules, and each
0:12one took progressively longer to learn,
0:15but has helped me build significantly
0:17more valuable businesses over time. And
0:19it's what has allowed me to go from
0:21making 50k a year to millions and
0:23millions of dollars a year. And so, here
0:25are five rules or questions to ask
0:27yourself if you want to become dangerous
0:29in business and entrepreneurship. Now,
0:31for these to make sense, I want to share
0:32a powerful analogy with you. Put the
0:35best jockey in the entire world on a
0:38horse with a third lymph leg. They are
0:40going to lose to an average jockey that
0:43is on a horse with, you know, obviously
0:46all four legs and who's super fast and
0:48well trained. And so, I used to think,
0:49oh, it's, you know, it's about the
0:51jockey, not the horse. But, I have seen
0:53too many times very talented
0:55entrepreneurs who have the wrong vehicle
0:58for their talents, and because of that,
0:59they are forever on this uphill battle.
1:01And I think that the more insecure you
1:03are, inexperienced you are, or the more
1:05this is your first business even, the
1:07more likely you are to be that jockey
1:09where you actually have a lot of skills,
1:11but you're on the wrong horse. If you're
1:13the one running your business, then you
1:15should be diligent about both of those
1:17pieces, which is are you the right
1:19person for this business, and is this
1:20business right business for you? Okay,
1:22so the first question that you want to
1:24ask is, will the customers pay me again?
1:27A business where customers come back
1:30month after month and year after year is
1:31going to get bigger more easily over
1:34time. A business where the customers
1:36don't come back month over month or year
1:38over year is going to get smaller over
1:41time. Just basic math, right? Either
1:44you're growing or you're dying, and this
1:45is why businesses
1:47Well, it's overly simplified in this
1:48way. I'll give you some some ideas about
1:50this, right? Costco, for example. Costco
1:53makes its money on the membership, not
1:54on the groceries. Costco runs insanely
1:56thin margins, and all of its profits are
1:58on the membership fees. Now, why does
2:00that work for Costco? It works because
2:03Costco has a 92% annual renewal year
2:07over year. Meaning 92% of the customers
2:10that were there in 2016 are there in
2:122017. So, they lose 8% of their customer
2:14base. That's it. The reason why it's
2:17such a genius model is because they have
2:18this membership fee and that membership
2:20fee is what allows them to sustain their
2:22growth over time. So, customers are
2:24paying this fee, everything else in the
2:25store is cheap, and you're not even
2:27thinking about that fact. I'll give you
2:28another example of a business. So, pest
2:30control. It's like
2:32that's an easy one because bugs are
2:34going to continue to come back time and
2:35time again. It's like each month you're
2:37going to have more bugs if you don't
2:38have the pest control come. So, the
2:39renewal rate on pest control is like a
2:4275% annual renewal rate because it's
2:44like, "Well, yeah. If I don't have them
2:46come back, I'm going to have bugs come
2:48back to my house." So,
2:51what does that mean? That means that the
2:52customers keep paying the business.
2:54Costco, they keep paying the business.
2:55Pest control, they keep paying the
2:56business. Now, on the other side, let's
2:58look at something else. I had someone in
2:59my company and
3:01he was like, "I want to go off and start
3:02my own business." And I was like, "What
3:03is it?" Um and he didn't ask my opinion,
3:05he just wanted to tell me what it was.
3:06And he said, "Oh, I want to start a
3:07wedding photography business." And I was
3:08like, "Jesus."
3:09Like, if I could think of a worse
3:10business to start, sorry, but it would
3:12be that. And now, what's the reason for
3:14that? Why is it that like wedding
3:16photography specifically? Because it's a
3:17one-time event. And you know, the funny
3:19thing is I have my hair and makeup, you
3:21know, ladies, and they'll tell you like
3:23the hard part with weddings and stuff is
3:24like they're never going to turn into
3:25recurring customers because like they're
3:27from out of town, it's a one-time thing,
3:29they probably don't spend money on this
3:30very often, and they're not going to use
3:31you again for what? I don't know, a
3:33year, two years, whatever. So, at best
3:34you're going to get referrals even
3:35though you can do a fantastic job. You
3:38can do the best wedding in the world.
3:39You can take the best pictures. Your
3:41customer's probably not going to come
3:42back.
3:43Because how often do you have a wedding?
3:45Hopefully only once. Maybe only twice.
3:48And this is what we saw when it came to
3:49when we were running Gym Launch. The
3:50difficulty with gyms is that if you
3:52looked at something like a Planet
3:53Fitness, why was Planet Fitness able to
3:55continue to grow and grow and grow? They
3:57were membership based. They didn't
3:58promise results. That wasn't where the
4:00main value prop was and they put all
4:02this value in the membership. I mean, I
4:03remember I kept my damn membership for
4:05the tanning bed.
4:06And I know how many people kept it for
4:08the tanning bed, the massages, the the
4:11free bagel Mondays, the pizza, whatever
4:13it might be. They had all these
4:15incentives to keep people paying for the
4:17membership because they knew what the
4:20issue with most gyms have, and
4:21especially most small gyms. Most small
4:23gyms, the reason they have difficulty
4:25keeping customers is because they're not
4:26membership based. They're results based.
4:28People go to a small group training gym
4:30or something to that degree because they
4:32want to get a result. A result is
4:33finite. So, it's like once you achieve
4:34the result, what keeps you there? That's
4:36why that is a difficult business to be
4:38in. I'm not saying it's impossible.
4:39Obviously, I had that business for 7
4:40years, but it's difficult because you
4:42have to figure out all the reasons why
4:43somebody would stay. So, for example,
4:45with a small group training gym, it's
4:46like, yeah, they're going to stay if
4:47there's um
4:49community more than anything after
4:51they've achieved their result. And
4:52because they now have the habit of doing
4:54the thing. But if there's the slightest
4:55bit of friction, it's like you could
4:56lose the customer fairly easily. And so,
4:59for those gyms, for example, um if
5:01you're in So, I'll give you I'll give
5:02you what you can do, right? So, if
5:03you're listening to this and you're
5:04like, "Oh, Well, my business is
5:05not membership based, and it's actually
5:07we we lose money." Um this is what we
5:10taught our gyms, which is, "Okay, so if
5:12it's already like a one-time thing, like
5:14you understand that the
5:15the lifetime value of your customer is
5:16fairly low based on the nature of what
5:18you sell. Wedding business, you know,
5:20result based gym membership, whatever it
5:21might be." There's two things that you
5:23can do, which is one, you can raise your
5:25prices. I would say that one-time
5:26things, things that have a finite amount
5:28of time, you can tie a bigger price tag
5:31to. A membership, for example, it's
5:33like, "I'm going to be paying this for
5:34this for forever." You're not going to
5:35be charging people $10,000 for a Costco
5:37membership. But you can charge somebody
5:39$3,000 for a, you know, 6-month weight
5:42loss program to lose 20 lbs.
5:44So, you can increase the prices. You can
5:47also add in something recurring. So, for
5:49example, like what Planet Fitness did,
5:52take a page out of their book. Is there
5:53something in the gym? Is there some kind
5:55of membership that you can have that is
5:57a lower fee that people can continue to
5:59access once they've gotten what they
6:00wanted? Same with like a, you you
6:02wedding photographer. They could sell
6:04you, "Hey, you know, I know we got your
6:05wedding photos. You're looking to have
6:07kids. How about annual family session?"
6:09Something to that degree. So, you have
6:10options. The second thing that you can
6:13do, if you're in a business where you're
6:14saying, "Okay, I don't keep my customers
6:16for a long time." is at a higher tier.
6:18So, for a lot of businesses, the reason
6:20that they're not able to grow is because
6:22they're in the business of losing
6:24customers over time because of the
6:25nature of their product or service. And
6:27then, what happens is they don't add a
6:28product tier above that. And so, because
6:30of that, they have a very thin profit
6:32margin. And then, there's nothing else
6:33to sell people into. If people are not
6:36going to stick with the first product
6:37for a long time, at minimum, sell them
6:40into a more expensive second product
6:42that they can at least stay for an equal
6:44amount of time. Okay? We call this an
6:45upsell. An example for this is we used
6:47to do a 6-week challenge for gyms, and
6:49they would come in for 6 weeks, and then
6:50we would have another challenge after
6:53that, and another, and another. And we
6:54would just keep teaching the gyms have
6:56different challenges. It would be a
6:57booty challenge. It would be a back to
6:59school challenge. It would be a look
7:00good for summer challenge. And so,
7:02there's another reason for them to come
7:03back, right? Now, that was of equal
7:05price, but you can do something else
7:06that's a a higher tier, depending on the
7:08kind of business you have. If you have
7:10an agency, for example, people are not
7:12going to stick with an agency for a
7:13long, long period of time. It's just
7:16trust me. I've had a business that
7:18served agencies. It's It was Seeing the
7:20lifetime value of an agency customers
7:21it's tough. So, if you're serving SMBs
7:23and you're an agency,
7:25for example, have a done-for-you program
7:27that's about that. So, it's like, "Not
7:29only are we going to, you know, help you
7:31with your agency, we're going to also
7:32work your leads for you." or something
7:33to that degree. Um or teach you and
7:35place a media buyer in your business. I
7:37like that way better than the working
7:38the leads for you because they're going
7:39to complain about you working the leads.
7:41So, those are two things that you can
7:42think about if you're like listening to
7:44this and you're like, "Well, Leila, my
7:45business is already like that." The
7:46second question that you want to ask
7:48yourself, if you're thinking about
7:49starting the business or the business
7:51that you're in, is how much of every
7:53dollar am I going to keep? This is
7:55essentially understanding margins, which
7:57is gross margin is what's left over
8:00after you deliver what you sold,
8:03and paid for everything else. So,
8:05marketing, your team,
8:08all of that, right? With a really thin
8:10margin, what it means is that every
8:11mistake is going to cost you more and
8:13more, and every person and resource that
8:15you bring in for your business is going
8:16to be harder to afford.
8:18So, growth is difficult because you have
8:21to continue spending more money on
8:22infrastructure to capitalize on the
8:23growth. Because if you grow your
8:25marketing and not your delivery,
8:27you're out of luck. And so, this is why
8:29making sure that you understand you have
8:31a business that has high gross margins
8:34>> [gasps]
8:35>> is so important. Okay, let's think about
8:37Costco. And let's think about Hermes.
8:39Both sell physical products, but their
8:41margins are incredibly different. Now,
8:42why is that? Hermes keeps about 71 cents
8:46of every dollar that they get from a
8:48customer.
8:49Costco gets about 11 cents of every
8:52dollar. So, Costco can survive on 11%
8:56because it has the membership fees and
8:58the 92% renewal. However, it would be
9:01much easier to run a business that has
9:0372% margins or not. That's how you can
9:06kind of understand margins and think
9:07about this. Now, where do people get
9:10stuck in the margin trap is often in a
9:14service business. So, a lot of
9:17businesses, if you're in a tech business
9:19or a remote business of any sort, this
9:21can be an easier thing to control. You
9:23can control for margins a lot more
9:25easily. If you're in a service business
9:27of some sort, a physical in-person
9:29business, that's tough because typically
9:32it you're looking at like a 25% to 35%
9:36or 40% margins, right? On average. I'm
9:39just taking the average of like all
9:40service businesses. Now, why is that?
9:42Because if you're in a service business
9:43that requires people, you're essentially
9:45selling somebody else's time on a
9:46markup. Like if you think about it, even
9:48with the pest control, what are you
9:49doing? You're selling the time of the
9:51person that's going out to the house to
9:52spray for the pest control. If you're in
9:55a cleaning business, you're selling the
9:56time of the people that you're employing
9:57for cleaning. And so, what's going to
10:00happen is people are going to compare
10:01you with the next service business, and
10:03so prices continue to get pushed down,
10:06which means you become a commodity cuz
10:07they say, "Well, I could just get
10:08somebody else to clean my house for $5
10:10less an hour, which is why particularly
10:12with service businesses, it's really
10:13important to think about the gross
10:14margins. When we were running our
10:15company Alan, which is a software
10:17business that worked leads, we would
10:18have agencies as our customer, right?
10:22And what I saw was that the agencies
10:24that charged less money,
10:27even when they're serving the same
10:28customer, were just in so much worse
10:30shape than the ones that charged more
10:32money serving the same customer. Now,
10:33why was that? Because agencies are
10:35commodity, and
10:37what everyone's afraid to do when
10:38they're in the business of a commodity
10:40is raise their prices, because this is
10:42one of those counterintuitive things
10:43with business, which is they're like,
10:44well, I can't raise my prices cuz I'm a
10:45commodity. It's like, right, but you
10:47also signal that you're no different by
10:49having the same prices as everybody
10:51else. So, you have to have the balls to
10:53raise your prices in order to get out of
10:55the shuck. So, what are some things that
10:57you can do
10:58if you're listening to this and you're
11:00like, well, Layla, my business does
11:02not have good gross margins. After we
11:04sell the product, deliver the product,
11:06staff for the company that supports the
11:08product, there's not a lot left over.
11:10We're looking at, you know, whatever
11:11amount it might be. So, there's a few
11:13things that you can do. The first is
11:16create bundles. So, instead of selling a
11:18cleaning service, we're going to clean
11:20your house, blah, blah, blah.
11:22We're not just going to clean your
11:23house. I have cleaners that also
11:25organize, they label, and they restock,
11:28right? And so, there's inherently more
11:29value to anything
11:32when there are more things included.
11:35And so, because of that, you can
11:36differentiate your pricing from another
11:38business because you've bundled things
11:39together. The second one would be like,
11:41okay, think of a pest control business.
11:42I know that for me, I have to pay for
11:44different types of pests that they are
11:45going to spray for. I would rather pay
11:48more for a bundle, which is I would just
11:50like you to say that you're going to hit
11:52the, you know, top 20 insects in my area
11:56every month.
11:57And that's it.
11:58It's like, great, that's a bundle. The
11:59second thing that you want to do is
12:01niche down. So, if you're saying,
12:04hey, you know, I'm an agency and my
12:06margins I'm a commodity, blah, blah,
12:07blah. Well, you're probably also not
12:09niched. You're probably afraid to niche,
12:10because again, counterintuitive, you
12:12think by niching down I'm going to deter
12:14customers from working with me. I'm
12:16going to have less customers to go poach
12:18for and to go look for and to market to.
12:20That's not the case at all. When you
12:21niche down, you actually signal who is
12:23the right customer for you and you will
12:24get more of those people. And so, you
12:27know, Dan Kennedy talks about this a
12:28lot. He wrote a book on niching down.
12:30The riches are in the niches and he
12:32talked a lot about even selling a book.
12:34If you sell a book that's how to grow a
12:36business
12:37versus how to grow a service business
12:40versus how to grow a pest control
12:42business.
12:43How much more money do you think you can
12:44charge for the specialized book?
12:47You can charge a lot more because it
12:48solves a more specific problem. So, the
12:51more specific of a problem that you
12:52solve, the more money that you can
12:54charge for that thing because people
12:55believe that you're going to solve their
12:57problem. I've had my nose done.
12:59When I looked for different people,
13:01there's generalists who did noses. The
13:03generalists were charging about 8 to
13:0510,000 dollars for a nose job.
13:07Specialists, 35 to 40,000 dollars for a
13:10nose job. Why do you think they do that?
13:12Because you know, you have a more
13:14guaranteed outcome the more specialized
13:16and niche down somebody is. [music] So,
13:19that's why I was willing to pay a lot
13:21more for my nose because I was like, I
13:24believe that you can deliver the result
13:26whereas with this person, I'm like, I
13:27don't know if I believe that I can get
13:28the result from them.
13:30So, I would rather go to a specialist
13:31which also means you're probably going
13:33to have better customers because you
13:35have people who really want the result
13:37and are willing to pay for it if you
13:38niche down. And then, the only other
13:40thing that I would be thinking about is
13:42especially in a service business
13:44adding a premium tier.
13:46It's like everybody always wants good,
13:48fast, cheap and in a business, it's like
13:50you kind of want to lead with one. The
13:51lower levels of service have usually
13:53one. Then you can think about it like as
13:55you go higher, they can have two or even
13:57three.
13:58So, you're going to have customers who
14:00are going to say, well, I want it to be
14:02good and fast, not just good and not
14:04just fast. And so, you can think of your
14:06tiers especially with service with like,
14:08how do you do it fast? How do I do it
14:09good? How do I do it good and fast and
14:11charge more money for it that way? The
14:12analogy that we like to give a lot is,
14:15you know, you can take Southwest, you
14:17can take JSX, you could fly private.
14:19Think about your service tiers that way,
14:21especially when you have a service
14:22business. Okay, next question you want
14:24to ask yourself, is the market that I'm
14:26in working for or against me? I'll give
14:28you a really good analogy for this. I
14:30know a guy and he had a bunch of tanning
14:34salons that he ran and he was crushing
14:36it. And then the government came out and
14:37they said they essentially put a 20% tax
14:40on tanning salons to the owners because
14:43of the risk of skin cancer. And so
14:45suddenly, even though he's so good at
14:48running tanning salons, the market is
14:50now working against him. He has to
14:51factor in this 20% tax out of nowhere
14:54just to sustain business. So, the
14:56question you want to ask is how hard do
14:59I have to work to fight the natural
15:02headwinds of the market or how easy it
15:05is it for me to propel forward because
15:07of the headwinds of the market? So, in a
15:09growing market and somewhere that has a
15:11lot of headwinds, you know, working for
15:13you, an average operator, an average
15:15CEO, average entrepreneur can kill it.
15:18Whereas in a dying market, a fantastic
15:21CEO or entrepreneur is still going to
15:23start going to have a hard time. So, you
15:25want to think about this carefully when
15:26you're entering
15:28a business because it's not just the
15:29skills that you have and the things that
15:31you know, it's also, well, is the timing
15:34right? And when people talk about timing
15:36in business, they're not really talking
15:38about timing, they're talking about the
15:38market, right? It's timing the market.
15:40For example, when we started Gym Launch,
15:43we didn't even know that we got so lucky
15:44with the market, which was we happened
15:46to be the first business that cracked
15:49Facebook ads for small gyms. And because
15:52of that, we hit the market at the right
15:53time where nobody else had done it yet,
15:54there wasn't another business
15:55capitalizing on it and a lot of people
15:58needed a lot of help because a lot of
16:00gyms had just started, strength training
16:02was booming, bodybuilding was booming,
16:04but people didn't really know how to get
16:05customers. And so, did we choose that?
16:08No, but did I understand after the fact
16:10that that was why our success was so
16:12easy in the beginning? Yes, I don't
16:13think that we were just so good that we
16:16were able to go from zero to 27 million
16:18in 18 months with just the fact that
16:20I've been a personal trainer Alex and
16:22owned a gym. I don't think that was why.
16:24Yes, did we work our asses off?
16:26Of course. But when I think about
16:27timing, I think about preparation
16:30and you know, I'd say grit to a degree,
16:33but also luck, which is did you hit the
16:35market at the right time? In the
16:36beginning when you're first starting,
16:38typically you don't think about this,
16:39which is why I'm making this video. But
16:40if you do think about it, you can avoid
16:42yourself so much pain and you can
16:44actually get lucky. You can create your
16:46own luck because you know what to look
16:47for. Let's think about it in terms of
16:50math. Okay, so if two businesses start
16:52at the same time and they each start at
16:551 million in revenue and they each keep
16:57the same market share year after year in
17:00a market that's growing 8% a year, that
17:03business is going to be at 1.47
17:06million after 5 years. In a market that
17:08is shrinking 5% a year, that business
17:11will be at about $775,000
17:14after 5 years. So what does that mean?
17:16You do the same job, you do the same
17:18ops, you have the same customers, you
17:20have the same staff. One of them is
17:22going to cut
17:23by 250 grand a year, the other one's
17:25going to go up by 50% just due to the
17:28market. Now you can fight with all your
17:30will, right? And we get that, but what's
17:32much easier is one, search your
17:35industry's growth rate before you get
17:37into it. The easiest thing you can do.
17:39And if you're listening to this right
17:40now and you're like, I don't actually
17:41know about my market, go right now and
17:43look. What is the growth rate? And then
17:45ask yourself this, if you're in a
17:46business and you're listening to this
17:48and you're like, well, it's not
17:49that good. It's not good growth rate,
17:50we're actually shrinking. Okay, well,
17:51what is taking the money from your
17:53customers? So a lot of people in fitness
17:55have been saying, you know, what, it's
17:56slowing down, it's this, that. A lot of
17:57online coaches, you know, still reach
17:59out to me, "Hey Alex." And I'm like,
18:00"Well, what's taking the money from your
18:01customers?" Peptides. I mean, everybody
18:04knows like red light chew tide, you
18:05know, GLP-1s, all the things right now.
18:07That's what's taking the money from your
18:09customers. It's not the other gym, it's
18:11not the other online coach, it's the
18:12fact that there's an easier way to do
18:14things. And so if you're in this
18:16business and you're looking at it and
18:18saying it's shrinking, how can you
18:19follow the money?
18:21And how can you serve your customer in a
18:22different way and meet them where
18:24they're at now with the changes in the
18:25market? The fourth question that you
18:27want to ask yourself is quite a simple
18:29one, but I'll explain it. How hard is
18:31this to grow? Now, when I say how hard
18:33is it to grow, if the business is more
18:35complex than the jobs that you have to
18:38hire for
18:40are appealing to the people who could
18:42run it, you cannot hire them and your
18:44business won't grow. Okay, so [music]
18:46what does that mean? If the complexity
18:47is higher, you can't hire or keep good
18:50people, the founder ends up doing
18:52everything. Because the complexity of
18:53the business is high, but the desire
18:55from the job market, from people looking
18:57for jobs to work in a business like that
18:59is low compared to what you're offering
19:01them. If the appeal is higher
19:03great operators are going to want to
19:04work for you and I think this will make
19:06sense. So
19:10a good match on this is a software
19:12company. What do software companies have
19:14that other companies don't have? One
19:15thing is the appeal.
19:17You need people that can do highly
19:19complex work and those people that can
19:21do that highly complex work are
19:23attracted to software companies. Why? A
19:25few reasons. One, there's good pay,
19:28there's equity, there's status, remote
19:30work. Pretty good reasons for people to
19:32be attracted to the opportunity. So, you
19:34can have a highly complex business that
19:36needs has a lot of talent needs and the
19:38talent most likely is going to be
19:39attracted to that opportunity because of
19:41all the things that it comes with. Let's
19:42look at a different opportunity that's
19:43difficult to staff for most of the time,
19:45restaurants. Tough, lots of churn. Why?
19:48Well, there's a lot of operations to run
19:49a restaurant. You have inventory that
19:51goes out and spoils. Uh you have to work
19:53nights and weekends. You have to survive
19:55inspections. It's a really fast-paced
19:57environment. It's you have to be there
19:58in person. It's not flexible. Usually
20:00it's a smaller salary. There's no equity
20:03and there's no remote work. So that's a
20:05high amount of complexity and a low
20:07appeal to the job market. So because of
20:09that, you have a lot of turnover in the
20:11average restaurant because it's like,
20:12well, try to get good people to want to
20:14work at your restaurant because they
20:15could take those skills and go elsewhere
20:18where they get more pay, maybe equity,
20:20maybe more flexibility, maybe some
20:21remote work.
20:22So then the question is, well, why
20:23should I work at your restaurant?"
20:24There's two ways that you can think
20:25about this to closing the gap. Well, one
20:27is if you haven't started the business
20:28yet, think about that. You know, one of
20:30the things I realized when we were
20:31running Gym Launchers, in order to turn
20:32this business into the kind of business
20:33that I needed it to be, or the type of
20:35business that would be appealing for me
20:37over the next decade, it's going to be
20:39very hard to attract the talent because
20:41of the nature of the business. And that
20:42was just something I knew, and it was
20:43something I thought about a lot. And
20:45guess what? I was right. Cuz at
20:46startacquisitions.com, my skills didn't
20:48change that much, and guess what? 10
20:50times easier to hire people. Why? The
20:52opportunity is better. It is more
20:53appealing to the job market. So, there's
20:55two ways that you can close the gap, and
20:56there's two ways that I have closed the
20:57gap in the back. The first is that you
20:59want to keep the infrastructure of the
21:01business as simple as possible. Okay?
21:03So, what does that mean? Fewer
21:04hand-offs, fewer products, fewer
21:07systems. You want to keep it simple so
21:09that you can hire talent that where the
21:11appeal matches the skill level. If the
21:14infrastructure is too complex for the
21:16people that you have to hire to run it,
21:17you're not going to keep them, or your
21:19business isn't going to work.
21:20So, you will have to oversimplify the
21:23infrastructure of the business because
21:24you can't get the talent that matches
21:26it. That's if you take that route. Now,
21:28the second one is that you could make
21:29the job more appealing. You could say,
21:30"How could I pay people in a way that is
21:32unique? How could I Is there a way that
21:34I could give equity? A career path? Is
21:36there a mission that people could
21:37believe in?" Small businesses,
21:39especially, the mission is the huge
21:40nuts, like the biggest part here. It's
21:42like you're not going to get people that
21:43just want to work for your restaurant.
21:44They want to hear, "How are we changing
21:46people's lives? Where's the community?
21:47Where's the culture?" Those are all the
21:49things that you have to lead with when
21:50you don't have all the rest. Another
21:52example I'll tell you I saw was there's
21:53one nail salon chain that we looked at,
21:56and it was the only chain I'd seen that
22:00like kept the quality,
22:02um and they'd scaled to six or eight
22:03locations, and they actually had a
22:05career path for all the nail techs. Now,
22:07why is that? Because it's really hard to
22:08keep people in that role. It's much more
22:10appealing. They can go on their own,
22:11they can do nails on the side, they can
22:13contract. Why should they stay there?
22:15They actually had a career progression,
22:17and they also had incentives, which is
22:18if you did more nails faster, you got
22:20paid more. If you're able to acquire new
22:22skills, you got paid more money. So,
22:24they were rewarded for all the skills
22:25that they were acquiring in the job,
22:27which then makes it harder to say, "I
22:29should go start my own nail salon
22:30because I actually get paid for my
22:32skills here pretty well." So, the
22:33risk-reward of leaving and starting your
22:35own thing is actually a lot lower in
22:36that case. The last question you want to
22:38ask yourself, am I the person this
22:41business needs me to be to run it? A
22:43business can only go so far as the
22:47person that is running it.
22:49Like, time and time again. Can you lead
22:50the business and can you keep the people
22:52and can you capitalize on the
22:54opportunity? And you really have to look
22:55at yourself and ask, is this the right
22:57business for me? And I I wrote down a
22:58couple things so you can think about
22:59this. Am I the leader needed to hire
23:02people smarter than me? Am I willing to
23:04do that and see them as a blessing and
23:07not as a threat? That's the first thing
23:08that we want to think through. The
23:09second thing is understanding that your
23:12job will change as you grow and being
23:14able to think ahead and say, am I
23:16willing to become the CEO or the
23:18entrepreneur that can steward that
23:21business through these seasons. In the
23:23beginning, you got to be scrappy zero to
23:25one.
23:26Then you have to quickly say, I got to
23:27hire people, I got to get systems in
23:29place, then I have to professionalize,
23:31then I have to be really good at
23:32culture, then I have to be good at deals
23:35and expansion and capital allocation. Am
23:38I excited genuinely to go through that
23:40growth? And if you're not, it's really
23:41good to look at your business and say,
23:42well, am I suited for the business I'm
23:44in? And it could be one of two ways,
23:45which is like, you might be in a
23:47business that's difficult to scale.
23:49In which case you're like, man, I don't
23:50like the beginning small stage and
23:52[music] I actually I tend to like when
23:53we're bigger, we need more operations,
23:55there's more professionalization.
23:57But if you're in a business that's going
23:58to be really hard to get there, there's
24:00a mismatch. At the same time, if you
24:02just want to run a big business and
24:04you've been coming from corporate
24:05America and you're like, I want to go
24:06operations, this, that, you're in for a
24:08rude awakening cuz the first years of
24:10the business you've got to be scrappy
24:11and that all that stuff is actually a
24:12drag you down, probably slow down the
24:14growth of the business. So, a good
24:16question that you can ask yourself is in
24:18three years, whatever this business
24:19looks like, do I want to become that
24:21person? Am I willing to do that thing?
24:24Am I willing to be the person who runs
24:25this business well in three years? And
24:27the best thing that I ever thought to
24:28myself when we started acquisition.com
24:30is
24:31playing this out, would I run this
24:32business for 10 years? Which for me, 10
24:35years is a lifetime. And my
24:36answer was yes. I thought through all
24:38the stages. I thought through all the
24:40things I would have to do, and I was
24:41like, yes, I want that. At the end of
24:43the day, if you don't want it, and
24:44you're not willing to wake up every day
24:46and fight for the business that
24:48you have, it does not excite you, you're
24:49thinking already of the next business
24:51you're going to start,
24:53then think about starting a different
24:54opportunity. Or think about the fact of
24:55maybe opportunity isn't the right one
24:57for
24:58I can't tell you how many people are not
25:00the right person for their business. And
25:01I'll explain it a different way, too.
25:03So, there's sometimes a personality
25:04mismatch, which is you're in a business
25:06that requires an immense amount of
25:08culture to make it work, an immense
25:10amount of camaraderie and teammanship,
25:12and you're not a people person. You're
25:14not extraverted. And you know what? It's
25:16difficult to hire somebody who's that
25:18good at it. That's not going to be the
25:20one running the whole thing. The
25:21opposite could be this. Do I Here's a
25:23good example. Do I want to run a
25:24technology business? No, I don't. I have
25:27run a technology business, and I knew
25:29going into it, it's just not quite for
25:30me. It's not
25:33suited to my personality and my natural
25:36skills that I already have. Could I
25:37acquire those skills? Absolutely. Do I
25:39want to? No, I actually really prefer
25:41working the way that I'm working. And
25:43so, businesses that have more people,
25:45culture, etc., it's more suitable for
25:46me. If you found this video helpful, you
25:48can go ahead and subscribe to my
25:50channel. Um if you want to learn more
25:51about business, we run workshops here at
25:54acquisition.com. You can click the link
25:56below in the video, sign up for a call,
25:58and my team will talk to you about the
25:59different workshops that we offer that
26:01can help you figure out if your business
26:02is the right one to scale.

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