The Game with Alex Hormozi - $100k is the Hardest Amount to Make | Ep 263

Episode Date: January 1, 2021

“You inherently become more valuable and you stop seeing your failures as failures”. Today, Alex (@AlexHormozi) talks about why making your first one-hundred thousand dollars is the hardest milestone to reach, time vehicles, leveling up your skillset, and how adding more people to the team can help you build the foundation of acquiring more skills.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(1:54) - First $100 in bank is most meaningful(2:51) - Hard to earn $100K: time, vehicles, leverage(4:30) - Earning $100 hard due to effort required by vehicles(5:29) - Common mistake: outsource work without learning new skills(9:17) - Deliberate effort improves skillset through volume of practiceFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Most people who've made millions started with something that got them 100 grand. And I will tell you personally, the first $100,000 that I put in my bank out was by far the most meaningful of all the money that I've made in my life. Welcome to the game where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. What's going on, everyone? I've got a special podcast episode for you today. What I want to break down is a conversation I was having with a different friend about how, $100,000 is the hardest amount of money to make.

And I was actually talking to him. He's starting his physical therapy clinic practice right now. And he's eating shit, for lack of a better term. You know what I mean? Like, he's just trying to figure this out. And the thing is that $100,000 is the hardest amount of money to make for a variety of reasons. And that's not me. I'm not the first person to say that.

Charlie Munger said, who's Warren Buffett's business partner, said, the first hundred grand's a bitch. He even says that. It's a quote. You can look it up. But anyways, and there's a bunch of reasons why. And so I wanted to kind of walk through it. The first is the biggest one, which is that when you set the goal at $100,000,

you only think of $100,000 opportunities, right? And what I mean by that is you're not like, if I were to say, hey, you need to make $10 million, you can't $100 grand your way times $100 to get there, right? You have to think of a different way of operating of doing business in order to make $10 million, dollars right because at that point you know you can't sell your time like it's not going to work right you have to do something else and so inherently when someone puts the constraint of i want to make a hundred thousand dollars on themselves then they automatically only constrict confined themselves to vehicles where they have to sell time for money right which are inherently constraining which is why it's a bitch right

it's hard because you literally have to sell your time in order to do it that being said most people who've made millions started with something that got them 100 grand and i will tell you personally the first hundred thousand dollars that I put in my bank account was by far the most meaningful of all the money that I've made in my life. I remember when I looked at Layla and I had $100,000 in my bank account after everything, I remember looking at her and saying, it's going to be okay. We've got three and a half years of money now that if we mess up for three and a half years, we'll still be all right. And I remember feeling that that sense of relief. And the reason that I think it was so impactful is that difference between zero, or let's say the difference between $1,000 you're making $100,000,

is a 100x increase. For me to have that same 100x increase, I'd have to go from $100,010 million in my bank account to have the same proportional increase in terms of security. And I'll tell you, even after I had $10 million in my bank count, I was like, it still didn't feel as good as the first $100 grand. And so it doesn't matter where you're at. Like, I'll tell you, if it's hard right now,

it's normal, it's supposed to be hard, but it will get better because you're going to start thinking differently. Now, back to the original topic of why $100,000 is the hardest money to make. First is you think of time vehicles, time for money vehicles. The second is that you have no leverage, all right? So what I mean to that is that inherently all businesses arbitrage, right? You're buying and selling things at less and you're making the difference, right? If you're in a service business, I'm buying people's labor and I'm selling it at a higher price to the marketplace because I see the discrepancy between that,

and I can add value to a person by training them in certain ways or putting them inside of a system, and then the sum of the individuals, or sorry, the sum of the whole is greater than the parts, right? That's essentially what it is. But when you don't have money, you have no leverage on anything. And so you have to do everything yourself. And so, again, it takes tons of time to get small amounts of output. And so because of that, you're really inefficient, right? Because you have to, and you also have to wear all of the hats.

You have to learn every aspect of the business in order to really turn the first dollar. And that takes time and it takes effort, a lot more effort than you think it will. Right. And then once you finally figure out how to make the first dollar, you have to keep repeating that action over and over and over and over again until you have, you know, $100,000 in your bank account. But once you have that, you can start paying people to do things. You can start paying for, you know, advertising and you're not worried about paying your rent

or, and what happens is you now start having the big L word, right, which is leverage. You can move the world a lot faster because you can have 10 people doing outbound for you. You can pay a team to make advertising for you. You can have a video setup or whatever that's going to get you a higher hour or a while. or make your stuff look better and you get more, you know, you get more engagement or whatever, right? But the thing is is that that first hundred grand is so hard because the vehicles that exist for it require all your effort. If you're doing sales, right, you're working all the time. If you're doing a job, you're working all the time.

If you wanted to drive Uber to make $100,000, you probably work 12 hours a day. And it would require your time. But the thing is, is that once you do that, though, you can then start piecemealing out pieces of your day. and you do that in reverse order of the value that you can buy that same skill in the marketplace. So let me dive into that for a second. So let's say that in your business you might be doing 15 different things, but you might find out that the administrative work of scheduling and answering the phone might be the least valuable.

It may be. It may not be, whatever. But let's just say it is. And let's say that the marketplace, you can buy that skill for $10 an hour. And so what that means is you can get, let's say, four hours of your day back for $10. an hour. And so now you have four more hours. And if you can make more money in those four hours, and this is a key point, I see this one as a mistake too, is people will outsource certain work that they're doing, but they will not replace the time with higher value skill. So then they basically

just pay people and then stop working and make the same amount of money, which can be cool. But if you want to grow, then you're going to need to continue to work and just do higher and higher and higher value, higher leverage time in the time that you buy back. Right. But fundamentally, when you think about your business as, what would it take for me to make a million dollars? What would it take for me to make $10 million? You think of different vehicles in order to get there. And if you don't know of the vehicles, I would highly, highly encourage you to look at the vehicles that already exists. So like one of the things that's here, here's an interesting nugget for you. There's no reason for anyone in the United States to make less than $25 an hour. Why? Because in one day,

you can go through a certification and become a phlebotomist and make $25 an hour. So who wouldn't take a one-day education to triple their income for minimum wage. Who wouldn't do that? The reason people don't do it is because they don't know. People are ignorant. Hey guys, love that you're listening to the podcast. If you ever want to have the video version of this, which usually has more effects, more visuals, more graphs, you know, drawn out stuff. Sometimes it can help hit the brain centers in different ways. You can check on my YouTube channel. It's absolutely free. Go check that out if that's what you are into. And if not, keep enjoying the show. Right. And so if you're watching this and you didn't know that that even existed, there are so many other opportunities that are like that,

that you can immediately get more leverage on the time just as you're starting. So if you're, if you're working a job and you're not making that, well, then go find small opportunities. Go find little mini certifications that you can get that qualify you for now. That's only get a certification if it's required. If it's just like, oh, this is a certain, then don't worry about it. But like, if you can find these little opportunities, you know, like I'll tell you for me, my plan B of like if my business was going to fail, I knew that what I was going to do was I was going to drive Uber and I was going to strip at night. That was going to be my 100% my gig. Because I knew that if I drove Uber 12 hours a day and I strip for four hours every night,

I would be able to make about 200 grand. And I knew that even if I started at zero, I could do that again and try and get another do-over. Right. And the thing is is that as your skill set increases, right, the base level of your building, as I like to consider it, like this is your building of skills. The base level of the skill. level, your basement continues to rise, right? And so the level that you could fall down to continues to go be higher and higher, right? And so once I learned how to sell, I knew that I would never really make less than $250,000 a year because I knew I could always go to a car dealership and sell cars. No matter what, I could go sell cars and make $200,000, $300,000 a year. I knew that

because I had that skill. And that means that from this point going forward with my life, I'll never make less than that, right? But then I learned how to market. And then as soon as I learned how to market. I knew that that was going to be my, because now I could take my sales skill and pair it with marketing, and then I could generate demand at will, right? And then that means that my new level might be $3 million a year, that I'll never make less than, because I have the skills that even if I have to start over, I can end there. And the thing is, is that if you think about your journey as an entrepreneur in terms of a, as a skill set stacking, all you're doing is acquiring skills and putting in your back pocket, put it in your toolkit, right? Then you inherently

become more valuable and you stop seeing your failures as failures. but rather lessons on the way to where you're trying to go because you inherently become more valuable because your work works on you more than you work on it. All right? I'll say that again. Your work works on you more than you work on it. And so even if you didn't make $100,000 in the first year, that's okay because you developed the foundational skill sets

that maybe got you above $50,000 a year, right? But as long as you were continuing to acquire skills, that baseline will go up. And the speed with which you move up will be how much volume you do. So volume of work for a specific skill with deliberate effort will improve your skill set. Now, you can do it faster or slower depending on how quickly you learn the skill, but you still have to learn it, and there's usually a certain amount of volume that has to happen,

which means that there's some amount of time, but then how do some people acquire skills faster than others? Some people are more deliberate with their practice. Some people get mentors and experts that feed into them. Every valuable skill that I've acquired in my life, I've paid someone to acquire so I could get it faster. all right and so if you're like well i don't have money then do the high value do the do the leverage do the shitty work now do the first $100,000 that's a bitch do that work now you have to trade some of your your life for money and that's okay which is why i have a saying which is you can you can't be busy and broke right you can't be both if you're busy you should be making money right and if you're

broke you're not busy which means you've got time so you can always trade back and forth time for money right if you have more money then uh but you're busy all the time then you can trade some of that money back to buy some time back, right? But you can't be busy and broke, all right? So think about that. And if you feel like you are busy and broke, I guarantee you're wasting a lot of your time. So anyways, to ring this full circle, $100,000 is by far one of the hardest amounts of money to make because we think about it only in time vehicles. And for many of us, it's the first thing you have to do. So just bite the bullet, go do it. And then after that, you can start leveling up your skill set. You can pay for skills. You can pay for things to happen faster for you. You can pay for other

people to do some of the lower value work that you're doing because they're earlier on in their journey so you can buy their time that's less valuable than yours and you continue to work up and build the foundation of that building that eventually becomes a skyscraper of your skills and then you'll have the perspective to identify the 10 million the hundred million the billion dollar opportunities and go all in on them because at this point you'll have the skill set to make it happen so anyways hope that was valid before you hope you're having an amazing day and I'll see you in the next day bye