The Game with Alex Hormozi - First 5 Hires As You Grow | Ep 613

Episode Date: November 14, 2023

Who you hire are the extensions of yourself. Today, Alex (@AlexHormozi) talks about hiring the first 5 people to your business in "reverse order" and being aware of what kind of debt you incur when you start.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:(1:14) - First 3 hires: admin, customer support, salesperson(3:18) - 4th & 5th hires: marketing assistant, fractional bookkeeper(5:23) - Entrepreneurship: buying back time for high leverage activities(7:22) - Incur debt strategically: financial, operational, talent, management, CRM(9:18) - Hiring in reverse order of value and cost to replaceFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition(This episode is a re-run. Original airdate was on March 22, 2022)

The process of entrepreneurship, if you think from a big picture perspective, it's always just buying back your time, right, so that you can level up the amount of time that you're spending on high leverage activities. Welcome to the game where we talk about how to sell more stuff to more people in more ways and build businesses worth owning. I'm trying to build a billion dollar thing with Acquisition.com. I always wish Bezos, Musk, and Buffett had documented their journey, so I'm doing it for the rest of us. Please share and enjoy. I'll walk you through the first five hires that you need to bring on in your company as you are growing. as a fundamental framework to think through this, you want to think about, especially for the first five,

that they are really just helping you do more. And so think of them as extensions of yourself. Over time, we're going to transition from that philosophy to really building a team in departments. But each of the five will more or less correspond to being an extension of you and doing the repeated tasks that are time-consuming but do not necessarily add as much value as some of the more strategic pieces of each of the roles. All right? So the first of these things, in terms of the order and sequence that you're going to be hiring them in, is going to be in the reverse order of the value that's being delivered and or what you can get in the marketplace in terms of dollars per hour.

And so the more valuable, the skill, the more it will cost. And so you want to replace the skills that cost the least amount of money for you, right? Should make sense. And so typically, one of the first two hires, and this can happen in any order, is going to be one person who's going to be more of an administrative help to you, because as you start a business, especially in the beginning, there's lots of administrative work that needs to be done. It must be done, but it's not necessarily the,

high value work that's going to move the business forward, but it must be done. And so number one will typically be someone in that type of role. The second hire will typically be somebody in the customer success or customer support role, all right? And you're still likely going to be heavily involved in the success or delivery of the product or service that you have, but this person is going to help take away some of the repeated tasks that you are doing that are not necessarily value additive, but must be done. All right. So this is like handling returns, talking to customers about repeated tasks, you know, switching out billing stuff. And again, you'll see that there's some crossover between this administrative role and the

help with delivery because in the beginning, that's where a lot of your time is going to start occur. Note that you're still probably marketing. You're still probably selling because that's what you need to do at this point in the game. All right. The third piece will likely be the first salesperson, all right? And that's because, and again, this will depend based on how good you are at sales. Right.

So like if sales is not necessarily your strong suit, then you might take this earlier, right? If it is a strong suit of yours, you're going to take it a little bit later because your dollars per hour in that role continues to grow out. So I don't want you to take these as hard and fast rules. These are just general rules of thumb that the corresponding frame worth they need to be thinking this through is how much value am I making per dollar, start per hour, and then how much would it cost me to replace that dollar per hour? So it's like, if I do not generate a lot of dollars per hour and it doesn't cost a lot of

money, then that will be the first thing. Now, if I'm generating a lot of money and I can replace it for a medium amount of money, then it's like, well, it's the net difference, right? And that's what we're looking at in terms of how we're replacing each of these roles, right? And so right off the bat, you're going to have some sort of administrative help, then you're going to have some sort of customer support help. Then you're going to probably hire some sort of sales role, right? From there, now kind of depends a little bit on the role. You'll probably have someone who starts assisting you with the promotion or marketing of your business. So this is oftentimes somebody who, who's doing setting or doing prospecting for you,

or if you generate customers by self-content, this is probably somebody who's being a videographer of some sort or helping you create the content in some way, some of the more laborious parts that are not as value additive, that would be kind of that fourth looking higher. And again, that can flip with the sales role. So like if, for example, you're a killer salesman, then you might have somebody who's prospecting

and doing some of the intro calls for you so that the majority of your time is spent just closing, which is the higher value task. So hopefully this common theme is working out and making sense to you because it's like the number one question I get or one of among the top questions they get is like what order should I hire people in when I'm starting my business, right? The next one is, and again, all of these rules can be, some of these things can be fractional right in the beginning. So you'll probably have some sort of fractional bookkeeper, which is really filling the gap for the finance hole. So they're just doing basic level of accounting for you to get so you just know how much money you're making at that time. They can help you take control of your expenses, et cetera.

Over time, that rule will probably come in-house, but much a little bit later. Right. So like before you're at $100,000 a month, you really, you probably don't have a ton that's going on. So just having a fraction bookkeeper is sufficient. Same thing with a, you know, somebody who's helping you with your taxes, somebody who's helping you with, um, legal stuff. Like, you'll have a lawyer, but it's not going to be in-house, right? And so as you're moving up this value ladder in terms of the value per hour and the cost per hour that you can get this, the process of entrepreneurship, if you think from a big picture perspective, it's always just buying back your time. Right.

So that you can level up the amount of time that you're spending on high leverage activities. Now, here's a key point. 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. I see this happen all the time. I'll see entrepreneurs replace all of their time. and then they don't do anything with that added time to add more value. And so in that case, your profit margins will go out because you are not continuing to add and do the things that generate the income, right? Now, as you progress, each of these roles become more solidified.

And these people, ideally, in a perfect world, actually can ascend up and then have teams underneath of them. The person who was helping you originally now has a team of people helping them. The administrative person originally, you might have to ascend them into a director of operations, who's really pushing each of the tasks and projects forth, they end up being a mini project manager for you, if done properly, right? The salesperson might become a sales director or a sales manager who's actually leading and training a series of salespeople. Now, I will tell you that a lot of times people have the difficulty

of going from an individual contributor on a high level to a manager. It's one of the hardest transitions in business, and it's commonly messed up by most people. And so one of the things that comes with experience in entrepreneurship is you recognize the people who have the talent to do the thing that is required later. So you can hire those people earlier on. Now, you can't take a COO of a billion dollar company and put them in as your operator, one, because you probably can afford it.

And two, they're probably not that interested in the opportunity yet, unless you have funding or some sort of vehicle that you can acquire that talent earlier. And so as a final concept that I want to introduce to you is that whenever you were starting a business, you are incurring debt, right? And this is something that I'm now very, very convinced of. And so you were incurring lots of types of debt. You are occurring life debt. You are incurring management debt.

You are incurring financial debt. You're encouraging technological debt. Right. So that, a technological debt, which by the way is probably the, if you had another next full-time hire, it's usually a tech person who's helping you manage the CRM, build out sites. They kind of make all the things that you want to have happened or know should be happening the background actually happen in the real world. They're helping manage passwords, onboard new people in terms of getting them logins,

all that kind of jazz, right? And so in terms of the debt that you're incurring, if you don't have a good CRM that's in place, you will incur that debt and then you'll have to pay it back with interest later when the company's bigger. If you don't have a good bookkeeper in place, your finances will be a mess. And as you scale, you'll have to fix and pay back that debt later. If you have not the best people or the values are not there, then you're encouraging management debt, which means you'll have cultural debt, which means you'll have to pay that back later. And so the idea in terms of moving quickly in the game of entrepreneurship is recognizing which debt I want to incur in what order. And so I used to poo-poo the idea of investors and venture capital and things like that who gave people money to start because I was like that's not real entrepreneurship.

And I think as I've weathered or aged in the game, I don't see it that way anymore. I just see it as just fundamentally an advantage is that they're choosing financial debt to incur fewer other debts, incur fewer operational debt. incur less talent debt, management debt, CRM debt. Like, you might have to have a bigger CRM that's better for you so that you can scale with having to switch platforms, which is common. But it would cost more money up front. So if you're bootstrapped, you might not be willing or able to do that.

But if you have funding or you have money that you're willing to invest in the business up front, then sometimes you can do that. And so one of the things that is difficult with people who go bigger companies faster is that they skip through the earlier stages because they know how to do it. And so it's the reason that each of the companies that we've had subsequently have grown bigger, faster, stronger than the companies that preceded them because we are willing to incur less of the other types of debt rather than financial debt because we have the finances, right? And so we can skip steps in the growth process that would normally offrail a quarter's worth

of growth by implementing a new CRM or offload a quarter or set me back another quarter because I have to fix my financials or set me back another, you know, year because I have a whole bunch of management team in place where inexperienced and I need to get more been there done that's on the team and fewer I'll learn as I go, right? And so as we're thinking through this and you're hiring your team, the two major frameworks that I'd like you to take away with this is number one, you're hiring in reverse order, a value that you are providing, and cost to the marketplace that you can use to replace it. And so typically, you will, one, gets customer support, two, some sort of administrative role. Three, some sort of sales or set a role. Four, some sort of marketing assist. Five, some sort

a fractional bookkeeper and or a sixth, which would be your IT person or tech person. That is usually the beginning of the core team. And then a Christmas tree's down. You'll have five people hanging off of each of these, not necessarily five IT people, but hopefully you can understand especially on the marketing, the sales and on the delivery, those are the teams that tend to grow as the companies grow. And the, you know, IT and finance departments and HR departments, which end up getting built over time, there's a ratio that is a higher ratio, as in you need fewer of them per amount of customers or employees that you have in the company. All right.

And so as you scale, that is framework number one. And then framework number two is be mindful of the type of debt that you are incurring. And make sure it is the type of debt that you would prefer to incur if you have the choice.