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Hard-wired Entrepreneurs, Grand Slam Offers, & More... (on Foundr Stories) Pt. 1 - Feb '22 | Ep 433

September 10, 20220 comments♥ 0
00:00Moses Nation did a podcast with Founders Stories where we talk about three main things in part one of the podcast.First is, are entrepreneurs hardwired as entrepreneurs or are they born that way?And I think I have some interesting thoughts around this that will serve you.Second, do you have to have a software company in order to become a billionaire?I'll give you my thoughts on this often overused path and the many dangers of thinking that is the only way to become ultra-altra wealthy and the many, many, many people who have not been.And third, how to craft an offer that's so good.People feel stupid saying no.And if you're used to it, it's a nice verbal overview.
00:31And if you haven't read the book, then it'll give you a decent crash course.If you like it, you can grab the book on Amazon for nine minutes.My belief is like the three pieces of scaling that I adhere to is zero to a million is promotion.One to ten million is product.10 to 100 is people.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.
00:55Alex, thank you so much for taking the time to speak with me today.The first question we ask everyone that comes on is,how did you get your job,aka how did you find yourself doing the work you're doing today?Oh, by a master plan.I started out when I was three.I iterated and failed my way here.So I went to school for a business degree,
01:18did management consulting after school for two years,did defense contracting.So space cyber intelligence, top secret, all that stuff.It sounded really cool, sounds much cooler than it was for me.I was mostly just taking notes during dictated meetings and turning them intoand highlighted color-coded notes.But didn't like that.Had coworkers told me that I should start fitness stuff because it was all I was talking about.
01:38Use the consulting method which I knew, which is look up experts and connect with them because it's faster to learn that way.He emailed 40 guys.One guy got back to me.I offered to work for him for free.Left everything I had, sold my condo, drove across the country 36 hours later.I was there. Work for free for three months. Started my first facility. Learned about Facebook adsat about that time. Use that as the primary of getting customers. After month 15 of the firstlocation, opened up a new location every six months at full capacity, went to a different marketing
02:08summit, saw a guy, signed up for his mentorship. He said, I should be showing people how I was doingwhat I was doing rather than opening up more gyms. I took his advice because he was richer than me.So then I did turnarounds for, so I flew around the country and did 33 turnarounds.So I flew out and filled people's gyms and had an eight guys sales team doing that,turn around eight gyms a month.That was an intense period.And then from there, I realized that the logistics were getting really difficult to scale.We were doing probably three, three-ish, $100,000 a month at that point.
02:41And so we switched to a licensing model.And then that is when everything kind of took off.There's a ton of heartbreak and bankruptcies and failed partnerships intermixed in there.but that is the two-minute story of how I got to the first big successful company,which is Jim Launch.Then we started a supplement company 12 months later.Then we started a software company 12 months after that.And then we started the parent company acquisition.com.
03:04We acquired interest in three other companies, about to be four, so we'll have seven in the portfolio.And those companies now do about 85 million here.Do you think entrepreneurs are hardwired?Or do you think they can be made?And if so, why?I think it's a really good question. I think it's a nature and nurture thing. So I think thatthere are some people who are hardcore could never live another way. And there are some peoplewho will never be entrepreneurs. But I think there's a whole lot of gray in between that depends
03:30on stimuli and circumstance. I think for me, I don't think I was hardwired an entrepreneur. I wasn'tslinging lemonade. I think if there was like 10 being, you know, the Gary Vee, who says he couldnever be anything but an entrepreneur. And then a one is, you know, an academic chair at aDepartment of Mechanical Engineering. I think I was actually closer to like a three. Like I thinkI'm actually left of middle in terms of not being necessarily an entrepreneur personality type.The only reason that I think I even got into this was because I so disliked the career that I wason that candidly, I just wanted the emotional pain to end. And so I just thought like I didn'teven want to be alive anymore. And so I just threw away all my goals around money and just
04:11said, I'm going to do something that I love, even if I don't make anything. I'll start a gym.I like fitness. But then I got the bug and realized I like business more than I liked fitness.And then that kind of started the next kind of passion that started growing within me.Like the day that I opened my gym was the day that fitness became second most important thing in my life.Business became the most important thing in my life. I see. So you wrote this book called 100 milliondollars. Yeah. It seems like a lot of, like it seems like it's doing really, really well.Like, what compelled you to write this and what inspired you to write this book?I share my numbers really transparently on the channel.
04:45You know, my wife and I have taken a tremendous amount of dividends from the business.And we sold, you know, one, I sold my gyms, but that wasn't anything huge.And I, we signed our will to give away everything we have when we die anyways.So in thinking through that decision, I was like, well, giving away everything that I have when I die is, is neat, I guess.Because then it decreases some of the pressure around like, why I make more now, right?but then I was like, I think the most valuable thing that I can give isn't money, which we do give,but it's the skills, right? It's the giving fish versus teaching them into fish. And so that was kind ofthe spirit behind the YouTube channel, the spirit behind the books and the courses and things that
05:24I'm just giving away now, mostly because it feels good. And because I get to participate in some coolcompanies, you know, some, you know, I get to meet new people from this. And I think thatLayla and I were really, really sheltered in terms of how we've done.our business career at this point. I mean, you know, we were known within a very small niche,but for the most part, we've just kind of stuck to doing that. That was actually an active decisionabout a year into gym lunch once we transitioned to licensing. We were doing about two and a halfmillion a month. And we said, we can't mess this up. And we've got too many families, too manyemployees who rely on us. And so we basically said, we're not going to have friends. We're not
06:00going to drink. We're not going to go out. We're just going to work. And right or wrong,you know what I mean? That was just where I was mentally at the time. I was like, I just need to dothis and do a really good job. And we did. But now that we've kind of come, I would say, come out ofthat season of life, now it's like, hey, we can look around and share some of the lessons thatwe've learned along the way. Yeah, that's cool. I respect that. So I have to ask you,just delve a little deeper on that piece that you said you and your partner,Lelavori, written your will and you give everything away. Like, like, why? Why?We're not big believers in legacy. You know, I believe, at least, you know, America's built on
06:34equal opportunity. I don't think that inherited wealth does anyone.any good. I think it ruins people. I think you have to learn how to, like, I believe money is atool. And my favorite magic card, which there's a game called Magic the Gathering that I playedone as a kid, but it was, she wished for a weapon, but not the skill to wield it. And so I think thatpeople get this very powerful tool and they don't have the skill to wield it. I think the only way tohave, not have money own you is to know how to generate it. And then you can respect it for what it is,know what its limitations are and know what you can do it, use it for. And I think that mostpeople who are gifted it. So I don't have kids, but if I did have kids, I still wouldn't give
07:12them the money because they have to do it on their own. Otherwise, it'll, I think it'll ruinthem. And when it comes to aspirations, one of my close friends, he's a, he's a gym guy. So I thinkhe, yeah, he been following you for a long time. He mentioned to me that your aspirationsare to become a billionaire, right? So like, you want to, you still want to acquire, you know,a sizable amount of wealth, right?Yes. The easiest way for me to explain it is like, I want to have a very big goal that sounds exciting, but I have absolutely no emotional investment. If I never hit it, I wouldn't be upset. I do think I'm going to get it, but I wouldn't be upset either way. Can you talk to us about the how, like conceptually kind of like top level? Like, like, how do you plan to get there? We're just going to be investing in businesses that are similar, the ones that we scale and participate in the growth. It's very simple model. And just, you know, penciling out the numbers. Like, I know that I can acquire.probably a decent size chunk of four to eight businesses a year. And I think that I can reasonablythree to five X those in three years because we're just looking at niche businesses that we know
08:19that we can crush. So the thesis, I'll zoom out for a second. So the thesis point acquisition.comis that formal education, at least in America for me, I feel like formal education failedmost of us, right? You know, we put a lot of money in. There's some in the U.S. you can't bankruptout of the debt. Like you cannot get out of the debt that you go for your schooling. Andthe entire idea, like the original premise of higher education was that you'd now be a more valuablemember to society, be able to be more gainfully employed and provide value, right?The problem is that the promise is under-delivered, right?And people go in and get the same level of income after they get a degree as what they could get
08:52before.And if you just look at the parallel track of somebody who took the same amount of moneyand spent it on what I would consider alternative education over a four-year period,I would say almost invariably the person who spends an alternative education would be far betteroff four years later than somebody who partied for four years at college.And so I think that with technology, I borrow this from Naval Rabakhan. I just like to quote a lot. Technologydemocratizes consumption and consolidates production, which means if you're the best in the world, you get to do it for everyone.And so I think that education is going to become or already has been and will increase in its fragmentation. So you'll have more niche verticals.
09:26And instead of having generalists, which is what formal education is based on liberal arts where you get like, I've got English and math and Aztec literature and female studies and whatever, right?Instead, it's how to use Aaron B to make money.how to drive Uber and make money.How to you, you know, do Amazon FBA.What's hilarious to me is that, like,there's more Amazon sellers than there are almost,then you can pick,you can pick a profession that's out there in the United States.
09:48And there are more individual Amazon sellers than there are almost of any,you know, sub-group of individual thing.But why isn't Amazon or e-commerce a major in undergraduate?It's a real, you know, it's a real way of making money.And so I think that with this huge fragmentation,education hasn't gotten close to catching up,but the demand for high value skills has never been higher.And so you have this huge amount of demand for people who want to have skills so they can
10:12feed themselves and provide value.And then you have almost no supply.And so what that's given birth to is what I would consider the alternative education scene,which is blowing up, right, the entire, all the gurus and e-learning and all that stuff.And some of it's bad, some of it's good.But at the end of the day, the demand is going to drive it.And so my bet that in my thesisbindacquisition.com is I want to find the people who are the best attheir specific thing, the best salon girl, the best auto mechanic, the best gym owner, the best
10:40all of these things, and then wrap the model that I already know how to deliver, you know,provide exceptional service, provide great value, how to teach effectively so that people canunderstand the concepts, and then ultimately make a lot of profit and then participate in thatprocess. So that's, that's the thesis behind it.Hey, Mosin, Nation, quick break just to let you know that we've been starting to post on LinkedInand want to connect with you. All right, so send me a connection request and note letting me knowthat you listen to the show and I will accept it.There's anyone you think that we should be connected with,
11:10tag them in one of my or Layless postsand I will give you all the love in the world.All right, so let's get back to the show.We share similar views on education and that whole system.Won't go too deep because we can talk about it forever.You talk about the billionaire goal.Once you hit that, like what's next and how,and when do you want to do that by?
11:33I think if I said it, it would sound unreasonable.But I think that, I mean, I'll tell you what I have it.I don't think I've said it publicly, but I think 10 years is what I think I can, I mean,it'd be cool to do it sooner than that. And that's barring, you know, a global meltdown and reset orwhatever, you know, like an erasing of currencies and crypto ruling the world. But, you know,short of that happening, and as long as, you know, whatever the recession that is coming comes in,it's just a normal level recession and not like a global depression meltdown, I think that in 10 yearswe could get there. And that's just based on normal, like just based on the assets that we already
12:05have how I plan on allocating the assets and what kinds of returns I think will be able toreasonably expect, that's where that's based out of. Because all I have to really do is get toa hundred million in EBITA in 10 years. And then the company, you know, the portfolio I have will beworth a billion. That's what I have to do. So I feel like I can do that though. I'm curious as well,kind of like what would be next once you hit that. So what would be next is just continuingto, Alex's boring recipe for success is just to keep doing what's working. I would just continue to dothat. But I think that what will be different by that Acquisition.com, the way in the designing it is,I'm trying to design it so that everybody, every single party that touches it benefits.
12:46So the vast majority of the, like, because there's a, it's like an ecosystem of what I'm tryingto build. So everybody who consumes all the content for free, right, gets hopefully value forand excess to the time that they're investing, because that is the real cost. It's the time thatyou're investing and consuming the content, right? And so if you get value for and access of that,then you will be left better off. And that's going to be not.99.9% of people because I'm not selling anything. For the 0.1% or 0.01% of companies that we may end uppartnering with or doing some sort of investment deal with, those companies will benefit because we'llbe able to directly invest in them and we'll help them grow. The team that I have within Acquisition.com,
13:21I'm recruiting the absolute best in the world. So we're talking about people who have uncappedearning potential so they can make $500,000, $1 million, $2 million a year, $5 million a year withinthat structure. So the people who will work for me will be.able to make, you know, tremendous amounts of income and create their own independent wealth.And then obviously, Acquisition.com as a portfolio itself has to make money. And then maybe inthe future, I'll be able to help all of those companies, you know, all those people, they couldreinvest their own money and then also participate as both an investor and a doer. And so that'swhat I'm trying to create is just a huge ecosystem that just creates value for all parties that
13:58are involved. Yeah, love it. So I want to dive into your framework more, but I have to ask onequestion selfishly. It's not written down here. Like, dude, if you want to become a billionaire,wouldn't the fastest way from my perspective, and this comes from, I've interviewed a lot ofbillionaires, spoken to a lot of like extraordinarily successful people, probably hundreds atthis point, there is no doubt about it that the fastest way from my perspective to acquire andgenerate serious amounts of personal wealth is starting a software company and getting it toa hundred million ARR. Why don't you do that? Like, you're a super smart guy. Why wouldn't you justfocus on that? It's a really good question. It's what, I mean, my wife and I talk about all the time,
14:43because I say the same. I mean, we go back and forth on this thing. I'll walk you through thedecision-making process, or at least the reasoning behind it. So I think that software, if you look atthe people who are billionaires, right, many of them create it through software now. And so what I feelis not represented as the many people who tried to create it with software and failed.And so if we're looking at the ones who become billionaires, it's like VC, if I bet on 50,one of them or two of them are going to hit it, right? But if you're the entrepreneur in theone, your success likelihood is far lower. Whereas I feel like if I invest the way that I plan oninvesting, I will have a vehicle that compounds capital at a very high rate of return,
15:23and I can diversify my risk and virtually guarantee that I get there. And so,So that's the, it's a risk analysis, which is I could probably hit bigger, but the risk that I don't hit it is high.It's reasonable at least.Whereas the risk that I don't hit it on the other side, I feel like is is dramatically lower.And I still have software companies that are coming to me that I can still participate in that process.So that's, that's the overarching reasoning behind it.Now, that being said, maybe in three years we'll get on here.I'll be like, you know what, man, I was full of shit.
15:56I saw the software opportunity and I crushed it.So maybe that's where I currently stand.And I think part of that's because my heroes are like Charlie Munger and Warren Buffett.Like those guys are my absolute heroes in terms of how they live their lives and how they make decisions and how they think through things.And so I think that's been a big influence on why I'm choosing to go in this direction.Yeah, that makes sense.So you go in like the portfolio model.Look, to be honest, it's probably more fun that way too.
16:22Let's be honest.That was a big part of it.Because Layla and I spent 18 months figuring out what do we want to do, what do we really want to do?is the next thing, the next season for us. And I had all these like non-negotiables, right? I was like,I don't know if I want to run another end to end. I mean, I can do it. I would just, I don't know if Iwant to do another, you know, grind first three years again. Maybe, but I don't know. What's something that Iwon't get bored of? Because for me, I get bored in about 24 months. That's my, that's my window.I know that. And so if I can participate in lots of different companies, I think that I will be able to
16:53keep my attention on one thing. And I think that's probably the biggest, that's probably thebiggest one. Because like every company we've started has gone from zero to two million a monthin less than a year, like every company. So we know how to scale them. I just, you get what I'msaying. I'll stop. So you talk about crafting an offer that's so good that people feel stupid sayingno. So why is the offer the most important part when it comes to selling anything or building abusiness in general. I struggle with saying it's the most important because you and I both know it'sit's like an engine right like a business is like an engine you need wheels as much as you need cylindersas much as you need gas all of them are important right but I see the offer as like the spark
17:37where we're actually giving them exchange for their money and I think most entrepreneurs who arestarting out do it out of sequence and so they try and fix step two or step three and they're like heywhy is my copy bad or why are my ads not performing when they're not starting with the veryfirst part of the process, which is that initial transaction, right? And so a lot of my learningsaround the offer came out of necessity because I prefer to be dealing with tremendous demand andfixing operational problems rather than trying to generate demand. And so my belief is like thethree pieces of scaling that I adhere to is zero to a million is promotion, one to ten million isproduct, 10 to 100 is people, right? And you can say, well, if you have the right people,
18:19you could do that. Yeah, but that's not typically how it actually happens, right? So you have to knowenough promotion because if you have nothing, then you need to get people to find out, right? So you haveto start generating some traction. Once you get the traction, and this is where I think people mess up,is they get their first dollar from promoting and then I need to spend more dollars promoting when it'slike the whole point here is to get the product market fit and make sure that product is exceptionaland we're getting virality from it. People are sharing it. We're getting amazing reviews.All of that stuff is happening because then when we go back to really scaling, we're going toso much more return on every dollar of advertising or media that we're buying, that it all makes
18:53the whole machine work, whereas most people then try and dump more promotion on top of it,but the product isn't fixed. And so the reason that the offer was so important was becausejust getting that first traction, that first spark started, it's so much easier to just givesomeone everything they possibly could dream of and then work backwards from there.I'm curious, kind of, you said also that the past few companies that you've worked with,you've taken from zero to two million a month in a year.Is that correct?Yeah, so Prestige launched $1.7 million a month by month, I think, like four.
19:26Jim launch hit $2 million a month within 12 months of us hitting, us switching to licensing.And then Allen was at 1.7 as well.So just under two.Yeah, wow.Okay.So multiple different industries, which was the steepest learning curve?Software.Why?
19:46I see business, like there's three pieces where you've got acquisition, you've got product,and you've got ops, right?Shared services, whatever you want to call it, right?So with the first two companies, so with Jim Launch, the gym licensing company,acquisition I could cover, product I could cover because I knew everything about,because what I was showing was how to acquire customers just within a smaller niche, right?And run the business model and all the other things.So I understood both the acquisition and the delivery to an immense amount of detail, right?
20:13I would say it was a master at it.I'd master's level both of these things.And then my wife is a prodigious operator.Like she can build a team around anything,which is why we've been able to scale so many things so quickly.So with the first company, all three pieces were in place.It blew up.The second company, I contracted the best doctor that I'm aware of
20:34to create all the formulas for all the products that we sold.And so I had the acquisition.I had the product.And then we had the operational piece again with my wife.With software, I knew how to acquire the customers.We knew how to build the team, but I'm not a code guy.And the mistake that I made when I was building Allen was that I did not have a technical co-founder,which is what I should have had.
20:56And so I had an outsource development team, and that was a big mistake.I shouldn't have done that.And the thing is, it's so difficult.You know, I was blind negotiated, is how I'd say.It's like, I would say, hey, can we change this button?Right.And then you'd say, you know, it takes a month.And I'd be like, I feel like you can do better than that.
21:15I had no idea.It could have taken two years.I have no clue.So I'm blind negotiating, trying to just keep a front.But I have no clue what I'm talking about.And I hate operating from some sort of that kind of information disadvantage.And so that was why it was so difficult.Now, I blew the doors off for the acquisition because I can go market and sell all day long.
21:35But with software, to your point, getting 100 million ARR to get the 10x multiple that you're going to get on it,it's about having net negative churn.And that's going to be all product driven, right?That's going to be making sure that the UX is amazing,the engineering team's on point,you know,like people are promoting like crazy,all that kind of stuff.
21:51And so I feel like it's interestingbecause in the internet marketing world,because I see this all over the place,so many of these guys are switching to trying to do software.But they're selling the software the same way they sell their digital products,which means they have a shit software,and they're just selling it.And they're like,
22:05I'm going to be able to sell this for a ton of money.It's like, no, you're not.You're only going to be able to sell for a ton of money.If you didn't market, it still grows.Moses Nation, hope you enjoyed that podcast, got some nugs on the hardwiring versus BORNso that you can no longer use that as an excuse or use an excuse for other people that you knowwhy you hopefully don't have to start a software company to become incredibly wealthyand hopefully give you a couple tips and tricks that you can use to improve the offers
22:27you have so you can get more customers, make them pay more and keep them longer.Stay tuned for part two where we dig into even more Mammajamba of Business Stuffs.