The Game with Alex Hormozi - How to Start a Business | Ep 513

Episode Date: March 21, 2023

“Intelligence is actually a speed, it's rate of learning.” Today, Alex (@AlexHormozi) breaks down the steps needed to start a business and make money, including setting up an entity, obtaining a bank account and payment processor, and identifying what to sell and to whom. He also emphasizes the importance of solving problems and providing value to customers, and advises starting with providing services for free to gain experience and build a customer base.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:(1:06) - How to start a business & 6 types of products to sell(2:56) - Identify what to sell & solve other’s problems(7:26) - The problem is you’re afraid to start a business(8:47) - Change behavior to learn and become smarter(11:10) - Decide if you focus on the technical or business aspect.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

If you want to be smarter, you can actually make yourself smarter by simply doing things differently, by taking action, by changing your behavior. And so the faster you change your behavior, speed of change, the smarter you are. 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 pulled my audience in 76% of you want to start a business but haven't. Most of the other stuff I make is for people who are trying to go from a million to 10 million, 10 million to 100 million, et cetera. But today it's dedicated to you guys. And the spirit of this is because I went to dinner with 8 20-year-olds who were in their senior year of college. And they told me six months earlier that they all wanted to start businesses. And six months later, I had dinner with them.

And I was like, hey, where are we out with those businesses? And they're like, oh, you know, I'm getting my LLC set up. And I was like, that's not a step. That takes five seconds and a hundred bucks on legal zoom. Like, what are you talking about? What did you do the last six months? The answer is they didn't do anything. All right.

And so what I want to do is actually break down what you need to do in order to start the business and make money. And the good news is it's easier than you think. So if you boil everything down to first principles of what do I have to do to make money. One, you have to have an entity set up, which you can do on legal Zoom for a hundred bucks. All right? You wait two weeks. They send you the paperwork.

Congrats. Take paperwork. Go to bank. Say bank. I would like a bank account. Bank account says here. Here's a bank account. They give you checks.

They give you a credit card. And they give you an account number. Fantastic. Now, take that, go to payment processor, sign up for payment processor so that you can collect money. Once you have those things, you are now officially able to transact. Now, all you have to do is sell something to someone. Now, where people get stuck is what's the thing and who do I sell it to? So I'm going to give you the fastest track way to do that today. So there are only six things that you can sell anyone. Number one is a product. Each of these have digital and physical versions of them. You can sell a physical product, which is stuff you get in the mail, or can sell a digital product, like a PDF. All right? The second thing you do is sell services. If you sell services, that's like doing a massage,

a digital service would be like software as a service. That's a digital version of work that somebody would otherwise do. The third thing you can sell is access. So you can sell physical access to something, like when you rent an apartment, that's physical access to something. Or if you sell concert tickets, that's physical access to something, right? Or digital access to something. That's where, like, you have rooms or you have experiences or whatever. The next thing you can sell is risk. You have digital risk and you have physical risk. Digital risk is like, cyber attack, physical risk is like insurance on a building. You can buy and sell money. That's what banks do. When they loan you stuff, they're selling you money and you're buying money at a premium.

And there's digital and physical versions of that because you have actual money and then you've got cryptocurrencies, et cetera. You can also buy and sell media, digital versions of media, which is like something like this, or physical versions of media, which people forget about, like books and newspapers. Those are physical media. Everything else falls into buckets of those things. And so when people are like, but okay, that's a lot of stuff, what do I do? My easiest piece of advice is to look at your past and figure out the things that you know a little bit more about. So because of the people that you are friends with, because of what your parents do, there are some industries that you may know a little bit more about. Like if your dad was a

mechanic, you'd probably know more about cars than I do, right? Both of my parents were eye doctors. So I know all the parts of the eye and a bunch of stuff about eyes that no one really care about. And I don't really even care about it, but I know it just through osmosis because I spent my whole life with them. So there are things that you know that you don't. even know that you know. And I could probably tell you problems that people around me are experiencing every day. And I'll bet you if you took some time, you could solve it for them. So step one is try and find someone that you can provide value to. That's what value is, solving a problem. The next thing you do is you're like, well, how do I get them to give me money? In the beginning, I recommend not trying to ask them to

give you money, but I actually recommend you solve it for free. Solve the first five, 10, even 20 people for free, and there's a number of reasons for that. One is because you probably suck because you've never done this before. So it's probably better to not get people's money because then they'll probably be upset about it. So offer to work for free and more people will take you up on it. And if someone doesn't take you up on working for free, ask them why. Because the reasons they won't take you up on it are called hidden costs. Those are the costs in excess of the money that you would otherwise charge. That's a reason somebody doesn't want to buy. And so if you can identify the hidden costs, then you can start solving those ahead of time and then ultimately make the thing you sell later much more

valuable. So once you start working with these people to solve their problems, you'll start getting feedback from them about what to do to make it better. Now, after a certain period of time, there's three benefits you get from this. One is you'll actually start to learn the skill, which is by far the biggest benefit of doing it this way. Number two is it's easier to ask people to do something for free because you're not asking for much. Number three is that those people will A, either leave you a testimonial, which you can then leverage to show other people that you're good at your thing, Or they will become paying customers themselves if you just ask them to,

because if you solve the problem well enough, on a consistent basis, they'll ask you to do it again. And at some point, you can say, hey, I actually have too many free customers, like I have to start charging because I don't have enough time. And what you just did was you artificially created, or in a real way, created more demand for your time than you have supply.

Now you can ascribe a price to it while also getting good. And then finally, those people, so subsection three, of why it's good for you to work for them for free, is that those people can also send you friends. And so you can say, hey, I'll do this for free in exchange for two things. One, that you leave me a testimonial and two, that you at least give me the idea of a friend who might be also benefiting at this. Now, if at the end of the process that you don't want to give you either of those things, ask them why. And then say, what would it take in order for you to do that? And then go do

that. Because it's very hard for people to deny you multiple times, especially if you met the terms or the conditions that they would do it under. So now all of a sudden, if we're fast-forwarding here, so you figured out the thing to sell, it's one of the six, digital physical versions of those six items. You've identified who you could solve the problem for. It's the people that you can provide the most value to, somebody who already has a problem that you know a little bit about, because just as a side note, Y.C has already done research on this. They prefer to invest in founders who have experience in the industry that they're trying to solve either directly or adjacent. And so I got into fitness because I had experience in fitness. So I knew a decent amount

about it, at least about the core thing. I didn't know anything about business, but I had half of it solved. If you have to understand the avatar and you have to understand the product and understand how to grow a business, that's a lot of ignorance debt you have to pay down. And so the idea is, How much can I pay down ahead of time so I can start getting ahead? And to be clear, a lot of people obsess about their first business thinking it's going to be their last business. It probably won't. If you're an entrepreneur, you will start many business over your career and you will learn from the old businesses to apply to the new businesses. And so my recommendation here is first four steps, get LLC, take LLC to bank, get account, go to processor, get way to process money, give away stuff for free until you have more people who are asking for your time than you have time.

to give, then start charging money. That's how you do it. And then once you do that, you start making the first dollar. And the first dollar is the hardest one to make. But once you make that one, the rest of the videos that I have hear about, how to take that first dollar to the millionth and 100 millionth and beyond. 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. So if you understand how easy it is

to start a business, the next questions you have to ask is why you aren't, right? Which is most of the times the problem isn't that you don't understand how to make the business. It's that you are afraid of doing it. And so you have to identify what voice or what person you extrapolate in your head who you think is going to judge you for doing this thing, or rather who's going to judge you if you fail. And so if you can isolate that voice and say, you know what, it's not people who are going to judge me. It's my mom and my uncle. Those are the only two voices I hear. then you can rephrase the question which is, am I going to live out their dream

or am I going to live out my own? And ultimately, you may have to die to the identity that they keep in their minds of who you are in the path that you're going to be on versus the path that you choose to live with. Because you can either just die for the rest of your life living their dream, or you can die to their dream to live yours.

One of the other reasons that people don't get the business started is because they struggle with impulse control, which is they cannot stay focused for a specific period of time on any task. They are a slave to their impulse. their impulses. They want to go watch porn and they want to watch YouTube. They want to watch Netflix or whatever it is. I call it mentally masturbating to the idea of having a business because that's actually easier and more fun than starting a business is because starting a business is work.

But you just have to decide whether you want to pretend to be a business owner and post about how you are pretending about your hustle or you actually want to be a business owner. And I remember the book that changed it for me was that they used this word called Wanchpreneur and said, oh yeah, there's all these people who are Wanchpreneurs. They want to be an entrepreneur and they like consuming the content. They like going to the workshops. They like watching the webinars, but they don't actually do anything. And I remember at that point, I'd been reading books for almost a year, a book after book after book about business and self-help and personal development and all that stuff, and I still hadn't done anything. And that was when I realized that learning comes from changing

behavior. And so there's two definitions that you should know in order to understand how to start your business and be intelligent about it. Intelligence is actually a speed. It's rate of learning. So somebody who's very intelligent, learns quickly. Now the question is, what is learning? Learning is, same condition, new behavior. So if I show you a condition and you learn something, when I show you that condition again, you change your behavior. Now, if up to this point you've consumed lots of content, but you have not changed your behavior, same condition, same behavior,

you have not learned. You're not intelligent. And so if you want to be smarter, you can actually make yourself smarter by simply doing things differently, by taking action, by changing your behavior. And so the faster you change your behavior, speed of change, the smarter you are. people see you from the external as being smart because of the actions you have taken. And so if you can disconnect your judgment from other people, worried about not starting because you're going to live out there dreams rather than your own, you can control your impulses,

so you can actually stick with it for a longer period of time. And you consume information in order to take action on it, you will start chipping away at it. The nice thing is that if you continue to take action over a long enough period of time, you will win and you will be successful. And a lot of people think there's a learning fallacy. They feel like they need to learn enough to start going. But the reality is you will learn more in your first 100 sales conversations than you will learn from 100 books on sales. And you can do 100 sales conversations in a month, and it'll take you years to read 100 books on sales. And the crazy thing is, most of the books that are written about business really only makes sense once you've started doing business,

because you actually have a lattice work of experiences to hang the learnings on. So I actually didn't read a book about sales until I'd already closed 4,000 deals. I didn't even know that the world of sales training existed. I just knew I knew how to have conversations with people get them to give me money. That's how I called it. I didn't even know it was sales, right? And so if you want to learn the skill, the best way to do it is to just start trying to do the skill and you will learn so much more. Because to quote Confucius, I hear and I forget, I see and I remember, I do and I understand. And so you're only going to truly understand the thing by doing it rather than reading about it, watching about it, listening about it. And so the faster you can condense

the time between when you think you want to do something and when you do it, the smarter you are because your behavior's changed. So if you want to learn, you got to do. So a big decision, that every entrepreneur has to make is you have to decide what type of artist you are. Because entrepreneurship, in my opinion, is just another expression of art. So either your art is the actual technical thing that you deliver, or your art is business itself. And those are two very different types of people. The artist who, for example, makes really nice wallets. They make really high quality leather wallets. That person, if they continue to make better and better wallets, will eventually have a point where they will have more people want their wallets than they

will have time to deliver it. That person has a single choice to make. They will either, raise the price of their wallets because they believe that the wallet is their art, because they love actually doing the making of the wallet, which is fine. The other version of that is that they create a wallet business, which is then they start looking into machinery. They look into hiring and training people to replicate the same skills that they have in the wallets that they make. They have a low-grade version and a luxury version. They start making tiers and up-sell process, et cetera. Now their art becomes business. And so there is, in my opinion, no right or wrong answer. Because you can make just wallets and make the best wallets in the world

and be very, very wealthy. Or you can create a business amount making wallets and be very, very wealthy. Both of them work. It just depends which one you enjoy most. And if you're not sure, start the one that costs you the least and then go from there. Because you know what? You might like making wallets today and in two years you might be sick of making wallets. And at that point, you can learn the new art for them.