The Game with Alex Hormozi - Ownership To CEO | Ep 365

Episode Date: January 25, 2022

OWN the company, not RUN it! Today, Alex (@AlexHormozi) talks about the difference between being an owner vs. a CEO of the business and the advice to take in order to sell the company and get the freedom you desire.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:(1:49) - Structure business to run independently for freedom.(4:46) - Be an advisor, not a leader in your business.(6:58) - Company must grow without you to be an owner.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

how to structure the business in order to sell it and why you should do that independent of whether or not you plan on selling it. 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. In this video, I'm going to talk to you about how to structure the business in order to sell it and why you should do that independent of whether or not you plan on selling it in the future. So hi, my name is Alex Ramesey. I have a portfolio companies that does just under $100 million a year in revenue. We own three outright. We have five that we have minority positions in and the reason I make this channel is because lots of people are broke

and I don't want you to be one of them. So if you have a business right now and you're trying to scale it, you're trying to grow it, there's usually one of two outcomes, right? Either this is something that you're super passionate about or this is an opportunity that you're passionate about because of the upside potential of making lots of money. There's tons of people who are, you know, build software companies that are not like super passionate about like data management, but they're really good at it and they think there's an opportunity to make money. It doesn't really matter to me, whatever way you do it is fine. But what happens is over the trajectory of the careers of the entrepreneur you know we develop in skill sets we level level up you know first we're doing

that we're managing that we're leading that we're casting the vision and you move your way up in the company as the company grows underneath of you as you scale right the thing is is that at some point you know I think the entrepreneurial journey is always trying to find the most leverage for our skills like what's the best vehicle for the skills that we have to capitalize on the opportunity marketplace right and that's the entire market not just within the context of your business but if you were building the company at some point and this I think one of the heart transitions that I've had to go through and it took me a very long time to do this, was transitioning from CEO to owner. And you've heard me talk about this before, but I'm going to say it again because

I think it's so important. Independent of whether I planned on keeping the businesses or selling the businesses, learning how to structure the business so that it could sell someday was one of the most valuable things that I've done as an entrepreneur. And I remember when I started out as like, I'm never going to sell this company. I'm never going to sell this company. Like, I'm going to keep these things for life. And that may or may not be true. But as I've gotten older, I will tell you this, I do like having optionality. And by doing, by structuring the company in such a way that I could sell it, which I'm going to get to what some of those things are in a second, it actually enabled me to have more freedom, which was the ultimate goal of the business. And so the biggest

hardship that I've probably forced on myself was starting another business while I had a business, which is probably one of the questions I get most frequently from entrepreneurs is like, well, you say I should be focusing on stuff, but you have all these businesses. And the answer is yes. And part of that is because I made mistakes and I'm hoping that you don't have to make the same ones that I did coming up, which is I was CEO of one company and then started a second company because I wasn't doing anything in my first company or wasn't going to plan on doing anything in my second company. I was like, I can be CEO of both. Terrible mistake.

And it cost me dearly in time and stress and all the other things that go along with that. But being CEO is a full-time role. And so unless you are truly the owner of a company and not the CEO, then that company still needs you. And it means it's, A, not sellable or sellable for much less because it's still dependent on you as the owner. And I remember I used to poo-poo this when I was, you know, earlier on in starting my career, I was like, when people, I would hear guru say like, and maybe it's because I didn't know how to do it. But they were like, you know, if a business can't run without you, it's not a real business. Well, I don't think it's not a real business. I think that you are not an owner if it cannot run without you.

or you're an owner, but you're also a CEO of the company. And so for me, understanding the differences between CEO and owner was really important because I didn't even have any examples of that. It was only when I started looking at the investor world, the wealth world, that I understand the difference between those two things. And so as an easy example, like if you look at Warren Buffett, he doesn't run Seas Candy. He owns Seas Candies.

Right? He doesn't run Geico. He owns Geico. And he doesn't own, you know, Bridgers, Jewelers, or whatever it is. Like, he owns it. He doesn't run it. And so if you think about that within the context of, you know, your businesses, is like, is there a way that this business could not only maintain, but also grow without my involvement whatsoever so that I could function the same way I do in the stock market as somebody who owns equity in this company, that it grows without me? Now, let me explain how my role works now because I have been able to structure my life so that I actually treat all portfolio companies the same.

So despite the fact that I have 100% ownership in three of them and I have, you know, minority stakes in the other five, I still structure my engagements with them the same way. So I'm still meeting quarterly with those companies and their leadership teams. And I have, you know, meetings as needed with them throughout. And one of the important pieces is that I am nose in hands out. And so you can write that one down like NihO and I got that from a mentor of mine. Nose in hands out, which means that when we have a meeting or we have a meeting or we have a long talk, we want to talk about something strategic, I don't walk away from the meeting

with homework. I don't walk away with to-does, all right? And that is a purposeful effort by design, because if I had to walk away with to-dos from all these companies, then I would never be able to get anything done, right? And so I go into there as a strategic advisor. I'm there to offer my experience, but I'm not there to lead the meeting. I'm there to bounce ideas off of. Hey guys, real quick, if you're new to the podcast, I have a book on Amazon. It's called $100 million offers that over 8,000 five-star reviews and it has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over 1,000 hours into writing that book. And it's my biggest gift to our community. So it's my very shameless way of trying

to get you to like me more and ultimately make more dollars so that later on in your business career, I can potentially partner with you. So that's my give. Go check it out, Amazon, and back to the And the way to make that transition is that you have to build it with that intention. So as I've now built businesses later in my career, compared to earlier in my career, my earlier businesses, I built independency on myself because I had those interpersonal needs, and I also didn't know any better. But hopefully if you're watching this, you can know better. And so this is one of the downsides of having a personality-based brand compared to a business

that's faceless, that's really just a brand in and of itself that's outside of the entrepreneur or owner who started it, right? Seas Candies is not about Warren Buffett. that Guyco is not about Warren Bobber. They have a gecko, right? And that's the mascot. And so as I've transitioned through this, I can tell you that now, finally, I would say I'm in a position where I actually am an owner, and it's awesome. It's great. These companies pump out cash flow, and I can allocate that cash flow accordingly and, you know, buy percentage of other companies, I can get real estate, all these other things. But it comes from literally being able

to do that, which means that I either have to bring someone up to operate as CEO. So right now, your business doesn't have a CEO and you say that you are passive in it, would probably challenge you on that and say that's not true. The company has to be able to grow and innovate without you. If it can do that, then it passes my test of ownership. And so I like to have a certain amount of involvement, which I just said, like quarterly and touchpoints and things like that. But beyond those things, the business must be able to operate and grow on its own. And a test that I have is that in a six-month period after I leave and I put someone else in charge, does the company grow during that period of time? Not only maintain,

but grow in both top line and profit unless there was you know some reason they wanted to make some sort of capital investment or whatever but for the most part you can use your own common sense there but that is my litmus test is six months so if I put someone new in and I give them six months does the company grow without my involvement switching to this communication cadence and I think one of the hardest and most significant things that you can do to really remove yourself from that is if you have any sort of central communication for the company so if you have slack or Assana or someplace that you that you

you are integrally involved, you see everything, if you can remove yourself from that. If you can get off of the company Slack, if you can get off of the company Asana, so that no one can have contact with you and you can start a separate communication center, which is what we have done with our portfolio companies. We just have one Slack that has all of the executives from each of those portfolio companies, so they are the only ones who have direct access to us, and their teams have access to them directly. And that is how we can have far more leverage with the skill sets that we have given the opportunities

in the marketplace. And so the important point here that I want to make is that independent of whether you plan on selling or you plan on keeping your company, structuring your company so that you can sell it will ultimately give you the freedom that you want. And this was something that I did not do earlier on in my career. It's taking me years. I mean, now over a decade to get to this point. And I can tell you, I don't think I'll ever build another company again the way I used to. And I think part of that comes with skill sets.

Part of that comes with beliefs. Part of that is character traits that you develop over time. But hopefully we can fast track that, which is why I'm making these videos for you. So I hope you've been that valuable. Hit subscribe if it was for you. I'm trying to help entrepreneurs who are trying to scale their companies and just kind of show you the lessons that I've learned along the way. The key point is ownership is the goal, not CEO ship.

And if we can act as owners, I think we make better long-term decisions. You are far less stressed about the short-term nuances in the business because you have a much more long-term outlook. And ultimately, I think it actually better serves the business. in the long run in terms of the value that it creates for its customers. And honestly, the value that the business creates for you in your life, which I think most of us wanted freedom. And it takes a long time to get here.

So, anyways, hope that was valid before you. Leave a comment if you like stuff like this. And if you have other questions around these topics, that stuff I love talking about. And I just want to make stuff that you find, you know, that's useful for you. So anyways, lots of love and I'll see you next video. Bye.