The Game with Alex Hormozi - When To Start A Business | Ep 312

Episode Date: June 29, 2021

Entrepreneurship was never easy. Today, Alex (@AlexHormozi) talks about the roller coaster moments in his life, one of the hardest decisions he had to make, and gives advice on evaluating who you are and where you’re at.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:(0:47) - Alex shares job dissatisfaction and decision to quit(3:22) - Motivation needed? Entrepreneurship may not be for you(4:20) - Long and short-term pay-offs in entrepreneur's journey(8:50) - Entrepreneurship: value investment, expect obstacles(10:53) - Constant improvement essential for success in this industryFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Quitting my job was the hardest entrepreneurial decision of my entire life. So rewind a handful of years ago, I was sitting on my balcony, I was 22 years old, and I was staring out over this condo that I had purchased because of the job that I had paid me well. And I was looking over the city of Baltimore, and I thought to myself, is this 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. Quitting my job was the hardest entrepreneurial decision of my entire life.

So rewind a handful of years ago, I was sitting on my balcony, I was 22 years old, and I was staring out over this condo that I had purchased because of the job that I had, you know, paid me well. And I was looking over the city of Baltimore, and I thought to myself, is this it? And this was a rock top and rock bottom moment for me specifically, because at that time, I had graduated in three years from Vanderbilt, Magcom Laudey. I was president of all these things while I was at school. I got a good consulting job and I had saved almost $50,000 at that point in my life and I had this condo that was increasing

in value and I saved pretty much everything minus my mortgage. And as I was looking out there, all I could think to myself was how I hated my life and how I hated my job. And I just didn't, I felt so empty inside and I was so depressed that I really, everything, Every day I would consider as I was driving, like, what if I went into the other lane and just like things would end? And so that was like my actual reality. And so that's called passive ideation, which is like, I'm not saying that I would want to kill myself, but if I died and didn't wake up tomorrow, I wouldn't be upset.

And that was kind of the existence that I lived for two years of my life. And it was very hard time for me. And so I don't know where you're at in your entrepreneurial journey, but I kind of wanted to answer one of the questions that I get most frequently is, you know, when should I quit and start my own business? And so I think a lot of it depends on you specifically in self-awareness. And I'm going to talk about skill set in a second, but I want to talk about the mindset first. Me quoting my job was the single hardest decision that I've ever made in my entire life.

And I mean that genuinely. It was the hardest decision that I've made. It took me six months to do it. And I listened to Arnold's Rules of Success speech every morning when I wake up about, you know, it's okay to fail. And I had to keep saying this stuff because I was so outwardly driven. I was so status driven that I did. want to take the risk of being seen as a failure. And so it only was when I was literally confronted with my own,

the fact that I was really not even willing to be alive anymore is one that was kind of my jogging to awaken this moment where I was like, you know what, if I'm willing, if I don't even want to be alive anymore, then what's worse than that? And so that was what ultimately shot me on the trajectory to quit that job, sell the condo, put everything that I had in my car. And I drove across the country in 36 hours to California,

which is where I thought, land to fitness opportunity would be. Now mind you, I was a management consultant. We did space cyber and intelligence for the military at a subcontractor of Booz Allen, if you're familiar with that consulting firm. And we, and that's what I did for two years. It sounds really, you know, cool and sexy, but it was not at all for me. And I really did not enjoy it. But I learned some valuable lessons, like how to learn while I was there. And so I think that what most people, you know, it really depends on who you are and understanding your skill set. And honestly, and how much pain you're in. And so, there's,

There's also different ways to satisfy that pain. I think true to my core, if I had been in a different company or I was working on different projects at that time of my life, I probably would have never quit. It was so hard for me. And I didn't have a wife, I didn't have kids, I had zero dependence and I lived on nothing. And it was still one of the hardest decisions of my life because I'm very risk-averse. So believe it around, most entrepreneurs, you know, a lot of people talk about how they, you know, they didn't do well in school and teachers never understood them and they always knew they had to go out on their own.

I never had any of that. I worked really hard in school. I did really well in school. Teachers liked me for the most part. And I got a good job afterwards. And so I did not have the traditional entrepreneur journey. And it was only because I was so sad, deeply depressed in that time of my life and felt so so empty that I actually made the jump.

And so I think the first thing is like, one, is there, one, are you incredibly sad? Are you incredibly dissatisfied with your life so much so that you'd be willing to uprid and change? Number one. Number two, entrepreneurship is not easy. And so if you need, I think Elon must have said this on a clubhouse meeting, and I just think it's so true. People are like, what words of motivation would you give for a new entrepreneur? If you need motivational quotes or motivational words, then entrepreneurship isn't for you.

And I tend to agree with him. Like, if you need that motivation, like it is one of the loneliest paths, period. You know, at least in coworkers, you have other people who are around you. But when you start on your own, you're starting at zero with no one, and basically no one's rooting for you. I mean, it depends on, like for me, when I'm. left like no one really supported me my parents thought I was stupid and that this was a stupid idea I was throwing my education away and I was risking everything to go start a gym right which is really not even that good of a return on investment you know what I

mean but I was so committed to the fact that I was so miserable that I was like at least I can just live my life doing something that I enjoy I don't even care if I make money and that was literally the the mindset that I was able to to quit with and so I again I don't know where you're at but the first piece of this is understanding short and long-term payoffs I did not make a significant amount of money for years after I quit my job. All right. So I'd say for the first four years, I essentially broke even and made less money than I did as a consultant.

All right. So like think about that for a second, right? Now there's a lot of mistakes I made too. And you're going to make them as well because none of us is perfect. There's so many skills that you have to, like, you have to acquire so many skills to run a business, right? And so you may have a single job right now and you were doing one specific function of one specific sub-department of a business. business, but in order to be an entrepreneur, you have to understand all of it, right, in order to be a successful entrepreneur. So you have to understand how to generate demand. You have

to understand how to generate leads. You have to understand how to work leads. You have to understand how to fulfill and deliver. And how to manage people, how to communicate, how to relay expectations, how to recruit, how to hire, how to interview. Like, there's so many things that you have to learn. And I don't want that to be overwhelming. I just want to confront you with reality. Because honestly, if I knew how hard it was going to be when I started my first business, I don't know if I would have done it. I just, I forced myself into a hole, and I always like to say this, is you'd be surprised what you can accomplish when you have no choice, right? And as dark and morbid as I'm going to, as what I'm going to say is, and don't get triggered by this. But like, the fact that an entire

race in our country was enslaved for hundreds of years and was still able to do that every day shows the strength of the human spirit and what is possible when you have no choice. And so I think that to juxtapose what I said about how hard it is, if you can put yourself in a position where you have no choice, you will be successful, right? If you want to succeed as bad as you can breathe, you will be successful. And so I think that was the situation where I was in where I was, I knew that the alternative to what I was doing was death for me. And so it was just, anything is better than this. And honestly, the next year of my life, even after that, was still incredibly hard, but it was different. But it was still incredibly hard.

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. And so just to give you a couple of stats on this that I think everyone should have data to make decisions.

It's proper expectations, right? So the average, so this is according to small business administration, the median, excuse me, the median income of a small business owner. $49,000 a year. So I don't know what you're making right now, but this is what the middle of the small business ownership makes. Now, you might be making more than that. There are people who are number 30 at Google

who make way more than this, right? And so you have to understand kind of where you sit on the hierarchy. And there are some people who would be so much better served. There are so many of my ex-employees who ended up going out on their own, and I don't think many of them make more than they did

when they were with us. And they probably have more stress. And that's okay. That was their choice. and there are tradeoffs you make for freedom, right? There are tradeoffs, right? Risk and reward. There are both of those things in the aspect of this decision.

All right. Now, that's supposed to say average. Sorry. Now, if you're curious, what's the average small business owner make, according to the SBA? $73,000 a year. Now, averages are skewed because there's top end people that move that average up. So that should say average, sorry. But median is 49.

That means that the most likely, most repeated outcome is $49,000 a year, which is pretty much the median household income of the United States. Kind of interesting. And then the average is 73,000. So it depends on where you're out and how dissatisfied you are. And so the first thing is, are you dissatisfied because you don't like the company you work for? Are you dissatisfied because you don't like the work you do? Now, both of those have solutions that are outside of starting your own business, right?

You can just go and find a different position and learn on someone else's dollar, which is, I think, is so wildly underappreciated. Like, go to a company that you like and learn and get paid to learn. That's amazing, right? Because you're not going to learn anything at school that's going to be useful for business. So if you want to be an entrepreneur, you're going to have to learn these things in the real world. And so going and getting paid to learn is one of the best things you can possibly imagine. You just have to understand that what you're getting paid for is not going to be your income for life.

It's literally you getting paid to learn how to do something, which is amazing. I did not have that. I literally went from making money to starting to learn everything from scratch. And it was very difficult for me. All right. Now, the piece here about short-term versus long-term. If you make this decision, expect a three, four, maybe five-year decrease in income. You're not going to make as much money for the first few years, right?

And then maybe if you are successful and you reinvest in yourself and you grow and you acquire skills and beliefs and attitudes and character traits, then you will be able to have the long-term payoff. But entrepreneurship is the ultimate value investment in yourself, right? And so, again, there are lots of people who don't have the risk tolerance for that, and that is okay. The vast majority people should not be entrepreneurs, right? The second thing in terms of the choices, right? In the beginning, it's do I need to switch companies? That's if I don't like what I'm doing.

Sorry, if I don't like the company I'm working for. Number two is, do I need to switch what I'm doing and get paid to learn? Which is a second alternative to quitting your position. Number three is if I like what I'm doing and I like the company, am I just not getting paid enough? Well, then talk to them and see how you can provide more value. Do not ask, I would like to get paid more. say, how can I provide more value? If you ask that question, any smart business owner will be able to

tell you exactly how to provide more value so that you can make more in a low risk environment. And then the fourth way you can do this, if you're considering quitting, is start investing all of your extra time in acquiring the other skills and start actually doing it. Spend some money on marketing. Do some outreach. Do those types of things to generate demand for your business. Now, in the beginning, it's going to be a side hustle, but over time it can grow. at a certain point, it will grow in excess of what you are currently making, and then you can make the jump. I did not do that. What I did was candidly, very stupid. And I got lucky. I got very lucky. I got extraordinarily lucky that I had people who were able to speak into my life at an

early time point. I was able to learn from experts very, very quickly, which candidly, I invested in that. I paid all of my savings that I'd saved up, the $50,000 was gone within the first three months of me starting entrepreneurship, gone. Because I paid for mentorship, I paid for coaching programs and I bought and I and I reinvested in a gym which I shouldn't have done. I shouldn't have opened it the way I did because I didn't know any better. Right. And so the biggest issue, your biggest risk when you start on your own is that you don't know what you're doing. Right. And so the idea is if you can decrease your downside risk by learning more skills, getting paid to learn them, asking your your business how you can provide more value, which will allow you to learn more

skills and get paid more as you do it. Right. If you do all of those things and after doing all those steps, you still are not satisfied, then be willing to make the risk and make the short-term tradeoff that you're going to make less for a period of time. And so this is why I'm so such a big believer in living cheap, right? Live cheap and keep your expectations at cheap so that if your income does drop, you're still not losing money. And then long term, you can keep reinvesting in yourself so that you as the valuable asset can become more valuable and then increase in your earning potential and by extension because of the skills you learn grow your business. All right. And so to answer the question, when do you, when do you couldn't start a business? It depends on who you are

and where you're at in your life. There are lots of other steps you can do before that, like switch the company, switch the job, ask if you can do things that are making more valuable. Start the side hustle first, then start making sure that it works if you like it before betting everything on it. And then finally, if none of those things work for you, then at that point I would say,

okay, if you have reasonable means that you've saved up, you have a vehicle that you know is tested. You know other people who are doing that specific thing, and you can do it, then I would say, it by all means. But I think that I made a lot of stupid decisions. And candidly, I think I got really lucky. And so that is the long-witted answer to this question, which is when do you, when do you quit, start your own business? It depends on you. I can't give you a perfect answer because I don't know who you are. But those are the frameworks that I'd be thinking of. And these are the expectations

that I would set in understanding. The average 25-year-old I heard from my neighbor thinks that they're going to be, sorry, the average 18-year-old, a senior in high school, when surveyed, believes that they will be a millionaire by age 25. How ridiculously unreasonable is that? That they believe, this is the average, right? Believes that they're going to be in the top 1% within seven years of graduating high school. Well, let's be real here.

Do we think that that is a reasonable expectation? No. So if you believe that, the stats are against you. Doesn't mean I'm saying I don't believe in you. I believe in you 100%. I'm your biggest fan. But understand that these are the actual expectations of what this means.

All right, I remember when I quit my job and I found out what the top gym owners were making. And I remember literally my first thought was, that's it? And so you have to understand that there's the hullabaloo of revenue, which I made in another video about measuring value. Lots of people talk big numbers. Not a lot of people make big numbers. Most people are broke. And the reason I have this channel is to make sure that you are not one of them.

And so hope you enjoyed this. Click subscribe if you did, and I'll see you in the next video.