The Game with Alex Hormozi - Why Creating Another Business Isn't The Answer | Ep 333

Episode Date: October 5, 2021

Take a few steps back, and you won't regret it! Today, Alex (@AlexHormozi) talks about his experience of starting another business was a mistake, the lessons he wishes to impart, and why doing the boring work is just as important as making money.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:(1:22) - Neighbor sold business, wants to start again with existing skills.(3:25) - Good strategy: know what to say "no" to, develop skills.(5:00) - Can't be CEO of two businesses, focus on weaknesses.(7:22) - Learn from 10+ years of experience for improvement.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

I was CEO of one business and so I said, oh, I'm outside of the day to day. I'll start another business. 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. So when I was 28 years old, we made $28 million and $17 million in profit. And the next year, I made one of the biggest mistakes of my business career, which was I started another business. And so what I ended up doing was I was CEO of one.

business. And so I said, oh, I'm outside of the day to day. I'll start another business because there's this big pile of money right here that I can't say no to because I'm a capitalist and I should definitely do that. And so the next year, we did $37 million in top line revenue and we did 13.4 in profit. So my profit went down and my revenue went up. Now I could try and, you know, BSU and tell you that it was because we reinvested in infrastructure and all that stuff. And we did. But candidly, it was because starting the business at that time, given the skills that I had was a mistake. And so what I want to do is talk to you about a conversation that I had with my neighbor, who was a trash man.

And he went from trash man to cashman and sold his business for multiple eight figures. And we were talking one day, and he was really excited. I was like, hey, man, what's going on? And he was like, my non-competence today. And I was like, oh, I mean, what does that mean for you? You know, he's like, well, I'm going to start another business. And I was like, well, what are you going to start? This is exciting, new chapter, et cetera.

And he's like, oh, I'm going to do the exact same thing again. And I was like, what do you mean? He's like, I'm going to build the exact same trash company and I'm going to sell it to the exact same company you bought my first company. And I was like, what? You have this opportunity to start with all the capital and all the knowledge you have now. And you want to do the exact same thing. Don't you want something like new and indifferent?

And he was like, no? He's like, why would I start over brand new? He's like, I'm so good at trash. And I've spent the last three years working for the company that bought me. I learned stuff from them. And I already had my knowledge that I came in with, you know, with my own company. So I understand the scale even better than I did before, and I know how to start it from the ground up. And what you have to understand about my neighbor is that he's not a warden or Harvard MBA.

He's not some statistical math genius or anything like that. He's a blue-collar guy from Wisconsin who maxed out his credit cards to start a trash business where he literally was the first one picking up trash for residential homes and whatnot, and then he just scaled that business through word of mouth and service with a smile. And there's a lot of things that I feel like I learned from him that I see all these people that reach out to me. And there's tons of people who are much smarter than I am who reach out. And they're like, hey, man, like, I've got this, I had a conversation the other day with an agency owner who, sorry, an agency coach, he coaches agency owners on how to scale their businesses. And he was probably a five or six million bucks a year.

And he was like, I'm thinking about going into general business. And I was like, why? And he was like, well, it's just, people are asking me for, you know, help there. And I'm just turning down money. And I was like, duh, that's the point. A strategy means knowing what you say no to. And, you know, I shouldn't be, I shouldn't, like, just because somebody asked me for something doesn't mean I should change my entire business to say yes, right?

You have to know who your avatar is and who it isn't. Because otherwise, if you try and be, you know, every, what is it, all things to all people, you're nothing to know one. And this was a huge mistake that I made earlier on in my career. It was because I didn't understand the growth that I had to do was not through doing something different and new and exciting, but the growth was going to come for me, sticking with it was from developing the character traits of grit, from developing the character traits of stick-to-itness, from developing the character traits of perseverance, of focus.

And I think that at all levels in business, you get seduced by a woman in the red dress, which is the analogy that I like to use. Because at every level in business, like if you know the Matrix, there's a woman in the red dress who walks by, Neo looks again, and then it's an agent pointing a gun on him. And I think that a lot of the opportunities that come around towards us as we scale up, and it happens at all levels of business. every one of them looks seductive and attractive. And at every level, it actually becomes more and more attractive.

And you have to kind of defeat them emotionally because it's so hard to turn down, you know, in the beginning you have to turn down $10,000, then you have to turn down $100,000, then you have to turn down $1,000, then $10 million. And, you know, for me, it turned out I wasn't able to turn down about, you know, a $20 or $30 million a year when I was doing about $20 or $30 million a year. And what it ended up doing is it cost me a tremendous amount of time and effort and probably lost growth on my main business at the time because I didn't know what I didn't know. And so what I'm sharing with you guys, Mosey Nation is hopefully the lessons that I learned from

this, which is you can't be CEO of two businesses. You can't serve two masters. You have to, if you're the one running your business and CEO, make no mistake, is the one running the business. Even though if you're not doing the day to day, just because you're like, oh, I'm an owner, you get paid for what you do, you get returns and what you own. And so if your business cannot run without you and you're like, no, it can run without me. Just because it can run without you for a day, it doesn't mean it can run without you. You have the attention. It's the shower time, headspace, where you're thinking about new ways to improve the business.

You're thinking about your threats. You're thinking about innovation. You're thinking about the team members need to circle back with. It's the small nuances that create the excellence in the business that your headspace has to be dedicated to. And when I split my attention and I became CEO of two companies and I was split my term to serve two masters, I basically made the same amount of money and I just did this. And I think what ends up happening for most people is that one of the truths that I've, observed is that the amount of money that I make is only proportional to the skill that I have as an entrepreneur, period. That's it. And so if you start more businesses, you're just going to end up leveling out. And so even though it looks like small and attractive, it's a small quick wind that we're choosing to take rather than confronting the hard, brutal facts of why is the business I'm currently doing, not growing? And if it is growing, well, is there a way that I can grow it better? You know what I mean? Can I improve the product in a new way? There's all these things that we can do to improve the existing business. And I'll tell one more story to drive this home.

So I got reached out to by a guy that I went to high school with, and he owned a general contracting business. And so I was like, cool, man. Like, what do you guys do? What do you guys specialize in? He was like, oh, well, we do a lot of roofs. We do a lot of roof repairs. We do new roofs. We do.

He's like, but I'm also doing like real estate stuff and contracting and flipping and all this. And I was like, man, that's a lot of stuff. I was like, why are you doing all those things? And he said, you know, I need to grow the different revenue streams of the business. And I was like, dude, there's like 200 million homes in America that have roofs. I was like the biggest roofing companies in the world are billion dollar companies. I was like why do you feel like you need to do more things to grow bigger? Because what happens is the better you get, the bigger you get.

It's not the bigger you get, the better you get. Better, begets bigger, not the other way around. 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 the deeper you can sink your roots in, the more time you can put under the bar, this has been my finding, the better the business becomes. And then as a result, the bigger it becomes. Because it comes from the disproportionate gains the knowledge we get at the end of the track, not at the beginning, right? In the first year of whatever business you do, you're going to learn more than you ever will

about that business than any other time. But learning what you learn in the first year is not the stuff that makes you better than the rest of the playing field. It's learning what you learn in the 10th year and the 20th year in that same business that gets you the disproportionate returns. And so the easiest way to think about this is like if you think about the Olympics,

because they're on right now, or they are, hopefully when you're watching this, who knows? But the Olympics, right, you've got sprinters. And if you were the best sprinter in the world, you win the gold. And you might only be one tenth of a second better than the fourth best sprinter in the world. I don't know track metrics, but you get the idea, right?

And so even though you're only this much better, The real world implications of being this much better is the just being gold and getting all the endorsements in Nike and Adidas and all this stuff versus being fourth and getting almost no notoriety. And I think the same thing happens in business, right? It's a winner take all world or oftentimes. And the way that you can combat that is being able to develop the stick to itness. It's the grit of understanding that your knowledge will compound with time. It's using time as an asset instead of a liability. It's not being in a rush. It's understanding that the growth that comes, as entrepreneurs doesn't come from new. It comes from doing the same. It comes from volume, right?

Which is one of the core tenets that we have at all of our companies is do the boring work, right? We're willing to consistently confront the hard fact of like, okay, if we're not growing, then it's our fault. It's not because we need to introduce a new thing. It's because we need to confront what is not happening. Why aren't we getting more word of mouth? Because fundamentally, if our thing was so good, then every single person should tell their friends and we shouldn't even have to market herself, right?

Because we should be so good at that. So there's always areas for improvement that we just don't want to confront because it makes our egos feel bad. And then we try and use our business to satisfy our interpersonal needs. It's try to satisfy our insecurities and the holes that we have because we want to have more attention. We want to have more status or we want to have more interpersonal relationships or we want to have novelty in our life and we use our business to try and satisfy our personal needs when in reality the business is only there to serve the customer. And so this is one of the biggest lessons, one of the hardest, hardest lessons that I've had to learn. And to make this, to drive this

last point home to make this real for everybody to show you that this isn't me just saying this. When I started my first five years in business, I think I had like 11 businesses. And it was only once I chose to commit to one of them that I saw the disproportionate returns in my life. And it was through sticking with it for a long period of time. Right. Like I had my chain of gyms, right? And then after that point, I was like, oh, I'm going to start an agency. So I started a Cairo agency and then I started a dentist agency. And I started, I had another thing. I can't remember what was I had going on. And I had my six gyms. and they were all different types of models,

at different partnerships. I was spread so thin. I was all over the place because I kept thinking the false premise, which is one of these things will take off when the reality of none of them will. Any of them could, but none of them will if I have all of them.

And so you have to pick and you have to commit. And the thing is that I think a lot of things that come with success are not intellectually difficult to comprehend. They're just emotionally difficult, which is why most people don't do them. Most people understand that you have to spend less than you make, right? But no one does it.

Most people know that if you want to lose weight, you got to eat less than you burn, right? But people don't do it. It's simple, not easy. And I think that a lot of times in business, at every level of the game, you have a more and more attractive opportunity. You have a woman in the red dress who walks by that you have to say no to because that's what it means to have a strategy.

And that's where the compounding returns come from. And that of doing more, of being able to stick your head down and continue through what you said you were going to do is what creates the growth. And so there's a story that I heard about Henry Ford. and he was walking, his CEO office was here and he walked past marketing every day. And so he'd walked every day and walk every day and you'd see this campaign that they were running, right? And after like three or four months, he was like, hey, John, he's like, dude, when are we going to stop running this ad? He's like, I'm so sick of it.

And the CMO smiled and looked at him and was like, we honestly haven't even started running it yet. And so we get sick of these things in our business that has nothing to do with the marketplace. It's only because of our own internal needs. And so we sabotage things inside of our own business because we want to satisfy things inside of us that have nothing to do with business. And so I think what happens is that's why I say it's skills, its beliefs, and its character traits. And so a lot of times I think to get to the next level, we have to look at ourselves and think, you know, for me, you know, which one of these things do I lack? Is it a belief about the world that is incorrect? Is it a trait that I have not developed yet?

Or is it a skill that I lack? And so I think a lot of entrepreneurs get stuck because what they do is they start doing too many things and they get spread two things because they like to recreate chaos in their lives because. whatever traumatic childhood story they tell themselves about, you know, how they had chaos in their early life. They try and recreate it in their business because that's where they feel comfortable subconsciously. And you have to unlearn those patterns in order to be able to consistently grow. Because honestly, the businesses that we have are fairly boring. I'll be honest with it. They're not like crazy, exciting all the time. You know, like we do the same things. We market, we sell, we provide value, we get referrals and we try and do as much as that as we

can over and over again. But that gets boring. And that's why do the boring work is one of the core tennis that I have. And it's one of the hardest learned lessons that I've learned in business career because you have to say no at every level. And so my goal for this channel, Mosey Nation, is that you can hopefully learn from the many failures that I've had so that you don't have to experience them for yourself. That is my hope. And if you enjoyed this and got value from this, hit the subscribe button, watch one of the other videos that we've got going on.

I try and share the stuff top of mind that that's most relevant right now. And from the questions, the DMs and the comments, I appreciate all those. I read them so that I can make stuff that's more relevant for what you guys want. So lots of love, keep being amazing. I'll see you next bit. Bye.