The Game with Alex Hormozi - Why I Sold | Ep 372

Episode Date: March 8, 2022

It takes one giant leap to change your life. Today, Alex (@AlexHormozi) talks about the story of why he sold almost all that he had in exchange for his time, energy, and headspace. He also talks about the obstacles he had to face when making this big decision.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:(2:44) - Five major themes: why sold, why kept, money story, headspace, outcome(5:54) - Story of why Alex sold almost everything he had(9:06) - Why kept one business and focused on it(18:04) - Reclaiming opportunity cost: headspace, time, energyFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

I also ended up selling a 75% stake in another company. So last year I sold a majority of three companies that I owned. I also sold my house and I sold two in my car. So I sold everything last year. 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. Video I want to take you through the much awaited breakdown of the decision of why I ultimately sold two stakes of two of my, portfolio companies at a $46.2 million valuation last year. I also ended up selling a 75% stake in another company. So last year I sold a majority of three companies that I owned. I also sold my house and I sold two in my car. So I sold everything last year. And so I wanted to walk you through at least the decision in this video. I'll talk in another video about kind of the lessons that I learned throughout the process. But this one, I just wanted to focus on why I ended up doing it.

And if you've watched some of the videos in my channel, you'd probably see that I'm, for the most part, if you could categorize me as anti-sale, that would have kind of been true. And so I wanted to kind of explain why I ended up selling. And by the way, if you don't know how I am, I'm a business investor, I own Acquisition.com. It's a portfolio I company that's about $85 a year. I don't have any coaching masterminds, courses, whatever. I don't have any of that stuff. I just make these videos because I like to document the process, and I hope the lessons that I've learned are that I've, to other people. So I want to hit on probably four or five major themes of the decision.

One was the story of selling it. The second was the story of keeping it. The third is kind of the money story. The fourth was the energy time and headspace story. The fifth was the team and resources story. And then finally sixth was kind of the vision for my life story. So I'll break down kind of of each of these in that order roughly. So I'm looking at notes if I'm looking away from the screen. I wanted to make this a full presentation, but honestly have been slammed with a whole bunch of new companies that were taking on. And so I just wanted to at least get this out to you guys while it was still kind of fresh. So the story of the sale, you know, on one side I had like in pro of selling was like, you know, do you need the sale to

become legit? And for those of you who are like, how can you say that? Like, we all suffer from this stuff. You know what I mean? Like I've been taking home. I'm million a month for almost half a decade, more than half a decade, you know what I mean, if you just average it out. And so like, like, I still suffer from the stuff. You know what I mean? And so like, to be fair, a lot of the achievements that I've had in life have been driven through, you know, insecurities of my own that I've tried to quell with material success so that I had a crutch that I could look at and see and say, look, Alex, you have evidence that you were not a failure. But I'm just being real with you. Like, so that was, you know, on one side, like the need for

legitimacy, which I ended up concluding that I already had it, right? But that was one of the thoughts. Another thought was, you know, needing the sale to increase net worth. The reality of it is that your after-tax net worth is actually lower than your pre-sale net worth. So whenever you have a liquidity event, you're decreasing risk, but you also decrease your net worth. And so, you know, to a certain degree, you have the value of whatever your equity is in the marketplace, which has a value, right? Someone's willing to pay for it. And that compounds and grows tax-free. And so when you choose to liquidate it, you actually have costs that are associated with a transaction. You also have taxes that are associated, bonuses to pay out, things like that.

And so you actually end up decreasing your net worth in doing that. So that was also kind of a false belief. And if you're like, Alex, all these things that you're saying sound like you're anti-sale. I'll get to why I ended up doing it in a minute. You know, another kind of story behind this was like, I've been known as a fitness and gym industry guy for almost a decade, even though right now the majority of our portfolio is not in that space. But I still had that story and I wanted to kind of break free from that just from a branding perspective. And so, you know, having the sale, I thought what helped me accomplish that, just create a little bit more space between me and the industry overall. The fourth was kind of around the headspace, which I'll cover as an entire topic. I'll tell you that the reality around this for me was matching the conditions.

And so what I mean by that is if I have this envisionment of what I think the conditions of what my life will look like after a sale, I can try and match those conditions while I still own 100% of the company. And so if I can match the conditions in a situation where I own 100% of the company that I don't have to have the inefficiencies of transactions. to decrease my net worth and still accomplish the same objective, right? And so I was like, okay, I don't necessarily need a sale to do that. I can try and match the conditions and accomplish that. Now, interestingly, over the last year leading into the sale, I was bored out of my mind because I was not involved in the company, which just by the way is what makes it sellable. If they think that you are needed to run the company, then you will probably have some

sort of earn out and, you know, seller financing and, you know, continued involvement in lots of transition services. I had none of those things in either of the three sales that I had this year. And so, you know, a lot of that, like I was already removed from the business, which is what made it sellable. And so, you know, I was like, how much different is my life really going to be? And do I really need to go through this, right? One of the lessons that I've learned, and the reason that this is one of the three hardest decisions I've made in my life, the first hardest decision I had was quitting my job as a consultant to open a gym, right? And I had to let go of something that most people considered a success to do something that was completely unproven, right? And that that was

still, I think to this day, the hardest decision I ever made in my whole life. Because I also had like parental approval and stuff that I used to care about at that time in my life. It's funny, though, just for anybody who's in that in that space, I can tell you that when you get to the other side of it, you're amazed that you even gave a shit. Just like throwing it out there. It's just kind of funny because it's like it's such a non-non decision calculus for me now. But to imagine that it used to be such a huge part of my decision calculus is like, what are my parents going to think? Will people approve of me? I can tell you that you can break free of that. But, you know, number one was that. Number two was selling my gyms. That was a super hard decision for me and starting

gym launch. And so again, I had this thing that I had six locations. And I was young. I was 26. You know, and people were like, why would you, why would you do something like that? this, you already have this success. And it was because I had to let go of something that I knew and I had in my hand for something that was unproven. But I believed, you know, I just believed that I could make something better. And so this decision was kind of just like that decision, just on a larger scale, which is like I had these companies that a lot of people thought were cool and gave me

status. But I wanted to do something else, which seemed like a bigger opportunity and more interesting to me in the future, which is really going all in on acquisition.com. And so those are kind of the three hardest decisions. And I think the common theme between them is giving up something that already gives you status for something that's completely untested and has a high risk of not necessarily working, right? I would say with each of those decisions, my risk of it not working continue to decrease. Like when I quit my job, the risk of me not having a business that succeeded was super high, right?

very realistically high. When I quit, you know, when I quit, when I sold my gyms to do gym launch, the risk of it not working was lower because I'd already had businesses, already had teams, I had a core scale set already. So the risk was lower. It was known to done that particular model, which I flew around and did turnarounds,

but like there was a lower risk. And then even so, going from, you know, selling a portfolio of three of those companies last year to doing, you know, minority investments that we do now, through the portfolio and kind of have an active business of building businesses that we, you know, own a stake in. That had probably, if we're being realistic, a lesser amount of risk associated with it, but there was still some risk of giving up the known for the unknown, right? And so each of those were still the hardest decisions, but they got decreasingly less

hard, right? And I think what made it difficult from the story of selling is that the story of keeping it was so compelling to me, right? Because, you know, I was like, I could just learn all the lessons that I learn from this entire sales process, keep it and keep the company. I can keep my net worth higher by not going through the liquidity event overall because, you know, they say rich people sell stuff, the wealthy people never sell, right? And I believe in that. I don't know. I think I may sell equity positions that I have in minority companies in the future, but I don't think that I will ever sell like majority or decision making power within acquisition.com because it's so core to who I am. And candidly, it was much harder for me to sell a gym launch than it was for me to sell

Prestige Labs or Allen last year from an emotional perspective because I think my thumbprint, my face was on the brand, even though I wasn't involved in the business at all. Like I didn't go to the events. I wasn't on the coaching calls. I didn't have any of those stuff. And so that was, it still felt like it was a part of me. And I'll tell you this as a side note. Like, I felt the loss of the business when I did end up selling.

and I didn't feel the gain of the money. Because for context, like my wife and I've already, at that point when we made the sale, had already taken out, I think, $45 or $50 million in dividends just from those businesses. And so, like, you know what I mean? Like the money wasn't going to make a material difference in my life at all, and it hasn't. And so that was kind of like yet another thing, right? And so the kind of one of the last pieces or one of the other pieces around this was like, I have this belief like you can't have more than one thing that's active.

And I still to a degree believe that. I think that maybe I just don't have the skill set yet to do more than one active thing. So like for me, Acquisition.com is one active business. And the products of that business are all of the portfolio companies in their subsequent growth. But it's one core business of building businesses. and then those are the outcomes of that. Whereas having like three or four companies that you are the active CEO of. So being owner versus CEO are different.

And a lot of times people think that they are owners but are still running the decisions and are still guiding the strategy of the business. Like all that time that you do research and then you think and you read and you look at data and all that stuff like that's actively what a CEO is supposed to do, not an owner. Like an owner, like if you own a stock and Apple, you're not doing anything. Right. And so like really thinking about that in terms of context of like what it means to be an owner. Hey guys, real quick, if you're new to the podcast, I have a book on Amazon.

It's called 100 million dollars 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 show.

So I'm looking back on my notes here. So I started asking myself the question like what, you know, what amount would I let it go for? And I realized that no matter what the number was, I would end up being a little bit sad. And that was also one of the things that was really difficult for me. And I also had this vision of just having this conglomeration of lots and lots of companies that I owned in my future. And so I was like, well, I already have these companies. Why would I sell them? And so I also talked to a bunch of people who, you know, have made more money than me.

And they were like, you know, honestly, I've sold companies and most of them I wish I had kept. And you're like, man, Alex, like, so you didn't need the money. All the people were telling you not to sell, you know, why did you end up doing this? And I'll give you two more reasons why I was concerned with actually selling. One was, I didn't think I was going to get energy and headspace back because I was like, I already don't do anything in the business. Like, what's it going to change, right? And then I knew that I was going to lose my core team, like, which we spent a lot of time building.

And I was like, I mean, that's what people are buying when they're buying the company. they're buying the team that runs it and provides value. And so I was like, I'm going to have to start over from scratch from that core team because a lot of the core team and those companies still helped us with some of our other companies. Like if I needed to help recruit for one of our portfolio companies that I own a minority interested in, I can still use my HR resources in the companies I have majority in to go do that.

So it gave me a lot of leverage. And so it's like, okay, Alex, you didn't need the money. You didn't need the story of the exit for legitimacy. It was actually going to decrease your net worth. You can just match the conditions instead. effectively have the same thing energy-wise you're going to lose your team lose your leverage you want to have this conglomeration you already have this head start you can already learn the lessons from the sale by already going through the

process and not taking the deal so why are you going why did you sell and so that's what I'm going to answer now so I wrote down this one kind of sentence at the top of my decision-making document because I have this document I still have tons and tons and tons of notes and I'll probably make more videos about this if you guys want just put in the comments if that is of interest to you guys it's helpful for me to know I ended up selling because I I believed like the two past hardest decisions that I had that if I had ruthless partization and focus on just this one active business that I didn't have my thumb print on in my face like I had with the other companies that net net I would still be better off.

And that was for me the bottom line decision. And I can tell you now that I have gone through the sale and I was really nervous because I was like, oh my gosh, what if nothing changes? What if I feel exactly the same after the sale happens? And I will tell you that from a money and all that stuff perspective, I had no high. I didn't even have like, there was that brief moat. Like I had none of that. I didn't even feel the money. It's just numbers on the screen.

And I already had a lot of numbers on the screen. And it was just like, okay, cool. And like, I literally never felt anything. And the moment where I knew I made the right decision was when I started building Acquisition.com, the core, basically a week after we sold. And before the sale, Acquisition.com had my majority interests and had three minority interests. And the minority interest was run with a very, very, very small team. But what we are doing now with Acquisition.com is really building the business that builds businesses and creating an active portfolio for myself so that I can actively invest money and time to get outside's returns.

That's kind of the general thesis. So we do majority work for minority stakes so that other entrepreneurs can get all the same benefits of having, you know, a private equity partner who knows a lot about scaling a company without having to give a majority up. And that's what we're doing there because it's something I'm passionate about. And something that I just really genuinely love. And I'll tell you this is, again, a side note is that now that I'm in the trenches again without leverage, it's so interesting because right now I have so much appreciation for my own love for the game. because the difficulty, you know what I mean, of starting the business from scratch again,

the last few times that I've done this, it was much more painful. And I would still say, like, there's still the pain or the discomfort of, you know, all the stuff that has to get done. But it's weird because I feel like I have more weathered eyes to it. And I know that when I was completely empty with nothing to do and lots of cash flow from these companies,

I missed it. And so I don't think I'm going to move to a chairman position again because I just realized that I love, I just love this. I just truly love business. It's the thing that like, it's like my first true love. Like, I just, I love it. And so I can, I'm doing this again now and I truly don't need to. But I just enjoy it so much that there's nothing else I'd rather do.

And it's weird because I feel like, I've said that or people say that, but like, I think there's just degrees to how true it is. You know what I mean? And for me, it's just so, it's just true to my core that I love this completely. And it's what I want to do because I really don't have to do it at all. And I could just, I mean, stick it all into, I mean, shit, I mean, just from the, you know, buildings and stuff we have, like, I believe me, I don't need to work from the dividends that come from that.

But I got a lot of summers left before I die. so I might as well do stuff, right, that I find interesting. So the bottom line of this came down to, does this fulfill the vision of what I want? And is it helping me accomplish the overarching thing that I want to do faster? And so that was the fundamental argument that won this battle for me. It was the opportunity cost of my headspace. And even though I had the argument for matching the conditions, I can tell you, that I know that if I had not sold majority of those companies, I would be using a lot of the

resources of those companies to build the other ones. I would be making different decisions than I am right now. And the decisions that I'm making right now are completely blank slate. And I think that they are long term the best decisions for this company. And I am so grateful that I made the decision to sell, the majority, you know, that's a 66% stake. And it was because I really, I really want to do this next thing. and I think that I was like if five years from now do I think I will build something bigger if I have these other companies or smaller if I have these other companies. And the answer that I came back to was like, I think that it won't be as big or as good if I still have these other companies that I own majority of, which would mean that I have like four companies that I'd be running, you know, owning majority interest in. And the hardest one was Jim Launch because my face was on it.

And I felt like my identity was tied up into it. And I'm very glad that I ended up making the decision not to so that this could be my one and only focus. And I really did get a tremendous amount of headspace back. Just because the headspace of responsibility, I would imagine it's like having a child. I don't have one. But I would imagine that even if your child moves away to college or moves out of the house, even if you don't have any time that you're spending with the child, the child occupies a lot of your, your shower time, your toilet time, your in-between time, your walk time, your think time. And so even if I didn't have anything on my calendar, it was still occupying my energy. And so that was

what I ultimately was trying to get back and accomplish because I knew even though I had a short-term decrease in net worth as a result of liquidity event and the inefficiencies that are, you know, that happened from taxes and things like that, I thought that long-term what I was going to build would be built better and faster. Not that I'm really in a rush, but like it would be built faster on the same timeline if I had 100% focus on it. And so that was overall why I made the call. It was super hard because we love the team that we built there. We knew we could potentially use them as the launch pad for the next thing, but I thought that would distract. It wouldn't be fair to those companies, which is ultimately why we brought an investment partner in who would prioritize those companies

and help them grow without having me like, you know, mentally drive it. And so, you know, I mean, some of the other money stories I had here is like, what else are you going to invest in that's going to get to the same return? The answer is I'd have to invest again in a company that I own to get to get the returns that I was going to get from continuing to own those. And so that is what I'm doing. You know, like, it's, I am investing. Like, I know that even more than the money, what I can invest my headspace and energy into will get me outsized returns than the company alone. And this way, it's also a little bit more diversified for me rather than being, you know, potentially at the, you know, whim of the governments that affect those particular businesses. So to wrap this up, I wanted to build the next thing.

And I didn't think that I could build it as effectively because I felt like if even I were 10% less effective building something that was going to be 100 times as big, then that 10% would still be more than the total value of the companies that I was selling. And so that was why I ultimately made the call. And I think with my call with Grant, he said, you know, rich people only sell when they think the party's over or they no longer have like an interest in the thing. And it's not that I no longer have an interest in the thing. I think it's more that I had a greater interest in something else. And so opportunity cost was the primary cost that I was trying to

pay down by making the sale. And what's interesting about this is like it felt like I was actually buying not selling. I felt like I was buying my time back. And it's weird because I was buying it with my equity, which almost means that I feel like the money was inconsequential. It felt like I was trading my equity for my headspace. And the money just happened to be an additional portion of the deal, but it was actually one of the least important variables in the entire process. So I hope this adds some clarity as to why I did it. I do think that, you know, the story of the exit, you know, here's some irony for you. Like, my net worth technically went down, but I had more people reach out from the woodwork from high school and college and professors and things

congratulating me on the exit and like basically giving legitimacy to what we had built as a result of the sale rather than pre-sale. And I think that's partially because a lot of different business owners run businesses differently. Like they don't make money while. they grow it, I've just never been a believer in that. There's nothing wrong with it, but I think you make poor decisions if you're poor. And so I like to make them from a point of not needing anything. And I think that that's long term, it's long term the best way to make those decisions. And so, anyhow, that's kind of the consolidated big picture reasoning behind it. So the story of the sale, the story of keeping it, the money affect, the energy time and headspace, the team,

and ultimately what I wanted to do with my life. And if something was going to be 10% less good with what I ultimately wanted than I needed to prioritize the thing that I ultimately wanted and having a priority means saying no and everything else. And so that's ultimately why I made the decision. So hope that Mosy Nation, I hope that makes sense to you guys. Or at least hope that the decision needs to make sense for you. But like hopefully the communication was clear in this video. I love you all. I appreciate you all. I make this stuff for you guys. Actually, you know what? I make this stuff for me. And I hope you guys benefit. from it so keeping awesome i'll see you guys the next bit bye