The Game with Alex Hormozi - You Work Harder Than your Partner Does | Ep 168

Episode Date: November 29, 2019

"You probably think you work harder than your partner does, and your partner's reading this thinking that they work harder than you do…” Today, Alex (@AlexHormozi) talks about the challenges of partnerships in small businesses and the importance of clearly defining roles. He advises against partnerships and suggests that entrepreneurs should develop all the necessary skills to operate a small business or hire someone to do it for a fraction of the cost of a partner.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:(1:16) - No clarity of roles in partnerships leads to issues.(3:11) - Clear division between entrepreneur and integrator is necessary.(5:14) - Clearly defined roles are key to success in partnerships.(7:25) - Define tasks and acknowledge strengths/weaknesses for success.(10:24) - Small businesses require fundamental skills.(12:26) - Establish buyouts early on to avoid conflict.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

What's going on, everyone? Happy Friday. Hope you guys are having a good start to your week. And by good start to your week, I mean good start to your week end. So a good end to your week. I wanted to continue the topics that are most frequently asked. And this one is about partnerships. I have tons and tons of scar tissue around partnerships.

I think I have eight failed partnerships that I can think of off the top of my head. And the common trait of those partnerships is me. And it is my fault. That being said, from a lot of failed partnerships, I've learned a lot, and I've developed some fairly strong viewpoints around the subject matter, specifically with fitness-owned businesses. I titled this, You Work Harder Than Your Partner Does, Purposely to somewhat illustrate some of the issues

that happen with initial partnerships is that if you're reading this, you have a partner, and you think that you work harder than your partner does, and if your partner reads it, they think that they're working harder than you are, right? Just by the very nature of the title, right? It's kind of why I did it. But there's some underlying truth there in that two people ascribe different levels of value towards effort. If I take out the trash and I think it's a three out of ten or a six out of ten, excuse me, and then my partner sees me take out the trash and they think that's a three out of ten effort.

Inherently, there's a discrepancy between how much effort we think is put into X, Y, and Z. And so the first issue that comes up typically in partnerships, and so I'm going to make this specific to small businesses, right? Because if you're, let's say, like, you're, if you're trying to found a company, right, you're being your co-founders and you're starting technology or something like that, typically there's clarity of roles, right? And that's the number one issue that where small businesses don't have that because most times the entrepreneurs are starting out are new entrepreneurs and don't know that. I say this, having failed eight times, like, so I'm saying this because I also did not know, is that there's no clarity of roles. As in there's no division of roles. It's just like, we're both doing this together. We both put half our money in and we decided to start this.

gym, right? And like, you take the left, I take the right. Like, it just, the thing is, is that both of you doing everything never ends up working because both of you start judging how the other person is doing the same thing. And then you also start wanting to do things your way. And so then you get in, you crisscross lines. You think there's different levels of effort. When one person takes a day off, it's because he thinks he deserves it. And the other person thinks he's slacking. Right. And so this happens and it continues over time. Now, before I go further, what I do want to note is that if I bet against a partnership, I have like a very, very, very high mathematical likelihood of being right right and so i'm i'm saying this with the understanding that

i definitely have the chip stack to my favor right it's like betting against a relationship when you see two people together like uh it's not that's not going to last up that's not going to last well think about how many people date and then what percentage of the people who date get married and then what percentage of marriages fail right if you go from like total number of relationships to number of relationships that make it all the way to death right very very small so if you're a betting person and you want to be a negative Nancy, you should bet against partnerships and relationships, because that's typically what happens, right? That being said, it's not going to help you.

So you work harder than your partner does. Getting back to basically one of the questions that I get all the time is like, what should I do with my partner? We're kind of at odds. Like, you know, they kind of do this. I kind of do this. And so the easiest way, the only way that I have seen this work is that you have clear division between the entrepreneur and kind of an integrator.

The problem is in a small business, the level of operations necessary is not super high. And so you can find someone with a skill set to run a small business, as you're the entrepreneur who does the promotion and selling, etc. You can find that person and replace them for a lot less than it costs to have a partner. And that's kind of the fundamental issue, right? Is that one of you is kind of typically in charge of acquisition and the other part of you is kind of typically in charge of doing the fulfillment. Where it does work is when you have one bank account. And so I do see married couples all the time working together, but that's typically because they're delusional.

What I mean by that is I include myself in this being delusional. Like, I believe Layla is better than anyone else thinks she is, right? Because I'm married to her. She believes I am better than anyone else thinks I am because she is married to me. I disproportionately value her level of effort compared to what other people would value. Right. And so we have these innate, these built-in safety mechanisms in our relationship where if she gets busy because of something outside because of personal life, it's my personal life too. And so I'm totally okay with it. Whereas if a partner has something that takes him away from work, if I were, you know, partner with another guy or whatever in the business, then I'm going to be like, well, that's stuff that's not my problem. Right. And you can see how the same situation, how I approach it differently based on my relationship, right? So, going to be back to this, partnership situations, partnership dynamics. I have seen it work in small businesses fairly exclusively with married, married people. They tend to do really well together because they have

any partnership dynamics. There's no real conflicts about money because it's all going to the same bank account. If someone has to take the day to do something for both of them, everyone's kind of on the same team together. All right. Now, if you don't have that dynamic and you are in a partnership, then the way and really the only way to make it work is to have clearly defined roles because then you don't have, well, I do this better. Like, well, I should be doing that because I do it better than it. It's like, cool. Once you define the roles, you have to let that person run their ship, right?

If you're in charge of marketing, then you're the one who owns every aspect of that. It also means you have to take responsibility when you mess up, right? To the same degree, if you're running the back half of the ship, which is going to be, you know, fulfillment, retention, ascension, all that kind of stuff that's happening on the backside, then that's going to be what you have to own, right? And the operations and the, you know, the weekly cadence and talking to, you know, doing 101, just daily huddles, all that stuff. If that's you running the engine side, then you have to own that piece as well.

And so those are kind of typically the division of roles. The problem is that partnerships in small businesses, there's just not a ton of money that is left over in a small business, typically, right? And so if you have two true entrepreneurs, they would usually be best served, just both running their own small business and finding the person to do the extra things that they don't do for a fraction of the price of a partner, right? And so most people just think of like, what can I do today? Which is like, I don't have enough money to start this gym.

I need to partner. But then like you're giving half away for like 20 grand. You know what I mean? And I know this because like I did this stuff, right? But the thing is it doesn't really make sense financially. Yeah, there's really no other way to say that. It doesn't really make sense financially. And so big picture, most times if I say, I don't think that your partnership is going to work or make sense.

It's because I also know that math is on my side and I try not to be negative Nancy, but this is also kind of true. Hey, Mosin, a quick break just to let you know that we've been starting to post on LinkedIn and want to connect with you. All right, so send me a connection request and note letting me know that you listen to the show and I will accept it. There's anyone you think that we should be connected with, tag them in one of my or laylist posts and I will give you all the love in the world. All right. So let's get back to the show. Right. And so if you're watching this and you're like, okay, or listening to this if you're a podcaster,

what do I do if I'm in the relationship, right? Well, one is you have to clearly define and you have to have like a real heart to heart about the stuff that you are good at and that you're not good at and you have to underline all of the tasks that are in the business. A good way to do this is right. Every single thing that has to get done in the business. The easiest way to divide it up is lead generation, lead nurture sales, fulfillment, and then ascension, right?

or retention and ascension. And then list all of the activities underneath of those things that you do as a company, right? And then all you do is you have to circle those things and assign them. And then from that point going forward, that is your clarity of roles, right? Then you kind of have to just deal with them. It's just long term, what ends up happening is that typically resentment starts to set in. Because if the business stops doing well or isn't doing well, then you're like, if it's not doing well, no, making money know it's happy right and typically it's like that's always there if it does

start to work then you start to look at how much people are getting paid per unit of effort of time and work right and then like I said earlier me taking out the trash feels like a six out of ten to me and to you it looks like a three out of ten right and then there's this inequity that happens and inequity happens typically because there's not clarity of roles that wasn't agreed upon in the startup right and then you start looking at replacement cost how much would it cost me to find someone else to do the same job as this person has right now right and then you start looking on the market right you're kind of like looking out for other relationships like huh I wonder if I get someone else to operate the business for like 30 green a year because my partner

cost me like 80 huh interesting right and then you start you start thinking thoughts that you don't like to think or that you don't want to think and you can't imagine the fact that your partner's thinking that about you like oh crap right that's just being real and so I think fundamentally Finally, if I like, I try to always give contextual, so I don't know your business. I don't know your partnership. I don't know your dynamics. But I'm saying what I have observed in general is that for small businesses, partnerships that are not marriage partnerships have a very hard time working in the long run.

I also acknowledge that betting against a partnership in general over the long run is is in my math favor, right? My mathematical favor. But you should think about why it's in my mathematical favor. and maybe think about that when you're, if you're starting a gym or you're starting a second location or something like that,

you're like, I'm going to just partner up really, really, really, really, really, think hard about it because usually you're trying to partner because you haven't fully developed out a skill set that you should have. In a small business, you should have all the skills that are necessary to operate a small business.

If you get into like bigger levels of business, like the required knowledge is more niched and more deep, right? Like to run a small business, business you don't need to have, you don't need to have relationships with bankers and, you know, know how to do fundraising and know how to do an IPO. Like, you don't need those skills. And so, like, I just get, I get annoyed when it's like, you should be able to delegate and bring people in who can do each of these, like, in a small business, the level of, like,

skill that's required is really fundamental basics for the majority of the quote departments. And most of the departments are headed by one person, right? Like, finance doesn't have, like, you have accounts receivable, you've built it, like, you have all these things that don't really exist in a smaller business. And so, who don't want to get in the rabbit hole. All that to say, you probably think you work harder than your partner does, and your partner is reading this thinking that they work harder than you do, which is the fundamental issue when you have a small business because everyone's sharing the roles because the skills are

basic, right? And it's hard to create clarity around those. So if you were considering getting in, I'd strongly consider you get all of the skills and be able to hire and create a model that doesn't require having a partner. If you do have a spouse in it, then you probably, have a head start compared to everyone else. And I have seen that work many, many, many, many times successfully. The times where it's different is where the same people with the same skill sets come in the

door. Both of you are trainers, both of you have clients, both of you put money in, and then the games begin because both of you have to bring the exact same thing to the table, which means that there's no need for one of you. And both of you realize it very soon and then just spend the next few years slogging back and forth and talking to your spouse and talking to, you know, your friends about how the other person doesn't do XYZ. And so it just gets into this shitty relationship and it's just a shitty dynamic.

So I vote no for Proposition 15 for partnerships for small businesses, which is different than co-founding like a large entity or something like that that requires more niche-based knowledge. Like if you're developing a product and you have a product person who's going to be a co-founding, you have a kind of marketing slash promoter person who's going to be a co-founder or like a CTO like a coding slash co-founder with like those situations make sense because there's clearly defined roles and niche experience is necessary in small businesses it's really rare and so I would say don't make that mistake and if you're in that situation then do the best you can to

clarify roles and set expectations and also set out buyouts right to establish early on what like what you would what math you would both buy one another out for. And the nice thing is if you both agree on it, then it goes two ways, right? It's not unfair to anyone. It's like, I think that we would sell, or any person can buy the other person's shares

for X times profit or X times revenue or whatever, right? And then you can stick with that on trailing 12 months, whatever. And then that way, at least you have an exit flap. If you want to pull it, you can pull the cord. And you can start over after you have more skills, or you can buy the other person out and start that and really take the whole ownership of the business

cut the overhead of having a partner so anyways hope that was out before you um i would say tag your partner maybe don't tag your partner in this um maybe if you have a wife or something like that you can tag them in it but if you did like this drop a like or a comment um anyways lots of love hope you have an amazing friday and i will catch you guys soon all right bye