Young and Profiting with Hala Taha - Starting A Business in 2023 | YAPSnacks | Part 1

Starting point is 00:00:01 Hey everyone, you're listening to Yapsnacks, a series of bite-sized content hosted by me, Hala Taha. This week's episode is focused on starting a business. We rounded up the best clips about that from the podcast, and we'll hear from serial entrepreneurs like Vishin Lakiani, Alex Hermose, Josh Kaufman, and Nick Loper. I'm sure a lot of you guys tuning in have the goal of being financially free this year. And in my opinion, the ultimate freedom is to work for yourself. Now, I was an entrepreneur straight out of college and I failed.

Starting point is 00:00:42 I then went back into corporate and worked in corporate for about seven years. And now I'm back to being an entrepreneur. And trust me, there is no freedom like working for yourself. And there's no freedom like not being dependent on just one income. When people think of starting a business, you often think of like huge companies like Amazon or Microsoft. But not every business has to be this Fortune 500 company that has over a thousand employees making millions of dollars a year,

Starting point is 00:01:09 your small business can have the purpose of making you an extra 100k a year. Maybe income to replace your full-time job or income to supplement your full-time job. Starting a business is the freedom to grow your business as big or small as you want. And so I want you to remember that. It could just be a side hustle forever. And that's okay.

Starting point is 00:01:28 There are so many approaches to get started when it comes to a business. And here's Mind Valley CEO, Vishin Lakiani, giving us two cents. on what you should do before you go out and start a business on your own. You must, must, must, must, know your minimal livable income, your MLI. That's the word I coined. Your MLI is the minimum amount that you need to survive, lead a decent, healthy life.

Starting point is 00:01:58 Once you know your MLI, all your decisions on starting your business, okay, need to basically revolve around how can you cover your MLI. And knowing your MLI will also let you know when you can safely quit whatever day job you have if you're not loving it. So in my case, I worked for a company that had really bad culture. It was seriously bad. I mean, we had office politics. There was racism in the office.

Starting point is 00:02:24 I was a person of Indian origin working in this office in New York. And I remember just experiencing horrendous culture, horrendous racism. But I couldn't quit. I couldn't quit because I needed the salary. And I had a girlfriend who was European. We lived together. And because she was European, she couldn't legally work in the U.S. So I had to earn enough money for both of us. Now, here's the thing. Back then in New York, this was maybe 2002, 2003. I was earning $7,500 a month. That's a pretty decent salary. Rent was $2,800. We couldn't afford $2,800 on rent. So we had a two-bedroom apartment. We lived in one

Starting point is 00:03:03 bedroom and I had a close friend living in the other bedroom. We didn't even have privacy. But this is what I knew. My minimal livable income for me and my girlfriend was $4,000 a month. Four grand. Four grand means we could afford to pay our share of the rent for that shared apartment. We could afford cable bills. We could afford Netflix. This is back when Netflix were CDs that they shipped to you. We could afford to eat out at a decent streetside New York restaurant. I could go out for bar nights once a week with my friends. I could eat a subway sandwich for lunch. I could eat a white castle for dinner.

Starting point is 00:03:39 Don't judge me. No judgment. And I could have Starbucks for breakfast, $4,000 a month. Now, because I knew that, I could set my mind on a goal. How could I make $4,000 a month? So the first thing I did is I got qualified as a meditation instructor. Now, I could teach a class in meditation in New York. I could buy advertisements on Google AdWords, have people

Starting point is 00:04:00 call me on the phone, and then I would pick up the phone, and I would talk to them about the meditation class, and half of them would sign up on a $300 class. They would pay me via PayPal. And by doing this, I was able to generate an extra $1,000 a month or so in profit. That's not bad. Remember, I needed $4,000. Now I was at $1,000. So now I needed to do something else. I needed another form of passive income. $3,000. That was the gap I needed to fill. So the first lesson is here. Once you know your MLI, you can focus like a laser on climbing towards your MLI. That little meditation class, I thought it once every two months. I made $2,000 profit. So that's $1,000 a month. But guess what? It means I only had to work for two days every two months

Starting point is 00:04:48 to hit 25% of my MLI. That's pretty damn good, right? Yeah. Okay. Now the next thing is, when you take a baby step, a beautiful thing happens. Napoleon Hill in his book, Think and Grow, said, if you don't know how to start your entrepreneurial journey, if you don't know your path to riches, just guess. Take a baby step. Baby steps don't have to be accurate, but baby steps show intention. And one baby step may send you in the wrong direction, but guess what? You will learn. You will autocorrect. But take that step. The first baby step was teaching meditation classes. The second baby step was, I bought a domain, mindvalley.com. The third baby step was, I thought myself how to build a web page, and I started building a website for my meditation classes. And you know what?

Starting point is 00:05:30 Not a single person bought anything. But I took a next baby step. I figured out how to use Google AdWords and drive people to my web page. And again, not a single person bought. But I took another baby step. And this baby step is I bought a book on email auto responders. And this time, rather than come to the web page and try to sell them in a meditation class, I said, give me your email address.

Starting point is 00:05:53 And I'll send you a nine-part lesson series on how to get meditation right. That's it. And all of a sudden, people started signing up. Now I had an email list. Then from the email list, I would introduce them to my classes. Now, my classes was selling out. My first month, with this model, I lost $300 on Google AdWords. My second month, I lost $800.

Starting point is 00:06:16 My third month, I was making $4 a day. So $4 a day isn't much, but it started scaling. It went from $4 a day, which is, what is that, four times 30, about $120 a month. to $12 a day. And back then I had to count it in dollars per day. But soon, it hit $3,000 a month. And that's when. So I started this in January.

Starting point is 00:06:40 It was November. I remember just before Thanksgiving, 2003, I hit that number of $4,000 a month. And that's when I went to my boss and I quit. I lovingly quit. I said, hey, I appreciate you. Love you for everything you've thought me, but this culture isn't for me.

Starting point is 00:06:57 I want to do my own thing. I quit. And he's like, what are you going to do? I'm like, I'm going to teach meditation. He's like, there's no money in that. I'm like, I don't know. Let's see. I love it. And I went and now we come to the next lesson. If you do what you love, your odds of success are going to multiply. But again, you can't be stupid about it. You got to, I like the Japanese model of Ikigai. You must find something you love, but it must be something that you are truly good at. If I love teaching meditation, but I sucked at it, wasn't going to make money. If you love creating photography, but you suck at it, you're not going to make money. And the third thing is this.

Starting point is 00:07:31 It must be able to make you money. So find what you love, what you can be good at, and what can make you money. So I had found all three. I love teaching meditation. I was good at it and it could make me money. Once you find that, my God, the wheels of motion start kicking in. That little business went from $4,000 a month to eventually it became a business that hit a hundred million in revenue a year. with no VC funding. Now that took, by the way, that number, it took 20 years, 20 years in the time I quit my job to have a business, which me and my employees own all of it. So we have no VCs. It's just me and my employees. Every single person working at my company owns a piece of the business and that business has a hundred million in revenue. But it took 20 years,

Starting point is 00:08:18 but you just keep innovating and innovating and innovating. And what I'm proud of is that I still love that business because I pick something I truly love doing. I love teaching meditation. My newest book is on meditation. It's 20 years later and I still love this subject. I love exploring the human mind. I would do this even if I didn't get paid for it. But remember the humble stop. It all started with me calculating my minimal livable income, taking a baby step, getting qualified and teaching a meditation class, figuring out my first passive income, teaching meditation, then my second passive income, a website that could recruit people into the seminars. The third passive income was I started selling CDs on the website.

Starting point is 00:08:58 The fourth passive income, I thought, well, you know, I'm only teaching in New York. What about teachers in Columbus, Ohio, or Silicon Valley? What if I list their classes? I helped them fill their classes, and I take 20%. You see, it starts building up. But today, more than ever, it is easy to build a business. The main message is, know your minimal livable income. Focus on that.

Starting point is 00:09:18 And bit by bit, climb your way to it. that level. Once you hit that minimal livable income, you can quit your job and you can dive into your business and that's when it's going to start taking off. But before you hit your minimal livable income, it does help to have a steady paying job. In fact, a study shows the study was in the book, Breakthrough Company, that people who start a company while having a steady paying job are 30% more likely to succeed. Don't just quit your job, cold turkey. I built my little meditation business on nights and weekends. You know, I really do agree with what Vishin Lakiani is saying here.

Starting point is 00:09:56 It's a huge risk to just take a leap and quit your job without being financially secure. Because as an entrepreneur, when you're financially secure, you make decisions from a place of strength and not a place of weakness, which is just so important. And so there's many different ways that you can work up financial stability before you become an entrepreneur. And I'll give you a couple other examples. In my case, I worked double time. I started my company two and a half years ago. I didn't have any kids, right?

Starting point is 00:10:24 I didn't have much responsibility. And so I decided I was just going to work two jobs full time. And I worked double time. And I made sure that my side hustle, which is now Yap Media Agency, was able to pay me more than what I was making at Disney streaming services, my corporate job as a monthly salary. And I made sure that we had six months of steady business before I quit my job. So essentially, I made sure that my side hustle was able to pay me more than

Starting point is 00:10:49 my monthly salary at Disney streaming services and that it wasn't a fluke that we had business that I was able to replicate that business over and over again for six months. Then I actually felt safe enough to quit my job and I was able to maintain the same exact lifestyle but work half as much and have control of my time and my freedom like we were talking about earlier. You could also take the root of just saving up. So you might be the type of person who knows that you've got responsibilities. There's no way you could have two complete full-time jobs. you may decide that, you know, this is something that you want to do in five years from now and save up for that. We recently had Tina Anderson on the show.

Starting point is 00:11:26 She's the CEO of Just Thrive, which is a probiotic company that's blowing up. And she actually started her company in her late 40s with her husband. She was a very accomplished lawyer. And her husband was also really successful. They had some money saved up. They bootstrapped their company. They went for it. And now their company is doing amazing.

Starting point is 00:11:44 So there's multiple paths in terms of becoming financially stable. enough to take on the risk of becoming an entrepreneur. But here's the thing. You've got to test your idea before you quit your day job and go all in. This is the biggest mistake that I see entrepreneurs do. I speak all the time to new entrepreneurs. I speak a lot about starting a side hustle and a lot of people after these talks, they come up to me, they ask me questions. And the number one problem I hear is people are trying to push a product that no one wants. People are trying to push a product that has no product market fit, and that's a big problem. You do not want to go so far down the path without testing your idea. Here's side hustle expert Nick Loper with more on that. Tell us about the day that you quit your

Starting point is 00:12:30 nine to five job and what made you officially decide to start your side hustle career. The day that I quit, I was out to dinner with my boss and this has been kind of on my mind for for months, really, because I was building the shoe business on the side from this corporate gig. So I had to dinner with my boss. And I'm like, okay, this is the day. I'm like, I'm going to break in the news. Like, I'm out of here. I'm going to give my notice.

Starting point is 00:12:57 It still took me like a couple beers deep into this dinner to like build up the nerve to do it because it's like, is that allowed? Can I cut my own paycheck? You know, I went to school. I have these obligations. Like, is this actually going to work? And I had, you know, several months of earnings history at that point. So it wasn't, you know, completely, you know,

Starting point is 00:13:17 You might have heard the definition, oh, an entrepreneur is somebody who jumps off a cliff and it's going to figure out how to build their parachute on the way down. Like, that was not me. And it was still super scary. But after I told him, it was like this huge weight off my shoulders. And it's just like, okay, this is real. Like, let's go do this. Let's say I'm a millennial and I have this idea for a side hustle.

Starting point is 00:13:40 How can I test the idea and make sure it's a good one before I either quit my day job or spend a vast amount of time on it. This is good. Let's dive into this a little bit more. So what's the hypothetical business that you're thinking about testing? Let's say selling something on Etsy. Okay, perfect. So if you're looking at Etsy, where I would start is the existing listings on Etsy and the existing listings on eBay, Amazon, Red Bubble, some of these other similar marketplaces where people might be buying this stuff. If there are other people making sales, like that's a fantastic sign, right? There's money in that market. The second thing that I would probably do is Etsy costs like, I think, 20 cents to put up a listing.

Starting point is 00:14:21 It's almost free. So you create your listing very affordably. And so if it's a handmade product, I would just create one of those so you can take nice pictures and put up that listing for 20 cents. Etsy has on-platform advertising that you can use to drive traffic on top of their listing optimization tools and keyword tags and stuff like that. but one thing that you probably want to do before paying for traffic is to land some social proof on your Etsy page, which is like, you know, the number of likes on this page, the number of sales that you've made. So you can see that with some initial reviews from friends and family. You might even just give these away and say I'd really prefer if you ordered this through Etsy

Starting point is 00:15:02 to help my appearance on that platform. Like just to kind of seed the platform with a little bit of social proof. So the algorithms start to work in your favor. And so people when they do land on that page, they say, okay, this isn't a ghost town. There's actually, you know, there's something to this. Isn't that so funny how you could have thousands of listeners and the best personal feedback, but if you have no reviews, like you ain't shit. Yeah. And maybe that's feedback too. Like if nobody wants your thing, like if you can't get your friends and family to buy it, that's probably a sign that it's not the best business to go into. Let's hold that thought and take a quick break with our sponsors.

Starting point is 00:15:45 we have a super unique company culture. We're all about obsessive excellence. We even call ourselves scrappy hustlers. And I'm really picky when it comes to my employees. My team is growing every day. We're 60 people all over the world. And when it comes to hiring, I no longer feel overwhelmed by finding that perfect candidate, even though I'm so picky because when it comes to hiring, Indeed is all you need.

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Starting point is 00:16:54 Hiring, Indeed, is all you need. And what side hustles today, like this very moment in time, would you recommend to our listeners? Oh my gosh. If you have a skill that's in demand, absolutely understand that your boss, your company, is probably taking a large percentage of your VATTS. A friend of mine was a tutor for Kaplan or one of these big tutoring companies.

Starting point is 00:17:21 He was making $18 an hour, which was awesome for him, like in his early 20s. The company was turning around and charging the parents like $100 an hour. And he was like, wait a minute. I have this skill. I could go out and sell that directly to my customers. So I like that freelancing marketplace. Perfect first side hustle as a way to get your feet wet, understand that you have value outside of your business card outside of your paycheck.

Starting point is 00:17:41 my wife and her business partner on the side from her job started a photography business, completely unrelated to her engineering job. So it doesn't have to be, I'm an accountant by day, so I'll do accounting at night. We talked about the podcasting stuff. We talked about kind of like the online authority business blogging content marketing businesses. I continue to see, and I continue to be impressed by some of the numbers that these guys are posting. I just talked to a guy this afternoon who was selling for. $45,000 a month worth of a online course that teaches you how to start a microgreens farming business and grow the stuff in your garage and sell it to the farmer's market and to local restaurants.

Starting point is 00:18:23 And it just blew my mind that there was that much demand in a niche I had never even heard of. And I'm really excited by stuff like that. You know, people having this new ability to kind of monetize these little skills, hobbies, interests that, you know, they might be able to put out there. Yeah. I feel like courses are getting. more and more popular and so in demand because people just want to learn. And if it's unique content that they can't find anywhere else, you can package that up and monetize it. You know,

Starting point is 00:18:52 so. Yeah, make it easy for me. Make it step by step. Absolutely. Something I want to call out in what Nick just talked about is the demand in niche content. The thing about niche content is that the more niche it is, the more you can charge. And I want you guys to always remember that. The more broad your product, the cheaper it typically is. But the more specific, the more expensive it can be. So I'll give you guys an example. I have a LinkedIn masterclass marketing course. And right now it's very broad. There's one standard price. But in the future, I may customize this product to be for real estate agents. For example, I'm getting a lot of real estate agents who are joining the program. So maybe in the future I'll create a LinkedIn marketing

Starting point is 00:19:35 masterclass for real estate agents. And I can charge more for that because I'll have specialized information for that niche. And I could even take it a step further and charge more if I did it for real estate agents on the East Coast, for example. You pay for that specialized knowledge. Always remember that as you're creating your products. Next, we're going to hear from the guy you've got to think about when you think about starting a business.

Starting point is 00:19:57 And that's best-selling author Josh Kaufman. He wrote the Bible for business called the Personal MBA. It's used in colleges all over. Josh came on the podcast and schooled us on the importance of product market fit. the fundamental structure of a business, and we also learned how we can evaluate a potential market. So one of the first things that you have to do when you're thinking about a new business idea is to have a viable market, to target a market that, you know, would have demand in your services. So what's the best way to go about determining if your market is a good enough market,

Starting point is 00:20:35 if it's a viable market for your business idea? Yeah, there are a couple of very useful ideas I talk about in the personal MBA directly related to this. One, which you've highlighted brilliantly, is that you have to have a market to begin with or the businesses is just not going to work, right? So if there's not a waiting group of people ready and willing to pull out their wallet, checkbook and credit card and say, yes, please, I will take one, you're going to have a hard time. And so there are a couple of things that really help in the process of finding a market that's going to be large enough to support whatever it is that you want to do. The first, and this is related to an idea called the Iron Law of the Market, which I think was best framed by Mark Andreessen,

Starting point is 00:21:25 now a venture capitalist, but the founder of Netscape. And it just says markets that don't exist don't care how smart you are. You can have the most brilliant idea. you can have the best technology, you can have the best of everything, and without a group of people willing to pay you, you have nothing when it comes to the actual operation of a business. The easiest shortcut,

Starting point is 00:21:46 which sounds obvious when you hear it, or if you think about it, but it's like, pay attention to what people are already spending money on. Because you know, there's a 100% certainty that people are buying this particular thing. And if you can offer it in a better way, in a new way, with a bit of a twist or to a market that is not used to buying this sort of thing.

Starting point is 00:22:09 Very often the biggest competitor to a business is not another business. The biggest competitor is non-consumption. People just not doing this yet, not purchasing this in this way. And so I like to say a lot of early stage business formation looks a lot like anthropology. You're going out into the world. You're asking questions. You're looking at what people are doing and what they're not doing and what they maybe could be doing if they just knew that there was a better way of solving this particular problem. And so, you know, the early stages is you're going out, you're examining what people are doing, and you're just trying to find opportunities, things that could be a little less frustrating, a little more efficient, a little more flexible, a little more enjoyable.

Starting point is 00:22:59 And this is an idea called the hassle premium. And so usually the more annoying something is, you know, for a broad definition of annoying, the more people are willing to pay money, perfectly good money to make that annoying thing go away. And so sometimes in the development of a business, sometimes you're solving a new problem that hasn't been solved yet. But then sometimes you're taking an existing problem and you're just making it a little bit more fun, less annoying, less of a hassle. From there, it gets to a point of almost triage. So you're going out into the world. You're looking at all of the potential opportunities.

Starting point is 00:23:47 And if you're in this frame of mind, it's very easy to come up with a list of 500 things that you could potentially build a business out of. The world is full of opportunities like this. The question becomes, which of those opportunities are your best shot? What are the ones that are going to be the most straightforward, the most rewarding, the most interesting? So what should you spend your focus on? And there are two things that really help with this. The first is understanding the fundamental structure of a business, what a business is and what it does. It's the first thing I cover in the book.

Starting point is 00:24:24 It's called the Five Parts of Every Business. And so a lot of particularly early stage entrepreneurs are like, I need to write a business plan. You know, how do I write a business plan? What's a good business? Like, tell me all about this. It's very, very simple. Take a sheet of paper. You're going to write five headings on it. And these are the headings. Value creation, marketing, sales, value delivery, and finance. And so value creation is like, you're making something valuable for other people. what are you making and who are you making it for? That's value creation. Marketing is, if people don't know that you exist or your thing exists, they're not going to buy it. So how are you

Starting point is 00:25:06 going to get their attention and make them interested in this thing you have to sell? Marketing. Sales is, once you have their attention, you need to convince them to pull out their wallet checkbook or credit card and give you money for it. That's the sales process. How are you going to do that? once you take someone's money, how are you going to give them the thing that you promised? Because if you don't, it's a scam. It's not a business. And so what does the delivery of the value look like?

Starting point is 00:25:34 And finance is very simple. So for value creation and marketing and value delivery, you're spending money. For sales, that's the part of the business where money is flowing in. So finance is just the process of looking at how much money is flowing in from sales, how much money is flowing out in value creation, marketing, and value delivery,

Starting point is 00:25:56 are we bringing in more money than we're spending? Because if that's not the case, we're in trouble, something needs to change. But then also, is it enough? Is it enough to make all of your time and effort and attention worthwhile? Can you use the information you have at your disposal to make better decisions about either how to spend money or how to bring more money in? And so really, when you look at those five steps, value creation, marketing, sales, value delivery, and finance, that's what a business is. That's what a business does.

Starting point is 00:26:29 And if you don't know the answer to any one of those five steps, that's a blank that you need to fill in before the business is going to work. And then from there, you can start to evaluate one idea versus another. Do we think the market for this is better than that? Do we think that this is something that we could build once and sell for a long period of time, or are we going to require a large amount of investment ongoing? These are things that I talk about in the personal MBA called the 10 Ways to Evaluate a Market, which is once you have a clear idea of what's going on, then you can start to ask some more specific questions of like,

Starting point is 00:27:07 is this the kind of thing that seems like it's going to be a good fit for me? but you always start with a clear picture of what the business idea is first, and then you build on top of that by asking some more specific questions. Now, this wouldn't be a start-a-business episode without talking to the current hottest entrepreneur in the game, Alex Hermose, who, by the way, came on Young and Profiting podcast for a two-part episode recently, and his wife, Laila Hermose, who was equally as badass, came on for a two-part episode as well. If you guys are entrepreneurs or want to be entrepreneurs, I highly recommend that you immediately go listen to those episodes, some of my

Starting point is 00:27:47 favorites of 2022. Now, let's listen to Alex's thoughts on picking the right market and product when embarking on a new business idea. So let's talk about market. Okay, so a lot of people, they focus on a bad market, and I'd love to understand what makes a good market. The first thing is you want to make sure that the people actually want what you have. So typically, I express that as pain. They're in some sort of pain. They're suffering some, some problem that they want to solve. And the bigger the problem that you solve, the more money you make for it. So number one is that they're in pain.

Starting point is 00:28:19 Number two is you want the marketplace to be growing rather than shrinking, right? I can give examples in a second. The third one is you want them to have the spending power because the worst thing in the world is like, you've got a market that's growing. There's a painful problem that you want to solve and that you have the ability to solve, but then they ain't got out money. A friend of mine had a resume business, right? he wanted to help coach people on their resumes and whatnot.

Starting point is 00:28:42 And he called me up one day. He's like, this is brilliant. I'm going to make all this money. And it turned out, he was like, dude, they're all broke. They're all on unemployment. Now, you could make the argument that helping people with a resume inherently is not bad, but he had picked the wrong market to serve. If he had helped corporate executives get raises,

Starting point is 00:28:57 he probably would have made a lot more money. But he was picking unemployed people to help them get a job rather than helping people get a better job. Yeah. Tiny difference. The lever on how much money you can make, serving different audiences is the name of the game. The reason many of the Fortune 500 companies are enterprise, like Salesforce, like their enterprise, well, they've gone down market now,

Starting point is 00:29:17 but like they built their value on the fact that they served very expensive customers, million dollar, $2 million, $10 million your contracts. It's because you get to charge based on the value of their business, not yours. And that's one of the beautiful things about this. But like if you, let's say you have a CRO agency, so conversion rate optimization agency, and you go to an e-commerce store and you say, I can optimize. your site and get you 10% more conversions. Okay, cool. So if I'm making a million dollars years the commerce store owner, CRO happens, I make 1.1. Fantastic. If I go to the same, another business, same type of business, e-commerce, and they're doing 100 million a year,

Starting point is 00:29:53 and I do 10%, they make 10 million a year. Same work. And I make them $10 million versus $100,000. Which one do you think I can charge more? The $100 million. I could probably ask for $2.5 million of the 10 that I make them. Probably. Yeah. I could probably negotiate that. in if it was only on the gain. And so many times, the amount of money we make is partially due to the value that we provide, but a big part of it is the market. And the market I actually put before, I put the value of the offer itself, because I think it's actually an even bigger determinant. So a different example would be like COVID with toilet paper. If you were selling toilet paper during COVID, it didn't matter what your offer was. The supply demand curve was so strongly in your

Starting point is 00:30:31 favor that you could sell for whatever you wanted. You were going to sell out. And so the idea is to try and align those four things. You want a market that is actually in pain, right? We're not trying to sell ice to Eskimos, not actually. You want them to be growing. A friend of mine was in the newspaper business. And so he had an amazing offer. He would actually do a rev share based on only revenue that he would bring newspapers. And he was eating up market share. The problem is the market was shrinking at a compounding rate of 25% a year. So from year one to year eight, it had already gone to like five percent of the original market size it really was, even though he was, quote, gaining market share. grow the business and he kept looking at all these things. I was like, dude, just

Starting point is 00:31:07 just saw the newspapers. Like literally, I couldn't make this up. Like, you were selling to newspapers. So you couldn't grow. It's an extreme example, but many of us are pursuing newspaper type businesses. We're selling to people that the marketplace is closing down. We'll be right back after a quick break from our sponsors. Hello, young improfitors. Running my own business has been one of the most rewarding things I've ever done, but I won't lie to you. In those early days of setting it up, I feel like I was jumping on a cliff with no parachute. I'm not really good at that kind of stuff. I'm really good at marketing, sales, growing a business, offers. But I had so many questions and zero idea where to

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Starting point is 00:35:20 Those are the variables that we look at within the marketplace. And so the famous example is the marketing professor who's talking to his class and says, okay, if you have one strategic advantage for your hot dog stand, what would you have? And everybody in this, you know, it's like, better hot dogs, better sauces, lower prices, better location, whatever it is. And so, like, after it all dies down, he's like, a starving crowd. If you're out right in front of the bar at 2 a.m., you're going to sell out of hot dogs. If you're out in front of the stadium and you're the only hot dog stand there because everybody else is in their brick and war locations and you can wheel your car up front, you're going to sell out. It doesn't matter how shit your hot dogs are.

Starting point is 00:35:53 My point is not to say that you should make shit hot dogs. You'll sell even more because if the next time the game gets out and your hot dog was good, they'll come back. That's the piece that people miss is that anybody can sell one thing once. But the things that build the compounding businesses are the fact that the people, product is so good that A, they tell their friends, and B, they come back. I'm going to go on this tangent because I think it's important. It is. When you are a new business owner, you have to learn how to promote. You got to learn how to market, learn how to sell. And the reason is not so that you can make money. The reason is so that you can get customers. You get customers so that you can learn

Starting point is 00:36:22 how to fulfill on the product. What happens is, you get a positive reinforces. It's just like quitting the business. You get a positive reinforceance from learning how to market and sell. And so then you think, mistakenly, in my opinion, oh, I should do more of this. But the thing is, if you don't have a big percentage of your business that's referral, your product is still not good enough yet. And so what happens is you will get to a point where you cannot outsell your turn. And so the path from going to zero to like 10 million really fast is not the same as going from zero to 100 million really fast because you build the business differently, because you build it knowing that you have to have a compounding vehicle.

Starting point is 00:36:55 And for many people, the compounding vehicle is that the product you sell gets other people on their own to come back and bringing more customers. So here's some facts about business. Number one, advertising will become more expensive over time. Media always goes up in cost, number one. Number two, as you scale, infrastructure costs will increase. So if you have two forces that are going up and one that is barely going down, how do you continue to scale?

Starting point is 00:37:18 You have to have a compounding force that is viral in the other direction. So as you go to colder and colder markets that you have to reach to advertise to, that cost more and more money and you have higher and higher fixed costs of infrastructure, the only way you can continue to scale is that the customers, that are buying in that cold market, tell five other customers. Otherwise, what happens is your revenue scales up, your profit decreases, and then eventually you have a break-even point. And that's where many businesses go, because they're trying to build their ego by showing their top line, rather than building a business that has an amazing product. And so it's a race to show and brag

Starting point is 00:37:51 to their friends about their revenue, rather than think on a, remember, 10-year or 20-year time horizon, if you're looking like that, there is no rush to spending a year or 18 months getting the product right. One of my good buddies, is a software designer, and he spent an entire year just trying to get his user experience right so that he could get the return customer to come back on their own without him having to do any reminders. And as soon as he did that, his company, his software company, is growing at 25% a month with no marketing. But like most people would have the first product, learn how to market and sell, and then try and sell more and more and more and more of that,

Starting point is 00:38:25 shove it in the front door, but the churn at some point gets too high that you just have to sell more people to break even. And then you have too much overhead because you had to hire all these people to sustain it, and then you're fucked. And that's what happens to a lot of businesses. And they can't take the ego step back and say, you know what? We're going to cut down our marketing. We're going to cut down our advertising.

Starting point is 00:38:43 We're going to cut down our sales team. We're going to spend this year fixing the product. And what's crazy is when you do fix the product, the business will grow back on its own. And then you have the contribution margin from each new customer that you can go into colder markets, can spend more money on acquisition in different channels because you make so much money per customer. There's a role for marketing. Don't be wrong. Obviously, that's what I teach. You have to get sequence right. People sell first and then don't stop and think, I'm only selling so that I can learn how to fix my product and make it amazing. You have to get some people

Starting point is 00:39:13 to buy, for sure. But after that point, that's not the point you hit the gas. That's where you actually pump the break. Keep marketing and sales on a slow burner. Fix this. And if you fix this right, you will keep growing. And then at that point, you double down and you gas it. Profiters, this episode was a great guide to picking the right idea and getting it off the ground. I believe the hardest part about starting a business is getting started. And there's two reasons for that. For one, some people get stuck in planning mode. They dream and they think and they dream and they think and they never take any action. On the other side, some people go straight into the action and they don't think enough. And so they end up investing in the wrong idea and getting it wrong and they

Starting point is 00:39:57 keep going down the same path, but there's no product market fit. Both are a recipe for disaster and not having a successful business. So I hope that this episode gave you a good balance of taking action while also making sure that you're not making stupid decisions and you're investing your time and your resources in a smart way. The other thing that I want to call out before we close is this idea of creating a business that works for you and your lifestyle. Okay? So you can grow a business as slow or as fast as you want. There's no right way to do this. You can grow a business on the side for two years and then go all in after you've built it to a point like I did. Or you can go all in from day one if you've got some money saved up. Maybe you're a little bit older like Tina Anderson started

Starting point is 00:40:41 with Just Thrive. You can also grow your business super big or keep it small and just use it to fund your lifestyle. And you can also start at any age. I've got listeners who are 18 and I've got listeners who 58, and it doesn't matter. It's all been done before. Please do not let anything stop you from living out your dreams, especially something as silly as age. You are never too old or too young to do something new. That is one of my life's mission is to make sure that you guys know that you were never too old or too young to start something new. If you guys enjoyed this episode, if you listen, learn, and profited, make sure you drop us a five-star review on Apple Podcasts or your favorite platform. I love to read your reviews. I read them every single day. So shout out to

Starting point is 00:41:26 everybody who has left us a review. And if you listen to the podcast, let me know. Tell me your feedback. Drop us a five-star review. You guys can also find me on social media. I'm on Instagram at Yap with Hala. I'm on LinkedIn. You can search for my name. It's Hala Taha. And the last announcement that I have in terms of social media is we're on YouTube. We have over 15,000 subscribers still growing. We just started focusing on YouTube last year. And every single podcast conversation that I have is also shot on video. So if you guys like to watch your podcasts, check us out on YouTube. Search for Young and Profiting. You can't miss us. Shout out to all the guests that were featured on this episode, Vishin Lakiani, Nick Loper, Josh Kaufman, Alex Hermose. If you

Starting point is 00:42:07 guys want to check out those episodes, take a scroll on our feed and take a listen. I highly recommend it. This is your host, Halitaha signing off. And until next time, stay young and profit.

Young and Profiting with Hala Taha - Starting A Business in 2023 | YAPSnacks | Part 1

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