13 Years Of Brutally Honest Business Advice in 90 Mins

0:00 I've been in business for 13 years I've sold nine companies my last company I sold for 46.2 million I own acquisition. comom which right now does about $17 million a month across our portfolio I'm going to compress 13 years of brutal business truths and lessons into this one video brutal business truth number one sell to rich people until you have the money to sell all the poor people the middle is where you get killed Elon said you can either do a lot of good for a small amount of people or a little good for a large amount of people and I will tell you personally it's way hard to do a little good for a lot of people than a lot of good for a small amount of people there is a reason that Tesla started at the top they started only selling to rich people they had the Roadster which was $250,000 and so they sold those and then he was able to go down Market one and sell $100,000 cars

0:46 to just upper Ash line of society the wealthy and then after that he made the X which is a little bit cheaper than that and then underneath of that he made the model 3 which was going to be the mass model right and each time it was significantly harder to do the one before because if if you want to sell based on value in terms of low cost you need to build the infrastructure for huge amounts of demand because the only way that you make money selling to poor people is selling tons and tons and tons of them look at Walmart look at Amazon these are businesses that were built for volume day one and they win on efficiency that was the whole point Amazon he wanted to have the best selection and the lowest prices Walmart everyday low prices they want they win on efficiencies like they all fly coach they use fold out cheairs they drink out of paper cups they

1:33 purposely breed the culture of efficiency because it's the only way that you can win if you sell to poor people and I say poor people to be hyperbolic in terms of my language so that it drives the point home obviously I buy from Amazon but the point is is that the strategy is based on volume and you've probably heard some of my other tweets around this which is solve rich people problems they pay better or if you solve rich people problems you get to charge rich people prices this is what I think the key Insight is is that to someone who only has $11,000 when they pay you $100 they pay you 10% of their net worth their expectations of what they're going to get for that $100 is the same as a rich person giving you 10 million of their $100 million it would be gigantic right in terms of their expectations but getting a rich person to give you $100

2:18 they might have you notice and so the thing is is that it's actually easier in some ways to solve rich people problems because they're willing to pay more in an absolute sense for lower relative value and so with that extra profit or gross margin you can absolutely overd deliver for them and still make money and not have to learn all these things with infrastructure so for example if I wanted to start a bank I would have to have $25 to $100 million to start it up but if you do that then you have to build the infrastructure that you can handle money for zillions and zillions and zillions of people a very hard business to get into and so the idea is that you want to sell at least this is my belief is that you want to sell premium you want to sell s to wealthy people you want to sell to a niche person that you can do a lot of good for

3:04 in a very small slice because you don't have to compete against everyone you can have inefficiencies and still make money without having to have tremendous infrastructure and skill around building it once you make a ton of money doing that you can obviously just do more of that which big fan or you say you know what the next thing I do I want to do for zillions and zillions of people and so then you build a business like a Netflix that think about how insane Netflix is just as a concept you pay $13 or $15 a month or whatever it is now and they create movies and shows and they spend millions of dollars and they sign Comedians and they've got all these shows that are streaming and you pay $14 a month it's absurd think about if you were said hey Mom and Dad I want to start this Video subscription and I'm going to just pay millions of

3:50 dollars to get all these shows and movies made for us and I'm just going to charge 14 bucks it would be absurd that's how much value you have to provide to someone who doesn't have money to capture huge slices of the market how are you going to beat Prime $99 a year or 129 a year whatever it is now right and with prime you get basically all Netflix with Prime video you also have next day shipping same day shipping with anything that you want to buy 99 bucks a year $129 a year if you build to sell to the masses you need to build like you're going to sell to the masses and you're usually going to have to put a ton of money in for a long period of time because you have to have that infrastructure upfront to deal with that volume to have such a crazy value

4:35 discrepancy that someone who has no money still never wants to cancel that's the key whereas if you go to wealthier people you can get a premium you can have five clients that all pay you $5,000 a month and make an amazing income and have the resources to actually do a good job and hire a couple people to help you out who are competent and you can do that when you charge more money and those people are not the ones who are like and everybody's hurt seen this me where the $50 month customer is like hey so for this $50 a month what am I going to get now we make fun of that that's the reality of if you're taking 5% of someone's paycheck it means a lot to them whereas if you're going to somebody who's making a million a month and they pay you five grand if they get one good thing a year they're stoked and they're like oh yeah I sent the wire did you get it like the difference between

5:22 working with somebody who's on the lower end versus the higher end and so being very clear about who you serve not not serving other people going down Market only if you have the infrastructure to support huge amounts of volume and usually the capital to front it either you build for volume day one and win on efficiency like Amazon or Walmart or you build for a premium which means you Niche down and you completely solve problems for people so you completely solve a problem in a very narrow Niche and so let me give you a completely polar opposite examples here which I literally live on both sides of the spectrum on one side acquisition. comom is my premium brand right this is the brand that we do deals with this is where we have hundred million companies and stuff that we invest in that we own in right that's my family office and we do one or two deals a year just to being

6:09 really real we make very rich people way wealthier right that's what I do there so someone comes in is already worth 50 million bucks and we're like cool how do we get to 250 and that's what we invest in that's what we we scale the company on the Other Extreme we've got school so school is for everyone who's starting out now School took 5 years to get to the level of product that it is now and millions and tens of millions of dollars of development where it lost money the entire time and still loses money right now in order to create such an absurd value for the 99 bucks a month or whatever it is because we know that that $99 a month for somebody who's trying to start their business that's the entirety of their business budget and so we have to solve all of the business problems that those people have at that level and so these are two completely this I mean

6:57 honestly the most polar extremes of value Creation in terms of who we're selling to or who we advertise to and who we're attracting and how we help them and so there's no coincidence that I did acquisition. comom before investing in being a co-owner of school because I had to make enough money to be able to afford to sell to people who don't have much to be able to to help build the infrastructure and invest millions of dollars to build that so that we could accommodate millions and millions of users right now we have many millions of users on the the platform if you are confused about how to sell rich people stuff first off the easiest hack for selling a rich people is do what somebody else is doing that sells to rich people and do it in half the time and charge twice the price number one

7:44 rich people pay for time Above All Else But if we look at the value equation you've got the outcom so you got to make sure they want the outcome that you're promising and you got the three other variables you've got risk How likely is it that they're going to get what they want when they buy time delay between when they buy and when they get and the effort sacrifice the Richer they are the more guaranteed they want it to be now you don't have to guarantee things but you need the perception of the guarantee that's why reputation matters if you're the best plastic surgeon in the world you don't give a guarantee they just have a high perceived likely of achievement they believe that if they pay you the likely that their nose isn't up when they do the surgery is high if time delay they want it to be as fast as possible if they give you money and have it tomorrow rich people pay a lot of money for that and then you've got effort and sacrifice well I don't want to do anything I want you to do everything and so the thing is is that a lot of times that makes sense to have

8:30 very white glove concierge High touch things for people who are willing to pay for it because for them the incremental difference in cost for them is actually very small so the difference between $5,000 a month and $10,000 a month to a multi-millionaire not a huge difference but if you're just better for $10,000 a month they'll happily pay you than the $5,000 a month guy you're not going to sell someone who's Wealthy on how much money you're going to save them you'll sell someone who's Wealthy on how much time you're going to save them brutal business truth number two you lack priorities not information problems are easy to solve if you know what you're after if you know what problem you're actually trying to solve I'll tell you a story so I was talking to an entrepreneur who's done about 10 million a year and that was between all of his companies and we were talking and he mentioned one and then he mentioned the

9:15 second they mentioned the third they mentioned the fourth I was like dude how many companies do you have and he's like oh I don't know I was like you don't know he's like yeah I have an Excel sheet and so I was like well pull it up and so he pulled up his Excel sheet and he had like 56 companies that in total were making like $10 million a year and obviously one of them was the biggest one that was doing like half of that revenue and that was actually the company that I had heard of that that he that he found it I said dude if you just only had that one company how easy would it be to like 5x that business he was like oh my God if I didn't have these other 55 companies it'd be it'd be a joke I was like so if I waved to Magic W and that happened you think you could do it and he was like yeah and I was like then do it you can wave the magic wand you can end these other 55 Partnerships so that you can do this one thing and

10:03 what's crazy is that a year later I talked to him and he had done just that he was like dude I like didn't sleep for three days after we talked because I was like oh my God that's it so I see strategy as priority it's priorization of resources right you have unlimited options you have limited resources time money people Etc and so how you choose to allocate those resources against the unlimited options is your strategy it is how you prioritize and and when you have one clear goal for one clear company for one Clear customer the prioritization actually gets pretty easy and so a lot of people keep looking for these unique insights when the reality is you don't even have a goal have you toine the problem that you're trying to solve and

10:48 most people have it and that ends up being usually the first question I ask someone they're like hey I'm stuck with my business and I just say well what's the goal and then they say something they say well what problem are you solving right now and so if you can't clearly State current state desired State obstacle you're running around like a chicken with your head cut off you're not going to solve anything you're going to do a lot of work but you're not going to move forward so I had a media company approach me they've got 40 million subscribers across their channels obviously very very good at media they said hey we've been listening to your content and we think that our constraint like the problem that we need to solve that will get us the most bang for the buck is that we need to optimize our Sops for the media company I said okay well what's the goal I was like is it to just get more famous or is it to money and they're like no we want to we want to shift into monetization now I was like okay so let me ask you this

11:34 what product do you sell and they were like we don't have a product I was like okay so hear me out crazy idea if you had a product you would make a lot more money than trying to get your 97 out of 100 Media company to 98 and a half not to say that there's nothing like if they said I want to be more famous then I would have said absolutely you should do that that makes sense because monetization is in the goal but if they were trying to make money they had nothing to sell and I promise you if you have nothing to sell you make a lot less money than if you do have something to sell and so they could be a two out of 10 on product but with that amount of media that amount of traffic they would be able to get so many sales that they would they would blow it out of the water and so they were spending all this time trying to get in the intricacies

12:21 trying to get information on how to solve the wrong problem and so most times it's not that you lack Insight it's that you're solving the wrong thing and I think the reason that that happens so frequently is because those entrepreneurs are media entrepreneurs they like media they feel comfortable in media and so they like solving media problems and so they like solving problems that they know how to solve because they've solved them before I'll tell you a different story I had a guy who came out for uh a workshop here at acquisition. comom and he said hey can you go over the closer framework and I said okay you flew across the country you've been here for a day you had this one opportunity to ask this question to me I was like is sales a problem in your business what's your Clos rate he said 40% I said so sales is not the constrain of your business he was like no I was like then why are you asking me about the closure framework and I actually think that that lesson was way more powerful

13:07 than me trying to go over the closure framework because the reality is is he was a sales guy he loves selling and so he wanted to hear me talk about sales but sales isn't the problem in his business there's something else that's the problem he might not getting enough leads or people are turning out to to CL on the background or he can't even take on more customers because he doesn't have enough team like those were all other examples of problems that might exist and I'll bet you one of those three probably is the problem his business but that was the question he asked he asked about the thing that he enjoyed reading about the thing he enjoyed learning about and so right now if you're an entrepreneur it is true that you want to double down your strengths but the business as a whole has to be balanced so hear me out if you think about business like a like a body okay and you're a bodybuilder and so you want to have ideal ratios for everything in terms like if your arms were like this big and your you know your quads were tiny then you look weird right so

13:55 you want to be a specialist like you sure as an individual contributor keep doubling down in your strengths but the business as a whole will only be as strong as as weakest link and so this is where people get confused with double down in your strength versus be well balanced the business needs to be balanced your Physique in total needs to be balanced but you as an individual contributor can double down your strengths you want a team of people who are all doubling down on their strengths but you as the organizer of the business need to make sure that the business as a whole is balanced otherwise it will get constrained at some point and then that point will be your point of failure that will be the weak link that will be the part of the bridge where only $1 can get across even you've got 10x the front end and 10x the back end that one bottleneck is what's bottlenecking the business and so making sure that often times the thing that you're not the most excited if you're a marketing entrepreneur marketing is probably not your problem

14:41 if you're a product driven entrepreneur product's probably not your problem if you hate people and that's like that's probably your issue like I hate meetings I hate leading people I hate trying to reinvest my team I'll bet you that you probably are having limits on your business because you don't know how to recruit higher train manage and so that's actually what you need to either learn or recruit someone who already knows how to do that and so people spend too much time mentally masturbating to the concepts that they love in the idea that because it worked to get them to where they're at because they needed to start marketing to make money they think okay now if I 10x marketing that that's what it takes to make more money and unless that's the constraint that's not true and often times businesses do grow to the constraint of the founder they do grow to the constraint of that

15:26 individual Founders highly special I skill and then at that point it's constrained with something else that the founder doesn't like as much and so either you got to learn it and get comfortable learning stuff that you don't like as much initially or you got to find someone who does and so if you're like okay well I'm either a product entrepreneur and I need more marketing or I'm a market entrepreneur and I need more product or I'm either of those things and we don't have an operator we have somebody who likes to lead and manage people and invest in teams then how do you know what good looks like so first off one of the biggest advantages of business of of doing this for a while is to you start to recognize patterns so you hire Five Guys that suck and then finally find a six then all of a sudden you're like okay so this is what a good sales director look like this is why the businesses for example that we start now grow so much faster because one we know who's going to be needed next and two we

16:12 know what that person looks like and so think about how much time you save where if the constraint let's say is sales and you hire onboard train and that takes a month and then that person sucks and it takes you 6 months to fire them and then you do it again and that takes another 6 months to fire them and you do it again and then this time it works well you just wait wasted a year and change of growth that you should have been growing but you weren't because you're the wrong person at the point of constraint and realistically this is why so many businesses get stuck and the wrong conclusion is the person says oh I tried hiring sales directors that doesn't work no you tried hiring John and JN sucked it doesn't mean that there is no sales director doesn't mean you're the special snowflake that no one can ever replace you that no one can do this role it's just that you can't like there's Microsoft there's Facebook there are gazillion dollar companies someone out there on Earth is better than you

16:57 literally at the thing that you're best at and definitely better than the thing that you suck at now how do you actually tactically find these people when you don't have the experience so I'll give you the the tactic how I think about this one is I interview lots of people and so if you think about the interview process as an education process in asking them as much as you possibly can act like an ignoramus just be like I don't know anything about this tell me about it and then don't then immediately jump on the first person go on 10 Dates go on 20 dates I'll give you a little Sideline Story for school say I'm the founder interviewed 600 developers before he found his co-founder 600 and the way that he did that is the process of him outlining so first he said hey who here knows anything about development in his Network so he got he started interviewing those developers

17:43 and then he said hey can you introduce me to the best developers you know and so then those people introduced him because they had a better context he's like I'm not hiring any of you I want to know the best people you know and So eventually he kept going up the ladder of he talked to those people say who's who's the best one you know and he kept going up and kept going up only to fact find only to find information until he found somebody who's like oh my gosh this guy said more things and made more sense and at this point in the process he'd already spoken to so many people he had a good context from which to make a judgment and so that is the process I will tell you what I personally look for now I look for the quantity and quality of metrics that someone has to describe their role and so I'll give you a binary example so on one hand if so I was

18:28 hiring someone for customer success let's say that's like you're getting a lot of churn you're not getting a lot of ascensions you're not getting good reviews your NPS scores are low Etc you then saying okay Mr customer success candidate tell me about customer success what metrics do you measure now if they say like you know I just want to make sure people are happy that they're having a good you know a good time and that they're you know they're getting results and they're having a good experience I'd be like cool what do you measure and if they start squirming around like well what do you measure and they can only come up with one or two things then already know that this person obviously can't drive an outcome because they can't even Define an outcome now on the flip side if that person says okay well we like to Define an activation metric up front that we can do within the first 48 hours then we have like what is our time to value and what's our you know what's our North Star there we also like to measure cstat but I don't like to do it too often

19:14 because then customers don't like filling out the surveys and so we want to make sure that we can do it ideally within the customer Journey during a value driven exchange that they're going to have with the customer service rep or some sort of account rep that they have to manage and then we can just tack it into that process I like to look at churn but but churn I see more as a lagging indicator and I looked at look at these other things especially what's our time like how long does it take from sale to onboarding what's that handoff look like what percentage of customers are backing out in the first 24 hours 48 hours 72 hours and what percentage of these customers are leaving us review by day 30 and so all of a sudden I'm like okay well he just said like nine different metrics and had reasoning for that and so then the followup to this question of understanding the quality and quanity of the metrics that someone's going to bring to the table is awesome this is going to freak some people out how does what you do make the

19:59 business money and if the person cannot accurately describe how their function because every function of a business makes a business money that's why the function exists now the thing is is that some functions of a business are indirect versus direct so if I asked a CFO how do you make the business money they should say multiple things well one I control expenses so everything that I save goes to the bottom line and I have a process of consistently cutting out access costs uh every 30 days and so by doing that I can usually drive an extra 3 to five % to the bottom line which more than pays for me so I'm like okay great they're already even thinking about my return as an owner versus them on top of that they say okay also I see Finance really as a function of decision-making and so if we can collect the metrics that drive decisions around what things have the highest gross

20:44 margins what's our utilization rates um how can we make the decisions that will get us the highest return on Capital uh both human and money capital in the business then we will grow faster and so if someone talks like that then I'm like okay they understand how Finance is actually a data function by the way it is literally that's what Finance does is gives you reports it's reporting so that you can make decisions about the business so that they we make more money cool now sales is say like and I'll give you an example for a sales director so if I say hey how does what you do make us more money now if they say well I'm going to I'm going to drive sales I'd be like well duh but like you're not going to sell anyone CU you're a director so how do you make the company more money what you want them to say is that

21:30 I'm going to increase the average conversion percentage across our leads for the team because that is the output of the sales manager is closing percentage like at a fundamental rate it's closing percentage is one of the metrics but just total conversion rate of leads so if I get 100 leads and there's lots of mini steps you got to schedule you got to show you got to close you got to offer whatever there's cash collected there's other mini metrics along the way but you just want to see what percentage of eyeballs IND oror earballs and people who give us their information we can contact do we convert into sales and if you say I as a sales director will be able to increase that percentage then that's the job and that's how I make the business more money because here's the thing if they cannot describe an output of their job that ties to revenue for the business or

22:15 ties to profit for the business then you can be absolutely certain that they don't know how to do it and that they're not going to do it for you because they can't even tell you how it works and so I use those as the limit test test one I interview as many people as I possibly can so I can get a basis from which to make a judgment two from there I'll learn the metrics because I won't know them um that people use to describe the role to drive outcomes and I will look for the quantity and quality of metrics that people will track and what they would do to influence those metrics step two and then step three how does what you do make the company more money don't let them get away with like with the sales example well we're going to make more sales no but how do you influence that business truth number three things are hard because your team

23:01 isn't as good as you think they are and that's because your standards are too low a Metro mind said this to me and I've always kept this in mind he said your best talent you haven't even hired yet your best talent is in the future and so let's run a thought experiment for a second everybody who's listening to this has that one teammate who's just an absolute stud hopefully if you don't I'm sorry for you but at least one person on your team is pretty good if you had to those people would you be able to make way more money the answer is almost always unequivocally yes I'd be able to make way more money and so then the followup is then why is all of your attention not to getting more of those people if you listen to the Steve Jobs the boses the the Bill Gates Elon so many of them Zuckerberg so

23:47 many of them talk about talent and in the early days of Entrepreneurship I thought that they were trying to hide the secrets but it's really that they were talking about what they were focused on now and as I continue to do business the more I just care about who rather than what or how because if you really do have the right who you're one Higher away from somebody who's a 100 times smarter than you who's done this way longer than you have who can help you grow the business I'll give you this story that really drove this home so when we were looking at selling gym launch we had a lot of conversations with investment bankers and then finally fixed you know we picked an investment Bank to represent us and then we had a lot of conversation with prospective buyers so acquires um meaning people who like fund managers people who have big funds of money who buy companies for a living and I

24:33 remember a moment on one of the first of these meetings where I it was it was in person they'd flown out and all of their team was on one side and all of my team was on the other and I was sitting at the head and the managing partner was at the other side of the table and I just remember just kind of sitting there silently looking down the table looking at both sides back and forth back and forth and being like no wonder these guys are going to make $3 billion in the next five years versus my team and the thing is just to be clear it wasn't that my team was bad I mean we built a you know $100 million doll plus business I saw the discrepancy this is not a slight to anybody on the team we obviously had stars but seeing the average level of Talent on their team versus mine was a huge moment for me to understand just how important

25:19 people are and so there's a story in Google I think it was Larry Page surgery brand whoever typed into Google like parachutes whatever and the ads that came up were for like buy a radio buy a car and he screenshotted it and he puts it on the corkboard in the engineering room and said these ads suck he just wrote it on the screenshot and he hit the board and he walked out of the room and The Story Goes that the next night one of the developers just like stayed up all night and came up with AdSense and AdSense more closely paired what people were searching for with the ads that they were shown he didn't say here's the 100 step proc process that we're going to do to solve this problem he just said you guys are intelligent this is the problem go fix

26:04 it and so one of the telltale signs that you have bad people on your team or people who are too dumb or your standards are too low is that you have stupid rules and I and I I'm I'm I'm somebody who's done this so this isn't me preaching here this is something that I've I've now realized is that if you have to have a rule that's like hey everybody you have to show up on time hey don't drink while you're on the job hey um like you can't watch Netflix while you're working like that's not a good thing by the way all of these are rules that I have implemented at some time in a business that I've owned and I'm telling you this now because it seems so painfully obvious that if I have to say don't watch Netflix while you're on a customer service call with a customer that shouldn't be a rule that should be an obvious thing that anyone

26:50 with half a brain cell can figure out but what that really meant is that if you start making stupid rules it's because your standards are too low and you're hiring stupid people people rule number four lots of rules means you have dumb people so let's talk about that for a second so one of the things to prevent against this is a rule from Amazon which is that every person you hire you want to raise the average bar of the team that they're getting hired into I literally used this yesterday with someone that we were interviewing uh Lelo was like what do you think about this person I said well do they raise the bar of the team and he was like hm I was like all right well then there's our answer because the thing is is that all companies will unless controlled for dilute down Talent so people you know sixes will hire fives five will hire his

27:36 four fours will hire threes and people will always hire people that they're not threatened from because they want Security First and so you have to implement something like this because the reverse can also be true if imagine if every single time you hired somebody it raised the bar of the team then the team will just continue to get better and better and smarter and smarter people and then the company will grow and grow and grow and I have a fundamental Bel that the level of a business grows kind of like a Christmas tree where you've got the the number and intelligence of brains that goes up so if you have lots and lots and lots of really intelligent brains the the size of this business is huge if you only have one brain that's intelligent and everyone underneath of that has a subset of the skills of that one brain then it's only

28:21 one brain that's competing against companies that have a 100 smart brains and that was something that in my early days every person I hired I could do their job better than them and I trained them to do everything they did which meant the limit of the business was me I had to literally keep learning things which you always have to do of course but I had to learn everything from scratch and so the business then had to suffer what a a day one customer success rep would deal with because I didn't know anything about customer success and so the idea is I would rather bring someone in who has 10 years of experience in customer success so that we can start the business on year 10 of customer success I want that person who have learned all those lessons on someone else's dollar and then when they come to me have all those lessons so I don't need the

29:08 scars and so one of the one of The Telltale sides also of an early company is that you've got people who have zero experience in leadership roles for a function they've never done before and that's because it's like well this is my coo Sarah we have five people in our company but she's our coo it's like don't use the term coo CU she's going to look at salary.com and she's going to say that she she make more than the entire company makes in Revenue right no that's not the case like she's a manager right and realistically she probably doesn't manage the whole business she probably just manages this portion of it or he just manages a portion of it and so the thing is is like just because it's your mom or it's your brother or your best friend growing up or that guy who you hired first has been with you since the beginning it still doesn't mean that they're right for the role and so this is where a lot of the

29:54 money that you want to make is on the other side of a few hard conversations and many people never have they're willing to just accept mediocrity at the point of the bottleneck and never get debottleneck because they can't say hey Sarah I don't think it's working out and I think it's my fault because I put you in a position without the resources to win and I think and this is how you this is how I manage it what I want to do is I want to keep investing in you and here's how I want to do it I want to bring someone in who has a ton of experience who knows more than both of us put together and I want you I'm going to basically pay for you to learn from this person so that you can become more skilled in your career and then you I want you to get laser focused on this thing over here that you were doing before and absolutely tune it up and so

30:41 this way we you're going to crush what you're currently doing every day and it's absolutely within your scope and experience that I think you can do really well with it and I also want to build out your future by bringing this person in so think about it like me paying $100,000 a year for you to learn from somebody who has 10 years of experience it's about the biggest gift I can give you and so if you frame it like that it's not like this is a demotion or like you suck it's like I'm trying to invest in you and I'm going to invest in you by bringing this person in who's going to teach you now if that person has an ego which is usually the next common thing which is like I thought I was doing great then it means you probably have a communication issue like you're not telling them that Sarah's not doing a good job and then Sarah gets upset and the thing is is at that point Sarah might have an ego because she started at the front line and then became a manager then you give her another title uh progression too fast and to be really clear I've done this two times with

31:28 executive assistants um just with executive assistant within the companies a zillion times me personally I've done this and I don't really even deal with a lot of Personnel in general and it's like I just I promoted someone too fast I think it's the Peter Principle which is that people will advance to their point of incompetency and so someone does really well at sales and so then you put them in a sales manager and then they've never managed a sales team and they don't do really well at that but they get promoted to their point of incompetence so I lost a good salesperson and I got a bad sales manager and this is how most of corporations are run people do well and then their role changes into something they've never done before and then they do poorly and they get stuck there or they get fired and most times because the person who promoted them feels bad they just get stuck there and so You' got all these people who you still have positive associations with the work that they did

32:14 and you feel like you owe them because they did do a good job one time before but now they're doing a poor job because they're not properly equipped and you didn't give them the skills to succeed and they don't have the experience and yes that's your fault but the thing is you can't fire you because you own the company so somebody's got a and so either you got to move them aside you redefine the role and move someone ahead of them or you have to get rid of them and again this is what makes business hard it's not that it's complicated it's that you don't want to hurt someone's feelings and I get that that's what makes hard conversations hard if you hate somebody firing them is very easy right like someone stole from you firing is not personal experience there slept fine that night all right it's the conversation with someone that you know is trying their best that you really like as a human being but isn't

33:00 cutting it and even if you think you could get them there you're not willing to invest the resource to do it because it doesn't make sense I could wait for someone to learn neurosurgery and I think people could but it might take a decade and I don't know if I really want to invest all that time when I could just go find a neurosurgeon and yeah I might have to pay more but I'd rather pay that than pay 10 years and so to to to to Loop this back around to the story that I was talking with the private Equity firmers when I was looking at them one of the big OB things too is that many of the people on the other side of the table were making 1 million2 million $5 million a year and you know people who were in their 20s making 300,000 500,000 a year and I was like okay I need to reset my bar of what I have to compensate in order to attract a level

33:49 talent and once I really understood the value of people the way that we grew businesses completely changed it stopped being about building businesses and became way more about assembling the teams that build the business like one of the core functions we do at acquisition. probably the thing that we invest the most resources into is recruiting Talent like there's a reason that we go really hard on LinkedIn because people respond to our messages and we're like hey you ran all the ads at this $200 million per year director consumer business we have a director consumer business that's at 20 million would you be willing to take it from 20 to 200 because we think you have the experience or do you know anybody who does and because we have a falling there we get the responses and we can get that level talent but that level talent's not coming in for 100 grand a year you can moan all you want that oh these

34:35 employees want so much money but there's a Marketplace there's a rate and if you're not willing to pay it there's a company that is smarter than you that is willing to pay it because they know the return on it and I still think to this day one of the biggest Arbitrage that exists in business is paying a talent a wages to get 10x the output so let me let me drive this home so you can get a B player let's say let's use $100,000 as the Baseline so I want to hire a role for $100,000 for this thing and a b player in the role will take 80 and uh a B+ might take 90 or 100 but there might be an A+ plus guy who's like 170 it's like whoa that's like twice our

35:23 budget for this role but if that guy or gal has the output like an a player can get you 5x 10x the output of a b player meaning five people who are B players at $100,000 a year equal one A++ at 170 that's still a great return and better than hiring 5bs and especially in knowledge work so if you have anything that has to do with thinking and not like where literally more hands are are required to do the work the outsize return on intelligence is so high that I still see it as one of the fundamental Arbitrage that exists in business how much time you save by hiring somebody who knows exactly what to do how it drives Revenue in the business and they can use 10 years of experience that you don't have to pay so

36:10 I would rather pay 25% 30% more for somebody 50% more for somebody who can move me 10 years forward like it seems almost silly when you frame it like that not to but the thing is every day small business owners want to save $5,000 on an annual on on an annual salary for somebody who they know is perfect for the job this is truth number five if you want to get bigger get better better leads to growth bigger leads to bloat so I was reading estr Cathy's uh book wealth is it worth it and he talks about the story of Chick-fil-A and he said that what his his number one Pursuit um was better not bigger and that he believed that if they were better and they just kept getting better he said our customers will demand that we get bigger versus trying to get bigger for the sake of getting bigger and so he tells a story between him

36:56 Chick-fil-A and Boston Market so for those you who don't know Boston Market was actually a very big chain when I was growing up um That Grew really really quickly and so chickfila was you know privately held they take they took on almost no debt uh they grew really responsibly one location at a time and Boston Market was like we're going to franchise and we're going to raise a ton of money from Wall Street and we're going to make all this stuff and for a period of years they outg grew Chick-fil-A by a mile and they were like oh Chick-fil-A is going to get left in the dust they're going to get Al caped they're going to get crushed but because Boston maret grew so quickly because they didn't they diluted their talent because they had to hire so many bodies and not enough brains and because they wanted to grow because they wanted valuations they wanted money they were what I would consider mercenaries

37:42 whereas Chick-fil-A and EST Cathy was a missionary he believed in the product he believed in the experience and because he's a faith-driven entrepreneur he wanted his restaurant to represent the tenants of Christ this isn't me getting religious on it but he believed in his mission that's the point and basos talks about this he said you've got mercenaries you got missionaries the missionaries always win in the long term and so what end up happening is that the money guys some of these guys cashed out early because stock got inflated all this stuff they took on tons of debt and then the the company ended bankrupting I don't know something like 10 years later but guess what happened in that period of time Chick-fil-A just kept growing and the thing is is that Boston Market couldn't out compete Chick-fil-A in their Market they just grew faster but the thing is is that if you've got a Boston Market in chickfila if you know that your chicken sandwich is

38:28 you still always win it becomes an inevitability it doesn't matter if they get there first if you win in the end who cares because quality will always win provided it's priced appropriately and things like that but better leads to bigger bigger leads to bloat and so this has been something that was really hard for very hard for me to learn as an entrepreneur because you know we we like them I mean I like the feedback of how much money are we making this month I want to make sure it goes up I want to make sure it goes up because that it's a it's a proxy for growth okay and and I used to say this and I I like it which is either the business is growing or I am so if the business isn't growing or the business is going down I'm growing I'm learning when I'm I'm messing up and if the business is growing sometimes you're not learning because the you're getting rewarded for the work that you did while you were learning while you're

39:13 eating sometimes you get both and that's the ideal scene is that it's growing and you continue to learn and you st you keep your learnings ahead of the growth so the trains coming and you're building out the track you're getting around the ditches you're going through the mountain you're digging the hole you're doing that stuff to the train can keep running and keep growing a big lesson that I have taken from EST Cathy and some of the best entrepreneurs like Elon if you're going to enter a market so Elon talks about this if you're going to enter a new Marketplace you want to be an order of magnitude better than the existing Solutions and so I'll give you an example Elon just recently did uh he talked about getting into candy or chocolate which you might think why would he even bother getting into that I think it's because he had a gripe with Warren Buffett and Charlie muger which is really sad cuz I like both of them he had a little bit of a rift with them oh he was like well fine I'll take out C candies and so he was like I'm going to get into

40:00 chocolate and so he had all these people send him different recipes and all this stuff and he decided not to do it and the reason he decided not to do it is he said that there was no product there was no version of chocolate or candies that was in order of magnitude better than what already existed so he just didn't want to play if you think about how he entered into the other markets he got into space and was like oh we're going to redefine how space flight Works we're going to use reusable things that we're going to drive down cost 10x compared to the competition that's an order of magnitude better with cars the first real Tesla not the the Roadster the high-end one but the first one he made for Mass commercial use was literally the highest rated car um that auto whatever Auto magazine the premium magazine had ever rated it got the highest overall score of all time because he focused so much on making an order of magnitude better and the thing

40:46 is is that Tesla makes Great Cars by and large and so customers have demanded they get bigger because they continue to out buy out purchase their supply and so that forces Supply to increase so you grow and so if you're stuck and you're like I keep trying to grow and I can't grow sometimes you just to think let's not grow what if we didn't want to grow at all but we just had to make this thing absolutely insane from a quality perspective just get better and the way that you do this tactically is that you look at each function of the business and you say what's one thing we can do better that we absolutely very high confidence like we're just going to go from contacting our leads within 30 minutes to five minutes that's the one thing we're going to do for the next 12 weeks for for sales for marketing what we're going to do is we're going to make

41:31 sure that every single ad has a hook that's been tested before that's what we're going to do we're going to make sure every ad that goes out is going to have hook that's tested and we're going to make five times more of them great that's what we're doing on marketing and every single one of them here's the key point is that once you start that new that one thing the next quarter you add to that you don't just swap it and this is what most people do they do that one thing and then they forget what they were doing is that you end up creating this checklist of what creates amazing ads you create this checklist of what makes amazing followup you make this checklist of what makes an amazing handoff between sales and customer success make this checklist of how to activate a customer and so it's 100 golden BBS not one silver bullet that creates the outsized returns and then once you have 100 golden BBS you start getting the word of mouth you start getting people who keep buying from you and then all of a sudden your LTV

42:17 skyrockets and then you might find out if your LTV skyrockets maybe you don't have a marketing problem maybe you just weren't making enough per customer and I can tell you this the amount of times I talk smart businesses who are like we need cheaper leads we need cheaper leads we need we need to lower our CAC the reality is they just don't make enough for customer because they're not that good and either you mispriced which does happen for sure or your thing's not that good which is 100% under your control fundamentally growth is a lagging indicator the things you do to create growth are the leading indicators and the things that create growth are the things that make you better and so having growth as a desired behavior is trying to make an outcome into an input and then what happens is you have quote growth for growth sake and here's the problem with this just as a big big

43:02 picture is that if the reason that you're in business is to quote make money if that's your real Mission so many things make money and so what happens is you become distracted as an entrepreneur this is why the mercenaries fail compared to the missionaries because if you just want to make the best chicken sandwich anything that's not a chicken sandwich isn't a priority they could have Chick-fil-A credit cards right or Chick-fil-A miles they could do that stuff and they probably would make the money it's not core now go find out if they probably have a credit card who knows but like the point is is that it's not core to what they know if money is the goal then there are so many paths to getting there that it's difficult to stay focused which is why companies get spread thin which is why they grow for growth's sake and then all of a sudden they have five initiatives that are going on that all

43:47 aren't working that well because they couldn't focus on the thing that matter most which is getting better at the core promise that they make to customers business truth number six you work all day but you can't get anything done because you allow too many things that don't matter to distract you sometimes you have to let fires burn and so what that means is that you have to block time for work that moves the ball forward because a month later it'll be the only thing you have to show for the month before and so one of the things that took me a long time to realize is that there are very few things that are existential crisis within hours even within minutes right and so the idea that everyone in the company and all of your customers Etc can have immediate demand from you as or responses from you as the owner is not a good expectation because then it means that you're on demand for everyone else's needs but the business needs you and so I'll give you

44:34 a story to drive this home so at my first gym I had just started sleeping not at my gym which was wonderful for me and so right as like I get my first few nights of sleep I get a call that everybody hates at 5:30 in the morning because that's when sessions happen and I was like hello what's going on and he said I've got bad news and I immediately go to someone died from a heart attack in our gym that was the like the immediately went there and uh I'm just silent and I was like what is it and then he says there's a a water pipe that broke and it's leaking on the floor and I was like okay what do you want me to do it's like well I don't know what to do I I called you and I said well what do you think I'm going to do he's like I I guess call a plumber and I was like

45:19 okay what what would I do in the meantime he's like probably get a bucket I was like yeah I was like have you done that he was like well no I called you I was like like okay well why don't you do those first two things because there's nothing I can do there's a story of uh Elanor Roosevelt I think uh when I think someone in her family died in the middle of the night she gets woken up by her servant or whatever you know however they did it back then and he says you know Mrs Roosevelt I have some terrible news and it's like 3:00 in the morning and she's like what is it he's like your cousin you know John died and she said that could have waited till morning there's nothing I can do about about it and so there's very few things that will actually kill a business and so if you allow everything to be urgent

46:06 it means that everything's a priority which means nothing is and priorities literally mean prior they come first and I literally prioritize my day by the things that matter most and so I start my day I do prior to my day the thing that I think will actually move the ball forward because when I look back at my last month to see the progress that I've made I never think about you know Susan who I had to give a refund to because she was dissatisfied for something or we got a onear review and we need to you know deal with that or uh you know our our chat support uh went down for you know two hours in the middle of the day and people were like you know why did the chat support like none of these things are existential crusies for the business in the short term there's almost nothing that kills a business in the short term and like the only real thing is that your payment

46:51 processing goes down so you literally your ability to accept money goes away but beyond that like there's not a lot of stuff and so what you have to get comfortable with is letting some fires burn and being able to say yes this sucks but not getting the important work done will suck more and so I spend and I still do this the first four to six hours of my day working on the things that I believe matter most and I think that if I had a single habit that has gotten me the furthest in my life it's that I I work uninterrupted for the first four to six hours of my day on the things that I think think have the highest leverage in the business and I like to think about that as what's the one thing that if it were true all of my other problems would go away and then I put all of my effort into making that

47:37 one thing true or making that one thing happen but that can't happen if you have 20 other mini priorities that are Urgent and not important every entrepreneur suffers from this and so you have to draw lines in the sand or you will be spread too thin you will work all day and you will get nothing done to protect that first four to6 hours in the beginning I had to wake up early so that mean I woke up at 4:00 I worked for 6 hours till 10:00 and I start my day at 10:00 as I made a little bit more money I was able to like sleep in until like 5: uh or you know and then start working at like 6:00 and then I'd work from 6:00 to noon and so everybody on my team this has been for years everyone my team knew do nothing until the afternoon like Alex only takes meetings in the afternoon and so for me I do my thinking work in the morning and then I do my meetings in the afternoon as I hired more people more directors

48:24 more leaders more Executives a lot of those meetings all were able to disappear and so now it just became like Ivy meetings day and the remainder of my week is just completely open here like let me show you how this plays out in the real world someone reaches out and says hey I got to connect you with Jimmy I think you guys would have a lot of synergies I think that this would be a really important connection and I say um I take meetings on Mondays and they're like oh I don't think he can do that and I say okay I guess we won't meet we just sit there and that's it and you'll be amazed often times that if they really want to meet you they'll make it work on Mondays and if it means that it's also three Mondays from now then it's three Mondays from now and I will say this if I don't meet Jimmy you many people are there on Earth there's 8 billion people I'm not going to meet

49:09 most people and the likelihood that Jimmy's going to actually do something that because like if I know what I need to do to grow my business there's not a lot that Jimmy's going to offer me there like if I'm very clear on my strategy and I'm very clear on my execution anything that's not that fundamentally loses me money it certainly doesn't make me money and so just being okay with saying no and so I'll give you the tactic around this which is just saying I like to say so this is how I do this in Social settings i' would say hey I'm actually not taking meetings until after my book launches and then once my book launches I'll say I'm not taking meetings until we sell this company and I'll just always have something that I'll just push out that's way far in advance that seems very important that gives people a social reason to feel okay that I'm saying no to them not saying you're not important it's saying I've got this other thing that's really important to

49:55 me um and so so that tends to work pretty well with entrepreneurs but you have to be okay with it like if you have a team where you people manage your schedule for you like I had to explain this to my we have three executive uh assistants that manage Le and I calendars and I was like if I if you put a meeting in the morning at like 10:00 a.m. I was like you've killed my whole morning it's shot like I can't get into any kind of deep work and then I'm going to have two hours and I'm going to have lunch again and I'm have other stuff out like no like we don't do that if they are going to do something and it's quote very urgent and they have a very strong argument that I put at the very end of my day and I and I book from the back forwards and so that means that if I say I want to end my day at 5 or whatever then it means they're going to put my my first meeting of the day at 4 o'clock so from 4 to 5: if it's an

50:42 hourong meeting and if I have a second meeting that day then it's going to be from 3:00 to 4:00 and so I still get my whole day until 3:00 uninterrupted so I can work on the things that matter most and we have just learned Le and I working together that basically the more she takes off my calendar the more money we make and that's because that's where I'm most effective now the flip side is Lea is such an exceptional operator and leader that her form of productivity is an absolutely stacked day so that she can delegate invest in the team prioritize uh resources deal with small small decisions that have to move the ball forward check in on projects hope people accountable reward them for this the behaviors they've done like interview new candidates that we need to bring into the company like that's a super timec consuming thing that's very very high leverage and very high value like think about it if you have to take 20 interviews to find the right person who can then take an hire 20 hours a

51:27 week off your plate I mean gez you spend 20 hours once to get 20 hours a week for Life what a great return and this is why entrepreneurship at the highest levels I'm going to go on a side drain here but I think it'll be important entrepreneurship at the highest levels is always hiring ahead of where you're at and for people who don't like their current business I can promise you that if you grow it enough you're just going to be dealing with people all businesses at the top are you got a marketing person you got a salesperson you got a product person you got Finance you got legal you got Tech and that's that's the business and so whether you're selling widgets you're selling services you're selling software fundamentally you're just going to have a bunch of people that are executing those things and so at the very highest levels business is all the

52:13 same and you have to learn how to play business at that level to keep playing at that level business truth number seven brand takes a long time to build but it's the most valuable thing that you can know it gives you the ability to get insane Returns on Advertising pric far above the market and keep people only buying from you it's very hard to imagine something that is better than that it just takes time and so this was I mean this is probably the lesson that took me so long to learn like year I mean many many many many years I mean I

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