5 CEO MISTAKES that may be SABOTAGING your growth and LOSING MONEY…DON’T DO THIS..

Summary

• In my early days as a CEO, I created a culture where money was used as the primary solution to problems. I learned that imposing constraints is crucial; otherwise, spending can become frivolous and out of control.
• I incurred excessive legal fees, amounting to $1.1 million, by not setting limits and allowing lawyers to work unchecked, which taught me to run the business frugally, even when it feels like there are ample funds.
• Taking advice from people who offer guidance based on their experiences rather than tailored to your specific situation may not be beneficial. Ensure you receive advice from those who understand the current environment and ask the right questions to provide relevant solutions.
• Over-promoting employees can lead to their failure. High performance in one role doesn't guarantee the ability to train others; promotion should correlate with actual capability rather than potential.
• Change management needs to focus on altering human behavior in tandem with procedural changes. Implementing rapid change without giving the team adequate time to adjust can result in the efforts not being sustainable.
• Growth through improvement, rather than addition, is often more effective. Avoid the trap of constantly creating new products rather than improving existing ones, as this overcomplicates the business and confuses customers.
• Acknowledge personal biases and don't assume you're an exception to common business pitfalls. Recognizing your fallibility can help avoid mistakes others have made.

Video

How To Take Action

I would suggest implementing the following steps based on the learnings and experiences shared:

• First, put constraints on spending, even if it may seem like you have ample funds. Avoid creating a culture where money is the go-to solution for problems. Instead, find creative solutions that do not require significant financial investment.

• Before signing off on costly services like legal fees, set budget limits and oversee expenditures. For instance, when working with lawyers, agree on a maximum budget and keep a close tab on the hours billed to prevent unexpected costs.

• When seeking advice, ensure that the guidance is relevant to your current situation, not outdated or generic. Find advisors who ask questions specific to your business and can offer tailored advice based on the current business environment.

• Be mindful about promoting employees. Performance in a current role doesn't always predict success in a higher position. Promote individuals based on their proven capabilities and provide them with the necessary training to succeed.

• When managing change, focus on the human aspect. Implement changes progressively to allow your team to adapt. Educate and sell the change to your team, rather than just telling them what's different.

• Aim for growth through incremental improvements to your existing products or services instead of always adding new ones. This approach simplifies the business and maintains clarity for your customers.

• Acknowledge your personal biases. Don't fall into the trap of thinking you're an exception to common business pitfalls. Remember, understanding and admitting your own fallibility can prevent costly mistakes.

Remember, these steps are not just cost-effective; they are crucial for establishing a sustainable and efficient business. They require attention to detail, a proactive mindset, and a commitment to learning from past errors without significant financial inputs.

Quotes by Leila Hormozi

"You have to run things as if you do not have the money when you do"

– Leila Hormozi

"If you've just started a business you've got all this raw energy and you're just driving forward with it"

– Leila Hormozi

"Change is not about updating your SOPs…change is about managing human behavior around change"

– Leila Hormozi

"When you're asking someone for advice make sure they actually are asking questions, they're gaining context"

– Leila Hormozi

"If you operate like I can make all the same mistakes as everybody else, then you will probably not make them"

– Leila Hormozi

Full Transcript

what is up in this video today what i want to share with you are five mistakes that i made as my first year as a ceo if i sound out of breath in this video it's because i just got over 14 days of covid and i am quite literally out of breath and short of breath um so i'm gonna do my best to not sound exasperated in this video so the first thing that um when i look back at the mistakes that i made the first year in business this is just the first year because if i gave you the last five years and all the mistakes i've made it would be a three hour video if not longer maybe an entire day long so this is just from the first year okay the first thing that i can think of is that when it was good and when things were exploding and when margins were astronomical because you know you haven't uh hired all the people yet you haven't put all the systems in place yet you have way less overhead at this point you run things like you have a ton of money and what that does is it creates this culture where everyone learns that in order to fix things you need money and in the beginning it works um and then you realize that you cannot continue to solve problems that way obviously there are companies who are venture backed and like they can solve problems that way but i think if you're watching my youtube channel there's a slim chance that you're one of those companies and so what you have to be able to do is to constraints around problems what i tended what i what i noticed um is that a lot of the culture that was being built was one in which we just solve problems with money and the time that i can remember this the absolute most was terrible it was you know we were trying to understand and figure out where we sat within the advertising laws and so my team um was like we really need to get lawyers to look over everything that we have and so i thought you know okay lawyers are going to review our stuff it'll be whatever maybe you know i don't know 50 grand um and because i didn't put constraints in place because i didn't set the tone because i didn't say how much money we were allowed to spend on certain things it was just let's throw as much money as possible at these lawyers and let them do whatever they want and i got a bill three months later and we spent 1.1 million dollars on legal fees 1.1 million dollars on legal for a business that is not like we're not in an industry that needs that much compliance that was when i learned that you have to run things as if you do not have the money when you do because what happens is that if you do not do things that way then you soon will not have a margin and you soon will not have money because people are frivolous with it and so that is something that has to start from the top and you have to set that tone for the rest of your team and if i can save you one a million dollars in legal fees then let this be that uh which by the way lawyers charge by the hour and so they'll tell you that there's a million things wrong with your business and try to get as much money as possible from you when they're trying to scare you with compliance because most entrepreneurs don't understand compliance and don't understand advertising laws et cetera et cetera which are actually pretty simple and so they just overcharge you uh for looking at all those things so anyways that was the first one the second one is taking advice from people who are giving advice to their younger self not to you and i recognize this in hindsight is that i asked a lot of people for advice and what they told me was the advice that i believe that they wish they had given themselves when they were younger not the advice that was right for my business at the time and so what i have now come to be able to realize is that you need people who are not just been there done that you need people who also understand how to coach people understand how to ask questions understand how to gain context because if you don't have that then what you do is you just it's cookie cutter right and so they just give the same cookie cutter answer to everyone who asked them the question because they're just thinking oh i wish i had done this when i was in that position and so it doesn't work that way right it's like if you give a diet plan to somebody and you give it the same one to someone who's 200 pounds to the person who's 130 pounds right there's it just doesn't make any sense you don't do that and so that's um the second thing that i did is i took advice from people just because they had done more than me and i was like well they've got to know more than i do but it actually ended up biting me in the ass a bunch of the advice because there was no context and so i can tell you that for some of the advice i was given it was advice that was outdated and that's because business changes really quickly and so something i'm really cognizant of is when someone asks me for business advice i'm like how has this changed today right even from what i knew from the mistakes i made five years ago how are those different today how are people facing different challenges today the world is completely different place and so if you read a book on how to run a business from 15 years ago it's polar different than what you would actually do today to run a business running a business today is astronomically easier and there are so many more simple ways and so i listen to a lot of people who didn't take that into context and they told me a lot of really hard things to do to run the business but i uh unfortunately didn't pick up on some of the shortcuts because i was just taking advice from people who were just telling me what they wish they had known when they were running a business x amount of years ago and so that is the second mistake that i made is just taking that advice out of context and i didn't have the critical thinking deductive reasoning because i was just so involved and so in it and so overwhelmed to actually dissect their advice and really think it through and decide if i actually want to use it and so that's something i would say is when you're asking someone for advice make sure they're not just telling you what they wish they had done make sure they actually are asking questions they're gaining context and they actually want to know about your business and you and are taking into consideration the differences between now and then and so that's the second piece the third piece is um over promoting and this is something that i think everybody believes they are the exception to the rule of and i believed that i was the exception to the rule at that time with certain employees because you know i think we're just biased and we're desperate and we want to think that that person is the exception to the rule that they are going to be able to beat the odds of you know what we know when we talk about over promoting which is if you've got a high level individual contributor who's doing a really great job at a role and then we're like all right you know they should be able to train other people to do this role for sure and so we promote them and then that's just not the case and i remember specifically there was one person i did this with who was in an administrative function and she was doing a really fantastic job and alex and i were like you know i feel like we could promote her to operations manager and so we did and it was just absolutely horrible and i still regret to this day doing that because she would have been such a awesome administrative assistant and if we had still had her today i feel like it still would have been working and it's just such a shame because instead we put her in a position where she was bound to fail you know she didn't have the experience i didn't have the experience to train her and nobody underneath of her was experienced either and so there's just nobody knows what they're doing we're putting someone in a position where they're uh above their level of competence and they're just set up to fail and so um i think that it you have to be really careful because everyone always argues for why the person that they want to promote is different and why the situation they have is different and that is a mistake i made in the first year and i do not believe i have made it since i might have made it once since then slightly but i have actually demoted people who i've made that mistake with and said like i'm really sorry i it up again which sucks but it's like it's the truth and so that's the third one is over promoting and you know we have so much personal bias and a lot of times we really like the person and so we don't see past that okay the fourth piece is driving change too quickly something i didn't understand about driving change in an organization before i had more experience as a ceo was that change is not about updating your sops and getting the product live and launching a funnel and adjusting the sales script change is about managing human behavior around change it is not about the actual tactics itself and so if you create a change but you do not create a behavior change around the teams that are managing that change you do not have a change it will not stick what i have come to realize is that if you want the cost of change is high in an organization because not only do you have to change all the tactics you have to change behaviors and so you better make sure that those behaviors align with where you want the company to go and with what you say your values are what i did and the mistake i made was that i thought everyone's got to be just like me which is i immediately understand the change i understand why we need to change behavior and just like press the button go and i'm done like i can just immediately change directions and most people don't operate that way and they need coaching and they need time and they need explanation and they need to be sold not told why this change needs to happen and i think in the beginning we made a lot of changes very quickly and didn't give people time to acclimate and it bit us in the butt later on because those changes didn't stick you know it was like batting a 6 out of 10 rather than a 10 out of 10. and that's what happens if you can't get your entire team on board and make sure that you put the right drivers in place to change their behavior right because if you're trying to change behavior you want to change the metrics around what behavior you're driving because a lot of times that means you have to change kpis you gotta change comp plans you gotta have talked to these people and can explain to them why this change is positive and if you don't do that for every single person that touches the change process then you do not have change you have an attempt to change but you don't actually have real organizational change i don't think i understood the magnitude i'd never read anything on change management i'd never understood how to properly inform an organization of change i do think i quickly learned in year two how to do that but it wasn't something that i think i even delegated well until recently when i you know pointed out to a couple of leaders like this is something i think we should focus on as a company and they studied up in themselves and understood like okay this is where i participate in change management and i think in the beginning when you're just getting started you're just thinking i told them that it's different and so it must be different but that's just not the case the last piece in terms of the mistakes i made in my first year was trying to grow through addition rather than improvement and what i mean by that is i think that when you're in that startup mode and when you've just started a business you've got all this raw energy and you're just driving forward with it what you don't have is patience and what you don't have is the ability to incrementally improve a lot of times what you do is you know to start a business it requires a huge change it requires um basically a 360 right you're changing your entire life and so what happens is a lot of times we get used to that kind of level of change and anytime we see a problem we assume that level of change or that level of adjustment is needed for that problem whereas what it actually is is when you start a you know you actually get the business running and you get product market fit is it's a lot of incremental changes from there and small tweaks and improvements and instead what most people do is they overhaul and so i know what we did a lot of times was oh this product isn't 1 000 perfect let's make a new product and it wasn't like let's improve the old product it was just let's make something completely different and new and what that does is over time you just add a ton of complexity to your business and it's very difficult to run that your customers get confused they don't understand what products you have there's too many things in the suite and eventually you come to realize that you could have just slightly changed the pre-existing product um or service that you have rather than start a completely different one and so i think that that's a common mistake amongst people in the first year i think that it was for us because you just you have all of this belief around why you need to make monumental change to improve things and to get things started and then you don't realize that in an instant it changes and you actually just need to make small tweaks in order to move forward and so those are the five mistakes that i would say that i made in my first year that were the biggest those weren't detrimental but if i look at over um the entire year how much money was wasted and how much time was wasted from those mistakes i would say that it was a lot um like i said like just with the lawyer fees alone that's like 1.1 million dollars and so if you can imagine the cost of mistakes like i said the cost of change in any organization is high the cost of mistakes is even higher and so if you can take something from this video don't be biased to yourself we have so much personal bias against why we are the exception to the rule against we why we won't make these mistakes against why we might look like we're making these mistakes right now but we won't because we know better and it's just not the truth and i think that if i were to if i were to say my sixth mistake it's thinking i'm the exception right i think in the beginning you think you're really special you think that you're the exception to the rule you think that you're different than everybody else that you're a special snowflake and you're just not i'm not and so if you operate like i can make all the same mistakes as everybody else then you will probably not make them because you do not believe that you are above the rule and so i would say remember that you're not special everyone is biased and that is just human nature and so if you can put that in the forefront of mind and be more aware of your biases then i think you'll have a much easier time in your first year in business so if you like this video go ahead hit subscribe and i will see you on the next one