My biggest mistake when building a 9 figure business…
Summary
- I'm Leila Hormozi, co-CEO of acquisition.com, and my company earns about $85 million per year.
- I've made a significant mistake in my business journey: over-promoting 80% of my leadership at the start of Gym Launch.
- As a first-time business owner, I was inexperienced, highly stressed, and emotionally invested in my business, which clouded my judgment.
- I ignored advice from books about the need to regularly change and demote staff during rapid company growth because I believed we were the exception.
- When our revenue hit $37 million, I felt terrible due to the chaos from an inexperienced leadership team – everyone, including myself, lacked proper experience.
- I rationalized this for about a year and overextended myself by doing parts of everyone's job, delaying necessary actions because of fear and stress.
- The month we earned $4.5 million, I was too exhausted and stressed to enjoy it, which brought to light the need for change in the team structure.
- I had to make hard decisions, which included firing almost the entire leadership team over the course of one year, despite the excellent Glassdoor ratings that I initially valued.
- The process of firing was tough on me personally and on our company culture, and it took about 18 months to recover from the fear and uncertainty this created within the team.
- Three key lessons followed this experience:
- Accept the reality that not everyone grows with the business. Sometimes, you must let people go to scale effectively.
- Develop a transparent strategy for hiring, paying, promoting, and demoting staff before you need it.
- The way you handle firing affects company culture, and it's best to be as transparent and fair as possible.
- Lastly, I learned that dwelling on past mistakes cripples progress. Instead, use those mistakes as a learning experience to improve future decisions and help others avoid similar pitfalls.
- Everyone makes errors; what's vital is how you use them to prevent similar issues in the future and to move beyond self-criticism to productive action.
- Growing a business requires accepting the potential for, and reality of, big mistakes. That's the cost of aiming for significant successes.
Video
How To Take Action
A good way of doing things is to learn from mistakes. So, first, I would suggest not rushing to promote leaders in your business just because they've been around for a while. Take time to see if they have the skills for bigger roles.
If you run a business, you have to be ready to make tough decisions, like letting people go. To do this, you need to have a plan. Before you even hire someone, figure out how you'll promote, pay, and maybe even demote them. This keeps everyone clear on what to expect.
Here's what you should do:
- Understand not everyone will grow with your business. If someone can't keep up, it's kinder to let them find a place where they can succeed.
- Create clear rules for hiring, promoting, and firing. Share these rules with your team, so no one is surprised later on.
- When you have to fire someone, do it in a way that's honest and fair. This helps keep trust in your team.
- Don't dwell on past mistakes. Use them to get better and help others not make the same ones. And if you need to fire someone, it's better to do it now than wait and make things harder.
Remember, it's okay to hire people with experience even if they're not part of your original team. They can help teach others and bring new ideas.
Building a business is hard, and mistakes will happen. But use them to learn and keep going forward. That's the way to grow and do better.
Quotes by Leila Hormozi
"If you want to make a million dollars, you've got to be willing to lose 100 grand"
– Leila Hormozi
"To make a hundred thousand dollar mistake if you want to make 10 million dollars, you've got to be willing to make a million dollar mistake"
– Leila Hormozi
"And if you want to be willing to make a hundred million dollars, you've got to be willing to make a 10 million mistake"
– Leila Hormozi
"You have to admit the realities if you want to grow fast and if you want to scale fast, you have to do things that suck"
– Leila Hormozi
"You can either use that mistake to fuel your future success or you can use it the reason to not have any future success"
– Leila Hormozi
Full Transcript
my name is leila hormozy i'm co-ceo of acquisition.com which is a portfolio business that does about 85 million per year in revenue and my goal with this channel is to help you get from where you are to between 3 to 10 million in revenue for free and so that being said what i want to talk about today is a question i got asked multiple times last week which was what is the biggest mistake you've made in business and i'm sure that this is appealing because anyone who's uh i think as you're building a business it's encouraging to hear how many mistakes other people make and a lot of people don't want to talk about it and so i wanted to kind of extrapolate out and tell the story of what i believe the biggest mistake i ever made in my business career was and it's probably why i'm so passionate about helping people figure out how to hire the right team how to properly fire people or put them on performance plans it's probably why i'm so hr focused um because i would say that i'm like a really hr customer success focus ceo those are the two areas that i really pay the most attention to probably because i think that they're the most important but that being said i want to talk about what my biggest mistake was and so that mistake is over promoting about 80 of my leadership team in the beginning of our first company gym launch and i had you know at that point in time i was really inexperienced i literally listen guys i'd never run a company before i'd never managed people before i'd never done anything before and i was so stressed all the time i was so nervous like every step of the way even it was super successful people like oh my god congratulations i was like what do you mean it feels terrible you know like i didn't i didn't even understand and i would read all these books that said when your company's growing really quickly it's really normal to have to turn people over all the time but i honestly it was like having that business was like the first i want to say the first thing in my life that gave me like such an immense sense of purpose like it really did and i do believe you get to choose what gives you purpose that was the it was like i had finally found something big enough to really like dig my teeth into right to like sink myself into and i was really emotionally wrapped up in it and because of that you know i read all these books that said you know be careful about overwhelming people be careful about you know promoting people too soon how you pay people and i kind of just told myself oh our team's different you know this is different we're the exception and i kind of ignored it and so we ended up the year that we did i think it was like 37 million it felt terrible and it was like the year up to that just felt like absolute chaos all the time and the reason that there was absolute chaos is because of this alex and i were first-time founders of any sizable company and then we promoted all these people who had no experience either and so the entire company was being run off people who had no idea what they were doing and it started with us it's like i had no idea that these people were that incapable and it's not their fault it was mine basically what happened was you know i think that it was about a year that i ignored it i kept trying to rationalize i kept trying to train i kept trying to like i overextended myself to do part of everybody's job for one i felt like i was literally doing 10 to 20 of every person's job and then also just kind of like having this in the back of my mind like i read all these books that say you have to you know demote people and the people that started people that finished and i was just like freaked out about it and i just kind of ignored it until one day um it just kind of piled up which was it was actually the month that we did the most money we made like 4.5 million dollars which is the most we've made at that point in time in a month that's not like from launches and that's recurring revenue and we hit it and i remember thinking god we were broke as three years ago this is insane and the next thought that came into my mind was like and i'm like not even enjoying it right like i'm like so stressed and so overextended that i can't even enjoy this partially because i'm out of integrity with myself because i know what i need to do and i'm not doing it and partially because i'm so overextended that i'm exhausted all the time like i could barely keep my eyes open by seven o'clock every day and that was mostly from the mental going on in my head because i was so stressed because i knew i needed to do something i wasn't doing it and so that being said you know i had like a hard look in the mirror and you know i told alex i was like god i just want to end it all like i don't know what to do like it just feels terrible and he was like lilo he's like this is business and i was like okay i set it in like a moment of heat like i don't actually want to edit it all i need to fix this and i talked to a couple friends and a couple of mentors and they were like dude you know what you need to do and i was like like i knew what i needed to do and i was like i don't want to do this i prided myself so much on being a great company being a place where people want to work and like that like our glass door rating was like how i measured my own self-worth as a ceo almost because we were at like i think we had 4.9 i think it had been five it was like 4.9 at that time and i was like i'm so like i know what i need to do and i need to turn over 10 directors and the thing is is that everyone's like oh you know if they're not the right fit i'll just demote them and i'm like good luck i have one person that i demoted that they actually stuck because he's a you know a fantastic human and really humble but most people never want to take a demotion and they won't it's like i up so now you get to get paid less and you get to get less of a title not many people take that well you know the biggest mistake i really made was just not taking action sooner and so over the course of that year in 2018 i fired everybody and it was one at a time and it was me doing it and i was like it's my fault but i own the company so i don't get to fire myself but i promise you i feel like and that was pretty much how it went and i did it over the course of a year i could sit here and tell you how terrible it was because it sucked it really did it sucked really bad and i felt really shitty that entire year but i would rather tell you what i learned from that and why i'm so passionate about what i've learned and why i'm so i treat business so differently now because of that experience the first thing i learned is that you have to accept the reality of your business a lot of people want to grow very quickly and they want to scale their business to numbers that are unheard of right they want to do what hasn't been done before and they want to achieve their dreams and the price of doing so is also experiencing more pain than most other people will and the reason for that is because as much as you can try and as hard as you can try it is very hard to take everyone with you you can tell them that it's unlikely that they're all gonna be with you you can train them as much as you can there are some people it's just like once they hit that level of competence or incompetence it's just like banging your head against the wall and i think that i thought that because i have a background in studying a lot of human behavior and psychology and helping people transform their lives through weight loss plus then understanding business i was like i'm gonna be able to be the one that can help everyone change and that just wasn't the case you know i remember listening to reid hoffman talk about how you know most people have a tenure in a fast growing company it's like it's only one to two years because then they need to get somebody who's ready for years three to four and can scale a business to 50 million and the person who takes it to 10 million isn't the same person and i remember listening to it and thinking like i'll beat those odds all you know i'll get my team to to get on the same page with me and you know unfortunately because i had that belief i waited too long to make changes and i over promoted people and i made mistakes that if i had accepted that reality i could have just told them and been up front and been like hey you're just not the person for this job i'm gonna find somebody else rather than wishing and hoping and betting on their potential and then disappointing them in any way in the long run and so that was the first thing is like you have to admit the realities if you want to grow fast and if you want to scale fast you have to do things that suck you have to fire people you have to tell people they're not good enough you have to bring in people who are experienced you can't all not know what the you're doing and that's why i'm so passionate about that like with our portfolio companies one of the main things i see is that they have 100 people on their teams that have never done it before never been there never done that and i'm like we have to get at least 20 of people in here who have been there done that because what most people do in the beginning like me is you like i call it like taking in straight dogs it's like someone's like i got a friend who quit their job and wants to work here you're like sure take them come on come join join the party right like we don't need experience here like if you have the culture and the values like screw it whatever and it becomes this like hodgepodge of people who all are really excited about the opportunity and excited about the company and they have no skills and nobody to teach them the skills and so if you want the fast growth you have to balance it with people who have been there done that and that's the first lesson i learned now the second lesson i learned is that i it is so much better to build a company just like you have a strategy for how you're going to acquire customers you should have a strategy for how you pay and promote and demote people in your company and you shouldn't start it after you start hiring people you need to start it before and so i can tell you now you know we started acquisition.com i have all that done ahead of time like i have my pay philosophy i have how we're going to promote i have all those things already ironed out and i can upfront tell people when they apply for the job i didn't have that when we started our first company and so when people are like well i want to raise i'm like oh should i give them a raise should i knock them i don't know and then when these people were like i would like to be promoted to do this next job that you say is needed i'm like uh do they deserve the promotion yeah i think maybe they should have the promotion okay i'll give them a try right and if they suck i'll demote them and yeah that's not as easy said it's done and so there was just no system around it and that was the second thing i took away is like you have to have a strategy that is transparent that you can tell people about like here's how we promote here's how we demo here's how we give raises here's how we pay and so if they don't like that they can just not take the job at your company but at least if you tell people from the forefront then when they come in they know what to expect and so it's really understanding and developing a strategy around how you pay people how you promote people how you hold the standards and that is something now that you know again every time we take on a company or start working with one that's one of the things that i'm quick to try and get in place and push on them because i just know how important it is because what happened to me was like i had no strategy and so you know there's say there's two roles there would be a head of sales and then there'd be a head of finance and you know typically you know say the head of finance is paid 130 grand a year and typically the head of sales is paid say base you know 120 grand per year because he's more variable but because there was a strategy the finance person ends up at you know 150 and the sales guys at 70 was huge variable and then them looking at each other they're like why is he paid that why is she paid that and they don't understand their peers pay and so one thing that i like to say and that i learned from my experience is like pay everyone like you knew everyone else knew everyone's pay they should all understand the system if you can't be transparent about what you pay somebody it's probably because you don't have a methodology behind it to support why you paid the person asking and so that was the second thing i learned is having those systems as boring as they are they're really simple to put in place and to decide upon it'll only take you probably a week to figure it out and so having a pay philosophy and having those standards set and sharing them with the team ahead of time and then the third thing is that firing a lot of staff really with your company culture and again i how i've always chose to handle firing people has been as transparent as possible so you know one thing that i did during that time was like when i flipped that many directors um and dug into their teams and flipped people on their teams i tried to batch it all in like once like it was like cut once cut deep but it just sucked and so i tried to do it all in one day and then tell everyone after and explain why and explain that you know the mistakes that i made that led us to that point but i have to say even if you can be super transparent and even if you tell the absolute truth if you up that bad like i did and you like there's that many people that you know you were behind on firing like i had to basically let go of most of all leadership aside from two people you know the team's in fear and so i don't think that i realize how long that was going to last i want to say i mean i was talking about the day i think it lasted like 18 months it was like 18 months where it was like am i on the chopping block it's like oh i'm one of the survivors and i was like oh my god this is terrible and i felt like every time i was talking to the team i felt like they were scared of me more than anything and i was like i'm not a scary person i was like but i did something stupid so it's like i'm not scary i am unpredictable because they didn't understand right and i tried to educate the team through the process i was like guys i up you know we just didn't know but it was really hard to recover from and like i said i think it took a solid 18 months i can say now the culture is fantastic but it took 18 months to get there from recovering and i wish that i had just bitten the bullets as they came rather than let it all build up to like this big thing that seems like that's so contrary to what we've been doing and it's like no i just have been putting this off and so that was the third thing i learned and then here's the last thing i learned from making that huge mistake is i let that mistake beat me down for months and for months i didn't want to show up in front of the team i did but i wasn't confident i didn't want to impose change on the team because i felt terrible and i felt bad about how much change had occurred i didn't want to show up in content or anywhere public because i felt like i was out of alignment with what i believed was right and i let it take a huge toll on my self-worth because i had tied so much of that self-worth with being somebody who doesn't fire people with being someone who isn't that naive with being someone who doesn't make such bad decisions and after about six to eight months of just beating the out of myself mentally i was talking to my friend one day and she was like how's that working for you i was like what do you mean she's like you just keep beating yourself up for this i was like yeah because it was a huge mistake and i shouldn't have made it like i i knew better and she was like yeah but that's super unproductive and i remember just the moment she said it i realized she's totally right that's so selfish i've been spending all this time telling myself how i suck i'm a terrible ceo i'm this i'm that rather than thinking like what can i do to prevent them from next time how can i educate other people not to do this how could i tell my team so they don't make mistakes like this and i could have been using all that negative energy to productively create a better future but instead i just indulged in my own self-hatred and so i think a lot of times like if you're watching this video because you're thinking about the mistakes that you've made indulging in that mistake is why you're not able to move forward indulging that mistake hating yourself beating yourself up is what makes it so painful it's not the event itself the event is whatever you tell yourself it is it's you beating yourself up every day day after day and telling yourself you're not all these things you thought you were and so i think that's the number one thing is like you can either use that mistake to fuel your future success or you can use it the reason to not have any future success i think that's just the difference between like a winner and a loser like winners use that mistake as fuel to be better for the future whereas losers use that mistake as a reason not to succeed and that's my biggest takeaway is that after you know i think being in a funk for that amount of time i just realized i don't want to be that kind of person and that's not a good example for my team and i know that you could ask my team and they would say layla showed up great every day but it was how i felt inside like i felt like an imposter i felt like i didn't deserve to have this team i felt like i wasn't the right person to run the company and i was never any of those things it was just me telling myself that i wasn't because here's the reality of running and scaling a business if you want to make a million dollars you've got to be willing to lose 100 grand and to make a hundred thousand dollar mistake if you want to make 10 million dollars you've got to be willing to make a million dollar mistake and if you want to be willing to make a hundred million dollars you've got to be willing to make a 10 million mistake and that is the reality of business and so that is the biggest mistake that i have ever made i hope that one that can help you if you're growing your business right now and you're thinking i have people i know i need to fire or like you're right i have nobody experienced on my team like i freaking beg of you to get people who know what the is going on it's not going to help your business not to keep them or not to have those people that you know you need and if you're gonna do it one day you might as well do it today and i wish i had had someone tell me that and tell me how much more painful it would be if i weighed it because it absolutely was and so that being said i hope you have a great rest of your week day month bike ride bath shower whatever it may be and i hope this was abused to you i'll see you on the next one