OPPORTUNITY COST…How I went from $200k to $30M a year
Summary
- I created a decision-making framework that has earned me between $20 and $30 million annually for the past four years.
- In 2016, although successful in fitness, I realized my work did not align with my values, involving too much vanity and leaving me with no time to enjoy life.
- While making good money as a fitness expert, I had no time for myself and couldn't focus on my true passion: helping people.
- Encountering daily stress and exhaustion, I realized a change was necessary when I found myself crying before work every day.
- An opportunity to start a company called Gym Launch with a man I met on Bumble, Alex, challenged my belief in sticking with things long-term.
- A friend introduced me to the concept of sunk costs vs opportunity costs, sparking the realization that I was overly focused on my past investments in fitness.
- I compared my current position with my new business opportunity, including time and money invested (sunk cost) in fitness against the potential earnings of Gym Launch.
- I concluded that continuing fitness training might net $190k yearly, while Gym Launch presented a potential $2.8 million annual upside.
- The decision to pursue Gym Launch, based on facts and numbers rather than emotions, brought me over $100 million in ROI over five years.
- I learned that you shouldn't let past investments hold you back from new opportunities, and making a well-analyzed decision can change your life's course dramatically.
Video
How To Take Action
I would suggest implementing a decision-making framework that focuses on facts and numbers instead of emotions. Here's how to do it:
- Identify what you're currently investing your time and money in, which is your sunk cost. This could be a job or project that's taking up all your time.
- Consider the opportunity cost, what you might miss out on by sticking to your sunk cost. This could be a new business idea or job opportunity.
- Compare the two paths factually. Write down the time and money you've spent on your sunk cost, and the potential earnings from the new opportunity.
- Look at the numbers to see which option has a higher potential upside. Remember, the past investments shouldn't hold you back.
- Make a decision based on the potential gains of the new opportunity, not the fear of losing what you've already put in.
For example, if you are working a job that pays well, but leaves no time for personal life or passions, and you have an opportunity to start a new business, do the math. Write down how much you're earning now and the time invested. Then, calculate the potential income and time freedom from the business. If the new opportunity offers better long-term benefits, consider making the switch.
This is how you can make well-analyzed decisions that can change the course of your life, without letting emotions or past investments cloud your judgment. Remember, it's all about what the future holds and maximizing your value.
Quotes by Leila Hormozi
"I believe that most humans want to help people inherently"
– Leila Hormozi
"Emotions don't necessarily demand action, but facts do"
– Leila Hormozi
"It's always just looking at the evidence"
– Leila Hormozi
"Paper doesn't lie, your feelings are going to keep you stuck and miserable"
– Leila Hormozi
"The sunk cost is irrelevant; the past does not exist"
– Leila Hormozi
Full Transcript
so today what i want to share with you is the decision making framework that i used um that has paid me between 20 and 30 million dollars every year for the last four years and so what that looks like is figuring out if you need to grid it out or quit it and so let me take you back to when i made this decision um which was definitely the best decision i made my entire life um has continued to pay dividends and that was in 2016. and so bringing me back to that time i had finally achieved a level of success that many would deem to be where they would stay right it's not something that you really try to get past and what that was and what it looked like for me was being really successful at what i did in fitness right and so what i've done is i moved out to california from the small town of michigan i've lived in and i started my own uh essentially career and fitness right so i built up in-person clients online clients i started doing bikini competitions i did really well and i had everything that i thought i really wanted right i think that i set out and the vision for myself i had created was to be really successful in business really successful in fitness and have a great life right i thought that that's what was going to make me happy and here's the thing is that i actually hated it and the reason i hated it was for a couple reasons the first one was that i realized after really taking time and like sitting with myself is that it didn't align with my values right and so i remember being in a gym in california and thinking to myself like this entire career is just image-based right and i had set off wanting to help people lose weight but what i realized that just becomes a lot about vanity right it's not really about health it turns into more vanity-related and though i think that's great and i like looking good it wasn't something that i wanted to do all day every day with all of my time and competing kind of went with that i felt that there are many other ways that are more productive to inspire people and so it just didn't jive with me anymore the second thing is that i was making a lot of money but i had literally no time and so any of you who have been in a job where you have to work to earn more money probably know that once you make the amount of money you want to make you have literally no time so it's like why do i even want more money i have no time to even spend my money if that makes any sense and that was the second reason and then the third reason was that i couldn't even focus on the thing that i was truly passionate about and so i believe that most humans want to help people inherently right and that there's some way shape or form that work is an expression of that and what i realized was that those things were what i were innately i was innately good at right like i was already gifted and helping people and what i wasn't gifted in um was the business side of things right and so inherently all of my attention went to the things i wasn't good at because i was a one-man show and so all my attention was then focused on the business side of my fitness business and not the part that i really enjoyed which was helping people and transforming their lives and so for those three reasons i ended up realizing one day i was sitting in the parking lot and i was supposed to go in and train some sessions and i started crying just out of stress and exhaustion and then i realized that i'd been crying every day for like the last two months i would sit in the parking lot i would cry before work before i went in and i thought to myself that day i was like gosh like i can't keep doing this you know something has to change i know i need to do something differently and so there were a few things going on in my mind of what i could do but i had happened to have just met this man on bumble in my 30-minute lunches that i would just swipe the entire time uh who suggested to me that we go into business together his name was alex and he suggested that we start a company called gym watch and i remember one day i came to his apartment it was probably the second week we were dating and he had already started the llc and it was sitting on his counter and i realized in that moment i was like man i really want to do that like i i feel like i'm not getting where i want to be with where i am right now but i am really scared to take the next step and so what i want to explain to you is how i made that decision and how i broke it down in my mind okay and so i figured like i need to go get some space and so i went with one of my friends who was considered a more successful trainer and he actually was starting his own franchise at the time and so i was like listen i've got this opportunity but who i identify with is somebody who sticks with things long term right i identify with being someone who does the hard work who sticks out with what they say they're going to do who's loyal who doesn't do people wrong and in my mind leaving my clients was doing something wrong he explained to me how he made the decision to start his own franchise rather than continuing down the fitness path and so that's when he explained to me uh sunk cost versus opportunity cost right and this is a concept that many talk about but i don't think many people actually apply it to their decisions and so this is the first piece of the framework is really considering what is the sunk cost right well it's the investment that you have made that you are usually reluctant to drop right so you've made an investment i made an investment of at least three years in hard time to build my client roster right and then probably around ten thousand dollars including like moving costs courses things like that to invest into my education for being an online trainer but the opportunity cost on the other side is what you lose if you stick with the sunk cost right so if i stick with the sunk cost then i literally lose out on this opportunity because of it and so that is why he decided to start a franchise i remember we were on this hike in i think it was la jolla when he was telling me about that and i was like crap i'm totally just focusing on the sunk cost and i'm terrified of the opportunity cost that i could lose by not doing this right but i'm also terrified of sticking with uh of saying goodbye to this thing that i knew to telling all my clients and not working with them to quitting the the part-time in-person training to everything that i was doing right i knew what it meant for my life and it meant that every aspect would have to change including myself and my identity right because that's for so long i prided myself upon being someone who's stuck with doing the hard things and so if you're in a spot right now where you feel like i'm sticking with doing the hard work what i beg you to look at is have you gotten to a point where you have seen the fruits of your labor because that was where i was and i was living out the thing that i had wanted for so long and i realized it didn't actually align with what i what i thought i wanted and i think a lot of people get there and then out of stubbornness and fear they stay there even though it's not aligned with our values and the reason you'll know it's not aligned with your values is that you feel like crap most days right you're not energized you're not excited for work and you're excited to do what you're going to do and so this is the framework that i used to make this decision and so i think that emotions don't necessarily demand action but facts do right and so it's always just looking at the evidence and so i think that's why making a decision based on a framework and numbers is much more helpful than not right than doing the opposite just following our feelings which i don't think is actually productive and so what i did is i wrote this down right i've got my online training opportunity and then i've got gym launch right the sunk cost or what i want to call the investment for the online training was about three years of hard time actually it probably been about 12 years because that's how long i've been doing fitness and fitness working fitness jobs right but it was three years of hard time and maybe ten thousand dollars in costs okay gym launch i hadn't invested nothing into at that point okay opportunity cost or potential of each opportunity right online training you guys can think whatever you think about making six or seven figures a year with an online trainer most people make probably 200k a year uh if you take out all the costs of marketing sales hiring people et cetera right so it's just a really high paying job so on average maybe i could have made two hundred thousand dollars a year there that was what i thought was probable jim launch uh alex mapped out the numbers and it was like okay we can probably make three million dollars a year in our first year right so right there there's a huge discrepancy now if you'll notice i also put the 200k into the investment or sunk cost of gym launch meaning that i essentially lose this opportunity if i take this one so immediately then i say okay online training 10 000 200k potential that means that total net is 190k versus gym launch is zero down but there is the opportunity cost of the 200k i'm not going to make in the online training so then it's three million that it has as an upside potential which then brings you 2.8 million a year and so that is actually how i made the decision um and here's the thing about making these decisions is that everyone looks at it like it's easy to put on paper and i'm like right but paper doesn't lie your feelings are going to keep you stuck and miserable and so most people make decisions based off their feelings and that's why they continue to grit something out especially if you're watching this video you're probably the kind of person if you own a business you're really good at being miserable and being okay with it right you're good at being miserable but in reality most of the time when you're keeping yourself miserable you're also keeping yourself from the next opportunity and so i was lucky enough that this opportunity actually yielded me over in the last five years over 100 million roi and so i would say that it was good that i didn't follow my gut and i actually took the leap based on the math right and so if you're making a decision and you're trying to figure out do i quit my job do i go start a business do i quit my business and start a new business i beg you to put this together right because i think that that's the main reason people don't make the decision is they're so focused on the sunk cost the sun cost is irrelevant the past does not exist right instead we want to focus on the opportunity cost and you want to be able to write it down because when you write it down you get on paper you take all of the emotion out of it so i hope that was useful for you that is the one decision that i made um and it's funny because if you think about it right this one decision changed the entire course of my life and it was hard to make but it didn't take much time and so think about all the time you're spending like gritting out the thing you're doing now if that's how you feel if you just took even a hundredth of that energy and put it towards making one really good decision how much more return you would get on your investment so i hope that was useful for you if it was hit the subscribe button i'll see you on the next one