Your Business Is NOT What You Think It Is

Summary

• Most businesses are stuck because they're working on the wrong things.

• What got you to a certain level won't get you to the next; you have to solve harder problems.

• In the gym business, I realized it's about sales and marketing, not just fitness and results.

• Low-cost gyms still have high churn rates, proving marketing's importance over pricing.

• My supplement business taught me that it's about brand, media, and distribution, not just the product.

• When I started my software company, I learned that the product must deliver on promises, not just marketing and sales.

• Outsourcing development can be risky without technical proficiency on your team.

• Businesses like cleaning aren't about marketing and sales but about recruiting reliable talent.

• In consulting, law, or professional services, it's all about recruiting, training, and retaining top talent.

• Investing has taught me to say no more often and focus on fewer high-impact deals for better returns.

• Talk to people in a new market to learn the real hard parts of their business.

• Analyze if the foundational assumptions of your business are true before deciding to push or pivot.

• For Consumer Packaged Goods, focus on how many people repurchase the product.

• If something works easily and makes money, go hard on it; if it’s hard and unprofitable, go easy.

• Real estate development is scalable; property development can be scaled by adding more resources.

• Businesses can reach a billion dollars with the right time and effort.

• Focus on solving big, hairy problems and stick with it, rather than getting distracted by easier, seemingly better opportunities.

• Evaluate business problems from a first principles perspective to decide if you should push or pivot.

• Be wary of recurring pitfalls like jumping from one business to the next instead of solving deeper issues in your current one.

• Embrace trial and error as a necessary part of business growth and learning.

Video

How To Take Action

I would suggest starting by really understanding the business you are in. Many businesses get stuck because they focus on the wrong things. So, first, identify the core problem you're solving and make sure it's the right one.

Low-cost, high-value steps you can take:

1. Analyze Your Current Focus:

   • Look at your business and ask, “What’s the real problem I’m solving?” Make sure it’s aligned with what drives revenue. For instance, in a gym business, it might be more about sales and marketing than fitness results.

2. Talk to Experts:

   • If you’re considering entering a new market, talk to people already in that market. Ask them about the hardest parts of their business to get a realistic picture.

3. Simplify and Specialize:

• Take a good look at your processes and strip them down to the basics. For example, if you are running a cleaning service, focus on recruiting and retaining reliable talent instead of expending resources on marketing strategies.

4. Evaluate Foundational Assumptions:

   • Before deciding to push or pivot, ensure your business assumptions are correct. If something’s not working, validate if the core assumption is true.

5. Capitalize on Low-Hanging Fruit:

   • If something you’re doing is working well and making money easily, then push hard on it. For example, if a particular marketing strategy is effective, double down on it.

6. Embrace and Learn from Trial and Error:

• Don’t be afraid to try new strategies and learn from the failures. Each failure is a step toward understanding what works.

7. Recruiting and Training:
   • For businesses that rely on talent (like consulting or cleaning services), focus heavily on recruiting, training, and retaining top talent. Develop a solid training program to ensure consistency and quality.

Key Lessons:

• Remember, what got you to your current level won’t get you to the next. You need to solve harder problems to grow.
• Don’t get blindsided by seemingly better opportunities. The biggest opportunity is likely the one you're already facing.
• Ensure your product or service delivers on its promises effectively. Otherwise, even the best marketing won’t save it.

By focusing on these core areas and implementing these low-cost, high-value strategies, you can move toward sustained growth and success.

Quotes by Alex Hormozi

"The vast majority of businesses are stuck because they're working on the wrong stuff"

– Alex Hormozi

"The biggest opportunity is the one that's in front of you"

– Alex Hormozi

"What got you from 0 to a million or 1 to 10 million isn't what's going to get you from 10 to 30"

– Alex Hormozi

"Every business has a big hairy problem"

– Alex Hormozi

"There's a much harder problem in front of you that you have to confront"

– Alex Hormozi

Full Transcript

the vast majority of businesses are stuck because they're working on the wrong stuff the entrepreneur likes doing a certain thing they keep doing a certain thing but will got you from Z to a million or 1 to 10 million isn't what's going to get you from 10 to 30 there's a much harder problem that's in front of you that you have to confront rather than Sid stepping and getting distracted and looking at things that look like they're going to be better opportunities with the skills you have the biggest opportunity is the one that's in front of you and I want to share exactly how I think through what hard stuff do I push through and what hard stuff do I pivot through and being able to accurately identify what the real problem in your business is and it's usually not the one you think it is in the very beginning when I got in the gym business I thought the gym business was about results I thought it was about results and I thought it was about like killer killer workouts and it was really about neither of those things um the gym business is actually about sales and marketing and so I got into it because I was like I'm passionate about Fitness I'm passionate about getting people results but what what actually drove the business economics was sales and marketing the big problem is that with gyms as you might imagine a lot of people don't actually like going to the gym like it has inherent difficulties the good news in the gym business is that everybody wants to get in better shape and so you have this massive Market but people tend to turn out of gyms even the very lowcost gyms like a lot of people have this misbelief that they think like oh well Planet Fitness or Crunch Fitness is 10 bucks a month so of course no one cancels but they actually have five or 6% monthly churn they just have a ton of people who sign up every month as well and so the key that I didn't know is that the the businesses that are the biggest in the fitness space and this is when I got into it was they're actually just Marketing sales machines they know how to train sales they know how to recruit for sales they know how to Market on a number of different channels to get customers in the door and so once I learned that I started growing my gyms and I was started realizing that was the business I was really in then later on I got into uh prestig Labs which is my supplement business and I thought that I was in the product business so I thought it was going to be about all the ingredients that I was using I thought it was going to be about like how efficacious in all the studies that we could prove and so I got Dr cashy who's a genius biochemist got his PhD when he was 20 years old in Biochemistry which is absolutely absurd and I got him and he was you know he he did all the stacks for the Olympic teams and things like that and I was like okay I'm going to have the best smartest person in the world make the absolute most efficacious product with the best ingredients but that wasn't actually the business I was in in in in in the subon business it's about brand media and distribution like that's actually the business you're in and especially if you have products that don't have a flavoring so if you have capsules of any sort uh then it really is just about brand and distribution now if you have a product that is like a uh like an ag1 right now people buy ag1 because obviously they're exceptional at media they're great at traffic they're really just traffic machines but people keep buying it because it tastes good right and so like they think it's like oh I'm going to it's because of all these all these little ingredients in there but like you don't feel healthy right like you don't know if your levels of whatever are changing you just know if it tastes good and if you create a habit around it and so again in that business it took me too long to realize that I was actually not in the product business again I was in the median distribution business then when I got into Allen which was my software company I thought that I was like okay I've learned my lesson this is all about marketing and sales like this is software I get it I've learned my lesson and then as soon as I got in the software business I knew I could sell everybody the software the problem was I had to actually make a better product because with tech especially it fundamentally automates some element of of work right that's what software does is it automates something so if something can be done precisely and done accurately and done quickly and with software ideally it's done cheaply or cheaper than people because that's how Tech Works in general then that's an easy thing to sell who doesn't want good fast cheaper better everybody does and so it's very easy at least in my experience it was very easy to sell software if you have a good product Market fit in terms of what you're trying to sell the problem was that my product wasn't good enough to deliver on the promise and so I got into it and was like okay cool I'll just hire an Outsource development team and they'll just build me whatever hour is they'll get the product done and then I'll market and sell it and sure we sold a ton I mean we went to 1.7 million a month in uh in six months in terms of in terms of uh run rate um and that was per month 1.7 million and so the thing is we were able to sell the crap out of it but I then quickly realized that uh the product just couldn't deliver and then I was like oh shoot I have this outsourced team that owns the product and that's not their core business because they're really just a shop that sells to anybody and their incentive is to just build me as much as humanely possible buy the the way if you run Revenue through any kind of software as soon as the development shop sees how much money you're making guess what happens to your fees they go up and unless you have someone who can check them and knows how to code or knows how to at least QA them you're you're screwed you're hammered and so I had no technical proficiency myself I had nobody on my internal team that was like a W2 employee or at least an equity employ anybody who actually knew code and so I was absolutely at their mercy and it sucked and so in that business in the software business you think you might be getting in the Marketing sales business but you're really becoming into the product business because if you if you fundamentally can make that promise which is good or faster cheaper uh then people are going to buy right but you have to make sure that you can fulfill that promise and so I learned that lesson too late we ended up selling it to a um a strategic buyer who could incorporate it into their big development team he was like I can rewrite the code you already have a big customer base and um we did an all stock deal now I'll tell you a story that that kind of made me think about this was the first thing that actually got me into this thinking process of what business are you really in and so um one of our gym owners from way back when when we had gym launch um was a successful gym owner and he started making money with his gyms and so he started buying airbnbs and so that was kind of like his investment strategy he start bu buying airbnbs in his local area and what ended up happening was he was like you know what I can drive margins up by just cleaning the houses myself instead of Outsourcing the cleaning and so because you if you have an Airbnb especially daily rentals like the cleaning is actually a pretty big part of of the business and so he started hiring his own cleaning staff and doing the cleaning but uh he was like wow you know what this cleaning business I could start cleaning for other airbnbs right and so he starts cleaning for other airbnbs and he's like okay this is actually a business and so he used all the stuff he knew for running his gym which he knew how to Market and sell because that's the real business you're in when you're in the gym business and so he starts marketing selling and we I had dinner with him um probably a year into the business and he was like and so I said okay give me LTV me give me CAC like how's it work he's like oh uh LTV is insane people never cancel and CAC is like $6 and I was like oh my God like why are you not making gazillions of dollars he's like you know the issue is actually Talent it's actually getting people who clean houses who show up on time and do a good job and don't steal and speak English and communicate with customers he's like that's actually the issue and it was right in that moment I was like oh this business isn't like the other business he was in this wasn't this isn't a gym business even though it's a local business even though it's service if you're in the cleaning business you're not in the marketing and sales business because selling someone on let me clean your house and do this stuff for you not that hard right and getting people to opt in for cleaning ads not that difficult selling them not that hard the hard part is actually delivering on it and getting people who want to do it on a regular basis a lot so I'll give you an example on the counter side for gyms getting Talent getting trainers getting people who are Fitness enthusiasts who want to train other people people do it for free like people like working out people well I'll say people who like working out like working out just put it that way like there are obviously people who hate working out but there are people who are Fitness enthusiasts now I have not seen a cleaning Enthusiast there's not this under you know this this underworld of all these people are like man I I'm just a cleaning Enthusiast I mean there are maybe some people but the vast majority of people see as a chore right and so getting talent for gyms is not hard getting talent for cleaning much harder and so once we we started walking through this I was like oh you're in the recruiting and training business and I just saw his his whole eyes changed I was like okay think about it like this you know how to acquire customers you have to Market you generate leads you work the leads you have a you have a sales call and then you onboard them and then you retain them and you send them I was like we need to flip that and so you need to think about what is my acquisition for talent how do I generate leads and applications for talent instead of sales how do I interview instead of uh instead of onboarding customers how do I onboard a new employee and how do I train them so that they can be proficient so that I can then manage or Ascend them up inside of the organization and so as soon as he flipped that he took the business from I think it was like $30 or $40,000 a month to over $150,000 a month within the next 12 months and it was just that idea of oh this is the big hairy problem I have to solve and so every business has a big hairy problem and and this has just been my own experiences that because I'm probably just a nan or an idiot I only learn about it once I get into it and so as a recommendation if you are going to enter into a new Marketplace talk to people who are in it and ask them what the hardest part of their business is and so I'll give you give you two more examples of this and and then I'll I'll transition to kind of why I think this is important overall so a lot of people uh who follow me just because they're in the consulting or the coaching or the information the education space because I talk about that stuff a lot now the thing is is if you're in that space what business do you think you're in now you have to learn how to Market and sell that's any business right but if you want to make it big look at the biggest consulting firms Professional Service businesses in the world what are they you look at McKenzie you look at Bane you look at eron young KPMG you look at the biggest firms accounting look at law look at Consulting what are what are they they're recruiting machines and it's because they know how to attract Talent train talent and make people more Val and they get the best and brightest people and so the reason that people can't quote scale in these information coaching Etc businesses is because they have one talented person which is the guru and then they hire a bunch of minions or people who are not even close to as good as that person and then over time what happens is it dilutes the level of service and it's a service-based business and so people are like man this thing sucks or this guy sucks or this business sucks but McKenzie Bane BCG ey those are built on the principle of how do we continue to raise the bar how do we get better brighter smarter people and how do we train them better than anyone else in a faster way so we can get better Returns on human capital as in the people themselves how do we get better Returns on the humans and so that's the fundamental Arbitrage if you're in a service based business where you spell sell expertise is the return on the Arbitrage between what you pay somebody and what you can charge for that person's expertise now the difficulty in that business is that when you train someone and they become really exceptionable they become really smart what do they have they have opportunities to leave they can take those clients with them and so there's a reason that most of these Professional Service firms at scale become Partnerships they become llps so you have I become a partner at McKenzie I become a partner at the law firm I become a partner at the accounting firm because if you have a ton of very very smart motivated people they eventually will leave to start their own business or you have to show them a path where they can become an owner within the business they're in and this is just playing it out and so this is why I bring this up because a lot of people don't know what it looks like at scale like you have to bring in very intelligent people and have a system or incentive process that gives them uh a taste in the long run so that the opportunity or the risk adjusted return of them leaving versus them staying it still makes more sense for them to stay or at least for a good portion of them to stay now I'll give you one more example and then and I'll flip to why I think this is important in terms of identifying this for your own business so investing I thought it was about doing lots of deals at good prices and to some degree it is but in reality at least in my experience it's been way more about learning how to say no at a much higher velocity um to a much higher number of deals because you only need one Facebook and so it's kind of this counterintuitive thing where you have power law that starts really really uh leveling out so like we did 22 deals over the last two and a half years and four of those deals are the ones that are 90% of the returns that we have and there's so many the deals that we did where I'm like man that was it's lit truly just a complete waste of my time like waste of money waste of time because I can get so much more taking the the the largeest company of the portfolio is about $100 million a year if I can get that that going from 100 to 150 million is actually the same level of work sometimes easier than going from Z to 1 million or 1 to 10 million like and it's it's 50 million in absolute and you also get a premium on the eida meaning the the the take-home I'll say that in quotes for the business is that it's the reverse of of uh of of buying where you get economies of scale where you you lower the price when you get bigger with with businesses you get a you get a scale premium you get paid more for the profit that you get when the profit isn't absolutely bigger and so you get more more it's easier to grow than bigger and you get more for the growth you get and so this is where like getting more for the effort that you put in becomes really important and I didn't know that when I got into the business and so for each of these businesses I've had these big learning cores where it's like okay this is what I think that businesses is about and then you get into it and you're like oh this is what the business is really about this is the big hairy problem that I really have to solve and so the thing is is that at least I had the day yesterday um where I talked to these business owners and it became clear for a handful of them that they were plateaued because they actually didn't know what business they were in they were kind of like that gym owner who got into the cleaning he was like man this is this is tough because he kept looking at marketing and sales being like what am I what do I need to do differently here when the reality was the constraint of the business was actually a different big hairy problem and the good news for us as entrepreneurs is that we get paid to solve that problem we get paid very well to solve that problem and so what's interesting is that a lot of entrepreneurs will restart the cycle over and over and over again because they say so using that cleaning gym owner example he might say okay now if we hadn't had that conversation he might start yet another business where he can market and sell because he learned how to solve those problems so he knows how to beat the level one and the level two boss but as soon as he coms the level three boss which is a completely different skill set they needed to have he just stops and starts another opportunity and so this is what is so deceptive about the woman in the red dress is that the when I say if you're new to my stuff the woman in the red dress is the is the distraction it's the shiny object it's the it's the opportunity that looks more appealing with the current skill set you have you said it's that she she Whispers to you and she says listen you're marketing and selling over there if you just had the same skill set with me it'd be better it'd be so much better but it's it's false because what she doesn't tell you is that she's absolutely crazy in all these other ways that you didn't know about and then when you get in bed whether you're like oh my God she has six personalities I this is crazy right and so the thing is is that um that is what most opportunities look like you have uninformed optimism because you think this is the business that you're getting into and then you get into bed with that business and you realize this is the real business she actually has a baby daddy and she's got a kid she didn't tell you about and you're like oh I did not sign up for this but now you got a host of problems you got to solve and you got to decide whether they're the types of problems you want to solve and so um this is why so many entrepreneurs start and keep starting businesses and starting over and they get to the same size and then they just move move over to another woman in the red dress who promises a different outcome with the same skills they have and they get to the same level they get the same level of Revenue because they don't know how to break past it because they don't know the actual business they're in hey and if you're wondering where do I get these stories or like how could I be one of the businesses that's in the room getting kind of this like more personalized attention we just started a new division at acquisition. comom uh for workshops for business owners that are over a certain amount and so if you want to see if you qualify you go to acquisition. comom click through the steps and uh maybe we'll see you in Vegas and so they keep beating the same bosses because they're comfortable there and so what happens is in the beginning you don't make any money you learn how to beat one boss you start making money and you're like oh let me see if I can beat that boss over and over again at the in different businesses and that's how I'm going to grow but it's not that you have to beat a new boss every time and the hard work is figuring out the hairier the the hairy problem in front of you and it's usually the thing that we don't want to confront because sometimes it makes us feel bad about ourselves sometimes we're like well maybe my product just isn't that good oh wow I have to learn coding oh I have to bring technical talent in well I've never done that before well guess what that's how it that's what you got to do if you want to make this thing go big and so what's interesting about this and this is my like kind of like word of encouragement for for whatever business you're in is that the reality is that almost any business can be taken to a billion dollars with a long enough time Horizon this is truth almost any business can get to a billion dollars in terms of value with a long enough time Horizon so you're in the roofing space you can get to a billion dollar roofing company you have a restaurant there's a version of a restaurant business that is a billion dollars it's not a single location but it could either be a franchise of business or you could you could have privately held I mean there's there's a bunch of you know big high-end change you look at mastas you look at some of these companies they're several hundred million dollar companies and so you look at dry cleaning like you look at Zips like it's a massive you know uh uh at least domestic in the US um chain of dry cleaning things so like there are versions of every business that make hundreds of Millions worth billions of dollars it's just that it takes a very long time to get there and you have to beat new bosses at every level and what happens is most people get distracted because they don't know the business they're in they encounter a problem they think it's the opportunity vehicle they think they need to switch women they think they need to go after the the red dress but the reality is that like you just have to have that hard conversation with your wife or your girlfriend or whoever you're with right now to see if we can get to the next level and so if you solve the right problems and this is how I think about this I imagine that I've got this big concrete wall in front this is my imagery for myself that gets me through this because it is it sucks right you have these these moments where you're like okay I just realized that I'm now in the recruiting and training business for cleaning and I'm not equipped for this this is not what I this is not what I signed up for I didn't know she had a kid I didn't know that she has a baby daddy that's in jail and he comes he's coming out in six weeks I didn't know these things were there now using that example you might just dip but let's let's imagine a world where you had to stick with it right and so I imagine that I've got this big Harry Pot this big wall of concrete in front of me but what I do is and I had this convers ation with one of our portfolio CEOs I was like hey we have to build this new product line out and he was like I don't know how to do that and I was like well here's the good news once we do it I was like it'll increase the Enterprise value of this business by $200 million and I was like is that worth it and he was like well when you say it like that he's like I mean I definitely feel a lot more encouraged to solve the problem I was like right now I don't think it's 200 million hard I was like this might be 10 million hard but that's a great trade if if this is 10 million hard to get 200 million in Enterprise Value that's a steal and so I try to think like that is like okay I've got this big concrete wall in front of me and the thing is is that when you've got a you got a sledgehammer and you just don't know how thick the wall is and so it's like how many times I'm going to have to keep Hammer I know that there's 200 million on the other side I just don't know how far I got to go and I think that's one of the difficulties in entrepreneurship is the uncertainty that's attached to the level and duration and intensity of the amount of work that you have to persist and continue to do without seeing the light at the end of the tunnel without having a crack in the wall that you see a little nugget a little Shimmer of gold a little diamond that starts to peek through the corner like you have to keep swinging at the wall and so I I think about this as as making sure that I'm simply making progress and so there are I didn't think I was going to get into this but I'm going to go into it so there's two very different types of hard in business and there's the good kind of hard and there's the bad kind of hard so the good kind of hard as I see it is that you have you have underlying assumptions that you believe to be true from a first principal's level so I'll give you an example so let's say I want to get I want to start running uh Tik Tok ads for one of our companies we don't have Tik Tok ads going uh in that particular business and we think that fundamentally so this is the principal perspective are there let's say accountants on Tik Tok yes I think there are accountants on Tik Tok okay is there a way that we can run ads profitably and get our messaging in front of those people on Tik Tok if the answer is yes then I fundamentally believe that there's a profitable way that we can turn those eyeballs into customers period now if we start running ads on Tik Tok and then we don't immediately Roi that's the good kind of hard that's the okay well let's start at the beginning how did we get did we get enough clicks okay yes we got clicks all right do we get optins yes we got optins okay of the optins that we got are they the right type of people yes they're the right type of people or no they're not the right type people okay well then maybe we need to change the messaging maybe we need to change the targeting maybe we change the lead mag but these are the iterative types of heart this in my opinion is a good type of heart I don't see me losing money on the ads as quote losing money I see that as me investing in something that's going to increase the Enterprise value of my company because I'm going to get another acquisition Channel I'm going to diversify how I get customers to me that's a great return it's actually one of those underutilized ways of thinking about this it's like okay if I have a company that has one way of getting customers and I can get a second way of getting customers and I diversify risk in terms of my client acquisition that meaningfully increases the Enterprise Value even if I had no additional EB even if I had no more profit from doing this now obviously if you have another acquisition Channel and you get 50% of your business from that channel then it means you've double the business as long as you don't lose the first acquisition Channel and and so by doing that I get two multipliers on Enterprise Value one is I absolutely make twice as much money which is great but I also decrease the risk associated with the purchase for an acquirer which means that I will also make more money on the exit and so wow okay well if I do this again what's the price tag that I get to ascribe to this problem well if I can double let's say the E of the business is 2 million bucks and it's trading at 5x okay fine so this is a$ million doll business if I can add two and I diversify acquisition streams then that might add minimum 10 million in Enterprise Value but realistically maybe $15 million in Enterprise Value by having this one acquisition system and so if I lose a hundred grand trying to figure out how to run ads profitably on Tik Tok and it takes me six months if I reframe the question as hey will you invest $100,000 and wait six months for a $10 million return would I do it yeah I would do it but people don't think that way they get they get butt hurt because they're like oh my eyes didn't work I don't think Tik Tok works for us I don't think Tik I don't think marketing works I don't think pay ads work for us come on get out of here you so fundamentally it's saying I don't think that if I get on the phone with accountants and we sell accounting stuff that will make money it's Preposterous it's ridiculous but people are and that's why they don't make money okay so big big big big picture here right is that we get solved and sorry we get paid to solve big problems and the bigger the problem the bigger the payoff and so I like to ascribe one how much Enterprise Value am I going to get on the other side of this concrete wall and that helps pull me through the fact that I'm going to have to swing this hammer and I don't how many times I'm going to have to swing it and as long as I'm solving the right kind of problem which is a type of problem that I can reason to First principles of the idea of yes people who buy my stuff are on this platform and there is a way to reach them and I can do so profitably then we will make money now you're like well what's the what's the bad type of problem what's the bad type of heart so this is a classic problem of do I push or do I pivot and this is a classic you know entrepreneur dilemma that we have right and so I have pivoted a number of times in my career and I've pushed a hell of a lot more but I pivot when my underlying assumptions are proven Incorrect and so it's like if we believe this to be true then this is true and if this is true then this is true so if for example a report came out from Tik Tok and they said we have banned accountants because we don't want Financial people on our platform then I would say no we don't push here like fundamentally the assumption that we based all of these actions on is not true and so we pivot and so I like to use that as a very clear litmus test of when am I being a or when am I being intelligent and so if I say before we make this big investment these are the assumptions that we believe to be true and based on these assumptions we will continue to persist we will continue to iterate until we get what we want if one of those assumptions is proven wrong and we have data to support that it's not true then we will change our course of action and I will lose whatever investment I had there but I don't even see that as losing I see that as learning and we invested to learn data that no one else knows because if someone else knew it well they might have had to pay to learn it too great and I mean fundamentally that's the ignorant tax of business that we all have to pay for so let me give you a real example of a lady who I talked to yesterday who I actually said I think you should pivot which is tough for me because I I'm I'm always going to be the like how hard can we push is there a way that we can we can get through this but uh it became clear talking to her and I'll give you the scenario so you can understand the difference so she was uh a lady who um had a had a CO a canned cocktail business so she had premium cocktails they were in cans now you're like okay that's a little bit contradictory but okay so and the cocktails were 5% ABV so they weren't cocktail strength but so there's basically like Premium Fruit juices now she wouldn't say this this is me saying this Premium Fruit juices with you know organic ingredients and all that stuff that were priced premium without a premium brand but premium ingredients um and she was having trouble uh selling them now she was I think she was doing you know a million and a half a year and she had a thousand different distribution channels like a literal as in like thousand different stores were carrying it and if you're like wait a thousand stores 1.5 million a year yes the cell through rate was very low which means he was able to just basically front inventory to the people and they're not really moving it and so when I hear that when I heard that I was like okay well what experience do you have in this world at all and she had sold a gister early but for not a lot of money and I was like okay well that's kind of related um and then she was like well I've got Amazon going I've got a Shopify store I have B2B wholesale and I have she had all these different lines of business and I was like well and she just let all of her staff go so it's just her and it made zero profit and she was asking me like what should I do and so in and this was tough for me because basically I like to think about what's the hypothetical extreme version of this business what is the what is the maxim version of this business and so I saw two different paths here for her uh path one was you and she said I want to build a billion dollar thing and I was like all right well I mean if you want to build a billion dollar thing like that's going to be tough because you have no money and so you have a thousand distribution channels and so what we have to do is either a you somehow get a lot of money and get a premium brand sponsorship you get somebody who can make the association with you and then you use that brand sponsorship you use the rock Logan Paul whatever to leverage into these Master distribution bases and that person promotes it so that people buy in person now she was RTD meaning is ready to drink and so shipping costs made direct to Consumer for me not really a viable option it's too expensive now are there ways you can do it yes she was listed on Amazon it didn't make a lot of money there but it was there now the core thing that I asked her and by the way if you're in this business this is the core problem that you have to solve is that I said what percentage of people who drink your drink for the first time buy it again and she didn't have that metric if there's ever a important metric in a business for Consumer packaged Goods is what percentage of people who who try the thing do it again and I then mind you this is of Ideal customers not everybody so if you have a kid's chocolate and you give it to old people then they're probably not going to want to buy it again but of the ideal Avatar of the ideal customer base that you have what percentage of those people buy again and she didn't even have that metric it's like well this is going to be really tough now she'd never run Rec response before so I was like I know there's no way that she's going to be able to to do media she does like advertising I was like there's no way you're going to win build a billion dollar brand when you really have to be in the traffic business for cocktails if you're going to direct go to direct a consumer now if she was like I'm a dollar saave Club Advertiser then I'd be like maybe there's a way she could figure something like this out but that wasn't her skill set and so I was like okay well you could do this big she you knew how to get into distribution bases that was her skill because she had The Distillery so that was the one thing she brought to the table but she didn't understand branding at all and she didn't know if the product was good because people didn't keep drinking it so now what she doesn't have any money so either she'd have to raise a ton of money which I didn't think made a lot of sense at the level that she was at or the recommendation that I had is I said listen you're in the UK Market you need to go from a thousand distribution places to shrinking all the way down to Regional and you need to go on foot and talk to each of the local uh sellers that sell your product at their liquor stores or out their you know convenience stores and you need to stand there and Sample and Sample and Sample and Sample and tell your story and when you do that you'll make money people will buy the product just from you being there that that's profitable on a day-to-day basis but hopefully you do that a couple times a week at each store a couple times a week at each store and then all of a sudden the salespeople hear you saying it and then you make sure that they get Comm commissions when they sell your product and then all of a sudden they start moving it for you now all of this relies on the thing actually being good that if people drink it they come back and buy it again because the salesman can always move the first can and they're only going to really do it if they think it's good and so because they don't want to sacrifice their relational Capital with people that are regulars inside the store like oh hey Sarah what what are you buying this week I don't know we just got this new got this new cocktail thing you should give it a shot it's pretty good whatever and so these were the core pieces of which I believe that she would have to do if she wanted to make this successful now I said now to be clear in order for this to work one this thing has to be exceptional in terms of the The Taste and people have to keep buying it first core principle that has to be true because Tak it to its absolute extreme all the marketing branding in the world you're simply going to tell everybody you have a mediocre product they'll never buy it again and so Jesse Ito tells a story that I like a lot he had this product called sheets it was a caffeinated like Listerine strip and he partnered with LeBron so he had premium brand Like Jesse gets it premium brand big traffic big distribution he already had the connections with distribution and he said they started cranking sales first week second week more sales third week even more sales fourth week even more sales he's like this thing's going to be a billion dollar brand in two years this is going be unbelievable fifth week sales go down sixth week sales go even lower seventh week sales go even lower why why and he says this he's like the product just wasn't good enough and so if you're an expert marketer expert brander with consumer package grids you can absolutely get that big boom if you do it right and she didn't have that skill yet and he had money and celebrity endorsements she had neither of those things but I wasn't even confident that the product was good enough if the product was it would still keep growing at a slower Pace but it would still keep growing every month because people would come back to buy it so for her I said you have to compress this all the way down and then this might take 10 to 15 years and if you're willing to do that and she'd come into this being like this is the market trends blah blah blah blah blah but what I didn't sense was what I call a missionary heart now there's mercenaries who are like look at the Arbitrage look at the charts look at like this is the opportunity that I could I could tap into it's like yeah but no one's buying your stuff and if she had said there's a hole in my heart and I want this drink to be in the world because it changed my life then I'd be like awesome then like let's make it happen and you got and you're going to be willing to P 15 years because it's it's your soul it's your it's your passion it's something that you feel like you're on this Earth to do I didn't get that vibe from her and so seeing that she wanted to have this big billion dollar thing and seeing that she didn't have the heart for it and knowing that the Big Brand play was probably off the table because she didn't have the money for it I told her I said okay I'll give you one Hail Mary and if this Hail Mary doesn't work you shut down the business and you move on and so the Hail Mary was the can size was small and it fit well for airport uh airport people you know like the airport she says airplane stus and train and bus people they have these carts with little short trays and so she's like I'm in talks with them and they're very interested because the size is actually right for them and so I said okay well if you can go close a cruise liner that has 90 cruise ships and you can make them your distribution maybe you're selling to the wrong Market maybe instead of selling to brick-and mortar uh Distributors you actually just need to go to Transportation based businesses and then that's your Niche and the thing is is there you only have to out compete like two or three other people because it's super narrow now they're going to have very strict requirements of the can size the weight the packaging the labeling the price points which is going to be a problem for her because she's premium and no one cares but if you sell into that and I said go there big borrow and steel and do whatever you can to get that contract if you can't close one of these big contracts that'll give you the cash FL then to expand from there and that you can leverage like hey I just gotten a carnival hey Royal Cruise Line do you guys want to get it too because you can leverage that one sale that gives you all the credibility to get the rest of your meetings but if you can't close that deal for me I said I think you should pivot because I didn't think if I were betting I wouldn't have bet on the business and I try to serve the entrepreneur above everything else and given the skills that she had coming into it that wouldn't have been the bet that I would have taken and so I say I say that as the counter example of there were fundamentals that would have to be true in order for her to win here she would have to have a lot of money to do the Big Brand deal and have distribution she would have to be super passionate and have a 10 to 15 year time rizon to make the regional super small play Work hand toand combat she would have to have that she didn't have either of those things and so the only real viable path that required no money that had the existing skill set she had was go to Transportation distribution and use the fact that she had this kind of unique aspect of the size of the cans and have that be the selling point and hope to God that that actually works because if that didn't work she would run out of money before anything else would happen and then she would be forced to change the business and I would rather her learn that quickly than waste another three years not making progress on potentially a different business that would be better suited for her skill set and what made this particular woman really interesting is I said like how do you live cuz I I asked pretty Point Blank questions I was like how you know she looked like she had nice clothing she looked she like she lived nicely and so she said she sold a gym business so I said Jin as in like alcohol not gy um and she and she said oh that I actually didn't make a ton of money on that sale and I was like well where does your money come from and she said oh property development and I was like wait what and she's like yeah I develop pen houses and I was like wait so you have this cocktail business but you also have this property development business she like oh well I've been doing that my whole life it's just on the side it kind of runs itself it's very easy and I was like okay so let me tell you a little lesson that I've learned in my life for being an entrepreneur when money comes easy I go hard when money comes hard I go easy and so so many of the businesses I have are are half steps where it's like I thought I was going to get here and then boom this flow of cash opens up I was like oh maybe this is the business that I should be getting into like gym launch started by accident I was doing turnarounds flying out doing done for you sales and only because I was like Hey I'm going to shift my business over to just selling direct to consumer that I said hey I'll sell the licensing of all the stuff that I used to use that I made more money in a month that I ever made in my life and I was like whoa maybe this is the business I'm in and there's so many happy coincidence there was another business owner that was there that had an agency uh business and so many of his customers needed financing because he had a really high-end thing and so he was selling like you know $50,000 like very done for you you know TurnKey website build outs ads you know whatever and he realized that he was so good at getting people financing that he was making more money on the financing than he was on the actual agency services and so he stopped doing agency services and just got into debt financing for businesses so he just got into credit loans and sorry business lines and and uh and getting business debt and so like it's amazing how these things how these stories come to be it's like you just got to have the nose for the money and so she was here saying that she had a prop and I was like so hold on you've made all the money in your life from property development and you basically play business on the side so you you you easily in a couple hours a week make more money than you make with all your hours a week on this other business she was like yeah I was like well then why don't you just do all of your time on the thing that makes you the most money and she said I swear to God this is what she said she said that business isn't scalable and I was like okay I want you to say that to me again really slowly property development isn't scalable I was like so you're telling me that developing real estate is not a scalable business I was like do you know how many billionaires and 100 Millionaires and decamillionaires made all their money developing property it's literally the most scalable business you add zeros and you develop a bigger property that is how you do it that is how you scale it now you're going to have to hire employees but guess what you already know how to do it whereas in the other business that you're in you don't know anything about the business this business you've been doing your whole life and so you already know how you negotiate these these loans how you how you negotiate the properties and What markets you look after and where you see the Arbitrage and how you do the redecorations and who your interior designers are you already have all the connections you just need to hire people and so the real problem was that she just didn't know how to manage people she didn't know how to train people and That Was Then the real problem that honestly spread across all the businesses that she was trying to deal with but we tell ourselves these stories and it's so interesting the the stories that limit us because anybody from the outside would be like wait a second so you make all this money really easily on this thing that has clear scale that is a tried and true business that has existed for thousands of years real estate or you have this thing that you have to have tons of capital you have no experience in you don't know Market you don't know how to advertise you don't know how to Brand you don't know media and you don't want to go face to face hand to hand and do knock on a 100 doors and do that well maybe we do more of the thing that you're really good at that you have all the experience of and then we confront the problem that you didn't want to confront the big hairy thing which was she didn't know how to scale that business I said so what I want you to do instead of saying this isn't scalable I want you to say I don't know how to scale this and then that becomes a problem that you can solve it's the same as saying there's no salespeople who sell like me no you don't know how to get salese to sell like you there's no marketing doesn't work for my business no I don't know how to make marketing work for my business you go from it being a circumstance Universe problem to something that you can control and you take the sledgehammer you confront the big concrete wall you realize the payout that you have on the other side and you ask yourself if I had a business that was a property development business and I could scale it how much would that be worth to me and am I willing to do the work to get it and if the answer is yes then you get to work and so if we look at this entrepreneur the cocktail lady who had the property development business she actually was in the right business in her property development and rather than push she pivoted she got seduced by the woman in the red dress she got seduced by lady who said hey your skill set would be so much cooler over here you'd be able to build a billion dooll thing faster over here but she could and probably needed to Simply push through the existing business that had fundamental truths that you could not you can't disprove like when someone whenever someone says this business isn't scalable you have to break it down to physics tell me why physically it's impossible to scale property development is there not enough property to develop why why is it not scalable because PE entrepreneurs throw this thing all all the time they're like that business isn't scalable why it just means you don't know how to scale it or it's difficult to scale well guess what there's also a big payoff for once you solve it and so usually people progress through the easier problems they know how to solve and then they stop when it's a problem they've never seen before and then they try and come up with all sorts of crazy ideas that justify why they shouldn't keep pursuing or why they shouldn't keep failing and and when I say failing I mean trial and failing trial and erroring they they don't want to keep erroring on the thing they're in and they just want to feel like they win again and that's why they move they move because they know how to win in this other thing and so they they go for the quick win rather than the long win which is you get through getting punch in the face over and over again and sledging your way through the wall that you don't know how thick it is and for that specific entrepreneur because I did talk to you and you might listen to this if you really believe in this cocktail thing then you got to go go For Broke on this contract that you get for the transportation like there is it's a zero fail situation like if you want to make this business work that is your zero fail situation it's the only thing that's going to get you a lot of money for no Capital down that'll get you immediate distribution despite the fact that you don't have a good like a big good brand if you can just do that that becomes your Niche and then you try and own as much of that market as humanly possible if you can't or you don't succeed this is where the heart is we're like if you heart if you really wanted this thing to come to life then you would go back and You' start start working local and you'd go store to store and you'd say I'm going to commit the next 15 years to this and that's if the product is good enough if it's not good enough and people don't keep buying it all of this will be for nothing truly like it will be for nothing because fundamentally the product has to be good enough that people want to buy it again otherwise you spend all the money to a Car customer they drink it once there's no LTV in consumer package Goods unless people get rep purchases that's it it has to get repe purchases without you telling them to buy it and so if that's the the big principle like what's the foundational principle that we Prov to be untrue you'd either have to change the product or change the business