Business
#96 Business Expert: The BEST Way To Make Millions In Profit | Mike Michalowicz
In this episode, business expert Mike Michalowicz shares actionable strategies for maximizing profits and navigating challenges in entrepreneurship. He emphasizes the importance of focusing on your be...
#96 Business Expert: The BEST Way To Make Millions In Profit | Mike Michalowicz
Business •
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Interactive Transcript
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You're not generating $10 million doing your one thing.
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You haven't arrived yet, you're not good enough yet.
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This episode is with Mike McCallowicz,
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who wrote the book on profiting first
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and is going to teach us step-by-step playbooks
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for you guys to profit and make money right now
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in your business.
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To have a successful business,
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there's an intersection of three key elements
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you have to nail.
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What Stales does is it can bring in more cash
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but also brings in more organizational stress.
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You've more responsibility now.
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Our customers will never say to your face,
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you know, your business kind of sucks.
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But what they will do is go online
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and slam your reputation.
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So you can't trust their word,
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but you can trust their wallet.
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I got a magical Jedi mind trick question.
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I guess I got two that will blow your mind away.
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First question.
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We've been blown away by how fast the show is growing.
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Like getting to hang out with you every single week is so cool.
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But most of the people who tune in every week
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still haven't subscribed, which is crazy.
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It is the simplest way, though,
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to help me us keep scaling and bringing in the best guests
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like Mike McCallowicz and making the big deal a big deal.
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So I can't thank you enough for your support.
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Like we would be nowhere without you guys.
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And I just want to jump back into my conversation with Mike,
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but I also want you to do it subscribed.
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Oh, and share it with a friend if you like this episode.
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I think it's better when you profit together, you know?
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Can I start with some like kind of real challenges
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rapid fire that we've heard from owners?
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Yeah, throw them out.
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Okay.
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What if you're a business owner,
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your weeks away from running out of money?
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You're kind of panicked, you don't know what to do next.
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What's your first move if you call Mike?
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All right.
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So first thing is you acknowledge
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you're pretty much every business owner on the planet.
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There's a saying that most businesses are on the brink of failure.
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And the statistics show that most businesses
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don't have enough cash flow for four weeks.
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But my analysis, and I love contrarian thinking,
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my analysis is most businesses are not on the brink of failure
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because most businesses find a way to survive that moment.
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Somehow, some way most businesses yet again,
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doggy paddle and get above water.
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So I think most businesses are on the brink of success.
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It's just a good strategic move.
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So what we do, if a business like that calls,
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and I also invest in businesses,
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we do what's called reclamation services.
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We go into businesses that are specifically in struggle
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is we go through the client base,
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we deploy the Pareto principle 80, 20 rule,
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identify the best customers are and say,
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hey, what can we do right now to serve you?
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Because we're already the best customers,
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we get revenue in that way.
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We usually cut the lowest 20% of customers
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because inevitably they are costing you money
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and you don't even see it.
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It's like, oh, I'm making revenue.
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This is great.
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The expenses are in excess of the revenue
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and the emotional way is killing you.
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So we get rid of the unfit customers.
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We amplify the best customers
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and we start realigning the business around that.
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I love it.
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So you two moves.
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You call up your best customers and say, basically,
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you're asking them, but not this way.
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How can we sell you more things?
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Which is what else do you need
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and how do we increase the LTV of every single person?
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Yeah, you tell them you love them.
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When you tell a customer, hey, you're such an important
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customer to me, I value you so much.
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I just want to see if there's any other way to serve you.
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Rest of the process kicks in.
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They're like, we love you too.
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And we were thinking about getting this.
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Can you do it?
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Yeah.
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Love that.
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Okay.
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What do you do for someone who has more revenue
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than they've ever had before,
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but is actually making less profit?
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That again is every business I know.
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I was speaking yesterday at an event
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and I asked the group, is it more size?
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I said, who wants to increase their revenue?
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Everyone's like, that's what we need to do.
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That's solution.
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I said, arguably, that's one of the most dangerous things to do
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because it's a reckless belief.
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We believe that sales cures everything
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and that is total nonsense.
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Total nonsense.
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What sales does is it can bring in more cash
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but also brings in more organizational stress.
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You've more responsibility now.
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More things you need to serve us.
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So when a business says we're cranking up revenue,
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I am looking to see, are they doing it
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through diversifying their offering
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which I think is a mistake?
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Instead of becoming special, they're doing many things
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and they dilute their ability, they're not efficient.
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We'll look, are they serving customers with varying demands?
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Customers that are perhaps big names
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but then they assert their strength.
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I had a client of mine worked with Walmart
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was their best customer.
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Number one in revenue.
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We looked at them, their demands were off the charts.
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They said, when you deliver your product,
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it was like a bracelet thing.
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They said, it's got to come on a Monday at 1030 in the morning
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and if you're outside like a five minute window,
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we're gonna penalize you.
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If the skew that you PS code,
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if it's more than a quarter inch below the top of the box,
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we're gonna penalize you.
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And Walmart does this for efficiency,
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that's why they deal it.
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But my client, they saw that as good revenue.
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It was crushing them with the penalties.
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Their number two customer was Dollar General.
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Is that around here?
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Yeah.
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So Dollar General, Dollar General's like,
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hey, deliver it whenever you can
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because we're always playing second fiddle to Walmart.
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So, Cody will love this.
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Here's what he did.
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He put his sign above his desk
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and he had 15 employees.
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The sign says this,
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our policy is to answer the call in the first ring.
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If it's the Dollar General,
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answer the call and start taking their order
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and if Walmart calls, let it go to voicemail
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and then call them back when you're done.
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The miraculous thing was the next one.
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It said, we always answer the first ring.
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If the first call is Walmart,
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it start taking their order.
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But while you're in the phone with Walmart,
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if Dollar General calls immediately hang up on Walmart,
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like say, sorry, we have an emergency,
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disconnect and prioritize.
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So they're not cutting off customers or revenue
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but they're prioritizing the quality revenue.
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It transformed this business.
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It was a family business.
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It was 25 years old.
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They were struggling to get 4 million.
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It went 4, 18, 27 sold it.
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You know what's crazy too?
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And we'll take you guys through this process.
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So you'll go through a process
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where you basically analyze your cash flow
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and we'll use a 13 week rolling cash flow, which I love.
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And then we'll also talk to you about your underlying clients,
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what's your best avatar versus your worst.
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Because I think a lot of times
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we lump our business all together.
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We don't know what customers cost us to get
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and we certainly don't know what customers cost us to keep.
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And it's not because we're bad operators.
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It's because we're busy and it's sort of hard.
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And so it takes this pause and analysis.
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And the truth of it is, your team is not gonna do that.
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That is gonna have to be a you thing
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at most levels of the business.
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That is brilliant.
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I'll add to that.
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There's a real simple strategy that we've deployed.
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And what you do is you sort your clients out
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over the last year, the revenue that generated for you.
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And the reason is, is people lie to each other constantly.
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Cause it's social grace.
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Like when you saw me like,
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hey Mike, it's so good to see you.
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I'm a huge fan.
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Like, are you a co-e?
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Are you?
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But I am.
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Thank you.
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But could you imagine you come up to me and say,
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oh, your book's really sock, Mike.
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Like you can't do that because it's social grace
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and not be like, well, that's offensive
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and then we get into this disagreement.
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Or customers will never say to your face,
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you know, your business kind of sucks.
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Goup 911's here.
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It's kind of like more turd 411, you know what I'm saying?
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Like, they're never in it.
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That was good.
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That was good.
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That was juicy.
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But they would never, they would never say that to you.
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But what they will do is go online
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and slam your reputation.
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So you can't trust their words,
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but you can trust their wallet.
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So don't trust words, trust wallets.
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If they buy from you repeatedly
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or they're demonstrating they value you.
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But there's a second test.
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It's the intersection of them valuing you
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spending money with your appreciation
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and enjoyment of them.
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So when the car ID pops up on your phone
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or you're like, oh my gosh, they're amazing.
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Or you're like, oh gosh, I wish they didn't exist.
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Which one do you pick?
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Because if you have a customer at Jen's Lates
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Jen makes a lot of revenue,
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but you don't like working with them,
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you automatically inherently subconsciously perhaps
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deprioritize their service.
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You don't call them back as quickly.
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You delay, you avoid it.
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So we want the intersection of best customers
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that you love working with.
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Circle those customers and start to clone them.
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And by me by cloning them, I find out where they congregate.
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Where's their associations or communities?
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Where's the people like them hanging out?
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And I'm going to insert myself there.
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So good, yeah.
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We obsess on client avatars.
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And I feel like the number one thing
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that most people do wrong in business
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is they sell demographically as opposed
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to really nailing their avatar.
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Like I've never met a 45 to 65 year old male 40% of the time
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and 60% of the time a woman.
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I mean, these days, you know, but historically, no.
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And so, you know, I really like this idea
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of what are the characteristics of this type of avatar
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and then how do we go after that?
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Yeah, and look for the congregation points.
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So when I'm targeting a market,
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I'll say, is there an association for this?
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You know, this is what I'm selling B to B.
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Is there an association?
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Is there some kind of meetups or something like that?
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For example, maybe I'm serving pilots, retired pilots.
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Why is that?
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Is there a retired pilot association,
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which actually I know there is?
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So that's an opportunity.
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They're already congregating.
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But if I look for single moms who hate their mom,
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that demographic exists, perhaps even in this room.
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But they don't, do they have a meetup club?
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Or maybe not.
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If they don't have a congregation point,
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you have to assemble it yourself.
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It is the most exhausting time consuming effort.
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It rarely fails.
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So when someone says, I have a niche,
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it's, you know, I say, serve single moms
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who don't like their moms.
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I mean, that's not a niche,
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because you have to now assemble them together.
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But if you're serving the airline,
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retired pilot association, I know where they're going.
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They may have a dedicated podcast
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and you insert yourself there and they see you ubiquitously.
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They see you everywhere.
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So good.
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Let's zoom out for a second.
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What does everyone get wrong about making money in business?
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Okay.
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So this is very opinionated.
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It ain't about the money.
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And you probably heard that before.
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And when you don't have the money,
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it's very easy to say.
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I mean, it's very easy to focus on the money.
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And when you do the money, it's very easy to say it ain't
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about the money.
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My perspective is both.
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So I became a multi-millionaire
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and I was in my early 30s.
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I hadn't exit to Fortune 500,
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Robert Half International.
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You sold Clipper.
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I do remember them.
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You remember them?
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They had account attempts, so office attempts.
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I was doing a lot of work.
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Computer crime investigation and the Enron trial broke.
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My company right place, right time,
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we got the Enron trial.
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Now, to give context, we were not the prosecution.
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That's the FBI, the CIA.
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We were the defense.
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So if you remember names like Kenneth Lay, Andrew Fastow,
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they were our clients.
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They were guilty, by the way.
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That was their defense.
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That was their defense.
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They were guilty.
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And we got put on the map very quickly.
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What I assumed was, when I sold that business,
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and it was a lot of money, I was like, I've arrived.
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But I really didn't.
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What I did, and I'm embarrassed to admit this,
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but it's important to admit it,
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is I thought I had to show the effects.
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So I bought all the stable of cars.
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I got a private place out in La Naye,
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which is an island owned by Larry Ellison now.
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I first sabbatical, we got placed in a very affluent town
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in New Jersey where I live.
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And I'm like, look how important I am, people.
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And like, no one gives to, craps.
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Then, I blew all my money,
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because I thought I knew everything,
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I knew very little.
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And with the collapse, no one really cared either.
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No one really cares.
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I found the essence of a good business
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is that it's an expression of our purpose.
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Like, I know from the interviews I listened that you do,
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from the literature, you put out,
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you're such an authentic real human,
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that this platform is an expression of who you are.
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Listen, your mom is here.
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You know, the last time my mom came,
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my mom came, I was doing like a puppet show
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and third grade.
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Like, this is a dream.
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Have your mom here.
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Which also indicates the authenticity in this.
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I think too many entrepreneurs go for the money,
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only to find out that was a mistake.
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We gotta go for it because it's an expression of our heart.
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That's my opinion.
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It's so true.
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And you know what else is crazy
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that I love that you talk about often?
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That statement, it's never about the money,
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is so, was so triggering to me,
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when I didn't have any money.
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I'm like, that's cute, Mike.
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Like, give me a million, I'll figure it out.
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But what I've increasingly realized is,
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you never don't have enough money,
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you don't have enough knowledge.
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Because if you had more knowledge,
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you'd see that there are 372 ways to get the cash.
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And the real question is just like,
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what's the best way?
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That's like, what's the best game you wanna play?
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What's the right game you wanna play for you?
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Who's the right investor?
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What's the right way to get capital?
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It's just, then it becomes what's the right fit?
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Never just, it doesn't exist, why don't I have it?
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And if I could impart one thing to people more often,
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it would be that.
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And that you can make money doing anything,
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which is great, booperscuba, you know?
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Like we're just, also everybody should just wear
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their business shirts here
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because look how much market you guys are gonna have
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like an ad on this podcast,
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it costs a billion, not for you too.
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Poop 911, call my ladies.
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Okay.
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I got a question for you.
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Yeah, sure, yeah.
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So when it comes about money, I heard recently,
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and I've experienced this, and I'm curious about you,
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is there's not a single person who's ever had enough money.
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So I was talking to personal finance experts,
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I was just this interview series,
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and consists of like, heard wherever someone is financially today,
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they feel their freedom is double of their current worth.
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So if you're worth 100,000,
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when I get a two-hundred, I'm good.
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And people are two are saying four and people in a mill
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are saying two.
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So I'm curious, have you arrived financially?
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Oh, no.
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No, right?
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Never.
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Bullshit.
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I know, is that right?
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But also true.
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And me neither.
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Well, even like mom, we were having this walk this morning,
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remember what you asked me?
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She was like, aren't you proud?
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Like the headquarters and look how everything's grown,
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and because most of my businesses have been remote
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for many, many years, I ran businesses
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where we had people all over the world.
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She's like, you have a look back and touch it, you know?
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Do you take a second?
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And I literally was like, feels like what did I say?
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We haven't scratched the surface yet.
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So I totally think about it zero at any level,
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but it's also because I love the game.
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Not necessarily, I want the bank account to be bigger.
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I still have.
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Don't get me wrong.
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I mean, what do you ask me?
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Every time she sees me, she asks me.
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She asks me, but who takes care of the money
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at your company every time, don't you?
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She's always like, but who's the CFO?
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Who's in charge of making sure you don't run out of money?
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Because if you didn't grow up with any money,
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that's like deep inside all of us.
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We're just like, ah, but who's in charge?
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And are they stealing from us?
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And the answer is like, yeah, people are
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going to steal from you at some point.
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That is true.
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And it'll also be fine.
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And you'll keep going.
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But yeah, I agree.
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I don't think there's ever enough.
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But if you can flip it to stop talking about the dollar amount
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and start talking about, it's never enough
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because I just want to see what am I capable of.
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Like, I want to die having squeezed every last drop out of me.
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That's when I think it starts to get fun.
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Hunter.
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You've seen the rarest of things, which is you lost it all.
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Yeah.
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And I think that is off.
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How many people you're almost more scared of people
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knowing that you lost it all and like seeing the flame out
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than actually not having the cash?
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Who else?
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I see a lot of nodding.
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Like, I think that is what scares us.
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But you're a perfect example of like, I was there.
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Nobody's fucking cared, and I'm fine.
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No one cares.
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That's why.
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No one cares.
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And it is true that saying that the people who do care
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don't matter, and the people that matter do care.
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Wait, can I ask you a question?
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Did you have a very dark moment then when you were like,
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I lost everything.
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This is how I defined myself.
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Who am I?
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Yeah.
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Do you want to go there?
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Just in front of our 20 new bus.
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Exactly.
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New bus.
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So if you're, I wrote about my books.
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So this is the moment.
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So become a millionaire.
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Buy all these things.
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I got started off with the arrogance I had.
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I bought a Land Rover, a BMW, and a Dodge Viper,
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all within four hours on the same day.
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Thanks for laughing.
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And I thought, in the Viper, because in college,
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I saw the Viper.
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I said, when I arrive one day, I'll get it.
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I got to place out in Hawaii for a sabbatical.
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I got this adjoining club.
spk_0
I also started investing a whole different way now.
spk_0
I used to do basically private equity, putting in
spk_0
a bit small tranches, angel 50, 100, 200.
spk_0
You know what?
spk_0
Different businesses.
spk_0
And this arrogant dick.
spk_0
So I was like, oh, it doesn't matter if you're here, Cody.
spk_0
Mike's here.
spk_0
Here's the money.
spk_0
We have me.
spk_0
I have the might as touch.
spk_0
I believe my own story.
spk_0
And there is, I looked up in the Webster dictionary.
spk_0
There is a word for someone who has arrogance and ignorance.
spk_0
The word is dick.
spk_0
It shows it's a dead.
spk_0
It's a total dick.
spk_0
And in the Dodge Viper, it's like the winning trophy for dick.
spk_0
It's like, oh, I, within two years evaporated all that wealth.
spk_0
I lost every penny, Cody.
spk_0
And I'll never forget my account and clause
spk_0
made.
spk_0
It was February 14, 2008 Valentine's Day.
spk_0
And he says, Mike, you have to clear bankruptcy.
spk_0
I didn't have enough money to pay my tax bill that year.
spk_0
And I wasn't even a tax bill.
spk_0
I came home.
spk_0
I have three children.
spk_0
My wife and my kids had prepared a meal.
spk_0
And I was sobbing when I came home.
spk_0
And that's when I told them what happened.
spk_0
I lost everything.
spk_0
Now, I'd been lying to my family by omission.
spk_0
My wife was like, how's business?
spk_0
And I saw my bank account.
spk_0
I don't know if you've been there.
spk_0
You see it dwindling so logically I saw it.
spk_0
But emotionally, it wasn't ready to accept it.
spk_0
I'm like, that one client's coming.
spk_0
So my wife would say, how's things going?
spk_0
I'm like, it's fine.
spk_0
It's good.
spk_0
But I had to face it.
spk_0
We lost our house 30 days later.
spk_0
We liquidated our assets.
spk_0
Cars were gone.
spk_0
Vipers was gone.
spk_0
Thank God.
spk_0
Everything was gone.
spk_0
But this was the moment.
spk_0
And I'll price our crying.
spk_0
So I got to go quick.
spk_0
My daughter asked me, she goes, daddy, she was nine.
spk_0
Can I still go to horseback riding lessons?
spk_0
Now, to keep you context, there's 20 bucks for a group
spk_0
like 10 kids, they ride around for a half hour.
spk_0
And I said, I'm so sorry.
spk_0
We don't have anything.
spk_0
And as I said that, she got up and she ran.
spk_0
As fast as she could into her room,
spk_0
and I say, here's the door slam.
spk_0
And I'm sobbing.
spk_0
I'm like, oh my god.
spk_0
You and I, and we, we, we define ourselves as providers.
spk_0
We are here to provide for ourselves, our family,
spk_0
our community, our globe.
spk_0
And I'm like, my one effing job, I can't do it.
spk_0
My daughter is so scared.
spk_0
She ran away from me.
spk_0
And as I'm saying that, the door comes swinging open.
spk_0
And she can run and down those gangly legs.
spk_0
And she has a piggy bank in her hand.
spk_0
And she's daddy, daddy.
spk_0
She's just a pair of bills.
spk_0
I'm so embarrassed of that day.
spk_0
And you know what I'm saying about rock bottom?
spk_0
It's difficult as it is.
spk_0
At least there's only one way to go, which is up, right?
spk_0
It's a beautiful saying.
spk_0
It's total bullshit.
spk_0
It's total bullshit.
spk_0
You hear the bottom?
spk_0
You dragged along the floor of self-destain and hatred?
spk_0
Oh my god, it's coming back.
spk_0
And I went through two years of depression, self-diagnosis.
spk_0
And everyone to a therapist do now.
spk_0
You should drank a lot.
spk_0
I don't know.
spk_0
But in reflection is the greatest moment of my life.
spk_0
Because I said, I'm going to fix this.
spk_0
Your traumas, whatever they may be, my traumas,
spk_0
are traumas often are the biggest opportunity.
spk_0
I am on a path.
spk_0
I'm committed to eradicate entrepreneurial poverty,
spk_0
because I know how visceral it is.
spk_0
I know how freaking bad it is.
spk_0
I am committed to make every entrepreneur come in contact
spk_0
with as profil as possible.
spk_0
Because honestly, I need to learn that for myself.
spk_0
But we teach is what we need to learn.
spk_0
And so I'm just putting it out there, putting it out there,
spk_0
putting it out there.
spk_0
I'm not great with money.
spk_0
I'm better.
spk_0
But god, I'm never going to stop teaching it.
spk_0
I love that.
spk_0
How many of you guys resonate with that?
spk_0
You've had, yeah.
spk_0
I mean, my dad calls it the head and the hands
spk_0
in the dark with no idea what to do a moment.
spk_0
And I've had one, too.
spk_0
Oh, sure.
spk_0
Mine was the same thing.
spk_0
A company was almost out of cash that we had.
spk_0
And I didn't tell anybody.
spk_0
And mine was like really, it was almost so fast.
spk_0
It was like a cancer diagnosis where you die the next 30 days.
spk_0
Like, I didn't know.
spk_0
I didn't really have the slow burn.
spk_0
We had made a terrible mistake in a business.
spk_0
And it was, it's often, I think,
spk_0
mistakes are usually who's not house.
spk_0
And so I had trusted somebody.
spk_0
And that was my fault.
spk_0
And I had let them have too much control over one
spk_0
of these businesses.
spk_0
And the way that they had reported it
spk_0
had not really anticipated some expenses we were going to have.
spk_0
And also that we would have seasonality in the business.
spk_0
And I was so embarrassed about it that I
spk_0
called them in the middle of the night.
spk_0
And he said two things to me.
spk_0
He said one, when we step on a nail at a construction site,
spk_0
we don't ask how we got there, what happened, what's going on.
spk_0
Do I take a bubble path?
spk_0
So I feel better.
spk_0
We pull out the fucking nail.
spk_0
And so it goes, you're going to do the hard thing.
spk_0
And do the hard thing right now, which
spk_0
is you're going to look at your business.
spk_0
And that's why I've obsessed for all of you guys
spk_0
on making sure that when you are in that poverty center,
spk_0
how do we get out of it immediately?
spk_0
How do we, at fuck the emotions, fuck the feelings?
spk_0
We pull out the nail.
spk_0
You don't wonder how the nail got there.
spk_0
You fix the safety issues later.
spk_0
You wear better boots the next time.
spk_0
And so he did a really good job of snapping me out of it,
spk_0
of saying instead of staying here worrying about it,
spk_0
which is why I'm always saying to you guys,
spk_0
money really likes speed.
spk_0
He basically was like, why would you
spk_0
worry about this one more second?
spk_0
You're not going to sleep anyway at a night stay up.
spk_0
Stay up.
spk_0
Let's look at the books.
spk_0
Let's fix this.
spk_0
And what I've found in investing in hundreds of businesses now,
spk_0
it's almost always fixable to your point, almost always.
spk_0
But the reason it won't be is because you don't move fast enough.
spk_0
You don't have people who have been there before around you.
spk_0
And you don't focus on profit.
spk_0
You focus on what is going to look good, what is going to be okay.
spk_0
Like sometimes you got to do the really awful thing,
spk_0
which is rip off the bandaid.
spk_0
But I'm so kind of you talked about that because one of our missions here
spk_0
is, you know, we've looked a lot at the data surrounding small business.
spk_0
And most small businesses fail.
spk_0
That is true.
spk_0
Most of them do.
spk_0
Nobody talks about it.
spk_0
Most of them do.
spk_0
And a lot of the reason why I think is due to not having systems of control
spk_0
for situations in which emotion gets high.
spk_0
You have a ton of systems and stories and ways that you kind of are honest about yourself.
spk_0
You keep yourself in your, I'll call it your bumper lanes,
spk_0
because you know that you have self awareness to be like,
spk_0
I'm not the best with money.
spk_0
The people that get in trouble are the ones that think they're the best with it.
spk_0
Yeah, yeah, yeah.
spk_0
And so I want to talk about, I want to talk about a couple of things.
spk_0
You can kind of pick which one.
spk_0
I want to talk about either the pumpkin plan,
spk_0
or I want to talk about clockwork,
spk_0
or I want to talk about beacon.
spk_0
Do any of those speak to you in this?
spk_0
Yeah, they do.
spk_0
So I'd say pumpkin plan to start.
spk_0
What I did just to give context is one of the books I wrote.
spk_0
And it's the runner up to profit first in popularity.
spk_0
What I did was I hired a business coach before business coaches really existed.
spk_0
This is back in the 90s.
spk_0
And he came into my business and said,
spk_0
day one we're going to go to a pumpkin field.
spk_0
I'm like, what?
spk_0
He's like, you got to understand biology,
spk_0
because it's just a thing called bio mimicry.
spk_0
And when you study what Mother Nature's figured out,
spk_0
she's pretty freaking smart and spent a lot of time figuring things out.
spk_0
You can copy those strategies,
spk_0
and usually there have a more,
spk_0
a better success rate than something that's artificially engineered.
spk_0
So I went to a pumpkin farm and studied colossal pumpkin farming.
spk_0
And sure enough, it works for business too.
spk_0
So that's the context.
spk_0
Talk about why and what you got from it.
spk_0
Yeah, so there was a few things.
spk_0
The first one was it's called seed selection.
spk_0
And basically, to have a successful business,
spk_0
there's an intersection.
spk_0
It's like a bend diagram of three key elements.
spk_0
You have to nail.
spk_0
And the likelihood of growing is much greater than otherwise.
spk_0
Most entrepreneurs simply say, I'm doing this
spk_0
because this is my historical vocation.
spk_0
I have some experience I'm going to do it.
spk_0
Or I heard you can make a lot of money doing it.
spk_0
And I don't know if either of those are actually necessarily good.
spk_0
The first thing that we ask, and I ask myself,
spk_0
is do I have something that's truly distinct in the industry?
spk_0
Can you redefine the industry?
spk_0
I'll give you a personal example.
spk_0
Who's heard of the Savannah bananas here?
spk_0
OK, they're exploding, right?
spk_0
So Jesse Cole is a friend from before,
spk_0
very when the Savannah bananas were starting,
spk_0
and they used profit first.
spk_0
I went down and coached the organization.
spk_0
What he did was say, what is the industry doing currently
spk_0
and sucks about it?
spk_0
He said, I don't know if any of those, but baseball is boring.
spk_0
It's boring.
spk_0
So he's like, that sucks.
spk_0
And he went through all these different things.
spk_0
So the first thing he said is, where are the things
spk_0
that people don't like?
spk_0
I'm going to unsuck it.
spk_0
That sounded very, I don't know why it sounded so gross.
spk_0
So he, P and his wife Emily, started to redefine baseball
spk_0
to make it not boring and to make it entertaining.
spk_0
The second thing is they put intentional constraints in place.
spk_0
So they used profit first, which inherently means
spk_0
there's less money to spend.
spk_0
And one of my favorite things is he said,
spk_0
we don't have enough money for a cheer squad
spk_0
or anything to entertain people.
spk_0
So he's like, what do you do when you have no money?
spk_0
He's like, you ask your fans.
spk_0
So he said, if you're 80 years or older,
spk_0
and you're a woman, you're on our cheer squad,
spk_0
and teeth are optional.
spk_0
And the super half squad, I met the squad.
spk_0
And they're the Nana bananas.
spk_0
And people lose their effing minds.
spk_0
Like we lose our minds watching this.
spk_0
So what makes you truly unique?
spk_0
Better than the competition is not noticeable.
spk_0
You answer the phone and two rings.
spk_0
I answer in one.
spk_0
I'm technically better.
spk_0
The customer won't notice.
spk_0
You want to stand at baseball game?
spk_0
I have a grandma banana to answer around.
spk_0
I win.
spk_0
I'd be different.
spk_0
Secondly is you have to have client demand for it.
spk_0
So I could do something very different.
spk_0
I could be your first guest that comes
spk_0
dressed like Bozo, the clown, you know,
spk_0
Walker, Walker, I come in with my big flop of shoes.
spk_0
Everyone will notice it's different.
spk_0
But is there demand for a weirdo that does that?
spk_0
Maybe not.
spk_0
And now I've compromised myself.
spk_0
So who's the customer that wants that?
spk_0
And it's not your standard baseball fan.
spk_0
They're not there for the winning game.
spk_0
They're there for the winning experience.
spk_0
So he's redefined the customer.
spk_0
And the last part is to your earlier point,
spk_0
is systemization.
spk_0
And most people don't understand what systemization is.
spk_0
Systemization is where you can attract prospects,
spk_0
convert them to the customer's collect revenue,
spk_0
have them raving about the experience,
spk_0
all while you're sleeping.
spk_0
Without any of your active input,
spk_0
with the entrepreneur not doing any of that,
spk_0
now you've a systemized business.
spk_0
And so why learn from the pumpkin plans is that's the seed.
spk_0
And just like growing a cluster,
spk_0
pumpkin, you need to seed that matches the environment,
spk_0
the soil content, the climate.
spk_0
You need to seed that matches up with those three elements.
spk_0
Some of the greatest businesses start
spk_0
with nothing more than a notebook full of scribbles.
spk_0
But ideas aren't enough.
spk_0
They need execution.
spk_0
With GoDaddy Arrow, execution is fast.
spk_0
A few prompts and you get a website, logo, email,
spk_0
and even social content.
spk_0
Minutes, not months.
spk_0
You go from scribbles on a paper
spk_0
to a polished online business you can actually grow.
spk_0
So stop waiting, stop overthinking,
spk_0
launch your business today with GoDaddy Arrow.
spk_0
Head to goDaddy.com, backslashcodySanshaes,
spk_0
and see what's possible there.
spk_0
By the way, this live episode, if you guys liked it,
spk_0
if you want more, well, I have a live event.
spk_0
I only do one a year.
spk_0
It's huge, how big, really big.
spk_0
In Austin, Texas, just for people who want to make more money
spk_0
by businesses, build businesses,
spk_0
it's called Main Street Over Wall Street.
spk_0
So if you liked this episode,
spk_0
you're probably going to want to be there.
spk_0
There's only a couple hundred spots left.
spk_0
So click below.
spk_0
I want to shake your hand in person in Austin, Texas.
spk_0
Or go to msows.com.
spk_0
M.Sows.
spk_0
We'll see you there.
spk_0
So let's say that somebody doesn't have their,
spk_0
I believe you call it their prize pumpkin.
spk_0
Let's say that they don't have this differentiator,
spk_0
this unique component.
spk_0
What do you tell them to do?
spk_0
How do people start thinking about that?
spk_0
Dude, I got, I don't know why I call you dude, is that cool?
spk_0
I love dude, yes.
spk_0
Dude, I call my friends dude, so you just,
spk_0
I didn't even know, so subconsciously,
spk_0
you just qualified.
spk_0
So dude, this is what you gotta do.
spk_0
I got a magical Jedi mind trick question.
spk_0
I guess I got two that will blow your mind away.
spk_0
And it's not what you think,
spk_0
if that's how Jedi's role.
spk_0
First question, ask your best customers,
spk_0
is once we identified, what am I doing right?
spk_0
Now here's why this is a Jedi mind trick.
spk_0
They will not tell you what you're doing right.
spk_0
So I used to work with hedge funds.
spk_0
One of my first company, we did technical services
spk_0
for hedge funds.
spk_0
They had Bloomberg's, ILX, and all these different systems.
spk_0
I went to my best customer, Apple Lucid Management.
spk_0
I said, what am I doing right?
spk_0
And they said, you respond very quickly.
spk_0
Now this isn't the 90s.
spk_0
They said the typical computer guy
spk_0
was taking like a full day to get on site
spk_0
when our system went down.
spk_0
They got backup systems, but you get on site
spk_0
within four hours.
spk_0
Now here's the Jedi part.
spk_0
When your customer tells you you're doing right,
spk_0
they don't tell you what you're doing right.
spk_0
They tell you how they're judging you,
spk_0
what they're observing.
spk_0
You and I do, you do thousands of things to your customer.
spk_0
Your customer does not see the thousand things.
spk_0
They see one or two things.
spk_0
So when you ask them what I'm doing right,
spk_0
they tell you the thing they see.
spk_0
So when my client said, you respond quickly,
spk_0
I said, holy crap, I'm not responding fast enough.
spk_0
Because that's what he's measuring.
spk_0
So I figured out a way, it was real simple,
spk_0
dispatch one of my technicians or myself
spk_0
to be within a half hour radius of Apple Lucid Management.
spk_0
And anytime he had a problem, I would leave my other clients.
spk_0
I have an emergency with my number one client,
spk_0
Jollar General, get there,
spk_0
and I was getting on site within a half hour.
spk_0
Within a month, he's like, I don't know what you're doing, dude.
spk_0
But it is blowing my mind.
spk_0
The service level is skyrocketed.
spk_0
He's like, we're telling everyone about it.
spk_0
So trick one is what I'm doing right.
spk_0
It's actually what you need to do better.
spk_0
Trick two is what am I doing wrong.
spk_0
But here's a jet of mind trick.
spk_0
Don't ask what you're doing wrong
spk_0
because people lie to each other, social consequence.
spk_0
Ask what is wrong with my industry?
spk_0
It's the person outside the room.
spk_0
So when I leave here, you can have a can of conversation,
spk_0
like, oh, Mike was not that good.
spk_0
He spoke a little quickly and he did a list-be thing
spk_0
that didn't work.
spk_0
Like, whatever, you could say what you want.
spk_0
But to my face, you're like, oh, you know, you're great.
spk_0
Good tips, Mike.
spk_0
You can't tell me the truth of my face
spk_0
only when I leave.
spk_0
So have the conversation about the person outside the room,
spk_0
the general industry.
spk_0
So I said, what's wrong with the computer industry?
spk_0
This is when you don't remember the palm pilot.
spk_0
You're way too young.
spk_0
Do you remember the palm pilot?
spk_0
Okay, you're over 50.
spk_0
Over 50.
spk_0
Yeah, you're not over 50.
spk_0
If you don't know the palm pilot was,
spk_0
it was the first smart phone that was neither smart
spk_0
nor a phone.
spk_0
That's basically it, right?
spk_0
It was the weirdest things.
spk_0
And he said, my computer company, my last guy,
spk_0
tried or paired the palm pilot, and he charged me more
spk_0
than just replacing it.
spk_0
I wish there was fixed billing.
spk_0
We moved to fixed billing in the early 2000s,
spk_0
when MSPs only moved to it in the 2015s or so.
spk_0
So what am I doing wrong is your opportunity to,
spk_0
what's the industry doing wrong
spk_0
is your opportunity to differentiate from the industry?
spk_0
That's so good.
spk_0
I got fired up there.
spk_0
I was, it's good.
spk_0
I mean, it is amazing how the right questions serve you
spk_0
so much better than the immediate answers.
spk_0
It's because you can just rinse and repeat.
spk_0
One of my pet peeves that our company is,
spk_0
is we send a lot of surveys, I hate surveys.
spk_0
So I have like a, like how many of you guys get a survey?
spk_0
You're like, thank God that came out.
spk_0
I'm so, I needed more things to respond to in my email inbox.
spk_0
It's my huge pet peeve.
spk_0
I'm always like, instead we should actually,
spk_0
I'm curious, I'm like, we should actually try
spk_0
to sell people more things.
spk_0
The reason why is, because then you actually know
spk_0
what they want.
spk_0
And if you sell something and nobody wants it,
spk_0
you're like, oh, that's the survey.
spk_0
That is cool.
spk_0
Money is the survey.
spk_0
That is gold, right?
spk_0
So I remember.
spk_0
Do entrepreneurs sell enough to their customers?
spk_0
Are most entrepreneurs scared of selling?
spk_0
They absolutely do not sell enough
spk_0
and they don't sell the right way.
spk_0
I actually believe MVPs are not the right way to sell.
spk_0
So an MVP is a minimum viable product.
spk_0
I think that's too far advanced.
spk_0
We do a technique we call sell the tell.
spk_0
What we do is say, so I was a co-owner
spk_0
in a manufacturing business for a while,
spk_0
that we made leather products.
spk_0
She, specifically for knives.
spk_0
And instead of making a prototype
spk_0
and seeing what was out there,
spk_0
we simply announce our audience.
spk_0
We're thinking about making a sheath
spk_0
and it's going to have this feature and that feature.
spk_0
Are you interested in buying it?
spk_0
But we asked the most important question.
spk_0
If you are, put down a deposit now.
spk_0
People speak the truth through their wallet.
spk_0
I was actually thinking about doing a conference
spk_0
at my old high school, but to pull it off,
spk_0
we needed 250 people there.
spk_0
We reached out to our audience.
spk_0
We had 75 people put a deposit down and we said,
spk_0
no, this isn't going to go and refund their deposits.
spk_0
Ironically, prior to that, our marketing team said,
spk_0
well, we just asked, we had over 1,000 people say,
spk_0
oh, I'm in, that's amazing.
spk_0
And if we acted on that, we would've blown money
spk_0
and embarrassed myself at my old high school.
spk_0
I've always scared people aren't going to show up
spk_0
for my parties.
spk_0
Or go around.
spk_0
Literally every time still, it never stops.
spk_0
Okay, so you sell the tell, which I love.
spk_0
Do you have any good frameworks for how to know
spk_0
if you are selling enough as an entrepreneur?
spk_0
It's one of my beliefs that most entrepreneurs
spk_0
are too scared to sell until they don't do it frequently enough.
spk_0
How do you know if you're selling...
spk_0
Oh, the act of selling is opposed to the dollar number.
spk_0
Yeah, yeah, yeah.
spk_0
Are we asking our customers for enough things?
spk_0
Are we asking for enough upsells?
spk_0
Are we, what is our relation between content
spk_0
and actual conversion?
spk_0
Yeah, I think the two indicators,
spk_0
if you have customers come back to you and say,
spk_0
please stop that.
spk_0
That's a good indicator.
spk_0
And listen up, particularly your quality clients.
spk_0
Often we listen to the one naysayer who doesn't matter.
spk_0
Like, you sell so much, you totally suck.
spk_0
And they've never bought from you.
spk_0
And I'm like, oh, I'm so sorry.
spk_0
I'll never sell again.
spk_0
So listen to your best customers.
spk_0
Secondly, if you see, every time you sell a decline
spk_0
in purchasing, and I've seen that before,
spk_0
that someone sells so much, people like,
spk_0
you know what, I'm just turned off to you.
spk_0
All you do is sell.
spk_0
I think we have to care for our customers
spk_0
at an amplitude of a five to one, maybe a 10 to one.
spk_0
Just acts of service, caring for them,
spk_0
educating them, entertaining them,
spk_0
because appellals reciprocity,
spk_0
and then the sell becomes obvious.
spk_0
By think, particularly small businesses
spk_0
serve at like 100 to zero.
spk_0
They're all they're doing.
spk_0
It's like, I love my community.
spk_0
I'll do any for them, and they don't monetize it.
spk_0
I would say, Cody, your customers,
spk_0
people in this room, my customers, not in this room,
spk_0
maybe want us to be profitable.
spk_0
And your clients want you to be profitable.
spk_0
In fact, it's the number one customer,
spk_0
the number one person in your life
spk_0
that wants to be profitable is not you.
spk_0
It's actually your customer, and we don't believe that.
spk_0
Could you imagine, you go to your doctor,
spk_0
you have a heart situation, you rush in,
spk_0
doctor one comes out and she says,
spk_0
oh, here's the situation, I'm not profitable.
spk_0
I'm actually nearly broke.
spk_0
I'm really paying for money.
spk_0
I'm just selling anything to anyone,
spk_0
and I've decided to generalize.
spk_0
I'm gonna do neurosurgery, pediatrics,
spk_0
geriatrics, anything with an actics, I'm in.
spk_0
Dr. 2 comes out and she says, I am wickedly profitable.
spk_0
I make a boatload of money because I am wildly successful
spk_0
what I do.
spk_0
In fact, all I do is service one situation.
spk_0
Which doctor are you gonna pick?
spk_0
Dr. 2, you want your doctor to be profitable,
spk_0
and you listen, maybe you're not providing
spk_0
life-saving services, you're providing
spk_0
life-altering services.
spk_0
Your customers want to know that you're profitable
spk_0
because then you treat them as the number one customer.
spk_0
They won't say, hey, can you charge me,
spk_0
Moire, can you rip me off a little?
spk_0
But they will say, I want your undivided attention,
spk_0
I want the best of you, and all those things are indicators
spk_0
if I want you to be profitable.
spk_0
I see you.
spk_0
I see you.
spk_0
Well, it's such a good point.
spk_0
I mean, I don't know if anybody else feels like
spk_0
Mark Zuckerberg knows their purchasing pattern,
spk_0
better than their husband does, but like,
spk_0
Mark's got me on Instagram, those ads come up,
spk_0
I wanna buy.
spk_0
But if I go to double-click on a shirt or an outfit,
spk_0
and the cost of that shirt or outfit is like $7.99,
spk_0
I don't buy.
spk_0
Why?
spk_0
Because I think the quality is gonna be bad,
spk_0
because I think it's not actually gonna be a good service.
spk_0
So not only do I think we don't sell enough,
spk_0
I think we price ourselves out of deals all the time,
spk_0
because we're the cheapest, you know?
spk_0
Because we're like, oh, no, no, no, no,
spk_0
I wanna over serve the customer.
spk_0
No, you lost my business because I don't trust
spk_0
that it could be quality at that price.
spk_0
And so I wanna talk a little bit,
spk_0
you have multiple.
spk_0
Yeah, that's what I want you to do.
spk_0
So I would buy a $7 shirt,
spk_0
and I think what's important about that is,
spk_0
you have to bifurcate your customers.
spk_0
The large majority of customers are the cheapo customers,
spk_0
and that's me in that situation,
spk_0
but you care about the quality of your clothing,
spk_0
and therefore you're gonna pay a premium.
spk_0
Now I play guitar, I bet you,
spk_0
if I saw a thousand dollar guitar,
spk_0
I would buy, I don't know if you play guitar, do you?
spk_0
Okay, so you'll buy the $7 guitar, I suspect.
spk_0
And what price dictates is the quality of customer.
spk_0
You will find customers at the lower price point,
spk_0
and for anyone here that sells at a low price point,
spk_0
if you ever found that your customers are really bitchy
spk_0
and mooney and they really suck,
spk_0
it's because you're attracting the shit customer,
spk_0
the one who says, I don't really care about this,
spk_0
I just need a shirt, so I'll pay the $7.
spk_0
And that's why I think we need to have a higher price,
spk_0
we get a higher value customer,
spk_0
that's more vested in the outcome,
spk_0
and they're actually a higher quality customer.
spk_0
What do you think about,
spk_0
I tend to think that when you solve rich people's problems,
spk_0
they pay more and they appreciate it more,
spk_0
by and large, and when you're a junior entrepreneur,
spk_0
not even when you're not the best entrepreneur in the world,
spk_0
I almost like solving more luxury problems,
spk_0
because there's more margin in them typically,
spk_0
and you don't have to get as many,
spk_0
so it doesn't have to be such a volume game until you're good.
spk_0
Do you think that's true,
spk_0
or do you think when you go and serve luxury customers,
spk_0
you better be luxury, you better be top tier,
spk_0
you better be great?
spk_0
That's a good question.
spk_0
I think the quantity game is really difficult to compete in,
spk_0
because you only become profitable when you can handle that volume,
spk_0
which means exacting systems.
spk_0
That's why Walmart's so good,
spk_0
but they have to demand from their providers
spk_0
that has to arrive at 1030,
spk_0
and there has to be a skew at a certain point.
spk_0
Small businesses, we don't have the resources
spk_0
typically to pull that off, so that's very difficult.
spk_0
When it comes to quality,
spk_0
quality, I think it's misunderstood,
spk_0
quality, I think we hear that, and we say,
spk_0
well, it's a special fabric,
spk_0
or it's something that's really of long lasting value,
spk_0
but quality simply means distinct.
spk_0
I'll give you an example.
spk_0
My youngest son, this is like a bad father moment,
spk_0
when he was six years old,
spk_0
I wanted to show him what devotion and commitment was,
spk_0
and it was the Olympics,
spk_0
it was like the Beijing Olympics,
spk_0
Michael Phelps wins like gold number one billion.
spk_0
In this particular race, I don't know if you'll remember,
spk_0
he was actually in third place,
spk_0
and he's swimming super hard,
spk_0
and there's like three meters to go,
spk_0
he's in second place,
spk_0
there's a meter to go,
spk_0
and the person that lead the thing from the Ukraine
spk_0
is reaching out to us the wall,
spk_0
and Phelps jumps out of the water like a shark
spk_0
and slaps the wall,
spk_0
and it's like this long pause,
spk_0
and it pops up, and Michael Phelps won by 0.001 seconds,
spk_0
and I jump up, I'm watch my son, I'm like,
spk_0
Jake, that's the world's best, that's how you do it!
spk_0
Total commitment, total devotion,
spk_0
that's the highest level performer,
spk_0
and he looks at me, he goes,
spk_0
the daddy, Michael Phelps is in the world's best,
spk_0
Jimmy Mikkeldorf is.
spk_0
Now here's the bad dad moment,
spk_0
I said, who the fuck's Jimmy Mikkeldorf?
spk_0
I never heard of it!
spk_0
He's like daddy, he's in kindergarten,
spk_0
never said it to your kids, by the way.
spk_0
He goes, daddy, Jimmy's in my kindergarten class,
spk_0
he can swim across mountain lake, it's the lake near us,
spk_0
and he's like, he's the only kid in the world
spk_0
that can do it, as like, oh my gosh,
spk_0
so the context of the best and quality
spk_0
is the context of the consumer's world.
spk_0
For me, it's the Olympic stage,
spk_0
for him, it's his kindergarten class,
spk_0
and Susie can make the biggest cannonball,
spk_0
she's a rock star for him,
spk_0
as like, oh my gosh, I am such an idiot.
spk_0
So when it comes to quality,
spk_0
I just ask, we have to know who our customer is,
spk_0
and what can we do that's unique and distinct to them,
spk_0
they never experienced before,
spk_0
and now you've introduced quality.
spk_0
That's so good.
spk_0
Let's talk about distraction a little bit.
spk_0
You have a lot in multiple of your books,
spk_0
I think I'm referencing the pumpkin plan more here,
spk_0
but how do you personally decide
spk_0
when to double down on an idea,
spk_0
versus when to call it a distraction and cut it?
spk_0
Yeah, so we generally look at a revenue threshold
spk_0
because that's just a shocking metric
spk_0
to many small businesses.
spk_0
We generally say, if you're not generating $10 million
spk_0
doing your one thing, you haven't arrived yet,
spk_0
you're not good enough yet.
spk_0
For most businesses, that's about 0.001% of a market cap.
spk_0
So it's nothing.
spk_0
Yet most businesses said, oh, we're doing 300,000 in revenue,
spk_0
I should diversify and do more things
spk_0
and it starts diluting you.
spk_0
It's all about the efficiency game.
spk_0
That's where we focus.
spk_0
The second thing is we just do diagnostics with AI,
spk_0
it's so easy now.
spk_0
Just look at the customer base, what they're consuming,
spk_0
what's the profitability per product,
spk_0
and we just focus in on those few things.
spk_0
I think businesses pursue diversification too quickly
spk_0
because we hear if you're diversified, you're safe,
spk_0
you're protected, but it also stalls growth.
spk_0
Do you think entrepreneurs should ever have
spk_0
multiple businesses before they do $10 in revenue?
spk_0
If I say no, I'm a hypocrite.
spk_0
So I have many businesses that aren't doing $10 million,
spk_0
but I don't run them.
spk_0
So I think people on missing understand
spk_0
what a business owner is.
spk_0
In fact, when people ask me what do you do,
spk_0
in addition to author, I don't say I'm an entrepreneur,
spk_0
even though it's my favorite word,
spk_0
because entrepreneurs become so bastardized,
spk_0
there's pundits that say, oh, entrepreneurship's
spk_0
hustle and grind, it's work your ass off,
spk_0
that is not what entrepreneurship is.
spk_0
You were sharing something that I hope people took notes down.
spk_0
Six percent, you said, of the world population
spk_0
runs a business.
spk_0
The back, I'll give you the data behind this,
spk_0
some really into the numbers.
spk_0
17% of the population ever attempts to start a business.
spk_0
So if you think about kindergarten in the 20 kids
spk_0
in your class, 17, three kids, maybe four kids,
spk_0
ever attempt to start a business.
spk_0
20% ever start a business and after five years
spk_0
are doing it on a profitable, sustainable basis.
spk_0
That's 3%.
spk_0
So the 6% who are running a business,
spk_0
three half of them are actually pulling it off
spk_0
after five years, and that's how the math works.
spk_0
Which means if you ever thought about who is the weirdo
spk_0
in your kindergarten class, it was you, you're a weirdo.
spk_0
So some messed up part of your mind,
spk_0
it's like, oh, I can start a business and make money.
spk_0
The number one job of an entrepreneur is not to do the job.
spk_0
The number one job of an entrepreneur is to create jobs
spk_0
for the other kids in your class.
spk_0
19 kids in your kindergarten class,
spk_0
want good jobs and good companies to live a good life
spk_0
with just good experiences.
spk_0
If you are doing the work in your business,
spk_0
you're failing the responsibility of an entrepreneur.
spk_0
Your job, my job, our job is to create jobs
spk_0
for the other 97% of the global population.
spk_0
Yet most entrepreneurs are doing the work.
spk_0
So, let me get off my soapbox for a second.
spk_0
I don't call myself an entrepreneur anymore
spk_0
because unfortunately we're told that means
spk_0
to work in our business.
spk_0
I call myself a shareholder because I also own public stock
spk_0
and I'm a shareholder in my business.
spk_0
And when someone says, what are you?
spk_0
I say I'm a shareholder of small business.
spk_0
So I was like, what does that mean?
spk_0
Oh, in stock, I share in the profit
spk_0
and I give strategic direction, I vote.
spk_0
But I don't do any of the work in the business.
spk_0
So for everyone in the companies, we have a president,
spk_0
we have a C suite, if you will.
spk_0
And these are some of our small businesses.
spk_0
A C suite could be like six people in the entire company.
spk_0
But I am not in the business doing the work.
spk_0
So cool.
spk_0
Let's talk about Beacons.
spk_0
So you referenced a study about football fields
spk_0
and blind holes.
spk_0
But how do you stay on course in a business
spk_0
and not get distracted?
spk_0
So this study, this is my book actually called Fix This Next.
spk_0
What I found is most entrepreneurs are reactionary.
spk_0
And there was a study of a woman named Amanda Eller
spk_0
from the state of Hawaii back maybe 10 years ago.
spk_0
In this common story, she was a unique global phenomena.
spk_0
She went for a hike on a path she always does.
spk_0
Halfway through a hike, it was like a five mile hike.
spk_0
She sees a fall in tree.
spk_0
She decides to sit down and meditate.
spk_0
She comes out of her meditation.
spk_0
She picks up path, the key variable being A path,
spk_0
starts walking.
spk_0
She's like, oh god, I'm disoriented.
spk_0
I'm not the right spot.
spk_0
17 days later, she's found clinging to life by a rescue crew.
spk_0
What's interesting about the story is she was a half mile
spk_0
from her car.
spk_0
She started walking in circles.
spk_0
Without a beacon, this happens over and over.
spk_0
People get lost.
spk_0
In this German study, they took people on a football field
spk_0
and they put like a sleep mask on them
spk_0
and said, find your way across.
spk_0
No one could do it.
spk_0
And it wasn't the long way.
spk_0
It was the distance, like halfway across the field,
spk_0
which is only 50 yards, and they couldn't do it.
spk_0
Most entrepreneurs operate their businesses this way.
spk_0
It's very reactionary.
spk_0
It's like, oh, my instinct says go here.
spk_0
My instinct says go there and we're totally blinded.
spk_0
So we have to pick a beacon of what the business needs.
spk_0
The typical beacon is this.
spk_0
The most common missed part in businesses
spk_0
is are you profitable on a daily basis?
spk_0
At the end of today, Saturday, are you
spk_0
going to walk out of here in your business
spk_0
and made more money than it spent?
spk_0
And tomorrow, it doesn't make more money than it spent.
spk_0
Most entrepreneurs don't focus on that at all.
spk_0
They simply say, need to sell more.
spk_0
And they actually dig a hole further.
spk_0
So the number one beacon is sustainable daily profitability.
spk_0
The second beacon, after that, once you nail your profitability,
spk_0
you can use profit first to do that.
spk_0
Number two is efficiency.
spk_0
And I'll give you the hack to efficiency
spk_0
that most people don't do.
spk_0
Most people say, oh, I gotta learn how to delegate.
spk_0
Question.
spk_0
Who here has a personal assistant raise your hand?
spk_0
Live audience?
spk_0
OK.
spk_0
Hands up.
spk_0
spk_0
Who does not have a personal assistant?
spk_0
OK, keep your hands up.
spk_0
You are the personal assistant.
spk_0
If your hand is up right now, it is the biggest flaw
spk_0
in small business.
spk_0
Everyone that just raised your hand,
spk_0
hire a personal assistant, stat.
spk_0
And they don't let me full time.
spk_0
They work one hour a month.
spk_0
And it's not to have someone doing work for you.
spk_0
It's so you can learn how to delegate to other people.
spk_0
Is the biggest weakness most entrepreneurs have
spk_0
is the ability to delegate.
spk_0
Second tip.
spk_0
Most people delegate the wrong thing.
spk_0
What don't I like to do?
spk_0
I don't like doing this.
spk_0
I don't want to delegate it wrong.
spk_0
What do you love to do so much?
spk_0
You'll never give it up.
spk_0
Delegate that.
spk_0
Because when you can delegate your passion,
spk_0
you'll learn to delegate the entirety of your business.
spk_0
Love that.
spk_0
Yeah, I mean, Zach, you know what one of the first things
spk_0
we do in the boardroom is, which is yell at you guys
spk_0
to get V.A.'s, right?
spk_0
He's not even his head, yes.
spk_0
And that is because you're right.
spk_0
Otherwise, that means you do not value your time more
spk_0
than minimum wage offshore labor.
spk_0
And like, you got to look at yourself in the face
spk_0
and think about that for a second.
spk_0
You are saying your time is not worth more
spk_0
than a couple of dollars per hour.
spk_0
And if that is true, then are you really a business owner?
spk_0
And I think the answer to that is, no, you're an employee.
spk_0
They're still an employee status.
spk_0
And one of the first things we do in our groups is say,
spk_0
let's offload some of these.
spk_0
Let's kill the zombies.
spk_0
Let's cut the weight.
spk_0
And let's offload the things that you should never be doing
spk_0
in the first place.
spk_0
And now they're incredible systems to do that.
spk_0
And we'll talk about that later today as well as Zach Knos.
spk_0
OK, I want to talk about, let's talk about profit first.
spk_0
Many people think revenue minus expenses equal profit.
spk_0
And profit is the last part of the equation in business.
spk_0
You famously argue the opposite.
spk_0
Let's talk about what the profit first framework is.
spk_0
So after struggling with my own finances,
spk_0
I looked at my businesses historically and while they grew,
spk_0
and I did sell two businesses, they were never profitable.
spk_0
And so they were strategic acquisitions.
spk_0
I was lucky to get out.
spk_0
Most people will never sell their business.
spk_0
So I ran the data.
spk_0
There was a study from the SBA and conjunction
spk_0
with the major bank.
spk_0
They identified 83% of small businesses in the US.
spk_0
There's 36 million of us now.
spk_0
Under 25 million of revenue, you're
spk_0
considered a small business.
spk_0
So it's probably the majority of this room.
spk_0
83% of us are surviving checked by check.
spk_0
And probably everyone in this room, in part,
spk_0
started your business for financial freedom.
spk_0
So I'm like, oh, we started our business for financial freedom,
spk_0
but no one pulls it off.
spk_0
What's wrong with us?
spk_0
And then I was looking at the formula one day,
spk_0
and I said, holy crap, that formula is wrong.
spk_0
It makes logical sense.
spk_0
Sales or revenues, the strategy expenses,
spk_0
what's left over is profit, to make sense.
spk_0
It does not make behavioral sense.
spk_0
It is human nature, what comes first, gets done,
spk_0
what comes last, gets ignored.
spk_0
The money on the syndrome.
spk_0
We are told profit comes last.
spk_0
It's the bottom line, last.
spk_0
It's the year end, last.
spk_0
It's all last.
spk_0
And so most business owners, and however, my business,
spk_0
I'd wait till the end of the year, my gosh, shucks.
spk_0
I wouldn't use word, shucks, but your mom's here.
spk_0
I'm like, ah, shucks.
spk_0
Yeah, I can never swear it from my own mom,
spk_0
but I'm f-bombing here.
spk_0
I would go, shucks, I don't have any profitability.
spk_0
Maybe next year.
spk_0
And that was the fundamental flaw.
spk_0
Once I took my profit first,
spk_0
I started becoming a profit all every day.
spk_0
It's to pay yourself first principal applied to business.
spk_0
And this goes back to biblical time.
spk_0
It's like nothing new.
spk_0
In the Bible, they talk about tithing.
spk_0
And then it's essentially putting money aside.
spk_0
It's been modernized in tons of personal finances.
spk_0
We're told to have a 401k, pay yourself first.
spk_0
And yet in a business, we don't do it.
spk_0
So it's literally that simple.
spk_0
And in a shell game, it leverages into behavioral principles,
spk_0
a thing called Parkinson's Law.
spk_0
Parkinson's states that our demand for resource expands
spk_0
as the resource expands.
spk_0
The more time you have to do something,
spk_0
the longer it'll take.
spk_0
The more cookies they're served as a dessert,
spk_0
the more you're gonna eat.
spk_0
Guilty.
spk_0
And the more money you make in your business,
spk_0
the more you will spend.
spk_0
As your revenue goes like this over time,
spk_0
I bet your expenses increase the uncanny same rate.
spk_0
It's because of how we're behaviorally wired.
spk_0
So what we're gonna do is starting today,
spk_0
every time sales comes in like today, take a percentage.
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You wanna have 10% bottom line, take 10%, 20, great,
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take 20%, take that profit, hide it from your business.
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And now your business tells you what's available
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to run your business.
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What I say is profit first doesn't fix your business.
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It tells you what needs to be fixed within your business.
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Because if you want that profit number,
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it'll tell you you don't have enough.
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Your prices are wrong.
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Fix your margins inefficient, over costs, all that stuff.
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I love that.
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We'll do an activity I think later today
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that talks about like we like to have people actually think
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about wearing your business,
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can you cut costs immediately?
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It's like one of my,
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because it's hard to make new sales, right?
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You're like, yeah, I'd love to go right now,
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close a bunch of new business, go out there,
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execute on it, can be hard.
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You don't always have control over that immediately,
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but somewhere in your business is sitting some cash.
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And so we have a process,
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Carter's really good at this,
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where we go through and analyze again and again,
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where in your business do you have hidden money?
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And it's not the sexiest of things,
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because nobody's like, I saved a thousand bucks today.
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You're like, I close a bunch of new clients.
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That's way sexier.
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Who gets paid the most, sales people,
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who gets paid the least, accountants,
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and yet accountants are more consistent.
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And so I really like this.
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That's brilliant.
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There's a little hack you can do.
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Let's do it.
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Get a credit card, a new credit card.
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This sounds crazy for your business.
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You can do it in your personal finances too.
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Move all your subscriptions to that one card
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and get paper statements.
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I did my personal finances.
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I'm like, oh, I probably spend a couple hundred bucks
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maybe on subscriptions.
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Holy crap, I spent 500.
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I got the hydro system, I got the peloton,
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I've got Netflix, and I was like,
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what am I doing?
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I'm not using half this stuff.
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You've got to make it visceral
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and you've got to make it conscious,
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as opposed to subconscious.
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In your business,
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set a dedicated card just for your subscriptions
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and you'll see how much you're spending.
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It's the first way to get control of that stuff.
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I love that.
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Yeah, I mean, and I want to open it up
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from questions here at the end.
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So think about it for a second.
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Have your questions kind of ready.
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The other thing I think we don't think about
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enough as business owners is investing in ourselves.
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Yeah.
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And I know it sounds a little cheesy
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because it's so much easier to say,
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invest it in the business here.
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I, you know, I hired a new person,
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but I've found that if we don't become better,
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our business never gets better.
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And so I'm curious.
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You've been in the sort of educational business
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for a long time.
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Do you still have coaches and mentors?
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How do you think about investing in yourself
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as the entrepreneur and getting better?
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Is that important to you?
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So wickedly important,
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surprise.
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What I do is identified what is the role that I enjoy the most,
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meaning gives me the most joy.
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But first I had to eradicate myself from doing it.
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So let me explain.
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I get the most joy from being a spokesperson for my brand.
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Okay.
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I realize that requires a lot of public speaking.
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And I realize if I'm the only person to do it,
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I become the linchpin for my business.
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So first I educated about 50 people on speaking on profit first.
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And in fact, there's like three profit first
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keynotes going on today.
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And I'm not doing any of them.
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So that's the first thing.
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So I'm not necessary.
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Then I said, okay, my own the business.
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And I want to do what gives me joy.
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I'm not going to sit on the beach and stuff.
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So I'm going to reinsert myself.
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And I want to be the best spokesperson I can.
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So I go to improv classes.
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I study comedy.
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I look at what do my contemporaries do?
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And most people sit behind a diast and like,
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nice, nice, nice.
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Like that's the one thing I can't do.
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I have to be different.
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So I study theatrics, performance, all those things constantly.
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I have a speaking coach who comes to my events
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and critiques me sometimes live.
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Like, he'll be doing signals.
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He'll sit in the front row.
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He's like, I do.
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Like we have these hands, he goes, oh, my God.
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Hands out of her pocket.
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Name John Bates.
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Yeah, so I very much invest in that.
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I think for any of us, this is human nature.
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We can be super elite at very few things.
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But pick that thing and then you become the Michael Phelps
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or the Jimmy Michael Dorf of your category.
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Well, it's not you all know Jimmy Michael Corp.
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No, poor Jimmy.
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What the way is.
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I know.
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He's like 20 years old now.
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He's never had a girlfriend as a result because of me.
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I love that.
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Thank you.
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I think a lot of times we need to give ourselves permission
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to spend time getting better because it feels like there's
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too many things to do every single day.
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And it might even feel like a little bit of a luxury.
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And I'm a big believer that if we don't spend money
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becoming the best CEO, we can be, then how can we hire
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the best talent who can then be talking on other stages,
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who can then be growing the business?
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You cannot attract what you are not.
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And so I think you have to keep becoming better
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if you want to attract better people.
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OK, I have one last question that I'm
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going to open up for you guys.
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You often talk about building a business that
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runs without you.
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What's the first system every owner should put in place?
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Oh, with every business we invest in,
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we immediately schedule a for-requication for the business
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owner within one year of today.
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And I challenge you right now in your calendar,
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put a for-requication.
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That's one month away from the office.
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Tell your loved one, your going on vacation with them,
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perhaps, tell your kids.
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They're the ultimate accountability mechanism.
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And if the thought of that gives you a heart attack,
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and when most business owners it does,
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that's the first indicator we do not have a systemized
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business.
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If you can extract yourself from a business
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for four consecutive weeks, we actually
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turn off your email, full shutdown.
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It changed the mindset from how am I
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going to be the superhero again today
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to how am I going to get the business operating without me.
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And that's what we do.
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That's the first thing.
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At what level of revenue or existence of a business do you
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put this in a place?
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We found like $100,000 business.
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And it's like, how can you do with that?
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Is it one person business?
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Even if you're one person business,
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you have vendors, maybe an employees, you have clients.
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You can make your clients work for you.
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I grew up in the back in the day where you had catalogs.
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And you're like, you want to order
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that nice expensive shirt of yours.
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You call up and they operate, be like, oh, what's your address?
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And you say, it's one, two main street.
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And I'm like, what was that, Vayne Street?
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No.
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Now they have customers doing the work.
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We actually go on the web and we're like,
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like, one, two main street.
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We think it's cool entering the data for them.
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So you can actually train your customers
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to do the work for you.
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Your doctor, your GP, has you filled out
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this ridiculously long form for you.
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You're doing the work and I'm like, this is amazing.
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So even if you're $100,000, you can do it.