How To Identify What Business You're REALLY In | Ep 848

If we think about what the product of this business is, when you're in a service business, the product is the service, meaning the people who deliver the service are the thing you sell. And the margin of the business is the difference between what you have to pay them and what you charge for their work. Right. And so our acquisition process to scale the business doesn't have to be customer-facing because you've got phones ringing off the hook. There's already tons of demand. There's insufficient supply. The top 1% of business owners aren't smarter than you. They do things differently. And that's what I'm explaining in this video. I'm Alex Hormozi. I own acquisition.com. It's a portfolio of companies that generate hundreds of millions of dollars per year in revenue. And so I've seen a lot of different patterns across businesses that we both invested and scaled in, or some that we turned down. And so if you feel stuck, it's because what got you from $0,000 to $100,000, or $100,000 to $1 million, or $1 million to $10 million, or $10 million to $30 million isn't going to be the thing that gets you to the next level. And you're probably working on something that was once very important but is no longer. And so the first thing I'm gonna do is share some examples of real businesses that I built where I had to learn this lesson the very, very hard way. And then I'll show you how to correctly identify the core problem for your business today, not what it was last year or 2 years before. And finally, how to confront it and break through it. So to make this real, I'm gonna give you 3 examples of my own business experience of what I thought the business I was in versus the one I was actually in. So in the very beginning, I was into fitness. I got into it thinking that my life was going to be about what workouts were going to be and the periodization and how I was going to structure the weights and the intensity and what cardio we were going to weigh in. And that's what I thought all of the business was going to be about. And then as soon as I actually got into the business, I realized that the biggest issue is most people don't even show up to the gym. And so periodization means almost nothing. And so all of my attention was like, oh my God, I have to get people first in the door and how do I get them to stay? and how do I run this profitably when I've got rent, I've got trainers, I've got equipment that breaks. And all of a sudden I was like, oh my God, I thought I was going to be in the scientific fitness business when in reality I was in the sales and marketing business. And so one of the easiest ways to identify what business you're really in is to zoom all the way out to the people who are already 100 steps ahead of you. All right. Not just 1 or 2 steps, but like 100 steps. And the reason for that is because if I said, if you just look at somebody who's 1 or 2 steps ahead of you, you should do what they do. The thing is, is that they're 1 or 2 steps ahead of you and they're probably gonna get lost too. All right. And so sometimes someone's 2 steps ahead of you on the mountain, but you're both, you're both climbing the wrong peak. All right. But if you look at the people who are all the way at the top, typically it's because they figured out something that you haven't figured out. And so I remember in the early days of me when I was marketing, I used to see like Apple and Nike and I was like, oh my God, if they knew the direct response stuff that I know, they'd be making so much more money. And I said this as I'm like living out of my parents' basement. I didn't actually live in my parents' basement. But you get the idea. And so the thing is, is that when you look at the biggest fitness businesses and you're like, wait, how does this apply to my business? Don't worry, it will. If you look at the biggest fitness businesses that are gyms, most of them are basically in the sales and marketing business. They have absolutely mechanized the ability of getting people in the door. Their general managers for each location are just people who have membership quotas who are driving sales day in and day out. And so for For me, I'd never even sold before. I didn't know what a lead was. I didn't know what email marketing was. I didn't know any of this stuff. And the thing is, is I signed a lease and 30 days later I had to come up with $5,000 and I'm like, how am I gonna do that? And so then I found out that selling was, uh, when I was begging people to buy, to buy my gym memberships, that was a form of sales, not good sales, but it was a form of sales nonetheless. Right? And so all of a sudden through repetition, I was like, oh, okay. So I have to have these consistent conversations that get people to buy. And if I do that more effectively, then all of a sudden I make more money. Okay, cool. So this is really important to this business cuz believe it or not, people don't wake up someday and say, you know what, I'm gonna sign up for a gym membership. Doesn't usually happen that way. Usually they gotta get interrupted, so they have to get interrupted with some sort of ad and that then reminds them that they're not in the shape that they want to be. Or they put on their clothes in the morning, they're like, oh my God, I can't close this thing. But still they don't just say, oh, I'm gonna call the gym up. Not usually how it happens. Instead, again, it's other people stopping them at the parking lot being like, hey, do you want a free workout? Our thing. Or showing up to their office of work and saying, hey, we made these protein muffins. Hey, while you're eating these muffins of ours, can I tell you about what some of my private training might do for you? Right? Like, you actually have different ways of get— you have to get in front of people in order to ultimately bring them to the gym. The other problem with gyms that I didn't know I was in is that basically no one sticks with gyms. All right. Now, there's a very small select group of people who are hardcore lifters who do absolutely get obsessed with gyms. But here's the crazy part that everyone in the industry doesn't tell you. They are such a small percentage that they're the ones who actually take up all the space in the gym. And if the amount of people that actually were subscribed to the gym, all of them came, no gym model would work at $10, $20, $30 a month. Like if you actually had people pay who only used it, your gym membership would have to be something like $200 to $300 a month. Which just so happens to coincide with, with the vast majority of service-based gyms, cross-training facilities and boot camps and similar private training facilities. All of those have clients who all show up, and that's why those prices are where they're at. And so even a business like Crunch or Planet Fitness, they have $10 a month memberships, but they still have like 5 or 6% per month of their customers who turn out. So that's like half the customers per year are leaving out the door. And so if you've got thousands of customers and you lose half of them every year, guess what else you need? A machine for generating another few thousand customers to fill up the bucket. And so these very large companies know how to train sales staff, recruit sales staff, market across different channels to get customers in the door. And once I figured that out, my gyms started growing. But until I did, I was like lost. Okay, so every business has to be a marketing and sales business. Uh, kind of. And so then I got into the supplements business And I thought I was okay. So this business for sure is about what's inside of the bottle. Right? And so I got Dr. Kashey, he's the smartest human being that I know, who's a PhD biochemist, got his, you know, PhD when he was 21 years old. He also did the stacks for Olympic teams and he has a national log bus driver. So I was like, this guy's gonna come with the most efficacious product, the best ingredients. And I just said, listen, you make the best thing you could possibly make. I'll figure out how to sell it. Right? But here's the thing, that was the business that I thought I was in. The actual business that I was in with supplements is actually in the brand and distribution business. Now let me explain why. So the thing that, the ugly secret of the supplement business, at least in the United States, is that if something actually works, it's most of the time illegal. Because if something works a little bit, then typically if you put a lot of it in, it works a lot of it. Now I think supplements are good for, you know, filling up holes, nutritional holes in people's diets so that they can get some of these other, you know, minerals or whatever into what they eat. Or it's a truly a supplement where you're like, I need to eat more protein. Can I just like have a powder that has, oh, you know, a higher concentration? So I think there are benefits to that. But the thing is, is that if you are a customer, when you have two different proteins that have the exact same calories and macros, what gets you to buy? The brand. And so because every single supplement supplier has access to the same ingredients more or less as everyone else, and the research studies that are out there, anyone who says that they know the research, the customers certainly don't know what the research is. Nor do they really care. What they really care about is how good does it taste? And do I feel cool when I drink it or eat it? And I was like, oh my God, this is not at all what I spent my entire time building this business to be. And so then I had to learn all this stuff about brand. Now, I didn't know anything about brand at that time. And so that business kind of got to what I would consider like a direct sales model because I took all the gym stuff of like, oh, it's gonna all be about sales. It's all hand-to-hand. But what I really missed was the cool factor. I didn't understand how to make my products cool. And if somebody's going to buy a creatine for me versus a creatine that's $14 and mine's $60, why are they going to buy it? I didn't have a good answer to that question. And not only that, I didn't have distribution that was convenient. And so in the beginning, for a business like this, like you can sell online to consumers, they cover the shipping and stuff. but a lot of times people still like buying supplements in person because it's very easy. You don't have to pay the extra shipping. A lot of supplement sales happen in brick and mortar retail stores. So the business that I thought I was in was a combination of sales and making a great product. But the business I was really in was a brand and distribution business. And you may be like, okay, so that business was maybe different, but the third time he'll definitely get it right. You would hope that, but I, I didn't. And so the, the next business that I, that I had, uh, that, that I wasn't good at was my first software company. Now, now everything here I say with it, you know, with a tongue in cheek in terms of good or bad, right? Like that business still got to just, you know, about $1.5 million a month within 6-ish months of us really launching it. And so that business did pretty well by most people's standards, but I really thought the business could be a lot bigger than that. And at this point when I got into it, I was like, okay, listen, I can market and sell this thing. And so That's all that's gonna matter because I had, you know, again, I learned, I hit everything with the marketing and sales hammer 'cause that was what I was good at. But when I got in the software business, I realized that you could sell software really, really easily because most software solves a problem that's pretty easy to describe and the technology is supposed to remove a lot of pain. And so selling tech is like really easy. The problem is that as soon as someone logs in and it doesn't solve that problem or it solves that problem by introducing even more pain into their lives, which is very common. They then immediately hate it and you by default. Right? And so I thought I was in the marketing and sales business yet again, when in reality I was in the product business and I didn't know anything about product from like a software. I didn't know how to, I didn't know how to write code. I didn't know what UX or design is. Like I'm still not that good at design. And so the whole thing was just kind of like screwed from the, from the onset. I didn't have any of the talent and my strategy was not around product. So the fundamental issue with that business was that the product wasn't good enough to deliver on the promise. And the problem was I needed to make a better product and I didn't know how. Now I ended up selling that company to somebody who did have a full in-house dev team, and I had built, because of my sales and marketing ability, still a pretty decent sized distribution base that he could then leverage with his software and continue to expand the business. So that worked out okay. But let's double-click into this one a little bit more, because I think there's a lot of businesses that this concept will apply to. Which is that I, at the time, hired an outsourced development team, right? And so I just had them build the product. I was like, yeah, do all the code stuff and, you know, ship it back to me. But the issue that I ran into is a couple things. Number one is that I literally aligned myself with someone who had a disincentive to do a good job. So think about this, they bill hourly. And so their incentive is to charge as much as humanly possible and do as little as possible in that period of time. And just keep me on long enough that I don't cancel. Now, the longer you work with an outsourced development shop, the harder it is to leave them because they have all these developers who are dedicated to your account and they're all read up on the code. And so you're like, well, I can't switch now because they already have 5 or 10 or 20 developers that are allocated to me. And here's the even worse part. Let's say that you're still really good at marketing and sales. Guess what happens next? They see how much money you're making. They own the damn software. right? So they can see that you're making money. And you know what's crazy is that I, I noticed as we kept making more money, my fees just kept going up. Wild. Almost so much that I was like, wait, where's my profit? Right? And so at the end of the day, the dev shop was more or less taking advantage of us. And because I had no technical proficiency, nor did I have a co-founder who was really technical, because you can't absolutely have a business like this, somebody's got to know how to code. Right? Somebody's gotta understand technology and I didn't know it and I didn't have anybody else. And specifically, I didn't have anybody else who is incentivized to help because in the software business, you can make the promise of good, fast, cheap, and people are going to buy, but you have to fulfill that promise. And that's fundamentally what makes that business so hard, but also so lucrative when you get it right. So I'll give you another example of what business you really— so I talked to, uh, a, a guy recently who is in the M&A world, so mergers and acquisitions, and he was buying a plumbing business. Businesses. And so he bought up a plumbing business and I was like, okay, well, what's limiting the business? And he said, well, I can't find good plumbers. And the questions that he was asking me were about marketing. And I was like, why are we asking about marketing? Uh, like, do you have an issue, you know, getting new customers? He's like, no, actually, like the phone rings and we like have to turn customers away because we can't even deliver on it. And so I was like, okay, Hold on a second. What's the— and at that time he was like, I'm thinking about leaving plumbing and just getting into HVAC. So like, uh, AC heating, et cetera. And I was like, wait, you're thinking about leaving this business and going to this other one? He's like, yeah, because it's just so, so hard to find plumbers. I was like, well, what's your system for getting plumbers? And honestly, he didn't have one. And so I was like, okay, dude, if we think about what the product of this business is, when you're in a service business, the product is the service, meaning the people who deliver the service are the thing you sell. And the margin of the business is the difference between what you have to pay them and what you get to charge for their work. Right? And so our acquisition process to scale the business doesn't have to be customer-facing because you've got phones ringing off the hook. There's already tons of demand. There's insufficient supply. And so the question is, what are you doing to out-market your competition for talent? And so I introduced to him a concept that I love to talk about, which is the CAT to LT, I don't even know what the letters are, but it's cost of acquiring talent relative to the lifetime gross profit per employee. All right. It's a lot of letters, but basically this is how much it costs you to get people. This is how much you make from them. And so I said, well, how much is it? How much do you make from a plumber per year in gross profit? So revenue minus what you pay them. What do you make? He said, probably about, you know, $300,000 a year. And I was like, okay. I was like, so what are you willing to spend to get another plumber? He's like, well, I think we have like a $500 referral thing if any of the guys refer somebody else. And I was like, okay. So think about how wild this is. You're willing to pay $500 for $300,000 per year. This is per year. All right. For, from your plumbers. And I was like, does this feel a little bit low? Of course it did. It's insanely low. Because the thing is, is that if you're a smart competitor, what am I going to do? I'll be like, well, shoot, I'll pay $30,000. You're one. So all of a sudden, if I offered $30,000 to everyone in my staff, if they can go get somebody, what do you think is going to happen? They're probably going to find more plumbers for me. But guess what else I can do with $30,000? I could also say, you know what, I'm willing to spend that in paid ads or in recruiting or headhunting of people who just go and post people from firm to firm. Well, how do I know? How do I know if it's going to work out? Well, if you're doing a referral bonus, you can say that it's after they're productive at month 6. Now you've got somebody who did the referral who's super invested in making sure that it works out. Most recruiting firms have 90-day clauses to make sure that if the If the person doesn't work out in the first 90 days, they'll swap 'em out for free. That's a pretty typical offer. If you're running ads, you don't have to worry about either of those cuz it's just the cost of the ads. And so the question is, if the one thing that's limiting this business is that he doesn't have enough plumbers, literally everything that he does with his time that is not about creating an acquisition system for talent is the thing that's limiting the business. And so the thing is, is he comes in thinking I'm in the marketing and sales business for HVAC, when in reality he's in the talent business. I'll give you a different example. And the, the reason I'm keeping giving these examples is because it happens in every business. And this is typically what keeps business owners stuck, right? You started doing something, maybe it worked, and then it stops working, but you think, oh, I need to keep doing this thing or do more of this thing when sometimes that's the truth. But a lot of times it's just that the game changed or the real constraint of the business is not the thing you think it is. Right? So I was talking to a media company. All right. So just think super large YouTuber, big creator, right? And, uh, I said, well, what's the goal? And they said, we want to, you know, build, you know, make more money. I said, okay, great. What do you think it is right now? And they're like, well, you know, right now, and just to give you context, they're a way bigger channel than me. All right. Very big. Many millions, tens of millions. All right. And so I said, what are you doing right now? They're like, well, we think that we've really mechanized our process of creating content. And, you know, we think that we can get this, these new levels of, of efficiency in the content creation. And I was like, Okay. So out of 100 compared to the marketplace, what would you guys rate your, your content out right now? So what's funny is that like they were, they were like, I think we're like maybe a 90, but I'm like, like if you just do percentiles here, like your points, zeros, zeros, but everybody, when it's your own game, you know so much about it. You've forgotten more than people who are, have been in this for 2 years know about it. All right. And so I was like, you guys are probably like a 99 out of 100. On marketing. And so the issue with your business, despite the hundreds of millions of impressions per week that you're generating, is that you're just not making that much money. So would you really think that doing more media is the solution? And so they looked at me for a second. I was like, what do you sell to make your money? And they were like, well, I mean, we do, you know, we do sponsorships every once in a while. We basically this and that. They had ad revenue as a, as a, as a source of income. I was like, okay, do you think it's possible that not having a clear monetization mechanism is the issue? What would you rate your monetization strategy at? And they're like, oh, well, probably like a 5 out of, 5 out of 100. I was like, okay, so you've been deploying all your resources to go from 99 to 99.5% rather than taking those same resources. And the thing is, is that when you're this low, going from 5 to like 25 probably takes less effort than going from 99 to 99.5. And so what we need to do is fix the monetization of this business. When they had this larger goal, the business that they thought they were in, which is media, which they were to get to here, but to get to where they want to go, they were going to have to enter into having a business model. They're going to have to enter into monetization as the issue in the business. And so I could keep going with these, like cleaning people who think that they have to go marketing and sell, but marketing and selling cleaning is really easy. The hard part is getting maids who speak English, don't steal, show up on time, and are willing to do it for a long period of time. If you're in the massage business, you're in the recruiting, hiring, training business because getting people to get massages ain't that hard. The problem is finding good masseuses, right? So like I can keep going with this, but the problem that most businesses have is they don't know the business they're actually in and they keep trying to solve the problem that they enjoy solving rather than the one that the business requires to be solved. And so every business has a big hairy problem, and this has been my experience. And maybe just because it took me too long to learn, or I, you know, I, I only learned about it once I get into it. And so as a recommendation, so this is a, this is a, a hack of hacks. If you're entering a new marketplace, talk to the people already in that marketplace and ask them what the hardest part of their business is. And a lot of people follow me because they're in education or consulting, information products. So think to yourself, Well, if you're in that world, what business do you think you're really in? Well, if you learn the basics of marketing and sales, just like any business, but if you want to make it big, look at the big consulting firms. Look at McKinsey, look at Bain, look at Ernst Young or KPMG. These are all recruiting machines because on a long enough time horizon, in the very beginning you learn to market and sell, but on a long enough time horizon, you have to learn how to do other stuff because you can only keep selling infinite people for a period of time until eventually you've sold everyone within a marketplace and there's no one left. You've already pillaged the land. And so instead we have to find a way to get people to keep buying. And so if it's in the service business, it means having exceptional people. If it's in a physical products thing, it's how do we get customers to come back again and again? If you are in the, the, the software business, it's the same thing except you're doing it via code rather than kind of a recurring, uh, how do we basically engineer consumption? right? And so a lot of entrepreneurs who are in the education space, and I bring this up cuz I'm literally educating right now, is that they have one talented person, they have some guru, and then they hire people who really aren't as good, and then they dilute the service quality over time. And then they're surprised that somehow their business stops growing when they were smaller, really fast cuz you had a good product, which was you, you were exceptional, and then you hired all these other people and they're not exceptional. But then you're like, oh, I love this one. I decided to stop doing it because it's not scalable. One of my favorite lines to hear. I'm going to try not to curse. It's going to be hard not to. I'm like really struggling. Motherfucker. They are building cities in the middle of the ocean. We are sending rockets to space and building internet from satellites globally, right? We have electric cars, we have AI robots, and you think that you can't scale service? Of course it's scalable. You're just not good enough. But when you phrase it that way, now it becomes a problem that you can solve. And so this is a second hack of hacks for figuring this out. Insert the problem that you claim to have that is unsolvable and frame it in the form of an "I don't know." So, for example, "No one can sell like me." I hear this all the time. "No one can sell like me." What if you said, "I don't know how to get anyone to sell like me." Salespeople suck. I don't know how to find good salespeople. There's no good plumbers. I don't know how to recruit, hire, and train good plumbers. All the leads are crap. I don't know how to advertise to get good leads. One is a complaint, the other is a question, and the question has an answer. And so as soon as you can actually ask the right question, you start walking down the path to getting the thing that your business actually needs rather than you just complaining and giving yourself an excuse for why your business isn't growing anymore. And then you cast all the power out to some external thing that's amorphous or circumstantial. And that way you feel good and you can rock yourself to sleep every night saying, you know what, I gave it the good fight. But there are some people who actually wanna fucking win. And so for those people, well, this is who I'm making this video for. The thing that you're doing right now, if you keep doing it and it's not working, is the wrong thing. So let me give you one that you might not know as much about. So in the investing world, so I got into this, right? So we, Layla and I took out, you know, tens, many tens of billions of dollars in distributions. And we also sold the company for lots of tens of millions of dollars. And so we had enough money that we could start our own family office and actually start buying companies and investing. And so I thought investing was about doing lots of deals at good prices, right? I was like, okay, if we just buy stuff for really cheap, then we're gonna basically make our money on the buy. And what's interesting about this is that in some businesses it does work that way. So like if you are selling cars, right? A lot of times the price of a Honda 2000, whatever, is this. And so it does come down to like how low basically your proprietary way of getting a commodity for less. You're not going to get it by, by jipping people on the sale. Sure, you want to close at retail or as close to as possible, but you're not going to buy a Honda and then all of a sudden sell it for $100 grand, right? So you're going to make more of the money on where you buy and then you make up the difference on the sale at market rate. Whereas in the investing world, and this is what like I thought it functioned that way, but it assumed businesses were commodities. So think about this for a second. Assumed that, okay, I'm just going to try and buy as many businesses as I can and buy them for as low as possible. This makes sense because I'd read all this stuff. It's like, you got to decrease your risk, got to decrease your basis. But the problem I was missing is that a really good business can outperform all of your bad ones with one good deal. And sometimes good deals, and this is what's crazy, they did this big research study on this in the venture capital world. Oftentimes companies that have up rounds, as in like very quickly they go, you know, they 5x sometimes the enterprise value in like 6 months. Those ones which have absolutely absurd increases and investors are like, oh, I don't, I don't wanna invest in that. They were just, they were 1/5 of that price, you know, 6 months ago. Those still end up being phenomenal investments on a longer-term basis because they usually figured out something very core to the economics of the business now that have now dramatically decreased the risk of the business. And that 5x price is because it's anchored to that smaller price, rather than thinking about it as a discount on the $20 billion company it's destined to become. And so for me, what I thought I was in was the high-volume discount deals. The business that I was really in was learning how to say no at a much higher velocity to a much higher number of deals, because you only need one Facebook, right? I'll give you real numbers. So we did 22 deals over the last 3 years, and 4 of those deals represent 90% of our returns. And many of the deals were a complete and utter waste of my time and money. And the largest company in our portfolio generated over $100 million last year, just one of the companies, right? And so getting that company from $100 million to $150 million is actually the same level of work, sometimes even easier than going from $0 to $1 million or $1 million to $10 million, because that's $50 million in absolute growth. And you get a premium on that EBITDA when it comes to enterprise value. And so you're like, okay, taking a company from $100 to $150 is a 50% improvement. Taking it from $1 to $10 million is a 10x. Right? Not only that, the, the $100 million business has way more infrastructure, has way more talent, has way more people. And so you can, they can deploy strategies that are in, in a more rapid format. When you're $10 million, it's like you've got very limited resources. So you can do like, you gotta pick a couple shots and like, that's it for the year. Right? And you might hear this and be like, a couple shots, that's it for the year. If you've been at the same place for a while and you're not thinking like that, there is a reason. And on top of all that, despite the fact that the absolute growth is easier with larger businesses, and despite the fact that they have more resources, despite all of that, The increase that you get then drops to bottom line. And so if you were to have go from $1 million to $2 million in profit in that one business versus going from $20 million to $50 million in profit with the second business, guess what happens? That $50 million gets a higher multiple than the 1 to 2, even though it's 100% increase. And so hopefully me broaching you to death with different examples in different industries has gotten you to think, okay, maybe, just maybe this could apply to me. Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Layla and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all 8 functions of the business. So you've got marketing, you've got sales, you've got product, you got customer success, you've got IT, you've got recruiting, HR, you've got finance, and we show to show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part that's relevant to you, which will probably be about 90 minutes. Um, and so if that's at all interesting, you can go to acquisition.com/roadmap. Roadmap, R-O-A-D map, roadmap. So let's confront the real problem. At each stage, I've had these learning curves where I thought I knew the business, what the business was about. And then I realized what it was really about, the big hairy problem that I had to solve. And so here's how I think through this. And it can be painful because oftentimes we spend so much time trying to solve every other problem that we think we know how to solve rather than solving the one that we know we need to solve but don't know how to. That's a lot of times what makes that big hairy problem so hard is that you just don't know what to do. And this is why so many entrepreneurs start a second business because they're like, I don't know how to solve to grow this one past this one. And then they make up a reason and then they start another business because they think somehow the second business is gonna be different than the first. When in reality, you're just gonna reach a plateau that you don't know and then you're gonna stop again. Right? So you have to confront the issue. You have to confront the problem. And so this is how I mentally trick myself into getting to being okay with solving hard problems that I have no idea how to solve. I imagine to myself, let's just, this is purely hypothetical. All right. So let's say that I've got a business that's doing $10 million a year. You can use whatever zeros you want. Okay. And let's say that it's got, uh, you know, $3 million in profit. Okay. So this is top line. This is bottom line, AKA profit, leftover cashola, cheese, cheddar. Lettuce, money in the bank account, whatever you want to say. All right. So that's our top line, bottom line. Let's say that we've got this big hairy problem. All right. That's actually a pretty good big hairy problem. Uh, so we got this big hairy problem. Now we think that if we solve this big hairy problem, we're going to be able to continue to grow the business to $20 million a year in top line revenue. And that 3, because we've covered a lot of our base, our fixed costs in the $10 million is actually going to jump all the way to like $7 or $8 million. All right. In profit. So big, a disproportionate profit increase with the increase in top line, which is not uncommon. So here's what's crazy. This business might be worth somewhere in the neighborhood of $15 million. I'm just going to make an estimate. That's a 5X on this $3 million. Okay. Now this $8 million business might be closer to worth maybe like $72 million, right? That's with a 9X. And so the delta here, all right, between here and here is $57 million. And so the difference between these two amounts is $57 million. That is a big, a lot of dollars. And so here's how I mentally trick myself. I say, man, this big hairy problem is big and hairy, but If someone paid me $57 million to solve it, would I be willing to solve it? I'm like, hell yeah, I'd probably solve it for a million dollars. And so I've got this nice $56 million surplus of what I'm willing to do it for versus what it's actually worth. And so I, I tell our founders in the, in the portfolio, I say, once, once we figure out what this big hairy problem is, I always try and remember to do this. I say, hey, if we do this, this is going to unlock $50 million enterprise value. This is going to unlock $100 million enterprise value if we solve this one problem. And so sometimes there's, there's a common saying in the, in the venture capital world, which is, is this a feature or is this a bug? All right. So what does that really mean? So there are some businesses that I will see founders bang their heads against the wall being like, I have to solve the churn issue in my gym. I have to get it so no one leaves. I can tell you right now, you are never gonna solve churn in fitness. You're not gonna do it because it's a human problem. It's not a bug, it's a feature. And so we have to look at what are the features of our business versus what are the bugs of our business. The bugs of the business are the things that you can and should work on that can help you get to the next level. The features of the business is like, this is the core way this business works, right? And so if you know for a fact that people are going to cancel fitness, because let's face it, people do, then what then becomes the issue? I need to build a marketing machine so that I never run out of people. Now, the good news. Couple pieces of good news if you're in one of those businesses is that one, some people come back into the business, right? So if people lose weight or they don't lose weight in 2 or 3 years, they might still wanna lose weight and try again. And so there are people entering and exiting every single market on a consistent basis. Now that tends to be true of markets that have higher inherent churn, whereas there's other companies, let's say your, uh, your internet bill, right? You probably haven't switched providers in a while. Who does your banking for you? You've probably been with the same bank since you got a Looney Tunes account when you were 6, right? And so you've probably had this around the same things for a while because it's a pain to change and you probably don't care that much about it. And so for those businesses, they're all about aggregating market share, just having a really sticky customer base. But guess what? They have problems too. And so my CFO told me this, and I love this line. I was griping to her one day about, about basically features of this business. Like these are things that are absolutely true about this business. And I was basically just complaining because there's nothing I could do about it. And she said, Alex, you know, I've been in business and I've seen a lot of different businesses over my career. The grass is always greener on the other side because no one sees that's fertilized with shit. And she's like, it's all shit. They're all shit. Every business has shit. But the idea is that every business has overhead. Every business has stuff that are features and there's bugs, things that are wrong with your service that should get fixed and things that are inherent to the very nature of this business. Banks are probably gonna have far lower switching than gym memberships. An app that sells some sort of easy game on your phone is probably gonna have, you know, people who delete the app because it's either wasting their time or they beat the game or they just, you know, for whatever reason they just lose interest. It just happens. It's very, it's not as common to have, like, unless you have a super RPG that has an unlimited timeline and things like that. But again, new games come out and then people lose interest. So there's core features inherent to every business and we just have to be able to confront the issue that is at hand. And oftentimes it's big, it's hairy and it sucks. And we gotta make sure that we're not trying to spend all of our effort trying to fix a churn problem that will literally never get fixed because you're trying to ask humans to stop being human. And so if you think about entrepreneurship as a video game, which I often do. All right. So let's imagine that we've got these levels here. All right. So we've got level 0, we got 1, 2, 3, 4, 5, 6, whatever. I should probably end on 7 because 7 feels like a better level to end on, but let's, let's go with 6. All right, so maybe in the very beginning you have to figure out what you're gonna sell. All right, you've got a what. And the big issue at this point is that you just can't make decisions. You're completely indecisive. You can't commit to anything. You have this fallacy of the perfect pick. You think that, that whatever you pick has to be the one thing that you're gonna stick with for the rest of your life. But the reality is that you're probably not because you don't even know what you're doing, right? You don't have the perspective from which to make a judgment. And the only way you can gain perspective in which to make a judgment is to actually pick something and then start and then gain more data. All right? And so you have to do that first. Now let's say that you graduate from that level and you actually made a selection. Congratulations. Now, You have something to sell. So then you have to learn Advertising 101 because no one's going to buy your thing unless they know about it, right? So you have to learn that skill. Now, this is the point that I wanna make. At every one of these levels, you will have entrepreneurs that just get to level 1 and then they don't learn level 2. Let's say level 2 is they learn how to profit, right? They learn a business model around it that they wrap a business around it. Okay, let's say that's level 2. Well, they get to level 1 and then they say, you know what? I just saw this thing over here that, that looks easier to, to, to scale up. So I'm gonna, I'm gonna race through level 1 and level 2 here. And they do. And here's the crazy part. This next business, they do this in 1/3 the time and they're like, oh yeah, this was a great idea. I just, boom, look how fast I'm going. And they, they crash in the same level again. They're still stuck at level 2 because they never learned it. And so the big hairy problem is typically the problem that you need to solve to get to the next level. And it typically requires an entirely different skillset. And most people can't confront that level of uncertainty or that level of dissatisfaction with themselves. And so they just start something else. And I will, I will probably keep repeating this because it, it needs repeating, is that the woman in the red dress, right? She is the distraction. And if you don't know what I'm talking about, in The Matrix, there's a moment where Morpheus is training Neo. They're walking through a busy city. There's people walking. It's very like black and whitish, kind of like very monotone in terms of the colors. It's not black and white, it's green, but whatever. So they're walking. Then all of a sudden, a woman in a red dress walks by. Morpheus is talking. Neo looks back and then Morpheus says, were you listening to me? Were you looking at the woman in the red dress? And then he's, and he looks back at him and he says, look again. And he looks again, there's a gun pointed at him. And he says, freeze. And he said, this whole point, this training is to teach you one thing, which is that if you're not one of us, you're one of them. And so the one of us is, if it's not the core business, it is the distraction from the core business. Because every one of these other things, every one of these other people in the street, every one of these other opportunities can look attractive because you don't know the shit on the other side. It's the grass is greener. Because it's on the other side of the fence. And if you got close to it, you'd see the manure that you had to sit in in order to get it to grow. And so the craziest part about all this is that you can beat just about everyone if you can stick with something for a few years. Let me, let me conquer a big belief that is common among entrepreneurs. One of the biggest reasons that people will switch from their current business to the next business, there's two big ones in my opinion that I, that I hear a lot. One is a fancy way of saying it's hard. This is the, like, I don't think my business is that scalable. And I'm like, remember, cities, middle of the ocean, rocket ships in space, cars that drive themselves, robots that are smarter than humans. Really? You think it's not scalable or you don't know how to scale it? Remember, let's flip it into a question. I don't know how. I don't know how to scale it. How do I scale a business like mine? So what is the difficulties thing? The other one that they do is that they will say, I don't think this business can get to the size that I want for myself. Now I'll put a big disclaimer here, which is that if you want to be the richest person in the world, yes, you're going to probably have to do some sort of technology that has mass global appeal. And it can't look like any of the technology businesses that already exist because those already exist. So it has to be a true de novo idea. And I'll tell you something else. If your goal is to become a trillionaire, you probably won't. And the reason for that is because the people who are the absolute richest in the world are missionaries, not mercenaries. They do it because they genuinely believe that this solution deserves to exist in the world, and they're willing to eat glass for a very long time. Now, in your mind, and I say this as also an entrepreneur who has money goals, a trillion dollars is just like, you, you just see that as winning because it, that means that you're the richest person in the world. but like, can you name the richest person in the world 30 years ago? You can't. That guy was number 1, right? It wasn't Bill Gates. It was a Japanese guy named Tataki something. I can't remember, but like he was the richest man in the world for 10 years. You can't name him. And so I say like, do you know who Paul Getty was? Richest man in the world 100 years ago. 30 years he was richest man in the world. You can't name him. So this idea that you think of becoming the richest man in the world is going to somehow make you impermeable, you'll be immune to impermanence, that you're going to, that your life is going to now be meaningful because of that. It won't be. And I can also tell you that like a billion dollars is a lot of money. $100 million is a lot of money. And so if you, if you're not at that level, like I think having that goal is a bit silly because things will change as resources change, the math and the pieces on the board change as you develop as an entrepreneur. But under the assumption that you have what I would consider to be modest goals of let's say $100 million, let's say, let's make that our modest goal. All right. So bear with me here. Every business, in my opinion, can get to $100 million enterprise value. All right. So I wanna be clear here. I'm not saying every entrepreneur can get to $100 million. I'm not saying every, every business as it currently stands can get to $100 million. I'm saying that there's a version of every business that's maybe adjacent or one or two steps away that can absolutely become it. So lemme give you an example. So let's say that you are, uh, you're like, I have a restaurant. I don't think it's scalable, and I don't think that I can be a $100 million millionaire? Well, all we'd, all we'd have to do to disprove this is say, is there anyone who's worth over $100 million in restaurants? Turns out there is. There's actually a ton of them. In fact, my neighbor above me is worth a deca-billion, 10, $10 billion, and he owns restaurants. Uh, the guy who started Subway was the primary owner of Subway. Like, and those are two different models for restaurants and they're both, those are both fast casual. right? Or fast food, depending on how you wanna see it. Right? And in either of the— one is a franchise model, the other is privately held. Okay, so you— wait, so I definitely have to do fran— you can do either of them, but you have to pick which one you're going to do and you have to go all in for a long period of time. And you might be like, well, yeah, sure, Subway. Well, let's, let's play a fun game. How old do you think Subway is? 59 years old as of right now, me making this video. How long do you think Andrew Cherng and Peggy Cherng of Panda Express have been doing Panda Express 42 years. And so you're right, the 5 years you've been making your restaurant is probably not that close to the 59 years that Subway has. And you're like, oh, well, maybe I'll be like Chick-fil-A, 78 years. Now, can a restaurant business become a billion-dollar business as fast as a software company or technology company? No. But what did we say your goal was? You said $100 million. $100 million. That means you have to get about $10 million in profit in the business between now and the time you die. Doable. That's not a promise. That's not a guarantee. I'm just saying it's doable. And so even if you're like, okay, well I have a dry cleaning business. Okay, well we can make that into a franchise model and then scale that way. We can privately own them and just keep compounding the, the business. And what is, What's the, what business are we really in when we're in dry cleaning? Honest truth, I don't know. I've never been in it. What I would do is I'd talk to a bunch of dry cleaning people. What sucks the most about the business? Maybe talent's not that hard in dry cleaning because maybe the skills of managing a dry cleaning business are not that tough. Maybe the issue is the machines break a lot and you're actually like, actually I'm in the logistics and, you know, machining business. I need a lot of tech inside of that business. Okay, well that's the business you're in, right? Like ask people who are in the business what the hardest part of it is, right? And oftentimes they'll give you the big hairy problem. and then you just get to say, is that the type of problem that I prefer to solve? And this is a frame that Leila uses a lot that I love when we're, when we're helping an entrepreneur make a big, a big decision. What we'll do is they'll say, hey, there's these two paths I have in front of me and I'm not sure, should I do the franchise? Should I do the private health model? Right now, the big overarching thing that no one seems to mention is we might ask, what's the goal? Right? But the subtext underneath of that is in what timeline? Because almost all goals are accomplishable on a long enough timeline, but there's an unspoken thing that all entrepreneurs are like, yes, I would like that yesterday, please. And without, without risk or, uh, or work, right? Or any level of uncertainty. Of course, there's uncertainty. You don't know what to do yet. Now back to the two paths. Let's say that you're making that decision. I want to, I want to start a franchise or I want to keep privately held. Okay. If this is the path, what you want to do is you want to adequately be able to know what the big hairy problem is in each of those paths, cuz there's one and they're different. And then you ask the follow-up question, which is, which of these problems would I rather have? Follow-up to that is, which problem do I feel more equipped to solve today? And so that gives you a lot of insight because a lot of times people wanna think about the upside, but the downside mitigation is what gets you to the upside. Like Elon has this really great quote that he has from somebody else, but he says, entrepreneurship is a lot like staring into the abyss and eating glass. The staring into the abyss part is because you're constantly facing the uncertainty of the business and existential risk to the business every single day, feeling like it might not work, right? On the eating glass side, it's that entrepreneurship is the most efficient funnel for having nothing but bad news. So think about it like this. There are problems that are very hard to solve, and there are problems that people don't want to solve. You get to have the best of both, as in you get problems that no one wants to solve and they're really hard, right? Problems that are hard that people want to solve, they'll still work on them for you. Problems that are easy that people don't want to do, ah, you can usually pay someone enough, but like it's solvable. But it's the ones that really suck and no one wants that you get to have. And what happens is this becomes your lens of the world because you just think all day, every day is problems that absolutely blow And no one wants to do that, but you have to do it because who else is gonna do it? It's your business. And so every single day is just trudging through this muck. And you think that somehow another business is gonna have different mechanics, but this is a feature of entrepreneurship, not a bug. The mechanics of entrepreneurship and ownership, and especially specifically being CEO, being the person who's calling the shots, that's your life. And that's what you get compensated for. And so there's a lot of romanticism about entrepreneurship, the freedom that entrepreneurship gives you. Well, it depends how big you want to go. Because basically the day that you stop eating glass, the day that you, you, you stop dealing with that is the day that, in my opinion, you sacrifice something for potential for comfort. And I think that's okay. I think it's totally okay. But that's a trade you get to choose to make. But at the end of the day, I said that there was two big reasons that people say, I think I should switch my business. One is that the business I have is currently not scalable. Hopefully I've popped that balloon for you. And the other is that I don't think that this thing could become super big. Well, we have to ask the question, how big and why do you want it to be that big? Is if it's just for ego, you're probably never gonna make it because it's too hard and you already have satisfied your material needs. So the reason that those massive companies exist is because the people who started them genuinely thought that it's almost like their purpose in life was to make, was to do this service for the world. And as a result, the company continued to grow and they were willing to deal with all the glass for that entire period of time. And we talk about Jeff Bezos with Amazon. Yeah. You know, it's only just been like a chill 30 years for Amazon, 35. Like we talk about these fast growth tech, like Facebook's like 20-something years old, formerly known as Facebook, excuse me. All right. And so at the end of the day, you're gonna have this choice. And I want you to know that there is absolutely a version of your business that can become $100 million. I really genuinely, like I, I have a very hard time having someone convince me that there's not a version of just about any business. Because there's, because of this, no matter how small the niche is, there's 8 billion people in the world. And so with online, we can now access them. This might not have been true 30 years ago, but today it kind of is. Anything brick and mortar, you can scale nationally. Any national size business. Now, if you're like, well, I'm in a country that only has 7 people. Okay. Well then guess what? You become international. Are you saying it's impossible or difficult? I want to make sure we're clear here. I don't know how to go international. Do you think no one else has gone international before? Oh, people have done it. Therefore, is this possible? Therefore, I can learn it. I think about these big hairy problems because this is what hopefully the entire point of this video is, figuring out the business you're really in and being able to confront the problem ahead of you so that you don't switch paths and you actually solve the thing that takes you to the next level. While you're going through this, I think that there's this personal experience that you have to learn the difference between, which is what's good hard? And what's bad hard. And this actually ladders up to a very classic entrepreneur question of, do I push or do I pivot? And you're like, wait a second, I thought you said that, uh, I shouldn't switch new things. It's different. So if you're, and this typically hap— the pivots happen typically when you're smaller, not when you're bigger, just to be clear. And when I say smaller, I'd say like sub $3 million is when you're like kind of these pivots kind of happen above that, like a tru— like true pivots, like we're doing something totally different. Versus, you know, 3 million plus, it's like we need to add this tiny little tweak to our, our service to make it better, right? The good kind of hard is when you have underlying assumptions that you believe to be true from first principles and just have to push through via iteration. That sounded like a bunch of words. So let me just give you an example. So if I want to start running TikTok ads for one of our companies, because we did, we decided like, you know what, one of the things, the big hairy problem here is that we don't know how to advertise on paid. And that's what's, that's what it's going to take for us to unlock. I would ask the question, let's say I have an accounting firm, are there accountants on TikTok? Yes. Uh, sorry, if I sell to accountants, right, I would say, okay, are there accountants on TikTok? And the answer would be yes. And so it's like, okay, well, is there a way that we can run ads profitably to get our messaging in front of those people? If the answer is yes, then I fundamentally believe that there's a profitable way to turn those eyeballs into customers. Period. Now, you might have run a TikTok ad to get accountants and not gotten them, but it doesn't mean that getting accountants on TikTok is impossible. It's just, you don't know how to do it. Solvable. And you might be like, ah, but that's gonna be hard. Remember, there's gonna be a big dollar sign, a big price tag associated with solving that problem. Let's say if we start running ads and we don't immediately see ROI, that's the good kind of hard. 'Cause we can iterate. Remember I said good kind is you iterate, right? Do we get enough clicks? Do we get enough opt-ins? Are they the people who opt in, are they the right type of people? If not, maybe we need to change the message and change the targeting, right? All these are just iterative. but it's not that it's impossible, it's just it takes work. This is iterative hard. That's good hard. And so to be clear, I don't see losing money on ads as losing money. I see it as investing in something that's gonna increase the enterprise value by creating another acquisition channel and simultaneously diversifying how we get customers. And so having multiple acquisition channels meaningfully increases enterprise value without even having additional profit because it decreases the risk for the acquirer, as in the person who's gonna buy the company, right? If I have two ways of getting customers, I feel way better. If I had 6 ways of getting customers, I feel even better than that. But not only that, each of the 6 ways also brings more customers. So it also grows the business and decreases the risk. It's one of the most valuable things you can do in a business. And so it would make sense that the reason it's such a valuable thing to do in the business is because it's hard. And because it's hard, it's why most people don't do it, which is why it is valuable and it is rare. I can't say that I want this really rare outcome and then at the same breath say I'm not willing to do very rare levels of work. So let's, let's do a hypothetical. So if a business is worth $10 million, Okay. And I can add a second acquisition channel that doubles the revenue and diversifies the risk. That might add $15 million enterprise value. So if I lose $100,000 figuring out TikTok ads over 6 months, but I get a $10 million return on it, would I do it? Absolutely. But the thing is, is I say this and people nod their heads or they're listening and they're like, yeah, I believe that. But you have to see these as investments in the business. Like I'm going to invest this time and this money, and I am willing to not see success for this period of time before deciding to truly call it. And honestly, the when you decide to truly call it is just your ability to deal with pain. So there's something about human behavior around this, which comes down to frustration tolerance. So the basic behavior is how many times you try something again before you quit. And this typically has to do with your history of being reinforced. Forced after multiple attempts. So I'll give you a very simple example. So if you go to a door and you try and open the door and you turn the handle and it doesn't turn, how many times do you jiggle the handle again? Well, it's going to depend on the amount of times in your past where when you jiggled it on the second time or a third time, it actually opened. And so I'll give you a different real-world example. If you say, uh, hey, I'm not going to buy something from you. And the salesman says, well, like, have you thought about it like this? Or have you thought about it like that? The amount of times that that salesman is willing to both follow up and ask again on the call is directly proportional to the amount of times in his past or her past that after asking a second, third, fourth, fifth time, they were rewarded for doing so. And so if someone gets rewarded, again, intermittent reinforcement doesn't mean they have to get reinforced every time they ask 5 times. If they get reinforced enough times that they ask 5 times, they will ask 5 times Every time. So if you have a dog and they come to the table and you give them food because they beg, right? Then what do you do? You reinforce begging. So they come back and they beg. Now, if they come back and then you don't give it to them because you execute your willpower and they sit there, they're like, mm, and they, you still don't give them food. Fine. What do they do tomorrow? They come back again. And what do you do tomorrow? You don't give it to them. What do they do the next day? They come back again. Okay. They come back again. And here's the crazy part. Let's say that, let's say that they come back 5, 6 times. If on the 6th time you give it to them again, you've just taught them that they have to wait for extended periods of time. You've rewarded them trying again and again and again and again. And so entrepreneurs, we are like this too. And if you're newer to the game, then I would encourage you to increase your frustration tolerance. I can't manufacture the win that you're going to have, but this is why I try to make these videos. Is that the amount of times that it has taken me 100 iterations to get an ad campaign to work is a lot. And so now I just have a fundamental belief. I'm like, if we keep working on this, we will make this work because down to fundamentals, there are eyeballs here and we can pay to, to reach them. There's no reason physically why we can't get them to take a click and then ultimately buy our thing. We just aren't good enough. And so we just have to look, are there people who could buy my stuff on this platform? Is there a way to reach them? And can I do this profitably? Yes, great. Then we will make money on a long enough time horizon. And so the only thing we have to do is just not run out of money while we try. I said that this is what this looks like in reality. You make this decision to make this investment because you see the big price tag on the other side, right? And you say it would be reasonable for me to spend $100,000, $1 million, whatever the number is for you, and 6 months to get this thing that's going to double our acquisition, right? Of course you would make that investment. But the first month you spend $100 grand and then you don't make money back, people throw their hands up and they're like, ah, it doesn't work for me. Of course it didn't work the first time. This is why you get paid to solve big problems. The, the types of problems that occur in entrepreneurship is they're all one of a kind. And you're like, wait a second, I thought business behave in patterns. Absolutely. So I think there's this great, uh, you know, like history doesn't repeat itself, but it rhymes. And so it's the same thing in business. Like if I knew every single thing that I was going to do with every business that I started, uh, then it would be instant, right? You'd be instantly, instantly bigger. But no, there's similarities, there's patterns that you recognize, but you're like, okay, we're gonna have to turn on paid ads, but we've never done this for B2B on TikTok. So we're gonna have to learn that little nuance in this setting. And even if you've done B2B on TikTok, maybe you haven't done B2B on TikTok for accounting, but you did it for marketing agencies, right? So like, okay, fine, we did that. There's always gonna be more nuance because I can always say, cool, well, you did that a year ago, but what about today? So the idea that you're going to know the solution is a false belief that will make entrepreneurship significantly harder for you, or at least more painful for you. So I said earlier, this little diatribe that I just went on, there's good kind of hard and there's bad kind of hard. So what's bad kind of hard? Bad kind of hard is when your underlying assumptions are proven incorrect. So this is the classic push or pivot, right? So if we've pivoted several times, but I've pushed a lot more. So you pivot when your underlying assumptions are proven incorrect, meaning So let's say, for example, if a report came out saying TikTok had banned accountants from the platform, then I would say we don't push on TikTok. The underlying assumption was there are people here, we can reach them profitably. Well, the underlying assumption's wrong. That's not true. So at that point, we have to pivot to a different platform or different advertising method. And so I just use this as a clear test of when I'm being stubborn versus when I'm being intelligent. And so before making a big investment, I like to identify what I call the need to believes. Right, or the assumptions that I believe to be true or must believe to be true in order for the remainder to follow as desired. Right? So as long as those assumptions are true, we keep pushing. And if one of those assumptions is proven wrong with supporting data, then you change. And so fundamentally, that's the ignorance tax we all pay, is that sometimes you have these assumptions because you can't know everything. You're not God. And so sometimes you got to find out on your own and you find out that That assumption that I had is not true. And that was kind of like the whole thing this was predicated on. And so then you pivot, you find something else out that is true that you didn't know was true before, and then you make your change. I tell the story in my $100 Million Offers book of a good friend of mine who had a technology business. So you think, oh, technology, this is something that, you know, obviously it's going to be cutting edge. But what he chose to do was try and, uh, you know, turn around a dying industry. So he tried to turn around newspapers. So he said, hey, I'm gonna take you into the digital age and we're gonna have an ad product for you that'll take all your, all your print ads and turn them into online ads on your site. And it's just, you know, you can use our software to do it. It's one click, whatever. It's very easy. And so with that, you'd think, okay, that business makes sense. You're gonna transition these guys over. It gives them a whole nother thing that they can sell. Cool. Groovy. Now, What was the problem with the business? What are the need to believes in that business? The need to believes are that newspapers with their inherent business model are going to continue to exist. Right? That's a need to believe. Like if this is, if they can't make money with their current, because think about it like this, maybe, maybe you could get, you know, a certain percentage of, you know, newspapers to switch over to your thing. But if all of their revenue from print goes down to 10% of what it was before, one, maybe if you had the other, you know, online side, they've already lost their distribution base. So fundamentally, newspapers would have to continue to exist in order for that business to be viable. Now, at the onset, you might get into that business thinking, well, yeah, I'm gonna help them convert. That makes sense. But if those businesses cease to exist, there is no one left to convert because all the people have just switched their consumption to other platforms. And so in that instance, that's what I consider bad hard. That's like the underlying assumption of this business is no longer true. It's proven incorrect. We thought that they would continue to exist. We could flip them over and they'd generate the same revenues they were before. And so then we'd have this massive market to go after. But in reality, many of them just went out of business. And so there's really no one to go after. The few that did, that you could go after, continued to shrink over time. Not a good market to go after. That is a bad hard. It's super hard, just like the other hards, except it's the kind of hard that you can't fix. And so in that setting, you have to pivot. He would then have to ask the question, okay, what other businesses could I add digital ads to? And then at that point you'd have to say, okay, maybe I could take blogs and make it, make a network of blogs. And that's kind of more new age traffic and help them either cross-sell across each other's. And, you know, basically create this network of traffic. Like that would be an interesting business. Again, there'd be need to believes around that as well. But at that point you'd have to have a real existential question of like, who do we want to be when we grow up? Because who we thought we wanted to be ain't gonna work out. Now, little, little subtext here. It's very rare in what I would consider traditional businesses to have a need to believe that's actually not true. If you are an accountant, you are in lawn care, You're in your plumbing business, your website design, notwithstanding AI for the, for the time being and robots taking over, notwithstanding those two things for the last however many years, 50, 60, 80 years, those businesses more or less, you not being able to scale them was a you problem. It was fundamentally, you didn't know how. That was it. There wasn't anything wrong with the market. There's nothing wrong with HVAC. There's nothing wrong with plumbing. Nothing wrong with lawn care. All those things are going to continue to exist. And so if you are limited in what any kind of business that I would consider a normal business, just note that there's nothing to do with the scalability of your business. It's your ability to scale that is the problem. Yours. And so at the end of the day, a lot of entrepreneurs get into this for some sort of freedom or some sort of monetary goal, or because they wanna solve a problem or a combination of all three. But we fundamentally get paid to solve big hairy problems. And the bigger and hairier the problem in general, the bigger and hairier the payoff. Paul Graham said this quote on Twitter the other day, and I really liked it. He said, if you want to make a million dollars, you must endure a million dollars of pain. And I like to consider how much enterprise value I'll get on the other side of this concrete wall that I'm gonna bash my head into. And if the number's big enough and I've got a strong enough helmet, I will keep bashing into it so I can get to the other side. And that's what keeps motivating me. So as long as I'm solving the right kinds of problems, the ones where I can reason to first principles that there is a solution. And that it— and that solution will make money, then I keep going. And if I get to the bottom of it and I find out that my underlying assumption is wrong, I have to change. And that's just as hard. And so for the entrepreneurs who are stuck, who are listening to this, who are watching this, identify the business that you're really in. Confront the big hairy problem in front of you. Don't jump ship thinking that some reason the grass is greener or that the woman in the red dress is somehow different and not crazy from than the woman that you're married to right now. She just has a different kind of crazy, and you'll discover that in time. So you might as well be happy with the one you got because you know what you need to do to make this person happy, and you keep forging. And then you decide whether or not you want to push or you want to pivot based on the underlying assumptions. And if you push, focus on making progress and breaking through that wall because the payoff is on the other side, and that's what makes entrepreneurship worthwhile.