Recession Proof Your Business (2023)

Welcome to the Growth Stacking podcast. This is Dan Martell. The job of the CEO is not to build the ship, even though it is part of that. Our job is to actually set the sail. Right now, we've been gone through a whole lot of stuff in the economy. Banks crashing, valuations, going to a third. And what I want to share with you guys today is how to scale to 10 million, but do it in the craziest environments. If you learn what I'm sharing with you today, not only will you get to the 10 million mark, which is absolutely cool and fun, but more importantly, you guys are gonna transform your relationship with chaos. You guys down for that? Yes or yes? Perfect. You guys are in the right room. I wanna start off by sharing my personal story. Because when I was 28, I thought I was doing everything right. I had failed my first company at 17, gave it another try at 19, failed again. Started consulting, writing code for three or four years. And when I was 24, I finally decided to read a business book. It's crazy that I went so long never reading a business book. But I read the E Myth and through that process, I decided I need to do this. I need to create a franchise prototype. And I hired a coach named Bob. And Bob was this cool dude out of Toronto. He was a certified E Myth coach. And Bob showed me all the missing pieces around building a business. And because of his mentorship, I was able to finally find success in my third company called Spheric Technologies. And what happened is because I got a taste of success, I kept pulling on that string. I just wanted to win. You gotta understand, I went from 17 to 24, trying really hard and just failure after failure. So once I tasted a little bit of what other people would call successful and started generating revenue, I was just all in. And that's what I did. For four years, I was working 100 hours a week. I was traveling 250 days a year. If a customer called on a Sunday, I answered the phone, I went to my laptop, I would go to my friend's birthday parties. I remember one time, my buddy Nick, he had a birthday party and I show up with my laptop and I'm sitting in the living room while there's a full on party going on to celebrate his birthday. And I'm working on contracts and emails. It's called blue facing. You guys know what blue facing is? It's when you're in the dark and you got your phone in your face, you look blue. I was blue facing at his birthday party and I Thought in my head, I am one of the best friends in the world because I'm so busy. But I still showed up for his party and he thought to himself, dan is the most ridiculous dude in the world. That was my mentality. I don't know if you guys can relate to this, but because I had no success for so long, I was worried if I would stop any of that, that everything would slide backwards. Can anybody relate to that? Where you guys are just doing and doing and you're building momentum and volume and you're just worried if you stop. Well, here's what happened to me. Not only did I build a multi million dollar company at 27, I became a millionaire when I was 27. But the downside was one Sunday I was working at the office and I was supposed to be home for dinner. I was engaged to a woman. We had just bought a new house and I looked down at 6:30 and I go, I'm late. I jumped in my car and I rushed back and I run up the stairs to our home and I walk into the living room that was open to the kitchen and I see her in tears and she's just sitting there in the kitchen just beside herself, like, can't even breathe. I don't know if you've ever had somebody just emotionally distraught. And she just looks at me and just takes the ring off and drops it on the counter and just blurts out, I can't do this anymore. And leaves and walks right past me, goes and stays with her parents. And it wasn't the first time she had ever shared this with me, but I just knew that time it was different. And this was three months before our wedding day. And it absolutely crushed me because I had been doing everything for us, for our future, for this family we were going to create to have success. You guys want to hear the craziest part about all this? She never asked me for any of it. Some of you are on this rat race of success and you're using the excuse of my family, my community, the people paying attention, my employees, but none of them have asked you for any of that, Right? And that's where I had to learn these lessons. And I went on a journey after she left to just try to find myself because I had figured out how to achieve, but I didn't understand how to lead even my team. I was successful in my business, but I had 30 people reporting directly to me. And I was explosive. I was emotional. I would just tell everybody what to do and they would do it out of Fear. I didn't build a team. I didn't build a culture. And that's what I want to share with you guys today, is how do you scale your leadership to 10 million? Because there's this philosophy called the law of the lid. John Maxwell talks about it in the 21 irrefutable laws of leadership. And no business will grow past the level of the leader. So if you're in this room and you want to scale to 10 million in ARR, go look in the mirror. Because the only way that's going to happen is if you level up your leadership skills. So are you guys down to learn how to do that? Yes or. Yes. It's wicked. Let's dive in. So this is. I know how douchey I look when I put this up here. And it's either gonna inspire you or trigger you. And I'm totally fine with that. But I share this because this is a picture from a retreat that I do with my wife. Every quarter, we take three days off, and I wanna hopefully sell you on this concept that you can absolutely live a life that's bigger and actually build a bigger business. While I do these quarterly retreats, my company continues to grow. My team continues to show up, and it doesn't require, like, stock options and all these incentives a lot of you guys have been hearing about in the Valley. It just requires you to show up differently as a leader. And that's the meat of it. So I want to share with you guys three big ideas. But before I get into that, I want to talk about the pain line. So in the growth phase of any company, entrepreneurs will eventually hit what's called the pain line. And here's what I've learned about entrepreneurs. They will not grow into pain. If there is a knife to your throat and walking forward means you're going to get stabbed in the neck, you will not walk forward. Usually in these moments, I get the call because people want to do one of three things. I call them the three S's. They either want to stall. You know, I made more money last year with less headaches. Anybody resonate with that message? We've all been there, right? Where we grew a lot, you know, and we made less money, and it was a lot more headaches. My buddy Matt had an electrical company. He's like, hey, Dan, is it okay if I don't want to grow? Can I just be the same size? And I'm like, yeah, you can. But here's what I know. The market's not gonna slow down. It grows Every year. It's called gdp. Your customers aren't gonna require less of you. They're gonna expect more. So eventually, your best customers are gonna leave. And then the third is your best team members are gonna leave because they have a vision for their life. They that if you can't fulfill, they'll find that person to fulfill it. Because our goal as leaders, you might want to write this one down, is to have a vision big enough for every person on our team's goals and dreams to fit within it. If your vision for your business isn't big enough for everybody on your team's goals and dreams to fit within it, you're going to lose your best people. The second S is sabotage. And this one is a funny one. So I'm going to give you a few examples. My buddy Trevor did this recently, and he essentially had an opportunity to 3x his business in a month through a new partnership. And instead of replying right away to the opportunity, he sat on it and he opened the email. Then he closed the email. Then he opened the email. Then he closed the email. He never replied. Eleven days later, he goes to the gym on a Saturday. He's feeling good about himself. He ate really clean the day before. He's got the confidence up. So he finally replies to that email. And the person's response was, hey, man, appreciate you replying, but that opportunity has already left. He sabotaged himself from growing. Some of you don't realize that you've hit the pain line. And because growth means more pain, you sabotage your success. And it can show up. As simple as not making a key higher out of fear. It could show up essentially anytime. Your calendar will be compromised. If growth means your calendar will turn into chaos, then you won't grow. And then the third S is selling. You know, my buddy Jason called me probably six months ago because his business wasn't doing well. He wanted to exit. And I asked him, list me the three things that are not going good in the business. He's like, one, two, and three. I said, cool. If those three things weren't an issue, would you sell the business? He's like, no. I go, well, here's the thing, man. Every entrepreneur will hit their complexity ceiling. And you either decide to deal with that complexity ceiling today, or you can go to the next business, the next green pasture, the next. You know, we always think the other idea, the other market's better. You will hit that same complexity ceiling, and it's gonna stop you. So either start today or deal with it later. So what I Wanna share with you guys is the buyback principle, which is we don't hire to grow our business. We hire to buy back our time. Because if you do the second, you get the first. But if you do the first, you won't get the second. Does everybody get this yes or yes? Perfect buyback principle. This is the philosophy. So here's what I learned a long time ago. $10 million companies, startups were not built off $10 tasks. Mathematically impossible. It's a physics thing. You don't have enough hours in a week. You can't build a 10 million error company doing $10 tasks. What I'm gonna share with you today, specifically about scaling, is the leadership side. Cause I feel like that is the biggest opportunity for all of you, is how to show up for your team in a way that can scale and you don't become the complexity ceiling for your business. So three mistakes I see entrepreneurs make all the time. Number one is holding on too long. How many of you guys start to feel really warm on your chest or kind of like get super anxious if I tell you about delegating to other people, you guys a little nervous, right? The reason why is because a lot of us have a fear of losing control. My son's like that. He has Legos and he considers himself a master builder. But he does not like letting anybody else help him. Because what if they do it wrong and then he's got to fix it? Many entrepreneurs deal with this. They hold on for too long and write this one down. Your number one strength becomes your Achilles heel as you grow. So that's a crazy one for you to wrestle with. The thing you're great at as you grow to 10 million will be the number one Achilles heel in stopping you from growing. Because it's the thing you're going to judge the most and you'll be the most critical of, and it's the last thing you'll give up. And you'll be the bottleneck for your team. So I want to share with you the big lesson I learned from Richard Branson, which was it's not even just about buying back our time. It's about protecting our time. The opportunity for you to transform your team and the way you show up as a leader is through protecting your time. So I had the fortune. I grew up in a small town in eastern Canada. I read Richard's books. And if you don't know who Richard Branson is, he's technically the billionaire every other billionaire wants to be. Like, like literally exactly. So when I Get the email in 2017 asking me if I want to spend a week with Richard Branson. I was like, okay, what's the date? Is this April 1st? Like, what's this? Makes no sense to my brain. And the reason why is I was working on this company called Clarity, and Richard was an investor in my friend Dan's company, Zozi. And he said, hey, Dan, I'm going to Switzerland for a ski week. You should invite some friends. I'd love to meet some of the people in the valley doing cool stuff. Whatever reason he thought what I was doing was interesting. So I get to go spend a week at Richard Branson's. Tim Ferriss is there. Brian, who just sold his company Braintree for, I think 650 million, is there. There's literally. It's like imposter syndrome on my part the wazoo. Like, I'm thinking somebody's gonna discover quickly I'm not supposed to be there, and I'm gonna get pulled out of this house and brought back to, you know, back home. And here's the thing that resonated the most with me was watching how Richard spent his time. It was fascinating. And I think this is the opportunity for everybody in this room to understand is here's a guy that runs 400 companies. Technically, he owns 400 companies. Virgin Group of companies is like this big conglomerate. Each one has CEOs, and he has two CEOs that runs a Virgin group. It's amazing. And he's skiing all day with us. He's coming out with us for Apres Ski, and I was obviously really excited to finally get to meet him and talk to him. And we had dinner every night. It was amazing. But the thing that impressed me the most was how he protected his time. And the way he did that is every message coming into his life went through a person named Helen. And Helen was his executive assistant. And when you hear things like he doesn't do email and he doesn't have a laptop or a smartphone, it's true he might today. But at the time, literally every demand on his time went through Helen. And the way he processed it was they would have breakfast, and for 90 minutes, she would bring to him only the things she didn't know how to handle. And they would talk about it. And I remember talking to Helen on the third day, and I was like, tell me about your relationship with Richard, if you don't mind. Like, how does it work? And she walks me through this process, and I go, that's completely different than the way I'M working right now. And what I believe is where you're at today. If you want to get to 10 million, you're at a million. It requires a completely different paradigm shift in how you think about your time. When I was younger, I had all the time in the world. So guess what? I didn't value it. What I've discovered is when people get into their 40s and 50s, all of a sudden it becomes really valuable and they start looking at these opportunities to buy it back. And I learned that from Richard. He literally said, I do these things better than most people in the world, and I love doing this. Everything else has to go through Helen, and she knows what I prefer. So I want to teach you the framework called the replacement ladder. So if I was starting today from scratch, this is the sequence. If you don't have something to write down, take photos. But I'm going to go through it and you're going to want to remember this stuff. The first level of replacement is your admin. This is somebody that can do all the administrative stuff in your life. And specifically, I talk about inbox and calendar. Again, if you're building a $10 million a year company, but you're doing $10 tasks, the math doesn't work out. So even from day one, which will be counterintuitive to what you've heard from everybody else, I will actually encourage you and my portfolio companies, that's what I do, is to hire an executive assistant and have them manage your email in your calendar. My brother hired an assistant and I was asking him how it was going. He's like, well, I don't understand what the big idea is. And I'm like, dude, it's like transformational. He's like, yeah, I'm not really getting a lot of value. And when I asked him if he delegated his inbox to his assistant, he said no. What I do is I just send her stuff or him and cc them on task. And I was like, no, dude, all the stuff that's coming into your world needs to be processed by somebody else. And then you guys talk about what they don't know how to handle. So level one is an admin. Level two is customer success. If you're not there, you're gonna feel stalled. And the key roles they have to take over is all onboarding and all support. So far, so good? Yes or yes, perfect. Level three is marketing, because if you're still the one dependent on generating leads, then as soon as you go on vacation or get busy with a new hire, or go on a fundraising process, your business slows down. It's a dangerous place. But the key is they gotta own the traffic in the campaigns, they gotta own the creativity and make sure the traffic's coming through. The fourth level is sales, and this is freedom. And the reason why it's freedom is because of this. And these are only four hires. In your business, you now can sleep and have somebody generate leads, talk to those opportunities, close them as a customer, and somebody can onboard them and bring them into your software. Okay, four hires, and you're now at a level of freedom. And the favorite one is leadership, which is the top level. This is where you have to hire people that lead, but you got to ask them to own strategy and outcomes. We'll talk about this in a bit. But if you hire somebody and tell them what to do, you're doing it wrong. Okay? So this is the first mistake I see founders make. It's that they hold on for too long and they don't know how to replace themselves. This is the model to follow. Here's the deal. And guess what, you suck at it and you're overpaid. Let's be honest, you're not good at it and you're making way too much money, okay? So find a partner that can support you. Second mistake, heads, not hands. A lot of you are in software, so you guys think to yourself, I just need to automate this. I need to outsource this to another part of the world. I need to have just a bunch of hands doing stuff, falling SOPs and automations. What you need to do is understand how to get leverage with your people. That's why I call it heads, not hands. Too often I meet founders and they're like, oh, Yeah, I got 26 people in the Philippines. It's like, yeah, but are they just following scripts blindly? Are you actually hiring people, training them, and having them come up with solutions to problems? So I learned this moving to San Francisco when I was 28. After I sold my first company, I moved there and within a few months I meet Naval at this entrepreneurial dinner. And Naval Ravikant is arguably like our modern day philosopher and startup world. Right? How many of you guys know who Naval is? Naval Ravikant. Perfect. So I met Naval, I think, even before Angellist was a thing. And it was literally after going through so much pain in my previous company and asking myself, well, how do I create in the world but still do it in a way that doesn't sacrifice my relationships, I didn't have an answer to that question. But I wanted to figure it out. And I meet Naval, and Naval shared with me this really, really important framework, okay? And if you write this down, you will now have the four master skills of an entrepreneur. There's only four ways to get leverage. And leverage is everything, right? Because if you want to increase your output, time is a constant, the leverage is a variable, a multiplication of leverage. And then the output is dependent on how well you have leverage. And there's only four ways to create leverage. The first one is capital. A lot of us know this. We're in the software world. Raise capital to hire people to generate revenue. That's more efficient, right? And then we return the capital and we keep the balance. The second one is content, okay? That's why James said, dan's the guy, he's sharing content. I realized a long time ago when I was building standard operating procedures or playbooks for my businesses, that's content. Content has incredible leverage, right? Creating videos, media, all this stuff, incredible leverage. If I record a podcast, it doesn't cost me anything more to have 10 million people listen to it than the first 10. Does that make sense? Huge leverage. The third, which is like hot and heavy right now in the market, is code, right? Think about automation software. It's what all you guys do if you're in B2B SaaS. And then AI. AI is one of the coolest. If you haven't been playing with GPT4, it's blowing my mind what it can do, right? So the third area is finding leverage with code. The fourth one, and what I want to talk about today, is collaboration. Those are the four Cs, capital, content, code, collaboration. And when he explained to me collaboration, I was like, I'm thinking about it completely wrong. Because if I keep telling people what they have to do, then I'm not getting any leverage. Does everybody get that? Truly listen to that. If you have to tell people what to do, then you're not getting any leverage. So Naval shares this with me and I take it to another level. And I built this framework called transformational leadership. This is the solution to the second biggest problem. Transformational leadership is completely different than what I was taught or taught myself when I started in business, which is transactional management. Transactional management is you tell them what to do, you tell them what to do next, or you check that it got done, then you tell them what to do next, which sounds like what I did for the first three companies, Literally. I showed up, I told people what to do, I checked, they got it done. And then I told them what to do next. The challenge with that is that as you add people, there's this natural bottleneck of being able to do that. It usually is about 11 to 12 people, about a million and a half in ARR where you just can't manage. Has anybody ever woken up in the morning with like a project list and then you get in your inbox and then you get phone calls, then you get text messages, and then by like 4:00 clock in the afternoon and you put out all the fires and you told people what to do and you check that they got it done, you told them what to do next, that you finally, at 5, 6, 7 o' clock at night, get a chance to do the work you were supposed to do. Does that sound familiar to anybody? Yeah, I'm not gonna call you out, but that's cause you're doing transactional leadership or management. What you want to do is do transformational leadership, which is you start with the outcome. If I was trying to climb a mountain, I would be clear as day on what we're trying to accomplish. We will get to the top of this mountain. When we get there, it's going to look like this. You're going to have these resources and here's how it's gonna feel, right? Think of it this way. If you're asking somebody to revamp your website, tell them the success criteria that you're gonna use to evaluate if they did a good job outcomes. Then you give them the measurement that you're gonna use to measure their progress. If we're climbing a mountain, I'm gonna say, hey, the core metric we're gonna measure is feet of elevation per day. If I know how many feet of elevation per day you've been doing every day and you just text me, then I can do the third part, which is coach to success. Because maybe day one you got 1,000ft of elevation and then the second day you only got 50 and I'm going to check in with you, hey, dude, what happened? And you're going to be like, yeah, I got lost. Then I'd say, well, what are ways to avoid getting lost? And then the person hopefully will reply and say, well, it'd be good if I had a map. I go, well, where would you get a map? He's like, well, there's these other hikers, maybe I could ask them. Sounds like a good idea. Try that. See what I'm saying? That's what coaching to success looks like. And then you just keep measuring. You set the outcome here's why this strategy is so powerful. If you get this, it will change the game on your rise to 10 million in ARR. Essentially, over time, you build people to a point where they no longer have to come to you for the answers because you're building a pattern where they learn how to self lead. Does that make sense? That's why it's transformational leadership. They'll eventually get to a point where they will start with the outcomes, they will define the measurement for success, and then they will come to you only when they need coaching, but for the most part, they're going to self coach themselves or find the resources online. And this is how you remove yourself from having to be the person. And the day you remove yourself from having to be the person is the day your business will grow. It's the law of the lid in full effect. So here's the big idea. Delegate the outcome, not the task. Delegate the outcome, not the task. And really ask yourself when you're writing that email reply or you're getting on that zoom call and you're about to say something, am I about to tell somebody what to do or am I talking about the outcome? And watch your team elevate through this process. It's a beautiful thing. It's why I love the work I get to do so much, is because I know helping the CEOs in this room is gonna allow you to show up for your team in a way that's gonna transform your culture, it's gonna transform your people, and it's gonna build them to become the people that I'm sure you saw in them when they started with you. But maybe after a few months they start to frustrate you. Those people you're like, I saw potential, but why is he pissing me off so much? It's because of the way you're showing up. The third big mistake is the genius bottleneck. The genius bottleneck. Most entrepreneurs run around the world as the genius with 1000 helpers. And the problem is that you're never going to build the people around you. If you look at the most successful people, the Richard Bransons, the Mark Cubans, you name it. Naval Ravikant. And you look at their leadership team, you look at Bezos, each one of his direct reports CEOs of his divisions or whatever you want to call it, they're world class leaders. And the reason why is because Bezos got rid of being the bottleneck. Okay? And this is the strategy to do it. Adam used to work for me in hr and one Day, he comes to me and he's like, hey, man, I'm stressed. And I go, what about? He goes, well, we gotta hire 12 people in the next quarter. And I go, cool. He goes, I don't know how to do that. And I go, okay, well, what should I do? I don't know. Well, I mean, there's a problem. What's the problem? I need to hire 12 people in the next quarter. Sounds like you have a problem. He's like, yeah. I go, so, like, I love you, man, but are you asking me to do your job? Because I think you're the HR director. Well, I'm not asking you to do my job. I say, well, it sure sounds like it. If I have to tell you the answer to the test, it sounds like I'm taking the test. Yes or yes. Perfect. Stop telling the people the answer to the test. So instead, I taught Adam this simple rule. It's called the 131 rule. I learned it from my buddy Brad a long time ago, and it's transformed the way I show up. I shared it with Adam and I said, here's the way it works. Come back to me tomorrow. In the morning, he texts me and he just says, I'm good. He didn't need to talk to me. Here's how it works. The 13 wrong rule follows these three principles. First off is you have to come to me with one problem. The amount of times people come to me with place, like very broad thing that's not specific, it blows my mind. Defining a problem, a well defined problem is the first challenge. So step one, one specific problem number two is three viable options. Tell me, what are your three options to solving this problem? But viable ones, not like baloney ones that make no sense. One of our options is to do nothing. Well, yeah, duh, Like I could do that job. That's not a hard one. But like, come to me with three viable options. So I shared this with them. And then number three is, what's your one recommendation? Now here's what happened is I share this with Adam and I go, how much time do you need to put together some options? He says, how about till tomorrow? I said, perfect, let's talk same time tomorrow. Circle back. By the morning. When he did the research, it was obvious to him what he needed to do. He didn't even need to talk to me ever again. Here's why the 1:3:1 rule is a game changer for the genius bottleneck, is that when you implement this into your team over time, you get to push all problems down to the frontline workers who have the most context to solve your problem in the first place. Some of you are solving problems with imperfect information, but the team has it. The context is down at the front line, individual contributor level. And anytime somebody comes to you with a problem and you say, what's your 1 3, 1? That's the language you literally, if you're on my team, I will say that to you. Very often they go, oh, this is a problem. What's your 1 3, 1? Well, I don't know yet. Perfect. How long do you need to research it? All right, I get it. Cool. And see, it's not because I don't want to do work. It's just my happy place is arguing around the sequencing and the ideation, right? And that's what you love to do as a CEO. You don't want to actually tell people what to do. You want to know that they did the research to come up with options and then help them craft it and change it and tweak it. And then say, what's your recommendation? And they go, this one. You go, totally agree. Let's do that. That is how you build a company that is not dependent on the CEO. And it can scale, and it is one of the most beautiful things to watch. Here's my philosophy is we build the people, and the people build the business. You want to go from 2 to 10 million, 3 to 10 million in ARR. I'm telling you, it's a very simple recipe. Look at your team and invest in them the same way you invest in your marketing. If you invest in your people to a similar degree as you do in your marketing, in your sales, you will build a team that can execute that vision. If you keep investing in every other area of your business, right? Customer success and marketing, all that stuff. But you don't invest in your people personally with your time. If you don't pour into your people, then you're not gonna build the people that can build the business, and you'll always be the bottleneck. So those are the three big ideas. Number one is, what's the sequence of replacing yourself out of your business so you can get to 10 million? The second one is, how do I show up as a transformational leader so that I can inspire and grow and develop my people, but do it in a way that supports them so I'm not telling them what to do? And the third, how do I give them a tool where they, as a leader, can now push down to their direct reports so that they don't become a bottleneck for their own team because they're gonna do what you're doing. And if you show up as somebody that tells people what to do, they're gonna do the same thing and the whole thing gets bottlenecked. Does that make sense? Yes or yes? Cool. The one question I get every time I share anything about the replacement ladder is, Dan, how do I hire an assistant? Anybody thinking that right now, or what do I get them to do? Or what's your SOPs? Well, here's the deal. I'll give it all to you. I literally put together my job posting for my assistant, the test projects that we use for my Assistant and the SOPs, my personal SOPs. I had her sanitize it, put it together only for this room. So if you want to get that, just go to the URL, download that copy for yourself. And afterwards I'm going to be doing a book signing. This is my new book called Buy Back youk Time. If you like some of the content I just shared, I'd encourage you to go check it out. The audio book is read by me with bonus content and I just want to share this. I believe every one of you guys are here here in the world to do two things. Number one, become the best version of yourself. Wake up every day and grow and develop and just be the best version of yourself. And two, share that person with the world. To your community, to your family, to the people on the Internet. I don't care who you share it with. I really encourage you guys all to keep going on your journey of growth and sharing those lessons with people around you. Thanks for having me. If you like this week's episode, be sure to visit itunes, leave a review that'll help us get in front of other founders just like you. And if you're looking for more resources and video trainings, be sure to check out Dan Martel twolsdemartel.com to subscribe. Keep up the hustle, keep stacking your growth and I'll see you in next Monday's episode. Peace. Grow Peace. Bye Bye.