Everything $10M Business Owners Know, That You Don’t

At the time of this video, I'm 44 years old now. I started my first business when I was 19. So if I had a time machine and I could go back 25 years and talk to my younger entrepreneurial self, this is what I would tell me. To go from six figures to seven figures to eight figures and beyond, twice as fast with at least half the pain and agony. Now, just for context, my name is ryan Deiss. At 19, I started my first company from my college Dorm Room. At 21, I made my first $100,000. At 26 I have my first million dollar year. Now at 44, I run multiple eight figure businesses. And last year my companies combined generated over $200 million in revenue. But this wasn't always the case and it hasn't always been easy. So if I could go back and talk to my 20 year old self and give him some advice, Here are the 12 things that I would say. Number one, don't give people C level titles. I will never forget when I started my first business. My college roommate, who was sort of helping me out with marketing at the time, I made him my cmo. My receptionist, I made my coo. Now this was a problem because I'll never forget, one day my receptionist came in and was like, hey, I'm the coo. And I just realized what a COO should be paid, right? It's like, you're not a coo. People will say all the time, oh, titles don't matter. I can tell you titles do matter because unfortunately people more times than not, titles equal entitlement. And so if you give somebody a title that is over and above what they're currently doing and what they're being paid, that is gonna be a problem. It's gonna be a problem for all involved. So be very intentional about the titles that you give people. And if somebody's in charge of something but they're not yet a C level or a VP level or a director level, then don't give them that title. If they're in charge of it, you can just make them ahead of and that's a nice catch. All that doesn't necessarily denote that they're a chief of anything. Number two, pay yourself really, really well along the way. Now, when I first started my business, I didn't think about the idea of taking a salary or paying myself well. Basically, if we had a good month, I took a lot out and if we didn't, I didn't take any out. And I kind of lived in this feast and famine mode. Which was not really great for decision making. When times were good, I would get overconfident and I would take too much out. When times were bad, I would kind of starve to death and I would panic. And because I was in this up and down cycle, I kept the business in an up and down cycle. And it wasn't until somebody who was far more experienced than me in business, one of my first mentors, came to me and said, hey, Ryan, you idiot, pay yourself a salary. That thought had never crossed my mind. I never thought as a business owner that I could pay myself a salary. But that's not what I do. I'm not a wage earner, I'm a business owner. Well, it turns out that if you're a business owner who's also doing a particular job and function in a business, you should pay yourself whatever that role would ordinarily get. Not only is it good for you, it also is just healthier for the business itself. The ability for you to take lots of money out of the business, the ability for you to pay yourself well, that's proof, that's evidence of a well run business. And all these people out there saying, oh, money doesn't matter. I'm not doing this for the money. That doesn't mean you're noble. It means that you are naive. Because if we're going to have a business that's successful, if we're going to have a business that scales, we're going to have a business that employs lots of people, that does lots of good, that business is going to need to be fueled and it's going to need to be fueled by cash. And that cash is going to have to come from profit. The kind of profit that you would eventually want to take off the table. So yes, pay yourself well. Pay yourself really well. Pay yourself a salary, take out quarterly distributions. If you're running a business, you should be making a whole lot of money. Number three, pay your taxes. I can tell you this sounds silly, but the government is the only vendor who can take away your liberty. So do not mess with them. And I can tell you I had to learn this lesson the hard way. I'll never forget one time on a Sunday night I got a call from my accountant. And by the way, I now know it's a bad thing when your accountant calls you on a Sunday night. And I remember answering my phone and my accountant saying, hey, boy, you sure had a really good year last year. I now know it's bad when your accountant compliments you on the year that you had last year? And I was like, yeah, I did. He said, hey, by the way, have you been making quarterly payments? Have you set aside some money because you owe quite a lot in taxes? And I was like, what are quarterly payments? What do you mean? Long story short, it turned out I owed about a quarter million dollars to the irs, and I didn't have it. And it's not like I had spent it all on, like, Lamborghinis and popping champagne bottles. I was putting money back into the business, and a lot of the profits that I had made the year before, I had frankly put back into it in this new year. And I hadn't yet received it, so I didn't have the cash. This could be it. This could be done. So I made myself a deal at that point. I was going to establish a separate bank account just for tax savings, and I was going to fund it every single month. Even before I paid myself, before I paid anybody else, I was going to make sure that I got the government paid. Because you only have one vendor that can take everything away from you. You only have one vendor that frankly owns missiles. That vendor is the government. Let's make sure that they get paid. Number four, always own the relationship with your customers. Now, I talked about earlier how I got into that pinch with the IRS, where I owed him a quarter of a million dollars, and I was able to get out of it. Well, the way that I was able to get out of it, the way that I was able to cover it, is because I had a customer list. I had a customer database, and I was able to put together some offers really quickly, run a bunch of sales to generate a bunch of revenue to pay off the tax bill. Specifically, what I did. I remember I got that phone call on a Sunday night. I remember basically spending all Sunday night and most of Monday moping and feeling very, very sorry for myself. Then all of Tuesday working to build and put together all of these offers that I could then send out, distribute to all of our different customer lists, essentially pulling the best of the best. What's the best offers that we've run? The best promotions, the best of everything. Let's pull those off the shelf and let's get them out there and just see if we can generate as much revenue as possible. Long story short, between Tuesday and Thursday, I generated just over $330,000 in revenue. It was enough to not only pay for the IRS bill I owed from last year, but enough to also pay the taxes on what I had just generated. I basically took all the Money that I made that week and I sent all of it to the U.S. government. And, and I'll tell you, I was broke. And I've never felt so rich in my entire life because I didn't owe anybody anything. It was amazing. But the only way that I got out of that was again, I own the relationship with my customers. Number five, practice the Rule of 40. The Rule of 40 is one of those rules that I learned way, way, way too late in my career. And the rule of 40 essentially states that the combination the percentage of growth and your percentage of profitability should add up to at least 40. So if you're getting a 20% year over year growth rate and you're 20% profitable, that adds up to 40. We're good. So what we're doing with the rule of 40 is we're balancing growth with profitability. So technically, if you're having 40% year over year growth and you're break even, that's technically okay. Can we get at least 25 and 25? Can we have 25% profitability with 25% growth? And the reason that I like 25% growth is because 24% year over year compounded growth is doubling every three years. If you can achieve 24% compounded year over year growth three years in a row, you will double every three years. And if you're doing that while also dropping 20 to 25% to the bottom line, you're going to have a very big business and a very, very, very profitable business just by practicing the rule of 40. Number six, have three months of operating cash sitting in an emergency fund. And when I say operating cash, I mean cash. Don't invest it. This shouldn't be sitting like in Bitcoin on the stock market. Leave it in cash. Leave it in a money market. What you can do is you can take the three months and you can go to your bank and you can get a line of credit secured by that cash. And most banks, let's say that for you, three months operating is half a million bucks, it's $500,000. So you got $500,000 just sitting in an account, sitting in a savings account. Most banks, if you will put that in their account, they will allow you to get a line of credit secured by that amount of a similar amount or maybe 50%. So that's the way you can take a half a million bucks and turn it into maybe $750,000 with a $250,000 line of credit, or in some cases maybe as much as A million dollars. This happened to us. We had a big chunk of money in an account. We had a line of credit for the same amount. And when Covid hit, we were able to draw down on that. Fortunately, we didn't need it. But when Covid hit, we were able to draw down on that. And we knew while everybody else in the world was panicking, we were able to be incredibly opportunistic. We were also able to say to our team, hey, don't worry, we're gonna be able to keep everybody employed. It's gonna be okay. Here's how much we have in savings. Number seven. Don't, I repeat, don't hire an integrator, an operator, a coo. Want to call them Now, I'm going to get in trouble for this, but at some point in your entrepreneurial career, someone is, and some well intentioned person is going to hand you the book Traction by Gino Wickman. And don't get me wrong, it's a great book. I love Gino. There's lots of good things in there. But they're going to hand you this book and you're going to fall in love with a particular aspect of the book. And it's this concept of the visionary and the integrator. And you're going to look at this and you're going to go, oh, that's it, that's me. I'm the visionary. And so what I need is an integrator. It sounds so good. It's so incredibly compelling and appealing. I tried it not once but twice and it's literally never worked. It's never worked for me, it's never worked for anybody I know who's tried this. And the reason is really, really simple. If you're struggling to run your own business, why on earth do you think that somebody coming in from the outside is going to do a better job than you? You need to think about your business like a baby, okay? And just like if you were to have a baby, you don't get to opt out of dirty diapers. What do we need to do? As businesses get more complex, we simply need to get better at new stuff. Specifically, we need to get better at the system side. So what we need to do as the business starts to scale, we need to upgrade the company operating system, which is something you absolutely can do. It's absolutely learnable, it's absolutely figureoutable. And then once you have an operating system in place, then you can hire an operator to operate operating system. But not before, number eight, diversification is for Investors, not entrepreneurs. So here's the deal. You don't need five different businesses. You need one that actually works. And this is one that I violate to this very day. I just. I still struggle with this. I know. I believe that the biggest reason that people fail in their 20s is that they never go deep enough on any one thing. And just if you want to achieve mastery, if you want to achieve momentum, that's only going to come from actually sticking with something. It doesn't come from dabbling here and then dabbling there. It comes from diving all the way into something, sticking with it, and making something out of it, not jumping from the next big thing to the next big thing, and starting over from zero each and every time again. I spent a good bit of my twenties doing that once and for all. Stop telling me about Elon and how he has all of these different businesses. Elon started with one thing. He. He made billions of dollars, and then he bet it all on a few things. And let's be honest, you're probably not Elon. I know I'm not. Okay, so let's just do it with one thing. If you hit it big, you know, and you've got a great team, then we could talk about adding some more. But for right now, in your 20s and your 30s, let's get great at one. Number nine. Don't get into business with friends just because they're your friends. I will tell you the worst reason to start a business with somebody is because you're friends. To decide ahead of time. Ooh, you. We're friends. Therefore, we should start a business together. This is the start of something really, really, really, really bad. I mean, if the deal goes sideways, you won't just have a business failure to deal with. You'll also have the loss of a friendship to manage. Every business I've ever been involved in has had a partner. So I'm not telling you not to get into partnerships. I'm simply telling you if you're going to enter into a partnership, do it because your business partner brings a skill set that you don't have. And. And they're absolutely world class at it. Bad partnerships are way harder to unwind than bad hires. And so the relationship, the partnership, it should be based on two things. A clear division of labor and a willingness to share in the risk. It should not be based on co dependence. It should not be based on loneliness. It should not be based on, ooh, wouldn't it be fun if we got to hang out more? Number 10, hire for your strengths. Now this is opposite of what most people say. Most people say hire for your weaknesses, and that's right. Ish. But it's mostly wrong, especially early on. What I want you to do early on is I want you to hire people who make you better at what you're already great at. If you're experiencing any success right now, there's a reason for that. And the reason for that is always because you are doing something well, you're playing into one of your strengths. So what I want you to do is, is I want you to double down on your strengths and I want you to build a team around you that will amplify them. If anything, I want you to maybe hire somebody who's better at something that you're really awesome at. Because if you're great at something and if the market is responding to that, then if we can get even better, that's where the advantages are gonna be. Not getting a little bit better at something that you already suck at. Because if you're achieving in spite of something that you suck at, it probably doesn't matter that much. Obviously, if there's a mission critical role and you absolutely suck at it, then by all means make a hire. But more times than not, business owners hire for weaknesses that really aren't all that hard and time consuming. Right? We just hire for things that we kind of don't want to do. You know, we pretend like this is a weakness and really we just kind of don't want to do it because it's kind of a pain in the butt. And what we wind up doing is we wind up trading simple, albeit annoying tasks for a new, more complicated task called management. Now you have a new job called manager. You're probably not very good at that either. And you're managing somebody who's doing something that you sucked at, so you really don't know how to manage them effectively. Number 11, I want you to save 10% every single month. And then as quickly as possible I want you to bump it up to 20%. This is really hard for entrepreneurs to do. We work really hard, wanna enjoy the fruits of our labor. Frankly, a lot of our entrepreneurial friends, we see em buying big houses and fancy cars and we wanna participate too. Just try not to do that, okay? Try not to have lifestyle creep. And one of the best ways to not have lifestyle creep is to establish a 401k, an IRA Roth ideally or some other retirement savings account as soon as you can and fund them fully before buying anything fancy. Now I didn't do this until I was in my late 30s. And I was in my very late 30s before I ever set up a 401k for myself. How incredibly stupid. And the reason I didn't do it is because I was like, oh, yeah, that's more for wage owners, that's more for employees. I'm a business owner, we don't do that, that kind of thing. And you know, besides, what's the point having a 401k? I'm basically just matching with my own money. Yeah, exactly. I'm matching it with my own money. That is also growing tax free and tax deferred. I can tell you right now, I still look at that account. It's an enormous amount of money. But had I started in my 20s, I would have millions of extra dollars sitting around growing. If you're incredibly disciplined in your investing, maybe you'd say, I don't want to do a 401k, I want to do something different. Fine, I'm not here to argue any particular vehicle. In my experience, most entrepreneurs are not particularly disciplined in their investing. So whatever you do, get it into some kind of savings account so you don't spend it on something stupid. At the end of the day, wealth is not about how much you make. Wealth is about how much you keep and the return you get on the assets that you store. Number 12, go with the least worst option. Business owners get stuck, and we get stuck very often because we just can't find that perfect solution. We're looking out there at all the different options available to us and we're realizing all these options just kind of suck. Right? And at scale, this is going to happen again and again and again because you're going to have a team at some point and the team is going to be making decisions and then there's going to be some decisions that get kicked up to you. And I promise you, the decisions that get kicked up to you are the hard decisions. And the hard decisions are the ones where there's not an obvious choice. Business is about choosing more times than not from the least worst option. I don't want you to take a flyer. I don't want you to look out there and say, oh, there's this new thing that we can try and it seems like there's no downside. I'm here to tell you if you're pursuing a new strategy because you believe that it's problem free, that is simply a sign that you haven't done enough research. The grass is never greener, especially when the grass you're choosing is in a field that you've never been to and, and that you have never seen. Number 13, always under promise and over deliver. For example, I said that I was gonna give you 12 things and this is thing number 13 and I'm not done yet. So I wanna demonstrate this concept of under promising and over delivering. Because early in my career that's not what I did. Early in my career, I thought I had to make the biggest promises, the boldest claims to get the sale and to close that deal. What I've learned over time is that success isn't actually about who makes the biggest and the most compelling claims. It's who makes the most believable and compelling claims. Right. And not just early on, but definitely if you want to build a brand that lasts. And so that's why you're way better off promising less and demonstrating more. So don't tell people what you're going to do, just go and do it and then tell them what you did. Number 14. Give the people you love first dibs on your calendar. This one's really simple. If you show me your calendar, I will show you your priorities. And I can tell you that for me, back in 2016, my calendars would have showed you that I prioritized that in many respects, I loved my business more than I loved my wife and my children. Because if you were to look at my calendar, you would see, wow, he's basically spending all of his time working and none of his time with his family. And this was not good. And everything reached a boiling point. It came to a head. I've told the story a number of times. Came home after midnight, my wife sitting up in bed, and she looks me in the eyes and she said, look, you keep doing what you're doing, but you can't pretend like you're doing it for us anymore. I would say to my 20 year old self, hey, you started this business so that you could buy a ring for this girl. Well, one day you're going to pull it off. This business you started, it's going to make enough money not just to afford the ring, but to afford a very amazing life for this woman and your four kids. In the future, you're going to be blessed beyond anything that you could ever imagine. But if you're not careful, the business that is supposed to provide for them is going to be the very thing that takes you away from them. Don't let it happen, because I did let it happen. I'm not saying that the solution is something really, really simple. But one thing that we did do, a change that we did make that had an immediate impact that you could do. I said this to my wife. You get first shot at my calendar. And so now my wife and I, we get together between Christmas and New Year's, and we block out our calendars for the rest of the year. We say, when are we going to take family vacations? When are just her and I going to go on trips, just us. And I build my business stuff around the time that we have set. Don't sacrifice your health, don't sacrifice your sanity, and definitely don't sacrifice your family and those that you love at the altar of scale and success. It's just not worth it. Number 15, if you are going to quit, quit on a good day. Here's the deal. There will be times that you will want to quit. There will be times when you will fantasize about having a normal job like everyone else, because you just get fed up with it. You just get sick of it. The pressure's too much, the workload is too much, the rewards are too little, and you're just over it. And I want you to know that that is okay. It's okay. It's perfectly normal to feel that way. In fact, it would be kind of weird if you didn't. That would mean that you're either perpetually successful, which doesn't exist, or completely delusional. If anything, I want you actually to be okay with the idea of quitting, because if you can't quit, then you're trapped, and that's not good either. So I don't want you thinking that you're never allowed to quit, because then all you are is you're now held captive by this business. That's no good. We don't want that either. So I want you to give yourself the option to quit. Just say, I'm allowed to quit. I'm just not allowed to quit. Unless I just had a really good day. I learned this lesson the hard way in my early 30s, and I got really, really, really burned out. I mean, really proper burned out. I was working constantly. Everything seemed like it was a struggle. I had, like, the opposite of the Midas touch. You know, instead of everything turned into gold, it's like everything we tried just turned to crap. And I just was fed up. And I remember sitting there, I was like, that's it. I'm done. And I fired myself. I mean, basically, I was CEO of my own company, and I decided. I went to my leadership team, and I was like, hey, everybody. I just put up a job post for a new CEO to come in. I'm essentially going to be stepping away. I mean, I'm still going to own the business, I'll advise it, but I'm stepping away. I'm out. And I remember they were concerned, they were disappointed. But I felt like it was what I needed to do. I felt like it was the right thing. So I brought this person in. And in the beginning everything seemed okay, but pretty quickly things weren't okay. They were, you know, doing some things from a culture perspective that I wouldn't have done, which that's not that atypical. But I'm starting to see some of our better people quit or in some cases get fired. I'm starting to see sales decline, I'm starting to see cash flow dry up. And basically in less than a year, we were in a death spiral that was almost impossible to pull out of. Now I was able to go in, let this person go, and step back into the role. But the reason that it didn't work, I don't fully blame this person that I brought in, it's that I completely abdicated. I stepped away. Had I allowed myself to still be involved, I would have seen these issues. I could have maybe provided some corrective action, but I was so burned out because I let myself quit on a bad day. Now, if you got value from this, I would love it if you could leave me a comment and let me know which tip was the most meaningful for you. Also, while I don't yet have the ability to go back in time and talk to my 20 and 30 year old self, I was able to talk to a 30 year old entrepreneur recently who asked me what it takes to scale a business from seven figures to eight figures and the hard lessons that I learned along the way. And I'll tell you, he was shocked by some of my answers and I think you will be too. So I'll link to that video as well because I think there's some pretty cool lessons for you to learn in that one. So go check that out and I'll see you over there.