If You Want to Scale, STOP Doing This...

What is up? Welcome to my YouTube channel. My name is Leila Hormozi, co-CEO of Acquisition.com, which is a portfolio of companies that does about $85 million per year in revenue. And my goal with this channel is to get you from wherever you're at in your business, between $3 and $10 million in revenue, for free. And so that being said, what I want to talk about in this video today is one of the most common mistakes in scaling from 7 to 8 figures. And the reason I'm making this video is actually this last weekend, uh, Alex and I went to an event and we went there to support some of our friends that were speaking at this event. And you know, we live in Vegas, so we're local to it. And so it's not hard to attend that kind of stuff. We were at that event and a lot of people came up to us and, you know, for me to give context, I think more people that are a little bit more operational came up to me and we're talking about the content that I've been putting out and how it's been helping them, how it's really resonating with them, you know, as they're really building into like an 8-figure business. And I was thinking more and more about it because I had a lot of conversations. I wanna say like I had 5 really great conversations with people who are at that point where they're at, I wanna say between 4 and 6 million and they're trying to scale to, you know, 10 and beyond, right? I think everyone kind of has like, Once you've hit 7 figures, you're like, I really just want to hit 8 figures. And that's kind of the, the focus. And from those conversations, I was kind of thinking about like, how do I make content on this? Like, what do I want to talk about? And I realized that each conversation was really me helping them work through why they're not there yet. Right. And each person kind of had something that was like a sticking point for them. Um, and so when I was thinking about it, I was like, there's really 5 main things that I see when we're talking to companies, when we're working with our portfolio companies, when I'm talking to just, you know, people in general when I meet them that stand out to me and that like I realize that my brain is constantly looking for in their companies in terms of why they're not at that 8-figure mark yet. And so I want to share that with you guys today because these are things that I have gone through and I deeply feel. And so, you know, I was talking to one woman at this event and she's like, I just feel like your content is so perfect for me. And I'm like, it's just, it's literally, it's not, it's because I've done this 4 times. This is our 4th business that's, you know, gone beyond 8 figures. And so I just want to share what's worked for me and what's helped me so so you can avoid the pain because the first time or two times you do it, like, it's really painful. But once you see patterns and you have pattern recognition, and that's really what experience is, right? It's pattern recognition on a scale that most people can't comprehend. And when you talk to 25 businesses a week that are in this range, right, they're going from 7 to 8 figures, it's really easy to start spotting like what are the mistakes that people make that are stopping them from getting to 8 figures, right? And so yes, I've done it myself, but it also helps to talk to so many businesses every week and see where they're at. And so that being said, I wanna talk about the first mistake and probably the number one mistake that people make on their way to 8 figures. And guys, this is not the sexy shit. It's actually the really boring work. And sometimes I even get like really weird talking about this stuff because I'm like, is anyone listening? You know, 'cause like all the stuff that is sexy, like the marketing and sales, like that's usually not the problem when you're trying to get to 8 figures. And I think that a lot of our portfolio companies would attest to that. The number one reason that people can't get from 7 to 8 figures is that they have incurred too much management debt. Okay, so what do I mean by management debt? So in the software world, you can incur technical debt. Technical debt is really when, you know, you've built a product, but you've built it on a really fragile infrastructure. So what that usually means is that you haven't built it the correct way. You've built it in a way that you're like, I just wanna get the product out there, get an MVP, and then later we'll work on the real product, right? So it's almost like it's stood up on these, you know, toothpick stilts. And so then once the product works, you're like, check, we have technical debt we have to attend to. Otherwise, it's going to build and build and build, and eventually our product will explode down the road. Well, the same goes for service businesses and for teams. You incur management debt. Management debt is when you start off and you're a small business, and then as you continue to scale, you know that there's some people that probably aren't the right fit, or they probably need to get replaced, or they probably need some hard conversations, but you allow that debt to incur anyways. And so you essentially have built your business on toothpicks instead of silts. And so you're doing the same thing these software companies are doing, except in software it's very, it's like a hygienic practice to make sure that at that point when you know that you have product market fit, that you tend to the technical debt before you scale because they know that eventually it will implode the company. It's the same with management, except the issue is that most people don't actually do that. Most people hold on very long. And honestly, if you're a great leader, which I think a lot of people that watch this channel are, you probably hold on way too long than you should be. And it's really tough. I understand because I've gone through it. I hate firing people. I hate knowing that people aren't going to be able to make it to the next level, right? It's just the stats. You know, in my last video I talked about how to get promoted. Like, I shared a lot of those and I had a lot of people tell me, you know, like, I don't want to show my team this. I'm like, why is this not an ongoing conversation? We want to make it one. Like, I wish I had done that the first business, the first time around. Now it's something that I feel very comfortable talking about, especially with the team. But like, it didn't used to be— used to be this, you know, 'Oh, don't talk about that. You know, you don't want to scare people or whatever.' It's like, no, we're just trying to share the same information. And so that being said, most people let that pile up. And what I see most of the time, and what we have to do with a lot of the companies that come in, is we have to flip people out, change their role, coach them up, or fire them. And the reason for that is that most people, it's like they're waiting for permission for someone else to say, 'It's not you, it's them.' And so I hope this video, if you're watching this, you're trying to get from 7 to 8 figures, like, let this be the light for you. Like, it's not you, it's them. If you've been coaching someone for months If you've been struggling with someone for a year, why are they still in your company? And you know, here's the thing is that there are many times where it is absolutely your fault and you might be coaching them and you might be training them and guess what? You're not good enough yet. You're not even effective in the way that you're coaching or training them. And so it is your fault, but you are the founder. You're not going anywhere. You can't wait for you to change. And so you have to change them. And that's the fucked up truth. A lot of people don't want to say that. They're like, no, I can do it. I got to wait it out. It's my fault. Yes, it is your fault, but you also must do what's best for the business, which is take your faults into consideration and build a team that has strengths where you do not. That is why it's so important, because if you— the longer that you wait to flip these people out, to get new people in, to get people that accommodate your weaknesses, the more your business is going to— the more likely it is that your business implodes later on. And I've seen it happen time and time again. And I talk about it in my biggest mistake, which is like waiting too long to fire people. And guess what? I look back at now and Alex and I were actually walking the other day and we had this conversation where I said, you know, it's so funny, I can name 5 people off the top of my head that if they now worked for me, they would've stayed on the team. But I couldn't have done it then. Layla then didn't have the capacity to help those people, the capacity to coach those people. Does that mean I'm a terrible person or leader? I don't think so. That was inexperienced. And if this is your first time going from 7 to 8 figures, you're probably inexperienced too. And so you have to accommodate that for some way. You can't expect yourself to go from zero to hero overnight. It's unrealistic. And so even though it's your fault and it's on you, you do have to tend for that in your team. That being said, that's the first one. Now, the second piece, and I see all too often, I'll tell you a little story, is the CEO stepping out too soon. So I see this actually a lot, which is, you know, the business hits, I want to say like anywhere between, gosh, I've seen it as low as $2 million. It's like between $2 million and $5 million. And the CEO gets on the phone and they're like, everything's going great. I've got this operator, I've got these leaders, these people. I'm like, I'm not even involved in the day-to-day. And they say it to me like it's this good thing. And I'm like, bro, I'm involved in the day-to-day. Like this is my fourth business. It's grown very quickly. It's already got a lot, you know, going on. And I'm still involved in the day-to-day very much so. You know, there's nothing— one, there's nothing wrong with that. It's not bad. Second thing is, it's almost like if you're raising a child, right? And like, I don't have kids, so, you know, bear with me here. But if you're raising a child and then you're bragging about how like the child is all, you know, grown by the nanny, don't worry, it's the nanny raising the kid, she's got it, you only have to work with it an hour a day, whatever. Now the child is not raised with your values, but the nanny's values. And so the business is the same way. You are the most potent source of value is in your company. And if you outsource yourself too soon, and this is what typically happens, and there are rare occasions that are not, but typically at this point when you outsource your responsibilities too soon, the day-to-day, the leadership, etc., to typically it's an operator, it dilutes and it dilutes too quickly because one, the business is new, that operator hasn't even been there that long. They are not emulating your values like you do. They don't yet have those values. The only time I've seen it work is when it's a founder-operator. But if it's a brand new operator and you outsource everything, you're like, I don't even talk to the team, just talk to my operator. The amount of problems that pile up because of this are immaculate. And I know that because we've done diligence on these companies, we dig into these companies, and it happens all the time. I'll tell you a story, which is there was one company that we were digging into, and this person said, like, you know, they were at, uh, 2.9 a year, and he said, you know, I've outsourced everything to my operator. And I said, well, let me talk to your operator. And I interviewed the operator, and I was like, oh no. I was like, this is— I can, you know, it's like you can spot different archetypes. Like, this was the micromanagey, team hates this person but doesn't say anything because they love the, uh, leader and the CEO. This person was clearly like, had no experience nor the capacity to expand beyond where they were at, right? Like super high stress, super high strung. Super high stress and high strung doesn't mean you're organized, right? You can be organized and be relaxed. And so that's what I saw. And this person was so proud to say like, I'm not in the meetings anymore, nope, I don't talk to anybody, I don't do all— and I understand that as a founder there's a desire to get out of your business But until you have a CEO, which it makes absolutely zero sense to have one at that stage with most companies, that's not something to brag about. That's not good for the company. It's like being like, oh, my kid's 2 weeks old, I've got a nanny full-time, I don't do shit no more. Like, see ya, kid. It's like, it's way too early, right? And so I've seen this happen time and time again. And with that guy, ironically, a month later, he emailed and was like, I just had a huge blowout. I fired my operator. You were right. Can we talk? And now the business is like a huge mess, right? Because he didn't know what's going on. And then the people were really loyal to him. They had the complete wrong team. And I was like, man, this is like a little bit too much of a mess for us. You've got to clean these things up before we can work together. Because it's like now you have to flip the whole team. And that's what happens if you step out too soon. And so if you are, you know, trying to go from 7 to 8 figures and you're like, well, when do I step out? Or what does it look like? Like, Leila, what should it look like with me being involved in the business? I'll tell you, these are where I would stay involved in the business at that point in time. And if you're watching this video and you're you know, just hitting 8 figures, you're trying to hit 8 figures, I'd make sure that I'm involved in these things, which is one, weekly leadership meetings, always be running those, right? It doesn't mean that you have to be the one like setting the agenda and making the PowerPoint. No, but like you want to be a voice that's heard through the leadership team at this point in time. The second one is monthly meetings. It is so one of the biggest pieces that gets lost as your team expands to go from 7 to 8 figures is the voice of the CEO. It's now, it's becoming too big that you can't have personal relationship with everyone. Or it's very light touch. It's not as deep as it used to be. And so having a monthly meeting that you run, that you tell stories, that you ingrain the culture in the team, that you explain the why, explain the mission, right? And then say, are we on track or off track to our goals? That meeting is how you scale yourself. It's how you scale your culture. And if done well, can be one of the biggest accelerants to growing your business. Now, the third would be monthly check-ins. So a lot of the times, you know, if you have an operator and you're a CEO, and you're going to 7, 8 figures, your operators checking in with those people on a weekly basis, you don't want to lose touch with them. And so like, there's nothing wrong with having monthly check-ins with leaders on the team, leaders and people that are like key team players, right? Like they may not be over a department, but they're very important to the business. It's very important that you keep touch with those people. So having monthly check-ins with those people, very important as well. And then the last thing is your sweet spot, whatever you are absolute best at, I would not outsource at this point in time. Now, does that mean that you're handling the day-to-day, you're running ads? Let's say you're good at marketing, like you're running ads, you're changing the pixel. No, but it means that you stay involved. And a lot of times people think, oh, well, now if I want to hit 8 figures or when I hit figures, like I can't be involved in this anymore. You should absolutely be involved in it. You know, like our company is doing $40, $50 million and I'm like, I'm still involved in hiring people. I'm still involved in customer service. I'm still overlooking stuff. It's called quality assurance. And that's one of the biggest jobs of the CEO is to make sure that you continue to do that in all the areas. And what's most important is that you don't outsource your strength too soon. Or at least all the way. You have to keep really close quality assurance on the areas that you're very good at. I see this happen a lot of times, especially with CEOs who are really great with marketing, and then they say it's time to outsource marketing, and they do it. It's like an all-or-nothing thing, right? It's not like a process. Outsourcing is a process. It's not an all-or-nothing, like, here you go, it's off my plate, now I never look at it again. It's like, yes, I'm going to be on the marketing meeting still, I'm going to be meeting with the marketing team still. It just means it's maybe not my hands clicking the buttons, but I'm talking to those who do. And so that's how I see the most successful companies when they're making that transition from 7 to 8 figures stay involved. And then number 3, in terms of common mistakes scaling from 7 to 8 figures, is the fear of reinvesting in talent. And I talked about this in a couple of my other videos, but it's really, it just keeps coming up. And so I'm going to say it in 17 different ways until I feel like people really hear it, which is people are afraid to reinvest in talent to grow the company. And I see this manifest in different ways. There's one company that we work with that every time there's a new role, I'm like, all right, here's where we can source for this role. Here's this, here's that. And it's like, they have to go, they almost always wiggle around and they go find within their network someone that's cheaper. It's because they're afraid to reinvest in talent. I think at a deeper level, it's afraid of what will true talent say if they come into this business? What will my role look like? What will they think of me? Because if you bring on true talent that has experience and has insights that you don't have, it's a little intimidating. You might feel stupid, and right now you might feel really smart. And so there's really two fears that you're like battling at this time. One is the fear of the money that you're reinvesting in the team, because the truth is, and I've done this different ways, it is better to hire ahead conservatively so that you can grow, hire so that you can build the infrastructure to accommodate new clients, than it is to not hire and then, you know, have clients come in, have a terrible experience, you ruin your reputation. You can't get your reputation back. Having said that, that's the first one. It's like people are afraid of reinvesting in that talent because they're afraid that they're gonna lose money. The second piece to it is that they're afraid of what that person's gonna say about them. And so whoever is involved and responsible for the hiring, typically their insecurities come into play here. And you see them hire people that are less than, hire people that aren't quite as good as them, hire people that like them, that make them feel good. They don't hire people that are necessarily best for the job. And I know this because I've seen it so many time and time again. And I can say that This is, is not actually something I've struggled with because I don't feel like I'm that great at anything. Like I feel like I'm a massively talented generalist. I don't feel like I'm a fantastic specialist to anything. Like there's not one area I would say like I'm probably HR customer success heavy in terms of my skills. Like there's not one area that I feel like I beat anyone in the team at. I feel like actually what I am best at is knowing what everyone else should be doing, right? Leading the team, directing the way, you know, making sure the strategic plan is in place. So because of that, every time I hire someone, I'm like, well, shit, I'm not good at anything, right? Like, I look at— I think about it that way. It's like, I can work really hard, but I'm not naturally gifted in this area that this person is. And I think if more people could kind of— because I have to dissect my own success, right? It's like, I think that I— because I don't take— I don't believe that I'm better than most people at something, it's easier for me to hire someone who's very talented because I'm like, well, yeah, guys, I'm not that fantastic at anything. And they're like, oh my God, whatever, don't say that. But like, that's how I feel, right? And I think that some people feel the opposite. They feel like I'm fucking great at everything, like nobody can touch this. And so it's almost like they want to preserve that vision of themselves. It's your ego, right? And they just want to continue to relive that story over and over again. And so because of that, they don't hire people that are actually equipped for the job. And so that's number 3. Number 4 is they won't do the boring work. Trying to get from 7 to 8 figures, and especially going from like low millions to $10 million requires a shit ton of repetition. You have to repeat the same actions that got you that success at $3 million again and again and again and again, better and better and better to get to $10 million. And most people don't have the attention span for this. Most CEOs get too caught up in the premature success and they start doing different things. I need to be on social media, I need to be speaking on stages, I need to be doing this and that and that and that. And is that actually helping the business right now? Probably not. The business requires you to be boring for a little bit of time. And to scale a business often requires people to do the same thing over and over and over and over again. And the battle is more so to not get bored in doing it, to not lose enthusiasm in doing it. If you think about sports teams, it's like you're playing the same game over and over and over again, but like you get 0.01% better every time. And most people, when— what I've seen is they just can't They can't do it. You know, I get on the phone, there's some people that are like brilliant founders, brilliant CEOs, and I'm like, dude, you have like 6 businesses. Like, we can't grow just this one. You need to get rid of the rest of them. Like, your attention's so split and they're all doing only like a million a year. Often the reaction is like, I hate that, it's just too boring for me. Listen, there's nothing wrong with that. It's just very difficult to grow a business with that objective in mind. Like, if you'd rather be entertained than make more money, that's like, that's cool. But you're not going to make more money. You're going to be entertained. You're not going to be bored. You're going to probably like what you're doing. But like, if you could be bored and you can learn to be bored for a period of time and find ways to make the things you are doing more entertaining for yourself, you know, learn how to run better meetings, learn how to really ingrain the culture, learn how to do things better and get those incremental returns, you're more likely to hit that 8-figure mark. It's just that most people don't have the attention span to do it. And then lastly is really ego. And this is something that like I've really had to catch myself on because early on, you know, different mentors that I've had I think a lot of times, you know, when you're asking a mentor, you're like, what should I be doing? They tell you what works, what they would do now, not what they would do when they were in your shoes. And that's something I have to be really cognizant of because especially for me, when someone says, you know, what should I be doing now? I, I really try to think if I were them in the position I used to be in at that revenue level, what would my advice be? Not what would my advice be today? And I say that because what I've noticed a lot of people do once they start to gain some success and they're on their way to 8 figures is they start emulating people who are really far ahead of them. And so they see someone that's too far ahead of them. Say you're doing $10 million, you see someone who's doing $100 million and you say, oh, I see them speak on stages, I see them making content all the time, I see them doing that and doing this, I will do that as well. You didn't see the 30 steps in between. And so you probably skipped a lot of steps that it took to get them there. And I see this a lot with— and it's something that we try to be really verbal about, which is, you know, don't copy what Alex and I are doing right now. Look at what we were doing when we were at your revenue level. Copy that. Like, I certainly, when I was trying to go from 7, 8 figures, was not making content. I didn't start making content until we almost were done selling our business because that wasn't what was best for the business. Now I love making it and I love learning. It's a new process that I'm, I'm enjoying, but I knew that it was something I had to sacrifice at that point in time to really be the leader that the team needed, to actually put my full-time dedication, my full-time attention on that role.. And you see a lot of people that they emulate success too soon and they emulate people that are just too far ahead of them. And so you need to either find somebody who can break things down to your level, or you need to make sure that you find people that are only a couple steps ahead of you, not 15 or 20, because that's probably not going to work. It's probably going to break what you're making. And so those are really the 5 most common mistakes I've seen when scaling from 7, 8 figures. It's not tending to the team debt, right? You're not flipping people out soon enough despite if it's your fault or not. You're stepping out too soon. You're letting people take over too soon. You think that now that I've hit and I've had some material success, you think you should really outsource the company and you should have other people doing what you're doing. It's being afraid to reinvest in talent, letting your ego get in the way, and not doing the boring work. And so that being said, I hope that those were useful for you from this video. You know, I think scaling, honestly, that's probably the spot that I see most people get stuck is just that scaling from 7, 8 figures. And I think I think the biggest threat to it of all is just that you've already had some success. I really think about it and I'm like, it's just the fact that you already are considered successful. And because of that, most people allow it to be an excuse like, oh, I'm already successful, so I should get someone else to run the business. I'm already successful, so I should start emulating this person who's really famous. I'm already successful, so I don't want to do all this boring work. I want to do some more fun, exciting shit. And I think it's just like you have to find a way to be hungrier than that. If $5 million a year or like $6 million a year satisfies your hunger, you're fucked. Someone asked me when I was at a— I was doing a Q&A on stage the other day, and they said, you know, when did you know that you wanted to make a million dollars? And I like just smiled because it's like, I never wanted to make a million dollars. I didn't even feel impressed with myself when I made a million dollars. I want to make a billion dollars. That's impressive. And someday maybe that will be. So I think it really comes down to knowing what drives you, and if you don't, figuring that out and using it to your advantage to stretch yourself. And to make sure that you're not satisfied when you hit $5 million a year or $6 million a year. Because if you are, the likelihood that you grow to $10 or $15 or $20 is very slim. So with that, I hope you have a great rest of your Tuesday, Wednesday, Thursday, and I will see you on the next one.