Success is Hard Until You Build Systems Like This

What if I told you that building a billion-dollar company from zero has nothing to do with working harder and everything to do with building better systems? I went from working at Subway to being the CEO of a $500 million portfolio, and I have learned that there is a reason that 99% of people stay stuck, and it is not lack of effort. Today I want to show you the 5 systems that I've used to build a business that runs itself so that you can level up your life and work like the top 1%. The first one is culture as a system. Okay, whether you have a company, or you're just starting one, or you're a leader in one, this is something that you want to understand, which is that culture is going to start with you. When you're a kid and you go over to somebody's house and you go over to one friend's house and like, it's like no elbows on the table, always take out the trash, if you're here you gotta take your shoes off, it's like if you don't do those things, they're like, you don't get invited back. Then you have your other friend where it's like you go over, it's like you could wear your shoes through the house, they don't give a shit where you sit and eat, there's food on the ground. That's a culture. Now, culture is a system that governs people when you are not in the room. Early in my career at Gym Launch, we had hit like $50 million revenue. I remember I was literally on a walk the day that I found out that we hit $50 million. I was like, holy shit, this is crazy. At the same time, I'm like, dude, fucking operator just quit. I lost my 3 best salespeople. I had these giant clients who had left and they like made a huge storm on the way out and like started a fucking Facebook hate group. It was fucking awful. At the same time, these 2 things are happening. I remember thinking, how is it possible to be winning so much on paper and feeling like so shitty about everything else that's going on? And that is when I learned that growth actually does not fit fix broken systems or broken culture. It actually multiplies all of those things. And so what I realized is like we had these values in the company and I explained them a lot. Like I told people of them, I had them everywhere. I said them all the time. I did not enforce them. Culture is not what you say, it's what you tolerate, it's what you enforce. So if you tolerate lateness, that's your culture. If you tolerate low standards, that's your culture. If you tolerate people who are rude to other people, that's your culture. So for a lot of you, what happens is that you keep people on your team who don't abide by the culture because they are good performers. Congratulations. Now your whole team thinks that behavior matters less than output. So if you keep high performers who have low culture, or if you keep low performers who also have low culture, you lose respect from the great people on the team, the A players who have abided by your culture, and now you have nobody that's good. So how do you actually do this? How do you make that culture into a system? The first thing is that it's okay, we have values, we're honest, integrity, all these things. Well, what the fuck does that actually mean in terms of observable behaviors? What can I see with my eyes? How do I know that somebody's honest? What do they do? What do they say? And so when people say, oh, we value integrity, well, what the fuck does integrity actually look like? We need to know how to observe it. If we can observe it, we can enforce it. You have to be able to observe what you want to enforce. You break these things down into observable behavior. I'll give you an example. We have competitive greatness. It means that when the game's on the line, they decide to stay until after dinner or maybe even later to get the job done because the game's on the line. They don't say, hey, you know what, I'm going to go home for dinner. They say, I'm going to fucking finish this because I need to finish it. That's competitive greatness in my opinion. Now, is that for everybody? No. And I make people well aware of that before they come to work here. So you can— second that we want to do, build rituals that reinforce those behaviors. Okay, so this is going to look like daily recognition, weekly shoutouts, monthly awards. Recognition is literally free. And there's a quote by Mary Kay that supports this very beautifully. The only thing that people want more than money and sex is recognition. And I truly believe that something that we do all the time is like, I will come back to my phone after this actually. And there's a Slack channel that says shoutouts. And it's just people shouting people out for following the values. That's it. It's just all day people are doing that. It's reinforcing the behaviors we want. That's the first thing. Now, the second thing is to enforce the behaviors we don't want, which I use what I call an enforcement matrix for this. It's essentially evaluating the people on your team because the Biggest way to enforce behaviors is by showing people by who you hire and who you fire. That is like the biggest thing you can do to reinforce a culture is like who they see go out the door and who they see come in. That's who you tell people, like, what is most important to this company is the people in it and who you decide to bring in, who you decide to kick out. That's going to tell people everything. Use an enforcement matrix. I use this matrix like this. And on this end of the axiom, you have skill. And on here you have will. I use will as I say culture fit, like how much do they embody the values? How much skill do they have to do the job? People who have high skill and high will or values fit, I would say those are stars. I want to keep reinforcing and publicly recognizing those people, promote them, shout them out, put them in front of people, give them more opportunity. People that have neither of those things, you want to kick out. If somebody has low values and low skill, why are they in your company? I don't know, because you're lazy and don't want to get them out or you're passive-aggressive. You got to get them out though. Like, that's terrible signaling to these people. These people hate being in a company with these people. They'll leave if you don't get these ones out. Here, you have people who have high values fit but low skill. That's good. That's not a bad thing. Coach those people up. In fact, use the stars to coach the developed, the people that need developing. Now, we can't have an entire team of them, but we can have a good ratio between these two. And on this end, if you have low values but high skill, those are the people that usually you're going to have to get out to. Now, you want to coach them, hey, you're not adhering to the culture, this is a risk. But a lot of those people, it's harder to coach culture than skill. And so usually you have to end up coaching these people out of the business as well. Now, these systems make your culture real, and culture is what allows your business to run without you because culture is what people do when you're not in the room. System 2 is removing the founder bottleneck. Your business isn't stuck because of your team, your market, your strategy. It's probably stuck because of you. There are so many things in our life where we become the bottleneck and we don't even know because it's almost like a fish doesn't know it's in water because it's just there. It's just how it is. And I remember the first time that I realized I was the bottleneck is when I was running my first company, Gym Launch, and it was 2019. There were so many things coming my way, decisions, and I realized that I didn't even have enough mental capacity during the day to make those decisions. I remember I came back home one night and I was at an event, had to go run my quarterly the next day, and I came home to like 17 Asana tasks and they were all asking me to make decisions. And what I realized is like, I am now the bottleneck. People are waiting on me to make decisions. They cannot move forward until I do something. And think about it like this: the bottleneck is often at the top, not the bottom. So a lot of people, when they see problems in their company, they go to the bottom. They're like, what's going on over here? Usually problems are upstream. So most of the time it's you. And this is like the hardest thing to see, but your company is really a mirror of you. Every business is capped at the founder's personal capacity. I see across every portfolio company. Is not a talent problem or an industry problem, is truly a founder problem. For example, I have this founder, he's He was a super bright guy, but he was stuck at $10 million for almost like 4 years. And he kept asking me, what do I need to change? Do I need to change the team, the strategy, the structure? One day I just couldn't take it anymore because I was like, this is, you know, 4 years ago, I was a little nicer than I am now. Now I'll just get straight to the chase. But I was like, no, you need to change. You are still operating like you have a $5 million business. And I remember he looked at me and he was like, okay, so who do I need to become? And that is the question that most founders never ask. They are so busy trying to scale the business, trying to fix the business, trying to fix the people, fix, fix, fix, fix. They don't look at the hardest thing, which is to look at themselves. They don't ask the question that actually matters, which is, who do I need to be to grow $1 million, $10 million, $30 million, $50 million, $100 million, billion-dollar company? This is the pattern. You hit $1 million because you learn how to sell. You hit $3 million because you can delegate a little bit. You hit $10 million because you learn how to actually hire people who can do stuff. And then usually around $10 million, things, if they aren't growing, start to become way more a leadership issue rather than a product or market issue. Because you don't learn how to lead people and how to be a great leader. And so these traits that made you very successful early on, they're the exact same traits that hold you back later, or they become useless. And so at some point, those things work against you. Like, very common, moving fast. It actually becomes too chaotic and people don't want to work for you because they're like, dude, we have a giant company. Like, I have to retrain the team, redo the systems, get a new CRM. Like, we can't just pivot tomorrow. And at some point, other things like having all the answers, it actually prevents your team from thinking and feeling competent. So in the beginning, when you hire people that aren't super smart and you tell them what to do, they're like, okay, thank you, I didn't know what to do. When you hire smart people and you tell them what to do, it's like, what the fuck? I thought you hired me to— for me to be smart and use my brain. There are so many times when this happens. I remember specifically when I brought on my first executive assistant and I was like, listen, I don't always know what to tell you what to do, but I'm gonna do my best job to be your boss because I'd never had an executive assistant before. And I remember it got to some point where I could see that she was becoming more capable and able to more. And I kept still doing certain things that I had done for myself in the past because I've never had an executive assistant before. How am I supposed to know? And I remember one day where, you know, emails came through and answered the emails and made these decisions. And I remember she messaged me, she said, why'd you answer your email? And I said, because I did. And then she was like, why are you doing my job? And I was like, oh. So I started to realize, wow, I need to do things differently. Like, I need to be able to let go. And I think in the beginning it's all about gaining control, and as you grow, it's all about letting go, which is just like complete opposite of the kind of person that you become. If you want to build a business that runs itself, you have to start with the question, where am I the bottleneck? And then you have to build yourself into the person that has the traits, has self-control, the skill, deploys the competitive greatness to make that leadership sustainable and scalable. That is the hardest part. The business cannot outgrow you. If you can fix yourself, everything else is going to start working. It sounds really hard, but if you think about it, observable skills. What are the observables that you need to acquire to become the person that can do this thing. Watch other people who are at the level you need to be at. How do they act? Success leaves clues. A lot of them act in different ways. You don't see a ton of very frenetic billionaires. Why? Because at that level, that kind of activity, it actually works against you, not for you. The third system is the people flywheel. And this is why at some point you need to learn this because you realize you can't do everything. This is a mistake that a lot of founders make. They think, Oh my God, I'm so overwhelmed, I need to hire somebody. And so for like 60 days after you've hired somebody, you have this like very euphoric, very fake relief. But then this person you've hired starts asking you questions, they start slacking, they start asking you, they start asking you more questions, then they start duplicating your work, and then they don't know who owns what, and then you don't know who owns what, you don't know what's clear and what they do versus the other person. And then you start to realize that they don't actually make decisions without you. And then 6 months later, you have more people, but you have the same capacity and you haven't grown. And you're like, why did I fucking hire these people? Because I thought if I hired, 10 more people, I would grow by 10 more. And it's like, no, you hired a person into a system that either sucked or didn't exist. A lot of the times what happens is that people point to the person, they're like, I've got the wrong people. Most of the time it's that you didn't build the right system. So you need 3 elements in order to scale. Okay? You need functions. This is what work actually needs to happen to make the business work. This is like you would literally list out all the activities that occur in your business. Like some businesses have manufacturing, they have sourcing, Some just have like technology and they have hiring and they have customer delivery. What are all the functions that need to happen to make your business work? Second is you need people. Who are the right people to create the outcomes and the functions? It's an important question to ask. What people can make these functions work? What people can run these functions? And then you need operations. How does information flow between all the functions and people? If any of these three pieces is weak, then you end up filling in the gap and holding it all together. So you have to ask yourself, is it a functions issue, a people issue, or an operations issue? They are different issues. Most people point to person and they say it's the person, but oftentimes the person is the symptom and they are the last piece in the puzzle. So again, what I told you earlier, you got to go upstream. Upstream, there's operations, there's functions, there's did you select the right people for those functions? Ask yourself these questions before you point to the person and say they suck. Next piece is that people look at the people and most people hiring people and they want them at a level 5 accountability, which is essentially like they want them to come in, take complete ownership, act independently, make decisions. And I would say that 99.99999% founders don't actually hire those people, but they say they want them. They hire people at a level 2 who need to be told what to do because most founders don't want to pay for a level 5. Because if I told you how much they cost, you'd be like, I don't even make that much. I know, that's why you usually have to wait until you're a certain point in the company. But what happens is they hire level 2s, they don't train them to be a level even 3 or 4, let alone 5, and then they stay stuck doing 10 or 20% of that person's job indefinitely. And so your job, you become a bucket of all the 10 and 20% of other people and you just do all that. You're essentially like the junk drawer. That's what you are. You're the junk drawer for your business. You do a little bit of everything and nobody exactly knows what's going on there. We can fix this with what I call the accountability dial. So the accountability dial is essentially you hire somebody who's at a level 1, which means they really just need to be told what to do. They can't even get started without being told what to do. There's hiring people at a level 2 where it's like level 2 accountability is like they can do some tasks, but they can't make decisions or follow things through without input. Level 3 is you hire people and they can do tasks and come and get feedback from you before they finish it. Level 4 is like they can do tasks and make decisions and then they get feedback from you after. Level 5 is where they can do tasks make decisions and don't even need to loop you in. And so what happens a lot of times, you bring someone at level 2, but you really want a level 4, and then you just want them to change. Instead, we want to train somebody up. So I'll tell you what I do. If I hire somebody who's a level 2, how do I move them up the dial? Easiest thing in the world is you have to prompt practice. So I can explain to an employee all day, this is how you make this decision, this is how you do it. Unless I give them the opportunity to practice, they will never learn. People don't learn by hearing an explanation. They learn by trying. So you have to prompt attempts. You have to prompt them to try. And so, for example, I had an executive assistant and I remember I used what I called the Q&A framework with her, which was every time you have a question for me, what I would like you to do is bring to me the answer that you think I will give you and I will tell you if it's right or wrong. And so we did that for a while. And this was because I wanted her to make more financial decisions. I didn't want her to ask me where to spend money or not spend money, especially if I was the one requesting that she go do something with my money. And after, I would say about 2 weeks, of her doing it, she was able to make decisions that me as the CEO of the company was only able to make at that point because she used the Q&A framework with me. What was that framework doing? It was teaching her to get the answer herself and then ask me for feedback before she went to the final. And then finally, I just said, you've gotten it right about 10 times without me. Go do it yourself now. Like, it is that easy. This helps because you can stop being the command and control CEO and you can start being the architect and you let this flywheel kick in where people are able to not just do things on your behalf, but decide things and move things forward. Better systems produce better people. Better people produce better outcomes. Better outcomes attract better talent. And that is the cycle for compounding a business. Which brings me to System 4, the talent engine. Companies that scale the fastest, they don't hire the most people. They hire the right people. This means that your talent system has to be as good or probably better than your customer acquisition system. If you think about it, it's like, A lot of founders, they spend like 40 hours a week on marketing, sales, brand, customer, customer, customer, and they spend like 0 hours a week selling talent, getting good talent, improving the team, figuring out how to get more A-players. But the bigger the business you want, the more you actually have to reverse that ratio. So I remember at Gym Launch, we were growing 30% month over month, and we were also losing people just as fast as we were growing. So I had to optimize like every single piece of customer funnel. Like I knew every email, every meme that got texted to a customer, every single point in the funnel. But my talent funnel was literally just like, I'm just going to post this on Indeed and Craigslist and pray to God that I get somebody good. And that was what I did. And what I learned through this is a few things. One, A-player talent is not scrolling on Indeed and Craigslist. This was 10 years ago. Don't judge me. They are being recruited. They're probably choosing between me and 5 other companies. They probably aren't even on the market, so they can choose where they want to go. So, for example, if my job description that I post on Indeed, which they probably won't even click on, you know, reads like every other job post, marketing manager needing to manage marketing things, Like, I have already lost. The companies that scale the fastest do not hire the most people. They hire the right people and they keep them. And they're able to do that by building out a true talent funnel. What I mean by that is you have to start seeing your talent funnel the same way you see your customer funnel. So it's like you have leads that convert into calls that convert into customers that then you onboard. Okay, here you have people who apply, who then you book interviews with, who then you interview, who then become an employee that you then onboard. It's the same on both sides. The issue is that you haven't dialed in the talent acquisition funnel the same way you have the customer acquisition funnel. So the goal is to have the same level of detail, precision, and thought behind both. Don't just use a ChatGPT generic job description posting, but like seriously throw that shit out. It's yucky and everybody else is doing it right now. Your job description is like the sales page. Your interview is like the sales call. Your onboarding is fulfillment, and your retention system is like your LTV. If you see those things the same way and you build out this system just as robustly as you've built up this system, which by the way, it's the same skill, then you can really build a business that runs without you. Which brings me to System 5, the final system, which is the operating system. Okay? Most businesses don't fail because they have bad people or even bad ideas. They fail because they have this little gap. Even when you get all the right people and you have all the right structure, your business can still collapse under its own weight if you do not have an operating system. And here's the thing, the team mirrors you. So if you lack cadence, they lack cadence. If you change priorities midweek, they do the same. If you cancel one-on-ones, they treat accountability as optional. I remember when I was running my business, I had like 13 people on the team and I was talking to them all day and I was like, man, I feel like we're like really not on the same page with things. And like things are all over the place and all stuff. I remember I messaged the team, I said, hey, what do you guys think about having like a once a week meeting? We just talk about like where everything's at. I remember like the first message I got was, thank God, I'd never been so excited for a meeting. And I was like, oh, fuck. And that was when I realized, I was like, oh, I don't have a system that keeps my business running smoothly. And so this piece, this system's actually pretty simple. If you think about operating system, it really comes down to a couple things. First one is expectations. You have to define outcomes. Not just tasks. So what's the outcome of this department? What's the outcome of this person? What's the outcome of this job? Every job description I have has what I call results section, which is like essentially the expectations. What are you expected to deliver by having this job? Every department that I have has metrics that they're supposed to report on. That's the expectation. I expect you to deliver on these measurements. Now, the second piece that goes with this is accountability. You have to measure the expectations that you've set. So if I set an expectation for somebody, I expect us to do these things, We have to measure it. Easiest way to get this in place in a business is to have dashboards. It's also the hardest thing to get in place. If you can't have dashboards, you've got Google Sheets and that will do for now. Third piece goes into communication. This means how do we talk about all the things and reinforce the accountability? This is usually by weekly one-on-ones. This is by giving feedback about the expectations if they have or have not been met. So it's like in all your one-on-ones, these are my expectations. This is what a 10 out of 10 looks like. Are you at a 6 out of 10, a 7 out of 10, etc.? And the entire point of a one-on-one is essentially to guide somebody to a 10 out of 10. You just want to be thinking, how do I get them to a 10 out of 10? What feedback do I have to give? That's how you get people to meet expectations. And now the fourth piece of this is cadence. How do you do this in a predictable way? Is it weekly? Is it monthly? Is it quarterly? What does it look like? That is how you get a system to continue repeating itself. And then you can continue recognizing and reinforcing what you want repeated. If you want people to do more of something, reward them for it. If you want them to do less of something, ignore them for it. Literally, that is how it works. Now, once these things are consistent, something really amazing happens. People actually can stop waiting for you, and they can stop waiting for you to solve everything, for you to answer all their questions, for you to make every decision. And you'll actually see people start leading, and your business is no longer going to need your specific energy to operate every day. In fact, it is going to run off of systems, not off of personality. This is what it feels like exactly, I can tell you. It's like you have just rolled this boulder up a hill with your own bare hands. And finally you have hit the tipping point and it starts to roll on its own. And I will tell you, it is like such a glorious moment when this happens as a founder because you realize finally, I am not the bottleneck. It does not all rely on me. It can roll without me pushing it. This is the best moment that you can get to because you realize, oh my God, now I can go focus on finding another boulder, which is amazing. And also not everyone finds another boulder, but I like to find another boulder. Which is how you continue growing the business. It is like the most relieving thing that you can have ever occur in your business. And it's really fucking great because it means that your business doesn't need you to operate. The biggest takeaway that I want you guys to walk away with is that systems are not just for when your company is getting big and scaling. They are prerequisites in order to scale. Otherwise, you're just going to scale broken shit. It's going to feel worse than now. If you have a small company, you think, oh, if I get big, it'll go away. No, you're just going to make the problems bigger. Now, if you want more tactical advice, on how to become the leader that can scale a business into running itself, you can go ahead and grab the link in my description here to my new newsletter. I call it Layla's Letters. These are my unfiltered memos I send to my team as we grow Acquisition.com to a billion-dollar company. So don't forget to hit subscribe on my channel, and I appreciate you guys for watching. See you on the next one, hopefully on the newsletter.