Throwback: 4 Critical Traits of An Entrepreneur | Ep 868

0:00So this is a throwback episode of the things that limit entrepreneurs within the business. And so if you think of each of these four, you might check off one or more of the boxes. But big picture, it's you're not growing as fast as you want because you don't know that something is possible, but it is. Number two is that you might know that, but you don't know how to do something in order to make it possible. Number three is you don't know how to get someone else to do that thing. And then number four is you don't know how to get them themselves to do it. And so as in you yourself. And so each of these situations can be a limiter and you can have more than one.

0:37And in this podcast, I break down what to do about it. At acquisition.com, my private equity firm, we talk to 600 entrepreneurs doing over a million dollars a year every single month. And 300 of them are over$3 million a year. And 100 of them are over$10 million a year. And so we talk to a lot of entrepreneurs every day. And over time, we've developed kind of a rubric or framework for how we analyze the skill of an entrepreneur. And so what I'm going to do today is break down how you can think through yourself as an entrepreneur and the four elements that we look at to say how good of an entrepreneur this person is and how much we're willing to bet on the fact that they're going to be successful.

1:15And if you're the person who's going to be successful for yourself, then it's about how do I increase the likelihood that I'm successful by looking through these four frameworks. So every entrepreneur isn't successful because they don't know how to do one of four things. They either don't know that something is possible altogether. together. Number two, they don't know how to do something. Three, they don't know how to get other people to do something. And four, they don't know how to get themselves to do something. And so we'll break down each one of these. When I had my chain of brick and mortar gyms, and I was transitioning to flying across the country and helping other people do gym turnarounds.

1:51So I had six gyms of my own. And then I started doing that as a service, I would actually fly out, get someone's gym to full capacity and go to the next gym. And I did that for almost two years, we did 30 plus turnarounds of gyms, right? Do it, fill the gym up in less than 30 days, collect all the cash and move on. And it was only when I talked to a mentor of mine that he said, Alex, you're too good at this stuff. You need to be showing other people how to do it. And he introduced me to the concept of licensing. I didn't know that that was possible. So for me, my deficiency was number one, it was an ignorance around what is possible in the universe.

2:23And so that's the same degree. If you have like, it's the biggest threat most entrepreneurs have is they don't even know what they can do. And that's because, and this is the biggest handicap for poor people or people who are born in lower socioeconomic status or their parents didn't make a lot of money. So if that's you, listen up. The way that you do that is by getting around people who make more money and watching and consuming the content of people who are wealthier than you and wealthier than your parents and wealthier than your parents have ever been. And ideally as wealthy as you want to become or beyond that, because they will tell you the things that are possible that you didn't know were.

2:57Like you probably didn't know that insurance isn't a taxable thing. Huh? You didn't know that was possible. You didn't know that the guy who sells your mortgage makes five to$20 ,000 on the mortgage itself. Really? Just for selling an interest rate? You bet they do. You didn't know that on average, 35 % of the average American income goes towards interest expenses to banks. So people don't know why do banks own the world? Because they have a rev share on everyone's paycheck of 35%. Because when they get you to take a loan out for a car or house or boat or whatever, most of what you're paying is not principal, but interest.

3:30And interest is just a fancy word for fee. And you know what it costs them to actually give you the money? One click of a button. And all of that is margin. So even though it looks like 1 % or 2%, 3%, the actual gross margin on it is very high. And so as I'm saying these things, you might be like, wow, I didn't know that was possible. And that is the ignorance debt that all entrepreneurs have to pay down, especially if you were born poor. The second thing is they don't know how to do something. All right. So these are the tactical skills that people don't understand. So they don't know how to build a website.

4:03They don't know how to integrate a payment processor into their site. They don't know how to set up an entity. They don't know how to send an email to a list. They don't know how to do many different things. They don't know how to build a product. They don't know how to source things from China. They don't know how to set up things for dropshipping. They don't know how to click buttons to run a Facebook ad. They don't know how to do something. The good news is that stuff is actually the easiest thing to solve. And I'll tell you the most technical thing that I learned and how I learned it. So when I was transitioning to my turnaround business, I realized I needed to learn more about ads.

4:38I'd done a workshop for two days and learned the basics of running Facebook ads in a local market, but I knew I needed to level up my skill. That had been a few years earlier and I hadn't learned anything since. And so I talked to a couple of friends and said, Hey, do you know anybody who's really good at Facebook ads? Mind you, this is six years ago or seven years ago, something like that. And they said, well, I've got these agencies that did a pretty good job. Maybe you could talk to them. So talk to the agency owners. They're like, I don't do, you know, fee for service. Like I'm, I'm only an agency and that's it.

5:00You can become a client or not. So, well, I don't really want you to run my ads. I want you to teach me how to run ads. And they were like, I don't do that. I said, well, it's America. Everything's for sale. So just name a number. And finally, one guy said, I'll do it for seven 15 hour. I was like $750 an hour. And he was like, yeah, I was like, all right, just, you know, just making sure. And so I said, sure, sign me up. I said, every week I'll meet you for an hour and you can show me how to do that. Now, if you're doing the math here, that was$3 ,000 a month. So like a pretty penny, but guess what?

5:28Within eight weeks, I knew everything that he was going to do on my ad account. And so the, the terms that I had were, you can't control the mouse. I control the mouse. You tell me where to click and why you're clicking it that way. And then very quickly, I learned how he was doing what he was doing in about four weeks. And the next four weeks I was like, okay, So this is what I'm doing. This is why I'm doing it. Does that make sense? He said, yes. And then eventually I was like, I don't need you anymore. And so all in all, it cost me about$6 ,000 to learn how to run Facebook ads just by paying someone for one-on-one tutoring.

5:56And I have done this over and over and over again to acquire skills in my life. Now, mind you, again, YouTube didn't really exist that much then, or like not nearly to the extent that is now where you can learn just about anything by looking online for free. But if you still need help, just offering to pay people way above market in order to have them stand over your shoulder and show you how to do something is one of the easiest and fastest ways that I've learned any skill in my life. So if you don't know how to do something, phrase what you don't know how to do as a deficit of, I don't know how to insert problem.

6:26And then that's what you Google. And that's what you can try and find a business owner who knows how to do that thing and sells it, pay them two times or three times that they would normally make to show you and transfer the skill. The third type, and I've done these in reverse order of difficulty. The third type of difficulties. They don't know how to get other people to do stuff. All right. So they don't know how to get other people to give them money. They don't know how to get other people to work for them. They don't know how to get other people to continue to work hard on their behalf. Right.

6:52And so we have different words for that. There's recruiting, there's sales, there's leadership, there's management. All of these words are fundamentally about one thing, which is getting other people to do something. And so if you think about that as a meta skill, if you know how to get people to do stuff, you could actually only learn that one skill and get everything else in your life done for you. Because if you could get somebody else to figure out how to do the website and someone else to figure out how to do the LLC and someone figure out how to do your finances, someone else to figure out how to market and figure out and someone else to figure out how to do the product and get people who are experts at all that stuff, because you had the meta skill of being able to lead and cast a vision to get people to want to work, then you would have the highest leverage of the ones that we just talked about.

7:33And so when we're looking at an entrepreneur, we think to ourselves, will this person be able to attract high level talent? Will this person be able to manage an enterprise that continues to grow with higher and higher level skillset people? And many times you can see the cap of the entrepreneur by their character traits, right? And this character trait is a, you know, an amorphous word, but it's really just personal and interpersonal skills. All right. And I'll get to the personal skills in a second, but interpersonal skills, which is how to get other people to do stuff oftentimes become the limiter.

8:00And so usually we have to find operators to complement the entrepreneur to help continue to scale the business. Now, they might not be able to get that type of talent, which is why we have a private equity firm so we can attract talent that otherwise wouldn't be available to the types of businesses that we work with. So many entrepreneurs who've done$100 million exit don't want to come work at something that's doing$10 million a year. But if we cast the vision that we've done many exits like this, then they'll be far more likely to do it. Now, that's where we transfer our skill of getting people to do things to the entrepreneur or on their behalf.

8:34Real quick, guys, you guys already know that I don't run any ads on this and I don't sell anything. And so the only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs, make more money, feed their families, make better products, and have better experiences for their employees and customers. And the only way we do that is if you can rate and review and share this podcast. So the single thing that I ask you to do is you can just leave a review. It'll take you 10 seconds are one type of the thumb that would mean the absolute world to me. And more importantly, it may change the world or someone else.

9:04The final deficiency is getting themselves to do something. And this is both the hardest and the ongoing one that goes for the rest of your life. Because in the beginning, you can't get yourself to do anything. And then you get yourself to do something. But over time, the things that you have to get yourself to do is over and over again, gets harder and harder to resist your impulse. And so if you've ever heard of character traits like honesty or loyalty or patience or focus. Those are just fancy words for a bucket of activities or behaviors that exhibit or manifest themselves in a certain circumstance or condition.

9:36And so if you have a loyal person, you know that they are loyal. If when presented the opportunity to betray you, they don't do it. And so if you want to practice loyalty or develop the trait of loyalty, which is just a skill like everything else, which can be learned, then you go into environments or you wait for the environment that presents itself with the opportunity to prove that you have this skill and then you exhibit it, you show it. And what happens is if you do that over and over and over again, eventually you develop a reputation as the type of person who does this type of thing. And so when you're looking at yourself as the entrepreneur and you have these four categories, The hardest one to determine that you're lacking is that you don't believe something is possible because the hardest thing to know is what you don't know.

10:23That's an unknown unknown, right? The rest of these, for the most part, are known unknowns. And so these are the ones that are mostly under our control. The unknown unknowns are to a degree under our control because we can go seek out other people who are further ahead of us to have them break our beliefs about what's possible. But the rest of these are under your control in that you go find the skill tactically. You go figure out how to persuade the people tactically, or you figure out how to get to persuade yourself tactically to do things the way you want them to be done. And that's how you can develop humility, develop focus, develop loyalty, develop honesty.

10:58All of those things are skills. And as soon as you make them that way, they become things that you can learn and develop. Otherwise, it's like, I wasn't born that way. This is just how I am. And that's how, if I hear a founder talking like that, I know that they will be significantly less coachable. They will not be able to develop that skill set, which I know automatically will cap their business. And so if you can look at yourself as the person or the asset that runs the bigger asset, which is your business, you can figure out, do I have a problem of not knowing what to do or how to do it? Do I not know how to get other people to do this stuff?

11:30Or do I continue to exhibit erratic behavior? Am I unfocused? Am I undisciplined? And then you define the circumstance where you exhibit the thing you don't like. on Saturday mornings when I should be working, I don't. So then you say, okay, if I worked on Saturday mornings, then I would tell myself that I had exhibited discipline that day. If you string enough of those days in a row, you are a disciplined person. And so it's really about stacking up that proof for yourself that you have the trait from what you've done rather than claiming some amorphous thing. Because that breaks this amorphous idea of focus down into what can I do today to develop it?

12:06And that is what everyone else will notice. And that's how you can attract better talent, who can do better things, who can accomplish things that are impossible. And the craziest thing is that the most expensive thing that's costing you the most money in your business right now is ignorance. It's ignorance around four things. But before I tell you what they are, the reason that it's costing you so much money is that right now, not knowing how to make a billion dollars a year costs you a billion dollars a year, which is why the biggest debt you have to pay down as fast as possible is what you're paying to the universe, what you're paying to other people, what you're paying to yourself to not know how, which is why knowledge is the number one asset that you have in your business.

12:41Because what happens is your business can disappear and a billionaire can make it again because they have the knowledge. They know how to do all of the things. If the government comes and takes all of your assets, which happened to my family in the revolution of Iran, the only thing they were able to take with them was their knowledge. They were to come to the United States and rebuild again. And within two generations, we had the same wealth as we did when we were in Iran through knowledge. If you don't pass knowledge to the next generation, then they will eventually statistically squander all of the wealth because what wasn't passed was the knowledge to keep the asset rather than the asset itself.

13:14So there are two ways to figure out what's possible, the hard way and the easy way. The easy way is to find people who are way ahead of you, talk to as many of them as you possibly can and cross collaborate the things that they are saying. Meaning you listen to this guy, listen to this guy, look at the things they have in common and say, this is the thing that the most people think is true. And so that has the highest likelihood of being true. If you talk to 20 people, you may get 20 pieces of advice, but there may be threads that all of them share, and there will be fewer of those, but those few threads are the things that you can count on.

13:44That's the easy way to figure out what's possible. The hard way to figure out what's possible is using Aristotelian thinking, which is called first principles thinking, which is basically you break it down to the most foundational unit of physics and think, why isn't this possible? And if it is possible, then it is believable. That being said, many people have a hard time with first principles thinking. And so in my opinion, for most people go to other people who are further ahead than you want to be and further ahead than all the people you are. And if you don't have access to them, get that indirect access, consume their content, read their stuff.

14:14Like that is the education that will break your beliefs about what you can do in this universe. The beliefs tell you what direction to take your action in. Once you have a belief, it now orients your direction into a higher leverage opportunity. A belief will change your action because it will orient it rather than changing what you necessarily do. So if you have the correct belief, then you'll be headed in the highest leverage, opportunity, boat, or direction in your career. And then the other three frameworks will apply to that with more outcome.