I started and sold a software company started and sold a gym licensing business started and sold a suban company and six other businesses over the last 13 years the vast majority of businesses that I talk to the entrepreneurs think they're in one business but they're actually in another by only being able to solve one set of problems they continue to jump from business to business to business rather than realize that there's one big problem the business they're actually in that unlocks all the Enterprise Value that gets into the next level but if you want to
make a big business you want to build an asset that to make you generationally wealthy this is for you I have made the mistake in almost every business that I've been in in thinking I was getting into one business when in reality I was getting into a very different business and discovering the real business that you're actually in is what will unlock the amount of growth and money-making that you really want to get into It's usually the second and third level of Entrepreneurship within whatever opportunity vehicle you're pursuing so let me give you example to
kind of make this real when I got into the gym business I liked Fitness and so I thought that the business was going to be about like macros and results and workouts and all of that that's what I thought the business was going to be about uh but once I got into the business I realized it was actually just about marketing and sales that specific business is about marketing and sales overall now when I make these generalizations all businesses are like cars like if you don't have wheels the car is not going to move if
you don't gas the car is not going to move if you don't have an engine the car is not going to move but the question is what is the biggest limit or what's the biggest thing that gives you the most return in that specific vehicle or that specific business and so I'm going to walk you through four or five different businesses that I've been what I thought it was versus what it really was and then I'll turn it back to you and thinking about how you can apply that same methodology and I'll bet you many
of you and I get this because I have a lot of conversations with business owners today they don't know what business they're really in all right so I thought it was about Fitness but it was actually about sales and marketing if you look at the biggest Fitness companies in the world like especially in the gym space they acquisition machines that's what they are very very good at the actual fitness component of it is actually pretty minor right and I mean I'll tell you this from talking to the franchisors who in many many many locations or
privately owned ones have thousand plus locations that the fitness stuff is almost an afterthought they're like yeah yeah yeah get people to sweat move around whatever because the reality is that within Fitness for example the biggest problem is that people don't show up because of other reasons and so you have to always go get more customers the good news is is that everyone's trying to lose weight three times a year and so there are plenty of people so that was the first business that I misunderstood what business I was really in now thankfully quickly I
learned that and then that became the skill set that I you know doubled down on now with that I then was like okay well I'm going to start a sub company which which with Prestige Labs now again I thought that business was going to be all about the product I thought it was all going to be about the stuff that's inside of it and so I got Dr cashy my good friend who's bi he's a PhD biochemist one of the smartest human beings on Earth and I said hey man can you make the best products
I said make a sandwich you would actually eat because he he made all these o things for Olympians and he would put together these trash bags full of like specific ingredients and specific compounds and he's like dude these are going to be way too expensive like it's not going to be commercially viable based on the quality of the ingredients and I was like dude just make the best product I'll figure out how to sell it and so um that's that was the focus that I had in Prestige lives but guess what once I got into
that business I realized that it actually had very little to do with what was in the bottle because basically anything anything that's in a bottle that you don't taste the inside the vast majority of products that are out there benefit off of plus sibo and no sibo effect basically people taking something and then they feel better because they take something and I want to be I want to be clear Placebo effects a real effect so like I'm about the effect whatever works for you works for you and that's not really the point of this talk
but more so that I got into the business thinking that what was inside the bottle was the thing that mattered but the reality was what was on the outside of thing the bottle and the thing that the bottle was next to meaning it became what I realized almost too late was that it's it's a business that's based on on brand it's based on branding and it's based on media in terms of having tons and tons of traffic and so I thought I was building a product based company that was going to be based on what's
inside the bottle when everything that was limiting the business what was on the outside of the bottle and I saw the guys who are the biggest in the space and this is the little Telltale sign by the way if you want to hack this is you look at the people who are the biggest in your space so take your model take it to its natural extreme and look and I think there's a lot of wisdom that can be found from that and trying to reverse engineer like what are the things that make this different now
you might be like and here's this is what I used to do all right so like don't make this mistake when I was in the gym industry I would look like when I started I was like oh my God I can make way better workouts than those guys that's because those guys don't give a about their workouts because that's not the main thing in the business I got into the sub business like oh my God I like these guys are making hundreds of millions of dollars on this product that's just mediocre like the thing is
is that most of the customers that are buying it don't even know the difference anyways which means that your differentiator isn't actually making you different you're the only one who knows your differentiator which is not good your customer has realize what the differentiator is and so the thing is is that for most supplements the differentiator is LeBron takes it or so and so takes it or I think this is cool or my friend Sally likes it right or and I'll be clear on a consumables perspective if it has a flavor then the flavor becomes very
important in the long run in terms of how good it tastes because most people take ag1 because they think it tastes good and because they feel good about it not because what's inside of it all right so just to be clear I got into the gym business and I thought it was about Fitness but is really about marketing and sales I got in in into Prestige Labs of sub business and I thought it was about the stuff inside the bottom when really about brand and building a big media traffic machine and then I was like
okay I think I'm getting the hang of this of just making mistakes over and over again so then I got into the software business and I was like okay I get it everything is about marketing and sales I'll be able to sell the out of this and guess what we sure as hell could because I knew how to Market and sell and so then I got into the software software business and I realized by the way side note software tends to sell itself you know why because if you can have technology and say hey there's
that thing that you're doing that this will do automat atically not a very hard pitch but the problem with software is actually delivering on the promise and so it actually is a very product driven business because anyone can sell it the constraint like software is not that difficult to sell at least this is my experience with this all right so take that with my big Himalayan size gra of salt for me that's when I realized that product was the main thing and guess what I don't when I started out I outsourced the product I had
an Outsource Dev team make the product for me which I then realized was the core part of the business it's like starting a s company then try to have an agency build your sub company for you if you're in the sub business or you're in the consumer product goods business Outsourcing acquisition Outsourcing brand Outsourcing media is like it's it's that's the business like that's the business you're in it's not the stuff inside the bottle all right so I'll give you another one so I had a gym owner uh friend of mine from many many years
ago he was in he was in he he became a Gard he was a ly awesome guy and he started um he had a couple locations and his wife started a cleaning business because they got into airbnbs because you started making money in the gym so you started investing and he realized he actually liked real estate better than you lik the gyms which is awesome great um and so they started a cleaning company to uh clean houses for the airbnbs but then they realized they got in the Airbnb community and they also got in just
like that area and they're like you know what we could probably just sell cleaning to other people and so this was interesting I had dinner with him and he was saying I was like so what's your LTV to CAC he's like oh dude cac's like $25 and I was like what he's like oh getting customers in cleaning not a problem and this is and he was like this is so different from the gym business because the gym business getting the customers getting have to arm wrestle suie for an hour to get her to say yeah
she's going to stop eating crap and start coming to the gym three times a week but if you just say hey I'm going to clean your stuff and you don't have to do anything not a very hard sale and so he said the real problem that I'm having right now is actually getting people to do the cleaning right is actually getting hot you know people who speak English who don't steal who show up on time and do all that and like do a good job consistently he the problem that's actually the problem of the business
and so I had this it was this great moment for me because I love seeing finding found finding out what is the real business behind the business and so if you're in the cleaning business you're not in the cleaning business you're in the recruiting and training business you have to learn how to get low skill labor in high volume to show up for you consistently which is a cultural thing it's a training thing and part of that has to do with brand but a lot of it is just having the incentive system structured such that
that type of person can still succeed and he had a cool little thing that he did he did he had a setup where they got paid not by hour but by clean and so they were actually incentivized and so basically and this by the way big Pro tip on business is you want to have paired incentives so it's like having quality and speed and so it's like if you have a customer support team you want to measure them not just on like percentage of tickets that are absolutely resolved you also want to have speed of
completion if you only have one then you have lots of people responding as quickly as possible but not getting it done and on the flip side if you just do on rather the ticket is completely resolved people won't move fast enough and so it's having paired metrics um Andy gr talks about this in high output management really good book If you ever like want to learn more about Ops pretty high level though just to be really honest with you but it's a great book any and so the paired meure for him was you get you
can clean as many houses as you can in a day and I pay you per clean and so that drove up his productivity per employee and so the paired metric was that if you don't do a good job you have to go back and do it again at no cost and so that was the deal and that was also part of his offer for the cleaning thing and it worked really great and so like if you don't think we do a good job we'll come back and clean your whole house again and we'll do it
for free and so that was the paired metric again so he thought he was getting the acquisition business he's like dude I can get customers all day long in this business and he it's because he came from the gym world and expected it to be the same and so I've noticed this is this continued thing is that what I think I'm getting into is actually not the real constraint of the business and I'm going to I want to Leap Frog ahead here but like this is a little bit of foreshadowing for the woman in the
red dress all right so I'll just I'll just leave that there all right so I'll give you one for the anybody who's in like the Consulting space or Professional Services space if you sell to businesses you sell how to Market how to I mean even accounting you sell lawyer stuff you do Consulting in general any of that stuff you think that you're in the marketing and sales business because that's what people will tell you right but if you really want to play this game at a high level now again it's a car if you have
no Marketing sales you're not going to have a business right duh but which is these things is the thing that unlocks the biggest level of growth is actually again look at the biggest companies in the space you look at ey eron young you look at KPMG you look at you look at uh McKenzie you look at Bane you look at BCG these big public massive firms multi-billion dollar hundred billion dollar companies what is what is the thing what is the business they're really in they're in the recruiting business as well and specifically the talent management
business because different than the cleaning business now structurally it's recruiting for sure but it's at a completely different level they're trying to skim the cream of the crop because how do you scale expertise their Intelligence on demand if you go to the bet you go to pulson you go to some big big Law Firm right in Manhattan right some big law firm with a Manhattan address they have to attract the absolute best and brightest people otherwise the brand will degrade over time but how do you attract the best and brightest people well that's why a
lot of these Professional Services businesses are based on Partnerships they're limited Partnerships they're llps all right and so it's because anybody they have a track for eventually becoming an owner in the business and most service-based businesses that rely on expertise have tracks for people to have small slices of ownership and they're willing to have a small slice of a $200 billion pie rather than start out on their own and they also have sub Specialties underneath of that you're a IP lawyer you're a you're a you know defense lawyer whatever they' have all these different you
know subtracks underneath of that and so again you get into the Consulting business and people say hey it's about marketing and sales but really if you want to scale and and again this is the thing if you want to scale if you just want to make money then sure just market and sell and and you can make a buck right that's not the problem but if you want to get big you want to build an asset the business you get in there is on talent and how do you retain talent and how do you improve
the value of that talent and make them look because otherwise what do you do what what happens if you do a great job with talent in that business but you don't retain them they take up they take your customers and they leave they start their own shop they hang their own shindle up that's that's the game there right so the G the the figure what you have to figure fure out this is the big billion dollar problem is what you have to do all right now um I I I'll leave it at that because I
think I made the point now here here's why this is important is that if you know the business that you're really in you actually can get paid to solve the right problem all right now the way that I like to think about this is that like as entrepreneurs we get paid to solve problems and the bigger the problem the bigger the payoff and so I like to imagine it like I've got I've got this big massive wall in front of me and the thing is is I see the wall but I don't know how thick
it is but I but I have an idea that it's pretty thick right cuz I'm like shoot I don't know I'm going to get through this wall but I like to mentally envision myself that there's this big pile of money on the other side and I remember having this conversation with a portfolio company we're like hey we think that we need to build software into this business and actually transform this business from a media company into a software company and it's like this is a big strategic bet like lot of resources a lot of time
basically a lot of like lost growth like instead of us gassing it on this side we're actually going to basically maintain here and then deploy a lot of resources into growing software Ware and so I was talking to the founder he was like this is really hard this is going to be really really hard for us to do and I was like yeah yeah it's going to be really hard I said but um if we solve it we get an extra $250 million so does that feel worth it and he was like well when you
say it like that and I was like right so for 250 million bucks would I solve it yeah it feels it feels a lot more uh approachable or at least it feels worth it and so I'd encourage you to think like what is the ultimate price tag of me solving this problem worth and then all of a sudden you're like okay then you can actually appropriately allocate your personal resources to solving the problem because it really will make you a lot of money now um a lot of times we need to frame the problem for
what we get by solving it otherwise we avoid solving it um and so knowing the business that you're really in isn't really what you think it is it's often the second or third order effect and that's the big wall and so you come in like my friend did he starts acquiring customers he's like I'm going to make so much money here and he's like oh shoot I got to hire in staff people boom he sees this big wall and he's like oh I'm not equipped to solve this problem and this here it is this is
the meat this is the part that I've been waiting to get you and Hammer you guys on is hey and if you'd like to get personalized advice on how to scale your business and unlock the Enterprise Value kind of like the stuff that we're talking about here today acquisition. comom just started its new workshop division uh where we we host one or two days a month uh at our headquarters here in Vegas for businesses that we're not necessarily invested in nor do you have to become a portfolio company but it's a way for us to
meet more companies for you to meet us for us to help you solve some problems unlock some big value if that sounds a little interesting go to acquisition. comom hit the scaling button and our team will see if you qualify hope to see you soon the woman in the red dress appears now as soon as you realize the business you're really in and you also realize that you're not equipped to solve it because you don't know what the hell you're doing and you don't know what you got into to begin with that is when the
woman in the red dress appears now if you don't know if you're not familiar with my stuff the woman of the red dress is any shiny object it's the distraction and the interesting thing about the woman of the red dress is that the better you get at business the hotter she is and so like you think you can you learn to say no to a two out of 10 yeah because you've got some crackhead lady on the side of the street it's like okay she's like hey let's go home and you're like I'm good I'd
rather just not get chlamydia whatever you've got right um and so all businesses have they all have they all have a big brick wall that you have to come in contact with and guess what that's why you get paid to solve the problem that's why you make outsized returns is because you have to be willing to confront with the sledgehammer in hand not knowing how thick the wall is going to be and start hammering away at it with the hope that when you get to the other side it will have been worth it and often
it is now I want to I want to drive this point home so if you have a roofing business if you have a restaurant business if you have a dry clean cleaning business all you have to do is look at the world and see is there any version of this business that is a billion dollar company or even a hundred million dollar company whatever your goals are and most times you'll find that there is that but you'll also find that it just takes time to get there because the ount times I have let's let's say
small business own this actually happens a lot right is hey I've got a I've got a a roofing contracting business okay cool and they say hey should I jump into a different opportunity vehicle I'm like okay what are you doing they're like I'm doing 4 million Top Line I'm doing a million bucks in bottom line okay okay okay well why why don't you just 10x the size of your company ah and then they say well I've got this big concrete wall in front of me right what they describe next is the real problem of that
business the business that they're really in that they didn't know they were getting into and I want to be clear this only happens at scale all right so once like all businesses like if you're if you're if if you're new to entrepreneurship you got to figure out the basics of everything you got to figure out that a wheel is round you got to make sure that gasoline is combustible you got to make sure that there's some sort of engine it might be a sewing machine in the beginning that's that's powering your car it might be
a remote control car that that can only go you know 10 miles an hour but like there's got to be some engine otherwise you're not going to get any movement right but when you start really wanting to achieve scale there's going to be a big hairy problem there's going to be a big concrete wall in front of you that you don't know how thick it is and that is the work that is where the Enterprise Value is unlocked and the vast majority of the time when we're investing in a company or we take over a
company we are just comfortable with the fact that there's a concrete wall and we're just going to chip away at it and so a lot of the work that I do is actually expectation management with the team is saying yeah this is going to take two years yeah this will take three years and they're like wait three years I'm like yeah well I'm in this F like I mean let me put it this way if in five years we had $100 million Enterprise to this business is it worth it they're like well yeah I'm like
do you think we can solve it in five years I'm like well yeah but then guess what they don't do be willing to wait 5 years and so the thing is is that sometimes it takes somebody from the outside say like dude let's Zoom all the way out if you solve this for 10000 million bucks is it worth it yeah okay well it's going to take that long oh huh and then things start to settle and then you get this you get less frenetic energy the amount of wasted effort for entrepreneurs that goes into this
ideation of what else they could be doing with their time or with their skill sets honestly it's it's like oh great analogy it's like it's like being single versus being married all right hear me out is that when you're single at least for me when I was guy I would say 30% of my time was or I'm being generous maybe 40% of my time might have been higher anyways I'm not going to into it was allocated to like the idea of chasing tail so it was like man what if what if that worked out what
if that worked out and I'm I'm I'm I'm spinning multiple plates I'm I'm doing lead nurture right I'm working the pipeline I'm planting seeds I'm I'm making a a quippy comment I'm responding to a story whatever and so I'm working leads and so as I was doing this right all my attention was going to possibility was to potential was to what if right as soon as I got married the thing the biggest gift that marriage got me was it got me 30 to 40% of my time back was I didn't have to think about this
like this part of my life was not done but like solved as in like I'm goingon to be with Ila cool great now all the extra tension that used to go to like possibility in terms of what who of who else could be goes back into the main thing which for me was business now within the business it works the same way is that I think most of you guys are dating your business but you need to get married to your business you guys are trying to have friends with benefits with your business trying to
go on dates maybe date a couple other business on the side have some side chicks and then you're wondering why your relationship with your business isn't that healthy if you go all in on the business the business will go all in on you and I promise you it's just that the guy who's beating you right now he's just committed he's just married he's just married to the business he's like I'm I mean if it takes me 5 years it takes me 5 years but like where am I going like I'm in this I'm in it
for the long and he sees what the value of a 30-year marriage would be or a 50-year marriage would be with his business and so if you know the business you're really in which you usually find out a couple years into the business which is once you solve the basics of business you realize oh this is the big hairy problem and then you don't know how long it will last but I promise you that someone else has solved it and I promise you that they weren't super Geniuses they just were willing to commit they were
willing to to swing the hammer at the wall for a very long period of time and willing to zoom out and say I can think in fiveyear in commence and do I think that if I put everything I have and not get distracted with the woman in the red dress not have the side chick not have these these other businesses I'm flirting with that I'm keeping warm on the side these networking lunches for this guy I might do a partnership with even though it has nothing to do with this business because he says hey you're
good at this I'm good at this we could do this thing together none of that and just being like no I'm just I'm just going to keep slamming at this wall because if if I just get this one thing right if I just break through this wall I will unlock all of the wealth that I've ever wanted but there is a big thick massive gray boring wall between there and where you want to go and it's just who's willing to keep swinging the hammer for a long period of time without getting distracted and without thinking
they're smarter than they are keep being awesome slay love you all bye
