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If you just keep running your business and keep taking the profit and buying shit you

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don't need, in the business, you're not running a profitable business, you're not reinvesting

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in growth, you're just not making money because you don't have discipline of spending.

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The wealthiest people in the world see business as a game.

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This podcast, the game, is my attempt at documenting the lessons I've learned on my way to building

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acquisition.com into a billion dollar portfolio.

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My hope is that you use the lessons to grow your business and maybe someday soon partner

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with us to get two hundred million dollars in beyond.

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I hope you share and enjoy.

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I have had failed partnerships in my career before I started making money in doing what I

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do now.

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There was a long period after those partnerships where I had zero partners for a very long

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period of time where I made all my money.

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I seemed like I am against partnerships but I am the opposite of that.

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I love partnering people, arguably too much.

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I had to make a hard rule for myself that I was no longer going to do this.

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I'm only defining those partnerships as partners that I need money with as in like that

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we generated business, generated revenue and businesses and when I talk about how I've

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had many failed businesses, many of them were with partners.

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There's nothing wrong with that.

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It's just that I didn't know how to do them well.

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I'm going to give you the nitty-gritty of every lesson I learned from all of them.

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The first partner that I ever took on was an advisor told me, hey, you should partner

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with this guy to start a gym.

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My very first gym.

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He said, he's already got a gym in the neighborhood you want to be in.

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You can start with his clientele base and just go into a bigger gym and come together.

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I was like, okay, that sounds good.

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He's like, yeah, you guys both of the exact same skill set in the exact same business, you

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guys should just split it.

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Then I will take 10% for putting the deal together.

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You'll be 45, he'll be 45, and I'll be 10 for advising and putting this whole thing

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together.

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We both said, sure.

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Guess what the worst way to start a business partnership is.

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You both have the exact same skill sets and you both bring the exact same thing to the

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table.

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We're both bringing work and very little capital to the table where we have the same business

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that we're trying to do.

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And guess what most people do when they start a business?

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Exactly that.

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So, lesson number one of partnerships, they have to have something you don't.

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So they either have to have time you don't, they got to have money you don't, or they

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got to have skills you don't.

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That's it.

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If they don't have one of those three things, one of you isn't needed.

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Lesson number one, they got to have something you don't.

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Lesson number two.

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You lose the most equity day one.

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So most people are so anal about how they want to sell their company for this amount of

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money and blah, blah, blah, blah.

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They're thinking about their equity or what their profit is and they're so stingy on

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these one or two percent.

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But day one, they lock half off and give it to somebody.

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They don't off two thirds off and give one third here and one third here because they've

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got three buddies and they say, hey, well, there's three of us.

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Let's cut the pie into thirds and we'll go into business together.

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It doesn't work that way because oftentimes the economic contribution is not equitable.

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Now, again, I said earlier, a time money skill, if you look at time money skill between

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all the people that are going to get into business together, if you have more than one

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of those and they have more than one of those, well, how much is each person contributing?

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Now, part of that comes down to negotiation being really honest about it.

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But people want to avoid these hard conversations early on because they're like, hey, if it works

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out, we make a lot of money, it's not going to matter.

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I fucking promise you the more money you make, the more it's going to fucking matter.

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I promise you, I promise you.

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You're afraid to have the conversation when you make zero dollars, try making four million

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a month with that same partner and think that it's not going to be cool when you're

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writing them a check for a million bucks every fucking month and they do nothing, all

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right?

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Think about it.

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I'm not living that from experience.

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So, point being, you lose a lot of equity day one, equity doesn't need to be equal.

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So for example, if you did want to bring partners in, you could have a 95-5 split.

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Just make sure that what people are doing, what they're investing in time, money and

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skills is appropriate for their contribution.

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And believe it or not, I think you just have to start with that frame, which is, hey guys,

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let's be honest, in this business, our contributions won't be equal.

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And so I don't think it makes sense for equity splits be equal.

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And if they bulk at that, then think fucking God, you said that on day one, so you don't

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have to do with it later.

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Now you have this fear, well, what if I can't do this business without them?

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I promise you, you can do the business without them.

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Every successful business I had during the period after my nine failed partnerships, I did

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on my own.

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Okay?

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And so, not all my own, with Laila, my OG rider, die partner, so I give half no matter what.

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But that was the lesson that I learned from my first two partnerships.

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The second two partnerships that I had, I basically brought in advisors and this actually

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had nothing to do with the individuals.

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This was purely on me for not knowing any better.

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And so when I got into business with these guys, I gave away too much equity, too soon,

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based on what they were going to contribute versus what I was going to contribute.

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And so I was going to run the business all day every day.

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I was going to be there.

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I also invested capital, and I was also the one who knew everything about fitness.

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And the individuals didn't know either of those things and work any spending all their

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time in the business like I was.

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And so they didn't take a salary because they had other income streams they were far

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wealthier than far older than I was.

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And I didn't.

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And so I had saved up about $70,000 in the first six months or so of my business.

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So you're like, wait a second, you were making money and the business was growing.

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And then you brought partners in, damn straight ahead.

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And then I sold two thirds of my business for the cost.

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It cost me to start it, not for what it was making me.

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So every month, I made two thirds of what I got paid for the entire two thirds of my business.

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Because I was a moron, not really.

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I was inexperienced and I didn't know any better.

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And so again, they were wonderful people and they still are great people.

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I didn't know better.

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Like it was me paying down ignorance debt.

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So when you're getting in, you want to be really clear on who's putting the time in,

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who's skills and expertise are being leveraged and where the money's going to come from.

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And if you're the one who's in the business, you should get paid as an employee as well.

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Like there's ownership and then there's working in the business.

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Now, if you own a business and business itself is sellable, then that business has employees.

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And then those employees, like over time, if you're an employee of your business,

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which you should be in the beginning, if you move out of the employee ship,

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you're going to have to replace yourself with someone who has to get paid there.

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So if you're saying, hey, I want to be 50-50 in this business,

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but I'm going to be working in it and you're not, for example, which happens a lot.

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You say, I'm 50-50, but I need a manager salary,

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because this is what this would be.

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And that basically makes out for the fact that you're doing the job and taking the risk on.

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Now, over time, you can replace yourself.

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Now, you're both owners outside of the business.

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But that was a mistake I made.

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Is that for two years, I didn't take distributions from the business.

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We kept opening the locations, which was great on paper, but I didn't take any home.

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And so I was living on my savings for two years.

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So you hear about some of the success and you also hear something like,

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how I live so cheap and it's like, how did those things happen at the same time?

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It happened because I didn't take any money out.

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And so, rule number three, make sure that if you're in the business and you're doing a job,

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that you pay like you're doing a job.

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On top of that, I would recommend forcing profit, forcing distributions.

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Now, if you're a fancy business person, then do fancy business things.

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Fine, you can reinvest the capital and you know what your rate of return is, whatever.

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But for 99% of you, your business is how you're going to make money and future self.

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So I'd recommend you treat it that way,

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which is that you should be trying to rip out profit every month,

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because that was the point that you started to begin with.

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So trying to optimize towards profit and not thinking, I'm reinvesting the business.

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The amount of times I talk to entrepreneurs who are like,

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I'm like, how much do you take home this year?

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And they're like, nothing.

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And I'm like, why?

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They're like, I'm reinvesting everything in the business.

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I'm like, okay.

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There's a difference between reinvesting everything in the business and not making a profit.

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Not making a profit is not reinvesting everything in the business.

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It means that your business sucks.

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And it's much harder to say that.

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And it's way sexier when you say, hey, I'm reinvesting in growth.

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But if you're actually reinvesting in growth,

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then I would say then what's your return on capital?

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And if you don't have the answer to that question,

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you're not fucking reinvesting in growth.

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It's not making money.

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And so reinvesting in growth means I've got a location, for example,

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that makes $200,000 a year.

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And it costs me $200,000 open to location.

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And so every year I take the capital because there is profit.

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And I take that money that is there.

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And then I put it to open a new location.

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And then that one starts making $200,000.

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And next year, I have $400,000 in profit that I now have to allocate.

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Now, if you just keep running your business and keep taking the profit

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and buying shit you don't need in the business,

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you're not running a profitable business.

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You're not reinvesting in growth.

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You're just not making money because you don't have discipline of spending.

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All right, so profit is a discipline.

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Like it's not natural.

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Money wants to get gobbled up because everyone wants it.

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And so you have to hold the line and say like, no,

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we're not spending this money.

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Period.

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So that there is money left over so that we can weather bad days,

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so that I also can feed myself.

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You force profit by not spending money on shit you don't need to spend money on.

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For real.

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If you're like, man, you have to be comfortable with like, that's good enough.

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Especially early days, if you're bootstrapping like,

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would it be great to have an amazing lobby?

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Sure, but if renovating the lobby is going to cost 25 grand

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and your business makes $75,000 a year,

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you have to make the argument that that $25,000

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is going to get you a return.

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You have to translate that into how is this going to retain customers?

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How is this going to get more people in the door?

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How is this going to be pricing power?

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Now, maybe a nice lobby might translate into higher close rates,

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but I'll fucking bet you spending $1,000 on training your sales team.

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We'll do a hell of a lot more than spending 25 grand on the lobby.

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So again, this is return on capital.

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You have to make an argument like yourself.

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And so McKinsey, Bane, and Harvard did these big studies

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on the highest performing companies in the stock market.

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Now, what do they have to do with me?

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I'll tell you, the CEOs that consistently

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outperform the S&P 500, which is just the index for the whole market

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or the biggest companies in the market,

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they thought of themselves as investors first.

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Because if you think about what a CEO does,

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it's strategy and strategy is just a fancy word for priorities.

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And so if a CEO's job is to prioritize,

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that means that they are allocating resources.

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Everyone has limited resources, time, money, effort, skill, whatever.

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And so we have to allocate it against unlimited options.

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So limited resources, unlimited options,

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and we have to allocate it where we get the highest return.

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And so the people who are the best at allocating time, money, attention

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are the ones who get the most back.

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And so if you think about yourself as CEO of your business,

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you have to be able to allocate time, money, effort

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into the things that get you the most back.

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So if I have a $25,000 lobby renovation,

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$4,000 sales training to bring in, to get my sales to go up,

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which of these is going to be better investment?

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And so the thing is, do I think the lobby

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might make us more money?

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Sure.

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But is there something else that can make me more?