I Lost $100 Million... Here's What I Learned

I've lost $100 million over my career and in this video I'm going to break down every single one of my mistakes so you don't have to my first big loss was crypto and I'm going to be order these roughly lowest to most amount of money at the very end I'll give you the Big Kahuna the one that I lost absolutely a shitload on that you'll probably be able to learn the most from in 2017 a buddy of mine was like hey man you should buy this stuff called ethereum it was 100 bucks I set up

the account I put a million dollars in and like right before I'm about to click per purchase at $100 it like went down to like 93 and I was like ah I don't know about this and so I decided not to pull the trigger long story short and then you know 30X from there or whatever it was this next time around a few years later it had been going like this and then right here Bitcoin was at $60,000 ethereum was really high too I called my buddy up not the same guy different buddy and I

was like hey man I'm going to get it on this and he was like I'll put a million bucks in if you do and I was like fine so we put a million bucks in and then lost 500 Grand in a matter of weeks but there's two things that I think were good reminders for me from this whole experience the first is that me making a million dollar bet at the time was not a huge percentage of my income or my net worth and I made more than that every month anyways I didn't plan on

having this be how I made money I made money doing stuff that are fundamental business things and then I basically made a bet or a gamble which realistically it was just gambling the second big point was that warm buff and Charlie Monger talk about your sphere of confidence business is very much within that Marketing sales acquisition pricing product those are the things I'm very good at now outside of this is probably real estate and crypto and a bunch of other things that other people do and have spent lots of time developing their skill set those

people should do those things I have no idea and I have just noticed the further away I get from my core the more money I lose and the closer I am to the core of what I'm good at the more money I make I will give you a a little tidbit that a a mentor gave to me if you know how to create wealth just create wealth don't [ __ ] with investing if you know how to make money and he gave that to me as advice and I try to remember that as like what

am I good at and so I think it's important to think about what are the themes that are going to be around these mistakes cuz you're hopefully not going to repeat the mistake I'd rather you just get the lesson without the scar right and so number one out of my sphere of confidence number two I latched on to fomo I saw these people like man I would like to make quick fast easy money too when everyone thinks something is a good idea it's usually a bad idea whenever you feel that fomo I've now learned pause

so the second big mistake I had uh was in real estate and you'll notice there's multiple big mistakes that I will make in real estate over my career and hopefully I sto making them this one was actually my first ever real estate investment so L and I have been making a ton of money uh in gym lunch for a few years now I think at the time we probably had I want to say like 20 million bucks in cash so buddy of mine's like hey I've got this guy he sells houses in Ohio cuz houses

in Ohio are actually really cheap when I got on the phone with the guy and he said yeah I buy them for 30 I fix them for 10 grand so I have 40,000 and then I flip it to you for 50 so I make 10 on the spread he's like that's my business model I just sell a lot of them I was like okay that's cool he's like well do you want to buy five do you want to buy 10 what do you want to buy and this is from a lesson that I had learned

earlier on less money I was like why don't I dip my toe in like let's not lose a shitload of money if this doesn't work but I said why don't I just buy one of these houses and see what happens it turned out that the house was not in fact a three-bedroom it was actually a two-bedroom house and the third bedroom was actually in a closet that they had put a mattress into the house did not actually have electricity they were running it from the neighbor's house illegally the driveway was so in shambles that the

people couldn't actually Park on it so tenants couldn't park there fixing the driveway on its own was like 7,000 now for a house that cost 5050 that's a huge chunk of what you put into as an investment now remember I'm trying to get like 6,000 a year uh a friend of mine who is in real estate different friend looked up the county records or whatever and found out that the guy who had sold it to me actually bought the house for $199,000 and had put no money into the house and so his business model was

buy it for 19 flip it to 50 to people who don't know any better that was me and the tenant's paying $700 a month now all right so that was what we got we were able to rent this place for now $700 a month doesn't cover the the driveway that I had to repair it doesn't cover the electricity that I had to actually run from scratch into this thing to make it livable and honestly really kind tenants they were like hey you think you know it'd be nice if we could have our own electricity and

like of course they [ __ ] should I didn't know I I was buying it out of state what did I have to do because he was unlivable I had to put him up in a hotel while we had to basically make this place livable and so that took like 30 days this family isn't hotel that I'm paying for this whole time as the landlord selling the house with the tenant in it I think for $20,000 because I was like just get rid of this [ __ ] thing but the thing that I lost Beyond

just the 30 or $40 or $50,000 I lost in the deal was the amount of time effort and energy and emails and phone calls that went back and forth about this [ __ ] thing and for context at the time I'm making 50,000 a day in profit like I like I was like just [ __ ] get this out of my life what a mistake so anyways I called the guy up who sold me the house and I was like dude like what the [ __ ] and basically sto responding to my my attempts to

reach out to him because it was apparent what he had done and I basically was like I just want to let you know I'm really grateful that you taught me this lesson for so cheap and he being the scumbag that he was said you're welcome he very much was aware of the fact that he was totally running a scam let me walk you through some of the lessons that I got from this so number one is that if it's too good to be true it usually is now he was telling me about 25% plus cash

on cash returns right I caught a a buddy of mine who owns a billion dollar fund and I was like hey what do you think about this thing he he was like this doesn't make sense he's like cuz if he really was doing that he should just own all the houses like why would he why would he sell these houses and I was like no man you're just not a Believer too good to be true all right usually is and the thing is is the hard part about this one this one's really deceptive is that

if you're in early on something sometimes it is really good but the thing that makes it the to be true part is that if no one else is aware of it there's this double-edged sword of like am I seeing some opportunity that's going to close in the marketplace or am I just about to get [ __ ] robbed blind the second thing is you'll see this lovely recurring friend we have here is that I saw my friend making money and I was like oh man I should do it and he was a business guy and

I was like oh if he's a business guy he can do it I'm a BS guy I could do it he lost his ass too which leaves me to number three which is now if someone tells me about an opportunity that they're doing for investing which for me is now a much longer time Ron I say how long youve been in this deal for if someone says they've been doing it for less than 2 or three years I don't care point three is that what's the hold period if I'm hearing about something from somebody they

better be doing it for multiple years before I'm going to even consider it and so what I would say I do now with these types of things is that one I'll do it with somebody but I want to do it with the guy so that guy who was on the phone with me selling me the property what I would do now is to say I'll buy a property that you buy and if they don't want to go on with me great then I'm not doing a deal in the beginning I was really greedy I was

like no I don't want anybody have the upside now I'm happy to give Partners the upside because the more money they make the more they want to make it with me and we'll do it together and I'd rather have a very sure 20% than a really risky 40 and whenever I feel that little tickle in my stomach or the back of my neck where I'm like ooh I feel like I'm missing out I literally just stop and I say wait because every huge amount of money that I've made has never been from any investment it's

been from me seeing an Arbitrage opportunity in marketing and sales and seeing that I can acquire a customer for $10 that's worth a th000 and then saying great let's Jam as much cash as humanely possible into that but that takes lots of iterations to get there and I was there every single step of the way it doesn't just appear on some spreadsheet showing how rich I'm going to get so mistake number two my little house in Ohio for $50,000 that taught me lessons far more valuable that have saved me way more than $50,000 over the

rest of my investing career so $50,000 goes survey says goodbye so my third lovely mistake that I had was terrible Partners now I'm going to go through a few of these um and I'm going to ladder up to the worst partnership I had the first Partnerships I made I made because I was insecure I made them because I didn't think I could do it on my own I just partnered with people that I thought would know more than me just because they were there more or less and this is not any disrespect to those people

it was my mistake not theirs I have had nine failed Partnerships in my entire life before I started making money nine different people that I was partnered with I'm going to give you the the nitty-gritty of every lesson I learned from all of them so the first partner that I ever took on was an adviser to told me hey you should partner with this guy to start a gym all right my very first gym and he said he's already got a gym in the neighborhood you want to be in you can start with his client

tell base and just go into a bigger gym and come together and I was like okay that sounds good and he's like yeah you guys both have the exact same skill set and you have the the exact same business you guys should just split it and then I will take 10% for putting the deal together so you'll be 45 he'll be 45 and I'll be 10 for advising and putting this whole thing together and we both said sure now guess what the worst way to start a business partnership is you both have the exact same

skill sets and you both bring the exact same thing to the table we're both bringing work and very little Capital to the table where we have the same business that we're trying to do and guess what most people do when they start a business exactly that so lesson number one of Partnerships they have to have something you don't so they either have to have time you don't they got to have money you don't or they got to got skills you don't that's it if they don't have one of those three things one of you isn't

needed all right lesson number one they got to have something don't lesson number two you lose the most Equity day one so most people are so anal about how they want to sell their company for this amount of money and blah blah blah blah they're thinking about their Equity but day one they Lop half off and give it to somebody they L 2/3 off and give one/ third here and one/ third here because they've got three buddies and they say hey well there's three of us let's cut the pie into thirds and we'll go into

business together doesn't work that way because often times the economic contribution is not Equitable if you look at time money skill between all the people that are going to get into business together if you have more than one of those and they have more than one of those well who how much is each person contributing now part of that comes down to negotiation being really honest about it but people want to avoid these hard conversations early on CU they're like well if hey if it works out we make a lot of money it's not going

to matter I [ __ ] promise you the more money you make the more it's going to [ __ ] matter I'm not living that from experience you lose a lot of equity day one Equity doesn't need to be equal so for example if you did want to bring Partners in you could have a 955 split just make sure that what people are doing what they're investing in time money and skills is appropriate for their contribution and if they bulk at that then thank [ __ ] God you said that on day one so you

don't have to deal with it later now you have this fear well what if I can't do this business without them I promise you you can do the business without them all right every successful business I had during the period after my nine filed Partnerships I did on my own with Lila my OG ride or die partner so I give half no matter what that was from my first two Partnerships that I had the second two Partnerships that I had when I got into business with these guys I was going to run the business all

day every day I was going to be there I also invested capital and I was also the one who knew everything about Fitness and the individuals didn't know either of those things and weren't going to be spending all their time in the business like I was they didn't take a salary because they had other income streams they were far wealthier than and far older than I was and I didn't and so I had saved up about $70,000 in the first you know 6 months or so of my business so you're like wait a second you

were making money and the business was growing and then you brought Partners in damn straight I did and then I sold 2ir of my my business for the cost it cost me to start it not for what it was making me every month I made 2third of what I got paid for the entire two-thirds of my business because I was a [ __ ] and so not really I was in experience that I didn't know any better it was me paying down ignorance debt which is why I'm making these videos for you so you don't

have to do it either okay and if you're the one who's in the business you should get paid as an employee as well like there's ownership and then there's working in the business if you're saying Hey I want to be 50/50 in this business but I'm going to be working in in you're not for example which happens a lot I'm 50/50 but I need a manager salary because this is what this would be and that basically makes up for the fact that you're doing the job and taking the risk on make sure that if you're

in the business and you're doing a job that you get paid like you're doing a job the amount of times I talk to entrepreneurs who like I'm like how much you take home this year and they're like nothing and I'm like why they're like I'm reinvesting everything in the business I'm like okay not making a profit is not reinvesting everything in the business it means that your business sucks and it's much harder to say that and it's wayte sex here when you say hey I'm reinvesting all my I'm reinvesting in growth but if you're actually

reinvesting in growth then I would say then what's your return on Capital and if you don't have the answer to that question you're not [ __ ] reinvesting in growth you're just not making money I'm still going to come back to Partnerships I'm staying on this page cuz it's it's going to be a recurring theme mistake number four getting fancy so my first location in Huntington Beach cost me $37,000 to open I had duct tape sandbags from Home Depot that I used the sandbag I couldn't afford the nice ones like I was I had so

little money to start this thing thing what's crazy though is that within 6 months that business was making 20 $225,000 a month right in profit it was making good money but the thing is is that once that business my hunting Beach location started making money I was like okay my next location is going to be really sick so I went from a 5,000 ft Warehouse that was behind an auto shop to an anchor location in a retail Center that was 7,000 ft so bigger more expensive rent big storefront I spent $250,000 to open it up

I wanted to be we got glass Lobby we like we [ __ ] you know we did it all up it made the same amount of money as my first location and so the lesson for me was like I literally just burned money so I could say I was investing in the business but all I did was buy [ __ ] that didn't necessarily turn into revenue and so that's why and this is the lesson here so this is D or whatever we're on right is roic I want you to write it down that's return

uninvested Capital if you're going to spend money in your business every expense you have on your expense line you should be able to say how is this making me money how am I getting a return on this right if you buy cost of goods you buy you buy products for 10 bucks and you sell them for 30 you have a return there you're tripling your money that's a great investment if you can get if you can go from 10 to eight all of a sudden becomes three and a half or whatever it is right whatever

the math is there but where you lose is where you spend $25,000 on something and you do make $25,000 over the next 10 years well [ __ ] that means you make $2,500 extra this year you're just down 22,5 and in a small business you should be making 3 to1 5 to1 10 to1 on the dollars you spend because you can when you're small you can be way more more efficient than big or organizations can you can buy leads for a buck and sell $500 things to one out of five spend five bucks spend 20

bucks make 500 like you can do that flip and that's where you can make crazy money really quick and that's where that's the main economic engine and so the rule is don't be fancy do the basics all right so I had a really interesting uh business Mentor who uh I called when I was considering selling my uh selling gym lunch years later he had been private Equity CEO and so all he did was basically they Dro this guy in when they buy a company and then he would have the job of tripling it in three

years or so and he had done it three times and so I'm on the phone with this guy and I was like so what's your secret man and he's like don't be cute backyard football he's like everybody tries to get get cute get fancy you know when you're you're a kid and you're like okay so we're going to do with a double deep fake and we're going to go AI to the right and we're going to we're going to spin it back and then you're going toss it back to me and then and then Johnny's

going to go to the left and then we're going to we're going to toss it to him and then and then we're going to get the he's like what happens I was like I don't know he's like you [ __ ] fumble and you lose the ball right and you lose the game he's like no we play fundamentals football he's like two fat guys in the middle to the right he's like that's how we play he's like don't be cute I did I get too cute right I get fancy with my expenditures right but I

also get too fancy in my strategy just saying like we want to provide Superior Service very easy to say very easy to understand and if you do it well most people get it if you do a good job people tell their friends they come back like it makes sense but really hard to do how do you get all of your staff to smile how do you get all of your staff to remember people's names how do you how do you write handwritten cards on a systematic basis so that people see that you're going above and

beyond like how do you do those things like that takes systems that takes effort right but the idea of just doing backyard football of just hey if we treat customers well they're going to come back if we provide a good product they're going to come back right we think through the details we actually drink our own Kool-Aid we eat our own dog food so that we know if something comes off I could write a book on business that if I just gave it to people who buy companies it would take me way less effort because

I could just write it for them but to be able to write a book that somebody who has no idea how to run a business and somebody who buys companies can both get five out of five value from takes a shitload more work and so that's the kind of obsession that happens with product that when you start getting fancy you don't have time for it a 4.4 product compared to a 4.7 product on Amazon in the same category the 4.7 might get 10 times the sales if you see a 4.4 and a 4.7 which one

you buying it's like it's it's obvious you're not buying the 4.4 neither does anyone else it's just the game of incremental improvements on the Big Basics that if you just get those right nothing else matters and I got really fancy and I got distracted from the thing that mattered most whatever that was me being fancy now let's go back to Partnerships so I had two different Partnerships um after the first four that I talked about where uh I just was like you know what I've got my gym business thing going I'm going to start doing

launches too and then I'm also going to start these agencies right and so I'm going to get partners cuz that's what smart people do I was still the main economic driver in all of them and so I was the one who was doing the sales and doing the delivery what is the partner doing right besides having the idea that we should start a business together all the parns I've had I've learned a ton from and I I wish all of them the best um and it was my deficiencies it was not their fault it was

my fault like I shouldn't have made these these mistakes which is why I'm making these videos so that you don't have to make them too I was the rain maker if you're the one who brings in the customers and makes the money you should get a disproportionate share of the proceeds if the business can't function without you but it can function without them you are needed they are not and here's a really hard truth you might think man I need an accountant okay cool most businesses do in fact all businesses do but it doesn't mean

that when I start a business I partner with an accountant just because I need it doesn't mean that they have to have equity in it and so just because you can identify a function in a business that is required in the beginning it doesn't mean that you have to have give Equity there like you can hire these people you can have vendors right you can have other companies do this for a living and then you just fractionalize the cost and you pay to them and they have systems in place and at a certain point maybe

you bring it in house maybe you don't right but these are decisions that early on I made mistakes for and so the partners that I had had functions that they could do they just weren't core to the business does it get customers in the door is it part of how we deliver you acquire the customer you deliver on the customer that's it and so if they are not core to those things they are probably not people that you need to give Equity to in the beginning or at least any meaningful share to a a completely

makes sense partnership is is where one person handles product and is like I will just make sure our thing's absolutely exceptional and the other person's like I will go tell the world about it a phenomenal split a great split that many people do now I'm going to get to the bad one now because I know you guys were waiting for it so I lost a lot of money a lot of money a lot of money and a lot of brain power when I got in bed with a very bad partner so I'm going to tell

you what I did and what I did wrong all right so this is number five bad Partners now I had Partners before and they were good partners we had bad Partnerships this is bad Partners so I want to be really clear about the difference all right all the partners I had before ethical fine people nothing wrong with that we had a bad structure and so you have the person and you also have the structure of the relationship that both have to be aligned the bad Partners I'll Define as people who have nefarious intentions who actually

want to hurt you this was actually the last partner that I took on so this was punishing enough that it was quote traumatizing it permanently changed my behavior and so I had just sold um so I had six locations at this time with my gyms all right I had bought out some of my past partners which cost me a lot of money and so I had six locations now I shut down one because it was too new and I decided to switch gears because I wanted to start the licensing business and then I sold five

now I had big pile of money this is now like basically my egg what I have to show for it for all this work and all the sacrifice I've done at this point I've got this S I was doing gym launches at the time so this is why I made the transition I started flying out to gyms I started making money and I could do like $100,000 in sales in about 3 weeks and I would keep that cash for myself because I had almost no cost besides my airfare my hotel and the ads Bend which

usually for me was like 1 to three grand so not a lot and one gym owner was like hey you're leaving so much money on the table red flag number one so much money on table you can't pursue every opportunity so it's the definition of Entrepreneurship that you have to say no which means there's always money you could make you choose to leave small amounts of money on the table so that you can have the one pile of money that is on the table that you're choosing to play at get bigger he's like you're opening

these gyms and you're filling them up to full capacity he's like you should own them average gy owner makes $36,000 a year for a full year of work working 80 hours a week I was making 100 Grand in 21 days and walking away way better business me being a [ __ ] I was like sure this is what a [ __ ] would do so I should do it he says how about this I used to run this gym $4.2 million year out of I know how to run a gym I don't know the Marketing

sales stuff you go to the Marketing sales I'll come behind you and I'll run the gym after you so he's like every month you open a gym you fill it up I'll come behind you I'll staff it he's like every month you can open a new gym and I was like man that means at the end of the year I'll have 12 gyms that means that my ego will go up and I can tell people I have 12 gyms so I launched his gym crushed that and so he's like hey so now let's do this

next gym as we're about to sign the lease he says small detail you know I had a little bit of a bad credit situation big misunderstanding but you're going to have to personally guarantee the lease sure makes sense we're Partners I'll personally guarantee it also I mean you just made all this money on my gym you should front the cost for the new location and I said of course also you should run the whole thing and then I'll come after you I was like okay so I'll take the risk do all the money and do

all the work and then and then you'll have half and he was like yeah I was like oh steal what a great partner and so I crushed this launch did 370 sales in like 6 weeks like new members I put all the cash into the account like all this cash my big Easter egg because I didn't understand how money worked and so I put all the money into the new bank account for the new nty cuz I was going all in on this new idea and then I wake up one morning cuz I would always

check the bank account every morning cuz it was a habit all of a sudden it was at zero or close to zero it was actually just one withdrawal and it was to him huh and he was like oh yeah I was just taking my hat I know you're taking your half off the top he's like I'm just taking my half he's like I did the math he's like this is how much my half should be and I was like first off you're accusing me of stealing second off what I had a coach at the time

and I was like dude what should I do print out the financials go line by line and show them where all the cost were and I was like okay so I printed all the all the expenses took me like 3 hours itemized everything and I was like let's go have lunch and like let's go over this I put the papers down and he pushed them off the table I don't need to see that [ __ ] and I was like oh I just got robbed he ended up sending the money to his girlfriend in Sweden

and filing bankruptcy so I can Su him so remember when I said like he said oh there's this big misund understanding early on with the whole lease thing he had been indicted for fraud before that I knew about it I have my own demons of like I [ __ ] up in the past two and I'm trying to you know do good now and so I want to always give people that benefit of the doubt and I'm going to say something that probably won't be popular I don't do that much anymore there's just plenty of

people I can partner with that I don't have to deal with that for here's my little tldr lesson on this this if someone shows you who they are believe them the first time red flags are red flags for a reason I'm not even going to tell you the amount of money that I lost because I will tell you what's more important is that I lost all my [Music] money and what felt like years of work and so from a loss perspective it was the amount of money was one of the smaller ones in terms of

total dollar amount that I lost but in terms of emotional significance I went from a multilocation gym owner to successfully exiting my gyms to losing everything that I had spent years building in 6 months use that lesson so you don't have to have the scar mistake number six is the classic example between push and pivot all right so if you don't know what the the push and pivot dichotomy is for most entrepreneurs most people in general that there are some times where [ __ ] gets hard and you need to push through it and there

are other times where your fundamental assumptions were wrong and you need to Pivot you need to change directions because the thing that you originally thought was true is no longer or you found out that it isn't and so the hard part is sometimes when you're in the thick of it you're not sure if this is a push or this is a pivot it's one of the hardest decisions in entrepreneurship there are dead bodies on either side of this road and it's hard because you just got to use judgment to be able to make the best

guess you can and the thing is you can never replay the game so I graduated three years from vanderbelt and I got a job at a management consulting firm that did space cyber at least the projects I worked on was space cyber intelligence with the military so it's a PT firm defense Contracting that's what I worked on sounded fancy that's why I took it when I was there I had the desire to learn I did learn a lot quickly in the beginning after that period of time which maybe took 6 to9 months I didn't feel

like I had more to learn and so I had two options and I took neither of them and I think that was the real mistake I didn't push and I didn't pivot I did nothing I coasted I was actually in that job a fairly bad employee you can look at work environment you can look at people you work with I was a bad employee and I would actually agree with them I didn't get challenged in that last period and so I just read books all day at that point it was either go to business school

um or start something else and so that's why I decided to start something else if you are somewhere where you know deep down you are you are not living up to your potential and you are cutting corners and you're looking at the clock and you're trying to just like count minutes and you're like holy [ __ ] it's only been an hour I have seven more hours of this [ __ ] like if you were living like that leave whatever the alternative is is better it was one of the most costy mistakes I made also

because of what I started feeling about me you know what I mean cuz I was like am I a slacker do something just don't do this push pivot push being go up let me learn more give me a challenge pivot being I'm going to change career paths I did nothing until it was forced upon me so that was mistake number six where I lost a lot of time and honestly a lot of self-confidence during that period of time which cost me dearly later so my seventh big mistake was actually getting into the food business now

the food business per se is a mistake cuz you're like what does this have to do with me it actually has much more to do with getting into a product that I had low understanding of and so I thought okay I'm in Fitness I talk about nutrition I can start a food company right because we have this big distribution base of gyms they already sell our supplements I went all over the US tried to find co-packers who could uh handle the volume that we could do basically overnight in scale which means I had to go

to really big companies that could handle that kind of volume we did this big launch we did this big buildup the first month sales were a little disappointing for me so we did like 600,000 the first month now you might be like that sounds like a lot of money but let me walk you through the margins of this business so $600,000 and you're like okay where's the M mistake coming from don't worry we'll get there the average meal was 10 bucks so we were selling 60,000 meals per month it's a lot of meals right a

lot of meals you think wow this is a successful business well sounds good right times $10 now here's the part that no one wants to talk to you about in the food business my cost was $9 I had to cover every expense that I had in the business marketing sales payroll customer support refunds for [ __ ] that went bad boxes that broke all of that on this $1 I was able to make in this business somewhere in the neighborhood of 7% profit margins that's because I ran this as a skeleton business cuz I knew

that it was low margin and I already had the supplement infrastructure for support and so that was a little bit of a help for why I like didn't lose my complete ass on this here's a little fun stat for you 80% of my customer support complaints came from this 90% of my profit every month came from my supplements from that line of business so you mean to tell me I just 5x the amount of headache for an extra this much profit just because you don't lose money doesn't mean you didn't lose money honestly I might

have made 500 Grand on this whole thing but for the amount of work of me building up to a launch using some good will with my audience to say hey use these meals I had a whole separate website build out one if I had just done nothing and taking all of that effort and just put it into the other one that was making 10 times more money could I have made 10% more on that business to make up for this [ __ ] yeah I could alternatively if I had just done a different opportunity to

go pursue could I have made more money than I did on this one and the answer is yes and the main culprit was that I did not know what I was getting into I didn't talk to anybody in the food business and say hey tell me how you make money real talk the only guys I did know were losing money the co-packer that I that I did this go with was losing money he had to keep raising funy he was not profitable I didn't understand what I was getting into and I split focus and so

right now remember we said earlier about there's money on the table there was money on the table and there was this tiny little pile of money and I decided to take my off the big pile of money and go on the small pile of money and I lost a year of effort and buildup and marketing and sales that I could have just directed towards the big money and maybe grow that by 50% here I did all these new things had to figure out all these new problems from ground zero and that's one of the biggest

mistakes I've made so many times in my entrepreneurial Journey that now I'm so obsessed about you hear me talk about more better more better more better because I had to learn the hard way of how many times I lost money splitting my focus when I could have doubled down and made so much more so this mistake realistically cost me probably about10 to $25 million reason being I ended up selling gym launch and we had a big multiple on that and so if i' had been able to just make two $3 million more in profit on

my main business it would have resulted in $10 to $30 million more in money to me that's not hypothetical money like I did sell that company and it was based on profit and that took away from the profit that I would have made so don't do that this is mistake number eight all right so I'm actually going to do this as a two-parter these are two separate mistakes that actually stem from the same principle so I had my lawyer situation and I had my payroll situation all right so I'll tell you both I wake up

one day and I look at my emails and there's this email that says cost of living adjustment huh I look into it and it said you have a 0. cost of living adjustment so I meant I had no change and I was like I wonder if this was like a payroll change in entity thing like they were reorg something whatever so gas who's one of our employees who's our executive assistant was like hey I just got a $6,000 raise um thanks I was like Leela what she was like I don't know I'm figuring out right

now we had a director of HR who lived in California and she had asked for a raise she was denied a raise because she didn't have enough experience which you will soon see why and so she took it on to herself to say well I deserve more money because I live in a more expensive area she then ordered a cost of living study on my dollar took that very expensive cost of living study and then looked at everyone's pay and said okay if you living in an area where it's cheaper we're not going to change

how much you get paid but if you in an area where it costs more we will pay you more now after making this decision unilaterally the way she chooses to announce this is just a blast email to everyone with just the amount that they got paid more so like if I were actually going to give everyone a raise I want to get some [ __ ] credit for it you want to tie it to something that someone does so you can reward behavior that cost increase cost me 600,000 a year of profit for zero additional

anything by the way she was in California and so she got one of the largest cost of living increases unto herself she costs me $600,000 a Year everybody just gets erased you now then say like just kidding she's an idiot like what do you do right like just kidding you're actually all not getting paid more very tough situation that I got put in so what we did was we got rid of her so she went from getting a $10,000 raise to getting a zero pay the reason I lost money and this is my principle I'm

going to give you know where the bodies are buried if you're too far away from the Apartments if you say hey what's going on and they say oh everything's good and you don't know how to go one layer deeper because you are too far away it means that you don't know where the bodies are buried I don't need to know everything but I do need to know what problems that every department is struggling with just so I'm aware so I can keep Loops like updates on what's going on because I was so far away she

was able to carry out a cost of living analysis and execute a companywide pay raise all without me even knowing until it was way too late second mess up my CFO Suzanne came in uh to gym launch and she said hey are you guys in a lawsuit and I was like and I was like why do you say that she said well you have a legal expense that's $120,000 a month yeah that's like you're on a full-fledged like multi-million doll lawsuit that's going on with like litigation arbitration all this [ __ ] and so she's

like that's how much that cost I was like oh I just delegated compliance to my team so then I clicked down a level and I was like hey what are what are we doing that's causing all these lawyer bills they're like oh well we do a uh we do a bi-weekly meeting with the entire legal team it's $150 an hour lawyers two 1our meetings a week and you're like well that doesn't that just wait and then what they're reviewing is all the work that their smaller attorneys that were getting built at 200 to 500 an

hour are reviewing every piece of licensed marketing that we made and that we gave to our lenses and so we were creating tons of marketing hundreds of ads every single month we're creating tons of trainings hourlong trainings two hourong trainings so if I did a 1-hour call every day to help my licensees I had four lawyers watching every hour and then sending notes on what I could have done to be more compliant now guess what I never read any of the notes and guess what neither did anyone else but because I said we need to

make sure that we're compliant they said great lawyers what do we have to do to be compliant they're like well why don't you just have us review everything and because I wasn't signing the checks and it was someone it was Uncle Alex's money they were like oh great instead of us doing work we'll give it to this Law Firm they'll do the work for us and not only did they not actually Implement anything from all the notes that came in from this they were happy to just have the meetings every week cuz they started getting

their buddy buddy with them and of course they were when you pay someone a million dollars a year they'll be nice as [ __ ] to you know where the bodies are buried part of the reason I brought uh CFO in because I was doing other stuff she saved me you know her first month she was like well paid for myself I already saved you a million bucks a year which is true she did save me a million doll a year and I was very grateful for it I didn't have the ding on that because

I was able to solve it but it cost me $1.2 million so that's mistake number eight multi-million dollar mistake let's go number nine you're like does it get worse oh it gets so much worse I started a software company Allen uh use Allen it was because I wanted to solve the next problem that most gym owners had which is that they didn't work their leads so we could get leads for them or give them ads that they get leads for themselves but they wouldn't work the leads and if you don't work the leads you don't

make sales it's kind of how it works I saw where AI was going and where messaging was going versus pickup rates and I was like I thought that we could create like a really strong automated bot with enough data and enough conversations that we could probably do as good of a job as kind of a low- skilled employee it turned out that we were right and so the average front desk girl at the time or guy at the time would get 10% of leaves in the door and we got 19% of the door here was

the mistake that I made so Allen was a purely software business I had never built software before I've never written code before and so I did what all very impatient Founders do I just said I'll just go find a software company and just have them build it for me and then I'll charge for it here's what actually happened so I went to the software vendor I went through this really long competitive process for people to uh bid the software out someone came in and said I can build it for you for 100 Grand or something

like that I said sure fine let's do that the 100 Grand came in and uh the thing wasn't built yet but now I have Sun cost fallacy so now I've put money into it I made promises and so I'm like fine we'll keep going and so when it was said and done I think I put 1 point something million into the software now you might be like okay well you spent a million bucks to a software company you had a big distribution base it might have made sense it probably would make sense except once the

software was operational and started making money who maintains the software the outsourced development team if if you're an Outsource development team and someone needs you to make money and guess what they can see how much money it makes what do you do to your fees you just raise them you just keep eating it up and what else did they do they didn't document any of the code which meant that no one else could go in and start working on it we couldn't have an outside firm come take this offer over because there was no road

map it was like writing a book with no table of contents they just consistently increase their fees to consistently reduce my margins until they ate up everything the mistake that I made in this big one was that you need to have a technical founder and the reason I believe that is that name me one massive software company that doesn't have a technical co-founder name me one I'll wait a technical co-founder can hold them accountable right so you could have a technical founder and then have part of your team outsourced but the technical founder keeps them

honest keeps them accountable make sure they're documenting things correctly keeps bidding things out and then over time you can start hiring people inh house and inh house doesn't even need to be us-based inh house could be overseas but they still work for you they're loyal to you not to whoever their boss is who writes the check who's not you this time obviously with school I'm not the person who is the technological person nor am I trying to contract that person I found the product just amazing amazing developers and they already had an amazing product and

then I'm coming with it right I'm I'm boosting on top of it remember I said the core engines of a business you either have to know how to get customers or you have to know how to deliver I was trying to Outsource the core value generation of the business to an outside company that is a fundamental mistake these guys businesses these Dev shops they rely on you making this mistake unless you have a clear plan of having somebody in house who knows more than them about software who can hold them accountable who probably has to

have Equity to give a [ __ ] you are just going to be at their Mercy over time I was able to sell to an actual software company that did have developers who could actually read into the stuff and they were able to retrofit the software and incorporate into their business so again I had this big pile of money that I could have just worked on doing more better of and yet again got distracted and if you're like keeping track here like wait there was a food thing there was a software thing yeah like [

__ ] all right so like I I share these lessons so that you don't have to as well okay multi-million dollar mistake number 10 vendors this was one where we had a company and I can tell you the amount lost $15 million real money all right so not not hypothetical not opportunity cost cost lost money we were building up for a big product launch in um one of the companies we paid $270,000 for a vendor literally for only one purpose was to have insurance that they could handle the volume that we were going to push

through this particular company was like we're pros of this this is all we do that's what I'm paying this insurance bill for is just that it goes okay as the launch approaches I hopped on like one of the vendor calls and the this was now one level lower so this wasn't the owner of the company this is one of his employees he's like oh yeah this is crazy this is breaking all the records we've ever seen we've never seen anything like this before and I was like what I thought this was going to be like

another walk in the park like that doesn't that doesn't sound good we're we're having to spin up all these extra systems just to handle it but now we're like 24 48 hours out we wouldn't made able to change this I think it would have been more risky to change it at that point we we do the you know we do the launch even though it went quote well 75% of the traffic That was supposed to go to the launch didn't make it there after all the marketing after all the the leaking of the you know

the stuff and the Goodwill that was built in that company 75% didn't make it they lied just straight up they lied they lied because they wanted to build their resume because they wanted to say that they they were you know doing something with that particular company um and put it on um on their on their website or whatever if you're going with vendors what the founder of the company didn't do is that he didn't look for references didn't ask for a single person who had done this before at the size that they claimed they had

done I want references just like me right just like just like whatever you're doing right references like you not just references but references like you or your use case so number one that never happened number two if someone shows you the way they are the first time believe them the first time all right there were flags that had happened early on we probably should not have ignored those flags I should have listened to that and I [ __ ] up that was on me everyone will lie to you and they'll lie even more if they

benefit from Association and and so when you have a bigger company people will basically just promise that they can deliver for you because they want to stick your logo on their website references just like you who have done what you want to have done and if you have any semblance where the story doesn't match up when there's bad news it's always worse after it happens than when you think it could happen so as much as it could be bad news beforeand because it's going to be more work for people it's a fuckload worse to lose

$15 million on something that you spent N9 months building up to lesson number three that I've learned about this referrals mean jack [ __ ] so if someone says hey I've got a great guy for this I say great I'm going to treat you as though I don't know you I'm just going to give you the call I think setting that stage up front with any potential event even it's like your closest friend has this guy who did all my IT services or whatever it is or this guy did all my marketing Services whatever I

want to be really clear you helped Mike out you helped him out in a big way that's why we're on the call today but from this point going forward I'm gonna act as though I've never met you before and I'm going to ask you for a lot of things for assurances to make sure that this goes well if someone gets weirded out by that walk away since this was $15 million we got into eight figure losses now technically we had another eight figureure loss earlier we're going to start using $10,000 bills that we're shredding all

right you can take that to the bank the last mistake this is the big boy this is the biggest Kahuna the worst mistake of all you're like could it get worse than that it could get worse than that give you the biggest mistake I've ever made before I get into it I want you to think how big of a mistake do you think it was was like how much money could Alex really have lost well you will find out shortly this one mistake lucky number 11 I actually made a pricing error this is 2019 things

were going well business-wise but like I felt things are going well on paper now but I feel like the trend is wrong like the vibe doesn't feel right like the comments I'm seeing we're losing steam we're losing momentum there was a competitor in the marketplace who basically took all my top gyms and offered them a partnership and said just teach Alex's [ __ ] as though it's your own and then you guys can run this business business I'll do all the ads and sales and then you guys do all the delivery they undercut me on

pricing what I decided to do was I was like okay I'm going to look at all the stuff that they're doing and all the stuff I'm doing and I'm just going to take everything they do and just add it on top so I'm going to do all the stuff we're already doing and add in a huge level of oneon-one which i' had never done basically accountability for all the gym owners so I took I took 35 of our best gemms and basically gave them status around specific skills that they were good at and then created

groups based on revenue of the gyms and grouped them together with the gym owners that were a little ahead of them so they could kind of help them with the next step and then once you do that you level out you go to another group that was kind of the thinking behind we had all the stuff that we were doing that grew gyms already and we added this huge accountability like very operationally complex component on top of it I thought to myself well not only am I going to give more I'm going to do it

for Less I went from $1,000 a week so 4K a month to $800 a week now this doesn't sound like a big difference I made this change so I said I'm going to do X I'm going to do y I'm going to do Z I'm going to do W I'm going to do V I'm going to do all of these things plus this this this that everyone else is doing and I'm going to do it for Less the first comment was a complaint they were like you could have been charging me this the whole time

[ __ ] you which taught me lesson number one which is that whenever you change price people complain I literally lowered the price for everybody like grandfather lowered not like new people everyone just pays me less tomorrow for the same thing but better and more the second thing that happened is that when you lose 20% of your Topline revenue and you run 40% margins you lose half your profit you run 40% margins all right and if you take off all of this and then you deliver more this is your new margin and so the difference

between this and this even though it doesn't seem like a lot changing from here to here lost me about 5 million a year in profit I never recovered the additional $5 million in profit per year and so when I sold at a multiple that $5 million difference got multiplied by a big number that would be the entire suitcase worth of cash by a lot one all pricing changes people don't like and it's more so that they just don't like change the second thing is that I was not being proactive I was being reactive it was

one of the first times in my business career where I was trying to respond to the the market rather than trying to anticipate the market I was looking at other people's ads looking at what they were doing looking at what they were talking about and I was like oh shoot we need to do that people were like you got to pay attention to your competitors I you got to pay attention to your customers if you pay attention to your customers your competitors are kind of relevant I think Paul Graham said this he said every business

problem can be solved by talking to your customers every business problem you can solve at the end of the day by talking to your customers Core Business problems finances go get a financial person but like the point is is that the core engine you got to talk to customer customers that a mistake I only want to make once so I'm going to take some more of this money and we're going to feed it in here and we're just going to keep feeding it in while we have while we have this time and just really think

about this lesson that we all learned together about listen to our customers and not our competition keeping awesome love you I'll see you in the next one