The Lie That Keeps Entrepreneurs Broke | Ep 973

You've been looking at your business through a keyhole when there's actually a massive door in front of you that you can open up and see what it truly is. I hate the word mindset so much that I might have to write a book about it. So many things in my life have happened because I like, it's so funny. It's like, I had my gyms and I had six gyms and I didn't know many people who had more gyms than me for most of the time that I had my gyms. And people started reaching out and asking me for help with the gyms. And I told Layla, no matter what, I was like, I never want to become a gym guru. And then like at the end of this whole life cycle I ended up becoming like the biggest gym guru. And so it's like, I hate the term mindset. I think it sucks. I think people have all this mythology around it. They're like, these things get stored in your body and there's these synchronicities and frequencies and vibrations and manifestation. It's like, dude, just define what you're talking about. Like, what are you saying? And whenever people say those things, I'm gonna go a little amorphous that I'm gonna get back to business, all right? So don't worry, give it two minutes, two minutes and then we're gonna hit business again. All right, that's my last point. When you begin to see language as behavior, so let me explain what that means. If I say hi, then I'm soliciting a response from someone, the sound hi, then they have been reinforced for saying hi back or what's up, right? And so what happens is, for example, I'll give you a different version of this. If I begin to cry, then I'm going to solicit a certain type of response from people around me. And this is where people start to create vicious cycles. Let me give you an example of one. This is one that I realized with Layla, my wife, so I'll just be real with you. So if Layla cries in the earlier part of our relationship, well, for many years, I'll be real with you. Many years, when Layla would cry, I would try in comfort and if she was still crying, I would stay quiet 'cause I didn't know what to do and she would still cry and then I would get angry and then she would stop crying. And so what ended up happening is that I ended up being reinforced for getting angry when she was sad. And so when she would cry, I would get angry and then she would stop crying because I learned to get, not consciously, right, but I learned to get Layla to stop crying, get upset. And so then Layla was like, "Well, I don't want to be upset around you "because you only get angry with me." And then I had to learn more about behavior and then I was like, "Oh, wow, I learned the wrong lesson here." And I bring this up to say that the words we say, oftentimes, we don't even mean the words 'cause we've never defined the words, but we say the words because of how other people respond when we say them. And so if you're in a community of people, for example, that say, manifestation, frequency, synchronicities, all this wild shit, right? You say these things, these people will agree with you and say, "You are one of us, you are accepted, we love you." Then of course you're gonna believe those words, you just haven't defined them, but you love the reaction you get when you say them. And so when you see these words as behavior, you begin to do that behavior more when good things happen. This is why I take definitions so seriously, like words matter, like what are we talking about, right? Which is why the first step of the three steps I have when I'm breaking down any problem is what does this mean? How do we know? And why does it matter? And so I would encourage you, that's logic evidence utility, by the way. What does it mean? How do you know? Why does it matter? And so with that being said, I said two minutes, now we're gonna get back to business. There's a single reason why most people stay broke and most businesses stay small. And the number one excuse that I hear from entrepreneurs about why they haven't grown is that their market is saturated, it's too small, there's so many people, it's over, it's super competitive, it's red ocean. Everyone has these different terms, like I don't wanna start this thing 'cause there's so many people doing it. Here's what's insane, 99% of people who say this are completely wrong. And so unless you're selling to 140 people in a rural town in the middle of nowhere, your market is probably 100 or 1,000 times bigger than you think. And the average entrepreneur has tapped into less than, 1% of the actual market. And so there is a massive gap between how you see your market, how you perceive your market and how big it actually is. Once you figure that out, you'll realize you've been looking at your business through a keyhole. When there's actually a massive door in front of you that you can open up and see what it truly is. And so what I'm about to tell you completely change how you see your business's potential is total addressable market. And you'll see why it's actually good to go into saturated markets, why red oceans could actually be an amazing opportunity for you. And it starts with understanding why this limiting belief exists to begin with. Now, the reason this exists to begin with, for the most part, in my opinion, is that people want to protect their egos. They say that their market is too small and that's the reason they have been able to scale. I can't scale my ads past $1,000 a day because I think I've saturated my market. No, bro, you haven't saturated your market. You haven't saturated Facebook. Your ads suck. You don't know different levels of awareness. You only know how to advertise to an avatar that understands the solution and product that you're selling. As soon as you get above that, there's a much larger market that could actually buy your stuff. But because you don't know how to advertise, you're unable to reach it. And rather than say, I do not know how to advertise in a way that gets more leads, I do not know how to scale. Instead, you say the market is too small. Real. Now, I want to be clear here. If you have a local business, it is possible, like my 140 person example, it is possible that you're in a market that literally, there's 140 people in your market and you're in the middle of the Sahara Desert. Yeah, it's probably not going to work, right? But most of the time, even in local markets, if you're in like an A market or a B market, there's a million people in your city, there's 400,000 people in your city. If you need 200 to make business work, you are fine, right? There's other things that are holding you back. Now, if you're in basically any other industry, which you can look up from like Google Industry Revenue, the likely that you have tapped your market is it's almost impossible, right? And the thing is, is that it is still one of the most commonly stated things and least commonly true. And so I'll tell you a quick story about this. So when I was, when I had Jim launch, I wanted to start doing outbound. Rather, I didn't want to start doing outbound, I was convinced to do outbound because the store was about to tell you. So I had a conversation with a guy who was a lead sales rep. It was, we were recruiting him in and I asked him how they currently get leads at his company. And he was actually in the Jim business. I didn't find this out until I got into the interview. And he was selling Jim software, whatever. And I asked him how much they were doing a month and they were doing 10 million a month. And I was like, holy cannoli, I've never even heard of this business. And I said, okay, well, then how are you getting all your leads? He said, oh, we just do outbound. And I was like, that's insane. I didn't know outbound could generate that kind of demand. But here was this company that I had never heard of that at the time was doing five times more revenue than I was doing and it broke a belief for me. So let's imagine that this is 100% of the pie. This is the entirety of, you know, like the market, right? So if you had 100% access to the market, you'd be super happy. Now this is what happens in people's minds when a competitor comes in. So you say, oh my God, there's them and there's me. Oh, I guess I will be medium happy about this situation. And then let's say you have two more competitors that come in. Now you're very sad because you're like, wait, I used to have this whole pie. Now I only have a quarter of the pie. This is false. This belief set will keep you poor or at least poorer than you would otherwise be if you adopted a different perspective. So you currently advertise in one way using one specific platform and one specific medium on that platform. And so this little red slice of pie here, right? What is it in actuality? Well, let me show you. This is what that little slice of pie looks like when we actually consider the size of the market and the aggregate attention that exists. It's so small, you can barely even see that it's happening. And this could be just all the different platforms on which content, let's say content is how you get your customers. This is, maybe this is Instagram, this is Facebook, this is TikTok, this is YouTube, this is X, this is radio, right? This is TV, this is Tabula, this is Google search. Like this is direct mail, this is email, right? Like you can keep going, this is school, right? All of these and you're here and you're saying, hey, I think I've cut my market into, like there's only, I only have a quarter of the market, that's available to me. But wait, there's more. We still have our ads circles, which you're currently doing nothing with, all right? And then wait, but wait, there's more. Now we have our outreach and on here, we could do direct mail, we could do DMs. We could do DMs on Facebook, we could do DMs on LinkedIn, we could do DMs on TikTok, we could do DMs on, we could do phone calls, we could do every single way that you can contact another human being one-on-one is the different ways that you could outreach. And so when we look at this whole thing, you had two competitors or three competitors, one, two and three that came into your marketplace and you said, oh, therefore this is now super crowded. But the reality is that you're this tiny little sliver of this one way that you get customers on this one tiny platform. And I haven't even added in the next layer of this, which is on that one platform, are you maximizing every way to advertise on there? I make a couple of Instagram posts. Okay, cool. Are you making stories? Are you making images? Are you making carousels? Are you doing all the different ways of doing that? Oh, I make YouTube shorts. Okay, great. Are you making YouTube blogs? Are you doing YouTube community posts? How many of them are you making? Right? And I told you that I wanted to shift this belief for a second because many of you are not being limited by your market, not even close to it. But even if you were, and I want to take the opposite perspective for this for a moment, let's imagine that you're in the absolute biggest red ocean, right? Red ocean being it's super populated, there's blood in the water, right? Do you think the business advice niche is populated? Do you think there's a lot of red ocean in business advice? Yeah, probably, right? And so should I have not gotten into this? The bloodier the water, it means the more fish are there. And so where there's the fiercest competition, there's also oftentimes the biggest rewards. Now, that being said, how do we merge this concept with the idea of you should niche down? Wait, Alex, I thought you wrote a book that said, hey, the riches are in the niches, right? So how do we merge these two ideas? Let me explain 'cause I get questions about this. In the beginning, you want to artificially constrain the pond that you're going after so that you can compete in a place where the sharks aren't swimming, okay? So you wanna be the biggest guy in a puddle. That's what you wanna do, biggest guy in a puddle. And then you say, you know what? I'm gonna go from a puddle to a pond because I think I'm too big for this puddle. And so you grow and then you go to the pond. And then once you go from the pond, you say, you know what, I'm gonna go to a lake. Now I'm in a lake because I'm gonna even bigger fishy, right? Now I'm in a lake. And then eventually you get to the point where you say, you know what? I think that I'm big enough to go into open class, open market and fight in the ocean. Now, if we were to look at this trajectory, I started as a trainer and I talked about nutrition and stuff. And then I talked about gym stuff. And then I started talking about business stuff. So you're going to have evolutions where you can get big enough for a pond that you can move on from the pond to the lake and the lake to the ocean. It's just that it's directly correlated with your skill and your experience. And so the reason that the riches are in the niches is that when you're there, number one, you're competing against fewer people. And so the upside is capped, typically. Now it's usually capped it way higher than you think it is, but it is capped to a degree and that's okay. But as a result, because we are in this town, we're able to charge niche prices, which give us more profit or pricing power 'cause there's fewer people. There's fewer things to compare you against, right? And so there does come a time where you can go move the market, right? Move your market rather to go after a different segment or a broader segment. So let me walk through what you can, how to think through this evolution for a business. So let's say that your current business is this little dot here, okay? There are five directions that we can move with this dot. We can go, so let's imagine this is a, we've got a triangle of a marketplace, okay? So this is where you inhabit. You can go upmarket, all right? So for example, in my gym lunch days, I could instead of serving single location, fragmented gym owners, I could go to franchisors, right? Multi-location owners and franchisors. So I have one off gyms here. Now the next direction, so this is direction number one I can do. Direction number two is I can go downmarket, which should be that I could go after trainers. There's way more trainers. They have way less buying power, but there's a lot of them. There's fewer franchisors than there are gyms and there's fewer, and there's fewer gyms than there are trainers. Pyramid, right? So that's the second thing we can do. The next thing we can do is we can go adjacent. So instead of gyms, I say, you know what? I think I can help chiropractor. That's what I think I'm gonna do. I'm gonna take my systems and we go into chiropractor. That'd be an adjacent market. I could also go broader, right? Which would mean that I would look at this way. Which means instead of gyms, maybe I talk about health and wellness in general. And so that means that I could go after chiro's, med spas, anybody, you know, weight loss clinics. Oops. All of these things are now broader. Or I can go narrower. So instead of gyms, I say, I'm only going to work with spin studios. I'm only gonna work with dancing studios. So this is our fifth. This is our fourth. This is our third. So that gives you five directions that you can go in to change the direction of the market that you choose to play in. Now, I outlined this. And what's interesting is that most people who are especially small business owners have never even defined this to be in with. And they pretty much just accept people's money. As long as they have a pulse and a credit card, there's obviously two requirements. Well, let's say pulse is optional, as long as they have a credit card. Kidding. That they accept. But the thing is that you want to get really, really clear on this. Because if you don't, your customers will be confused because they won't know what you're really about. Can you scroll up on my notes? So, keep going, keep going, go, go, go, go, go, go. Okay. So the tactics for you, if you're like, all right, I am not getting, 'cause typically people will say that they are in too small of a market because they're not getting as many leads as they want, which are two completely different issues, right? And so if you can at least believe the idea that I have that there is other ways to get customers, then you're currently doing, which I'll refer to you back here. What you do is you say, how do I make content in more places? How do I make more of it? How do I make it better? And then eventually you say, how do I also run ads? How do I also pair outreach with that? And that is how you can achieve omnipresence as a business. And so you need to do more in more places, even better consistently for a long period of time, because it's unlikely that you've actually capped the market. You were just too unskilled to capture the significantly larger percentage of the pie. And that's okay. And that's what we stay in the niche for the short term. And then eventually as you get better, you can expand it and expand it and expand it and you keep eating. And that's all right and totally normal. Now, let's be, now I said at the very beginning, if you're a local market, you can, this can sometimes bite you. So I wanna give some of the local guys, which are usually like 35% of people who are listening to this. So I'm gonna go real quick for you guys, what you can actually do to expand how much you can make with just a single location. So number one is you can expand your actual location. So that means you knock down walls, you add seats, you just increase efficiency. Like how can I get more from my existing four walls? How do I get more out of it? Like for me, when I started getting too crowded at my first gym, I cut the class times from 45 minutes to 30 minutes. And by doing that, I got, you know, one and a half times more classes in, I cut out the breaks between classes. So again, I could fit more people in. I could also extend and open more hours. All of those things expand your existing location. The second thing that you can do is what I just walked through, which is you add more channels. So, okay, you're posting on Instagram. Are you posting on X? Are you posting on YouTube? Are you posting on Facebook? Are you posting on TikTok? Like you expand channels. And I would say that many of you guys have heard my rule of one avatar, one product, one channel until you get $2 million a year. The only exception to this is sometimes local businesses. Now, if you were in, I would say an A or B market, you could totally just do that to get to $2 million a year. If you're in like a C or D market, so I would say, I don't know what the numbers are there, but I'm assuming it's probably like less than 50,000 people in like a 10 mile radius of where you're at. If you're at less than 50, then you're going to probably need to use more than one channel to get customers 'cause there's just not as many people. You have to saturate that tiny market by getting in front of more people in more places. The third thing that you can do is you open another location. So, you can expand the current one, you can add channels to drive you more into the current one, but at a certain point, you're gonna max out your four walls. And so you just open a new spot. And I see that as the eventuality of most of these businesses. And I think this is kind of interesting 'cause a lot of people feel like they're like, I don't know if this is a $100 million opportunity. It's like, well, yeah, your one store is at a $100 million opportunity, but you being able to duplicate and nail the model and then scale the model absolutely is. And so even if I can almost promise you, like, sorry, I almost swallowed my gum. If you have the goal of getting to $10 million a year, you can pretty much do it in any business. If you have the goal with the exception of if you are a brick and mortar and there's 100 people in your local market, probably not. But outside of that, that business model, even if you were in a tiny market, could get to 10 million a year, you just open up in new markets. That's all you do, right? And so most people's goals are achievable within their current vehicle. They're just too impatient and believe that there's another shiny object that someone will get there faster. But if you take the natural extreme and say, if I only did one thing for 40 years, so I think I'd be successful, probably. And so if you knew that to be true, then that would give you a very strong reason to stick with whatever you're doing. Because let me give you a visual for this. This is the cost of switching. So let's say that you're in year three of your current business, okay? Or current opportunity. It doesn't really matter what it is. So this is one, this is year two, this is year three, okay. Now, what people want to convince themselves is that they're like, I wanna start this new thing. Okay, that's fine. You wanna start this new thing. So let's see that year one of this new thing is higher. Okay, that's fine. This one is a little bit higher than this one on year two. But the thing is that this is year one of this year, but it's year four here. You're still behind. And not only that, growth when you get bigger is easier than growth when you're smaller. And you're like, okay, well, maybe this fast rate of growth, I'll be able to catch up. Okay, well, now you're year two. But now we're at year five over here, right? And so the head start that you give yourself by sticking with something, like sticking with it is how you get the head start. It's how you keep the head start that you already began. That's something that I think so many people miss when they're trying to go to this next opportunity. Unless there is something inherently wrong with the assumption that you have and skill is not the deficiency that you need to overcome, which it often is. Most of the time people get stuck on things that I call features not bugs. And this isn't my invention. Is that there's an element of your business that makes it hard. There's an element of every business that makes it hard. But that's what makes it a business and that's why you're compensated for it. If you're in the cleaning business, the difficulty you're going to have is attracting and retaining high quality talent. If you're in the fitness business, the difficulty is attracting customers and customer retention because people are inherently really shaky about staying with their fitness goals. But they typically stick with their cleaners for a really long time, right? And so every business has elements that make it shitty. It's just the name of the game. And you know what? I'll give you a different frame on this. So if you were to think about different business models, so let's think about, I doubt many of you guys have heard this, so this is pretty sweet. So let's say that you've got e-commerce, you've got, let's say you've got service, you've got, let's say info, education, media, and let's say you've got SaaS. All right, so software. Okay. So let's say that these are four different opportunities. Each of these opportunities has a different shape. So info looks like this. Starts really fast, very difficult to scale. SaaS is the opposite. Starts really, really slow, scales really, really fast. E-com is more like this. You can scale fast, but there's difficulty with typically cash flow because you have to continue to buy more inventory. You have supply chain issues. You have to switch suppliers, switch 3PL so they can handle your volume. All of this stuff happens as you continue to grow. So it's more like, hold on, it's more like this. That's the shape of E-com, right? And then service businesses are more like this. The slowest, but they are steady. And so when you see these four shapes, many of you guys just hit the crappy part of whatever the opportunity that you're on is and then say there's something wrong with my business, therefore I should stop, rather than seeing it as what it is, which is just the nature of how this business works. This is a feature, not a bug. It's gonna be harder for you to attract really good talent in engineering and build software. And you're probably gonna be not profitable 'cause most software sells for a lower ticket most for a period of time. And it takes a long time to get a product to actually be good. And so you're gonna basically burn money, burn time for a long period, and then eventually you can scale to the moon, but it takes a long time, sometimes years to get there. And a lot of people don't have that level of tolerance. Info on the other hand is kind of the exact opposite of that. You can make a lot of money really quickly, a lot being relative, right? You're probably not going to become a billionaire, but you can make a million dollars. And then very quickly, it gets very difficult to scale it. And I'll say like info specifically, more like coaching, things like that. And the reason for that is 'cause there's almost no revenue retention. People don't stay around. Once you've learned something, you learned it. That's why people graduate school. They learned, right? Service businesses, the issue is people. Because it's a very people-heavy business. You have to constantly be hiring, onboarding, and training. And it depends on the service you're providing. If you provide weight loss coaching service, or weight loss services, I use that as an example obviously 'cause I came from that. You have, it's easy for you to get talent because lots of people wanna talk about fitness and weight loss and food all day 'cause they're like really into it. So it's actually very easy to get good talent. And for below average prices because people would do it for free. On the flip side, customers never wanna do it. And so they're canceling all the time. If I had an accounting firm, it's the opposite. Accounting firms have super high annual stick. What's the difficulty with accounting firms? Getting the people who can do accounting. It's almost always this balance, right? If a lot of people wanna do it, there's going to be a lot of competition. There's very low barriers to entry. And as a result, customers have lots of options. And they don't wanna do it themselves. If there aren't as many options and you have a supply constraint in industry, then you're gonna have issues getting talent fundamentally. And you can look at this at the business level. You can also look at the industry level. And so I talk about demand constraints and supply constraints at the business level, but you can see if you're way off track based on do you match with your industry? If your industry, and by the way, if you are the inverse of your industry, you're usually doing something either really wrong or really right, side note. So great way to think about it. If you can be supply demand constrained in like the cleaning business example that I gave. If you give demand constraints, as in I could take a hundred times more customers than I currently am with my cleaning thing, well then you've either figured out something really amazing with cleaners to like attract them in and like you're about to go hyperscale or you're just starting out and you haven't done anything yet. There's either something really right or really wrong with what you're doing. But most of the time you probably match the same constraint of your industry. And the problem with not being experienced is you think there's something wrong. And so then you end up spending multiple years not being all in on your opportunity and then being upset that it's not growing as fast as you want it to grow. When in reality you never really gave it a shot because you're always looking, you're kind of like the guy who's in the marriage that they're like, they were in love a while ago and things are okay, but he's got a wandering eye, right? He's always looking, he's always trying to look for the next thing, the next girl, the next whatever. And he's like, well, my marriage isn't good. It's like, well, no shit. You're spending all your time looking at these other opportunities rather than doubling down on the thing you got. And when you double down on the thing you got, usually when you take the marriage, it takes way less time. I would, okay, I'm not gonna make broad sweeping statements on marriages, all right? But I will say that in my experience for my N equals one marriage, it takes way less time to go from like, we're upset about something to we're really good than it does to create the loyalty, the trust and the track record that you have from that marriage with someone else. Real. That was the thing that I wanted to talk about today that was top of mind is that so many people think that their market is actually limited when in reaction, their mind is limited and there are so many ways to advertise, but you do not have the skill to advertise it. And so I'll leave you with a really powerful question that I think is worth asking yourself when you're in these situations is instead of saying there are no good salespeople in my market or no one can sell like I can sell or I, it's really crowded, which really is usually a translation for I can't get enough leads or leads cost too much, by the way. But you say these statements, just frame it into a statement that you control. Meaning, I don't have the skill to get more leads. I don't have the skill to attract, hire, manage a good salesperson. I don't have the skill to get employees to behave in a way that is according to the goals that I have in the business. Those, as soon as you're stated in that way, guess who owns the outcome? You, you become source. You become the one who can change it. And so I would just like, it just does not serve you to cast your power outside of yourself and give that as the reason for why you lack the success that you want. And here's the crazy part. You could be right. And so what? Like some prizes aren't worth winning. Like if you wanna play the pity game and you wanna win the pity award for person who was born with most inconveniences or person who had the worst things happen to them, you can win that award. The question is just, do you want it? Is that prize worth playing for? Is it worth competing for? For me, when I hear or see a situation like that, there's also something that I think is the same power, if not more powerful, which is this person was able to win despite that. And that's a story that only you can have. And the more fucked up your childhood, the more fucked up the things that you went through to get to where you are, the stronger that story is for the people who follow behind you and look up to you. The more you can serve as an example for other people who have suffered the same things that you've suffered or suffered worse than you've suffered. And I think it's like you rob yourself of that opportunity by protecting your ego and saying that it was because of this other thing. And maybe you're right, but wouldn't it be cooler to be right about the fact that that was true and you won instead, and you won anyways, and you succeeded despite that? I think that's a much cooler story. And I think that if we use the story frame, which is one of my favorite razors, which is that when you're 85 and you're split between two choices in life, pick the cooler story. 'Cause at the end of your life, it's the only thing you're gonna be left with anyways. And when you have these two choices, there's usually the hard thing, which is the right thing and the other way. And the reason that I think you should always take the hard thing is because if the easy thing were the right thing, you wouldn't have had to make this decision because you would have already done it.