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 ordering 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. I set up the account, I put a million dollars in, and like right before I'm about to click 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 in 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 Warren Buffett and Charlie Munger 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, 'cause 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 stop making them. This one was actually my first ever real estate investment. So Lila and I have been making a ton of money, uh, in Gym Launch for a few years now. I think at the time we probably had, I want to say, like $20 million bucks in cash.

So a 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 $50, $50, 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 tenants 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 in a 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 stopped 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, 'Cause 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 "too good 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 run, I say, "How long have you been in this deal for?" If someone says they've been doing it for less than two 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 to 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 thousand, and then saying, "Great, let's jam as much cash as humanly 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 advisor. He 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 you 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 lop 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 'cause 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.

For example, if you did want to bring partners in, you could have a 95/5 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 failed 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 2/3 of my my business for the cost it cost me to start it, not for what it was making me every month. I made 2/3 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 it," 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 way [ __ ] sexier 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 because 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. What's crazy though, is that within six 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 Huntington 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 square foot warehouse that was behind an auto shop to an anchor location in a retail center that was 7,000 square feet. 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 on Invested 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 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 $8, all of a sudden it 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 $22,500. And in a small business, you should be making 3 to 1, 5 to 1, 10 to 1 on the dollars you spend because you can. When you're small, you can be way 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, 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 business mentor who, uh, I called when I was considering selling my, selling Gym Launch years later. He had been private equity CEO. And so all he did was basically, they'd drop 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 to 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 'cause 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 partners 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 rainmaker. 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 a big pile of money. This is now 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. 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 three weeks, and I would keep that cash for myself because I had almost no cost besides my airfare, my hotel, and the ads spent, which usually for me was like one 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 the 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 gym 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 six 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 entity 'cause I was going all in on this new idea. And then I wake up one morning, 'cause I would always check the bank account every morning 'cause 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 half." "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 three 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't sue him.

So remember when I said like, he said, "Oh, there's this big misunderstanding 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 too, 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 multi-location gym owner to successfully exiting my gyms to losing everything that I had spent years building in six 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.

I graduated three years from Vanderbilt 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 six to nine 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 costly mistakes I made, also because of what I started feeling about me, you know what I mean? Because I was like, "Am I a slacker?" Do something. Just don't do this. 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 because 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 and 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 mistake coming from?" Don't worry, we'll get there. The average meal was $10. 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 because 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 $500,000 on this whole thing. But for the amount of work of me building up to a launch, using some goodwill 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 taken 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 funds. 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 about $10 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 Jess, who's one of our employees, who's our executive assistant, was like, "Hey, I just got a $6,000 raise." "Thanks." I was like, "Lila, 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. 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 departments, 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 dollar 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 1-hour 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 billed at $200 to $500 an hour are reviewing every piece of licensed marketing that we made and that we gave to our licensees. And so we were creating tons of marketing, hundreds of ads every single month. We're creating tons of trainings, hour-long trainings, two-hour-long 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 'cause 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. 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 dollars 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 leads 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 sunk 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.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 outsourced 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 roadmap. 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, makes sure they're documenting things correctly, keeps bidding things out, and then over time, you can start hiring people in-house. And in-house doesn't even need to be US-based. In-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 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 have been 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 beforehand, because it's going to be more work for people, it's a [ __ ] load worse to lose $15 million on something that you spent nine 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 it is. 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 gonna 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-figure 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 one-on-one, which I had never done, basically accountability for all the gym owners. So I took, I took 35 of our best gyms 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 customers. 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 listening to our customers and not our competition. Keeping awesome. Love you. I'll see you in the next one.