I Lost $100 Million... Here's What I Learned
Alex Hormozi・2 minutes read
Speaker shares financial losses, warns against risky investments, stresses staying within expertise, emphasizes long-term investing and partnership mistakes. Lessons include being cautious of opportunities, focusing on core competencies, and providing superior service, while avoiding fancy business strategies. Entrepreneurs faced legal expenses, split focus in ventures, and stressed the need for strategic decisions, financial oversight, and technical expertise in businesses to drive success while avoiding losses and unnecessary expenses.
Insights
- Avoiding risky investments outside one's expertise and focusing on core competencies can prevent significant financial losses, as highlighted by the speaker's experiences with cryptocurrency, real estate, and partnerships.
- Ensuring strategic focus, proper vetting of partners, and understanding the industry landscape are crucial for business success, as seen through examples of missed opportunities, fraudulent partnerships, and market responsiveness, ultimately impacting profitability and financial stability.
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Recent questions
How did the speaker's initial cryptocurrency investment result in significant financial losses?
The speaker shared his experience of missing out on substantial gains in Ethereum due to a significant loss in cryptocurrency investments. He recounted how his investments in Bitcoin and Ethereum led to a financial setback, highlighting the importance of staying within one's expertise to avoid such losses.
What lesson did the speaker learn from a real estate investment gone wrong in Ohio?
The speaker detailed a misleading property purchase in Ohio that resulted in financial losses and tenant complications. From this experience, he emphasized the importance of being cautious of "too good to be true" opportunities and the significance of long-term investment experience to avoid such pitfalls in real estate investments.
How did the speaker's partnership mistakes impact their businesses?
The speaker reflected on past partnership mistakes, stressing the need for partners with complementary skills and fair equity distribution. They highlighted the success achieved after parting ways with previous partners and working with a loyal partner named Lila. This emphasized the importance of choosing partners wisely to drive business growth and success.
What was the outcome of the entrepreneur's transition from an unfulfilling job to entrepreneurship?
The entrepreneur highlighted the importance of pushing through challenges or pivoting career paths, transitioning from an unfulfilling job to entrepreneurship. They discussed the impact of venturing into the food business, resulting in low profit margins compared to the success in the supplement business. This journey underscored the significance of focus and strategic decisions in pursuing profitable ventures.
How did legal expenses impact the entrepreneur's business operations?
The entrepreneur detailed involvement in a multi-million dollar lawsuit with significant legal expenses amounting to $120,000 monthly. They highlighted the importance of financial oversight by hiring a CFO to save $1 million annually. Additionally, the entrepreneur discussed the consequences of not implementing compliance notes from lawyers, leading to unnecessary expenses and the need for better financial management practices.
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Summary
00:00
Avoiding Financial Losses: Lessons Learned and Shared
- The speaker shares personal financial losses, aiming to prevent viewers from repeating his mistakes.
- He recounts his initial significant loss in cryptocurrency, specifically with Ethereum, where he missed out on a substantial gain.
- Another loss occurred in Bitcoin and Ethereum investments, resulting in a significant financial setback.
- The speaker emphasizes the importance of staying within one's expertise, citing Warren Buffet and Charlie Munger's advice.
- He stresses the significance of focusing on core competencies to avoid financial losses.
- A mentor advised him to stick to wealth creation rather than risky investments.
- The speaker delves into a real estate investment gone wrong, detailing a misleading property purchase in Ohio.
- The purchased house turned out to have numerous issues, leading to financial losses and tenant complications.
- Lessons learned include being cautious of "too good to be true" opportunities and the importance of long-term investment experience.
- He reflects on past partnership mistakes, highlighting the need for partners with complementary skills and fair equity distribution.
11:12
Navigating Business Success: Lessons in Partnerships
- The speaker emphasizes the success of their businesses, particularly after parting ways with partners and working with a loyal partner named Lila.
- They mention investing capital, being the main driver of the business, and saving $70,000 in the initial six months of business.
- The speaker discusses bringing in partners, selling parts of their business, and the importance of getting paid for the work done in the business.
- They highlight the mistake of getting too fancy with business expenditures and the importance of focusing on the basics to ensure a return on invested capital.
- A mentor advises against getting too fancy in business strategies and emphasizes the importance of providing superior service through fundamental practices.
- The speaker shares experiences with partnerships, stressing the need for partners who are core to acquiring and delivering to customers, not just for functions that can be outsourced.
- They differentiate between good partners with ethical intentions and bad partners with nefarious intentions, sharing a traumatic experience with a bad partner.
- The speaker recounts a situation where they were advised to own gyms instead of just launching them, leading to a significant financial gain.
- They discuss the concept of leaving money on the table to focus on bigger opportunities and the importance of making strategic business decisions.
- The speaker reflects on their journey, acknowledging mistakes made with partnerships and the impact of a bad partnership on their business and personal life.
21:48
Lesson: Trust instincts, avoid risky partnerships.
- Partner proposed opening multiple gyms, with partner staffing them monthly, leading to potential ownership of 12 gyms in a year.
- Partner requested personal lease guarantee for new gym, with partner fronting costs and running operations.
- Launched new gym successfully, but partner withdrew all profits, accusing of theft, leading to financial loss.
- Partner sent profits to girlfriend, filed bankruptcy, revealing past fraud indictment.
- Lesson learned: trust initial red flags, avoid partnerships with questionable individuals.
- Entrepreneur faced dilemma of pushing through challenges or pivoting career paths.
- Transitioned from unfulfilling job to entrepreneurship, highlighting importance of pushing or pivoting.
- Venture into food business resulted in low profit margins, overshadowed by supplement business success.
- Lack of understanding in food industry led to split focus, diverting efforts from more profitable ventures.
- Splitting focus cost entrepreneur potential $10-25 million in profits, emphasizing the importance of focus and strategic decisions.
33:34
"Costly Legal Battles and Financial Oversights"
- Legal expenses amount to $120,000 monthly, indicating involvement in a multi-million dollar lawsuit with litigation and arbitration.
- Bi-weekly meetings with the legal team cost $150 per hour, with two one-hour meetings weekly to review marketing work by smaller attorneys.
- Marketing efforts include creating numerous ads and hour-long trainings, with lawyers reviewing each piece for compliance at rates of $200 to $500 per hour.
- Despite lawyers providing compliance notes, they were not implemented, leading to unnecessary expenses and no actual compliance improvements.
- Hiring a CFO saved $1 million annually, highlighting the importance of financial oversight and management.
- Starting a software company without technical expertise led to spending over $1 million on development without proper maintenance or documentation.
- Lack of a technical founder in the software business resulted in escalating fees and lack of control over the outsourced development team.
- Selling the software company to another with internal developers allowed for better management and integration, showcasing the need for technical expertise.
- Loss of $15 million due to a vendor's failure to handle volume during a product launch emphasizes the importance of thorough vetting and references.
- A pricing error in 2019 led to losing top gyms to a competitor offering partnerships, prompting a complex accountability system at reduced rates, resulting in dissatisfaction and loss of revenue.
45:37
Neglecting market changes led to profit loss.
- Running a business with a 40% margin resulted in a $5 million annual profit loss due to not being proactive in responding to market changes, emphasizing the importance of listening to customers over competitors to drive business success.
