S2 EP 22 The 3 Costly Mistakes That Kill Your Business (And How to Avoid Them)

WEBVTT - S2 EP 22 The 3 Costly Mistakes That Kill Your Business (And How to Avoid Them) Welcome to Building Billions. Building a 10 million, 100 million, billion or multi-billion dollar business is actually based on three things consistency, velocity, and results. I built, scaled and exited and rebuilt many businesses in my career. If you're serious about creating something that has real enterprise value, stay tuned.

This is building billions with Brandon Dawson. What if you could go back in time and erase the worst mistake you've ever made? I've built multiple $100 million companies, but I've also lost millions on one of my own company or on failed projects. And looking back, there's so many business mistakes I've made that I wish I had enough time to tell you the things to avoid.

And if I was starting from scratch today, these are the three biggest business mistakes I would absolutely avoid. Mistake number one is the sunk cost trap. So what is the sunk cost fallacy? Once I spent the first million with my new idea, I was kind of bought into it.

Then I spent 2 million trying to validate it. Then when I thought I validated, I spent two more million to confirm what I thought I validated. That's the sunk cost fallacy. When you keep putting more time, more energy, more money into something you've already proven doesn't work, thinking you're going to force it to work, that's a problem.

And I've had that problem a couple of times in my career. But fortunately for me, that tenacity of thinking and then being committed to doing it and figuring it out has also made me hundreds of millions of dollars. But let me tell you something. I've met hundreds of entrepreneurs who have lost their ass and their friends and family's money with the sunk cost fallacy, chasing a bad idea, thinking they can make it right.

In my case, I saw this consolidation that started happening in the dental space, but there was 89 point of sale systems that dentists were using. If I could create one system that that data would feed into, that would then run it through my system for operational excellence. Then people could buy using my business. Everyone's dental practices and get a better outcome.

Bigger, better, faster. And so I was spending all this money because of the complexity. What I did know is that those 89 systems would start putting firewalls and writing code, so you couldn't get their data. And I trusted the one company in the whole industry to deliver that data to me because they said they could.

Now, listen, can you imagine being one of my team members? I'm committed. I'm 6 million talking about $7 million. We're gonna push, we're gonna create this.

We're gonna innovate it, we're gonna do it. We're gonna do something nobody else has done before. And you raise your hand and you go, I don't think this is gonna work. I think you're seven millions going to zero.

Could you imagine with me being a high driver, what that would have resulted in? I don't think it would have been good. I'd have been like, what are you talking about? You're not a believer, blah, blah, blah, blah, blah.

Okay. The truth is, they would have been right, but I wouldn't have been able to hear him because I had committed to something that had no facts, no details, that I was fully aligned with, that it was my idea. I was gonna make it happen come hell or high water. Even though the people around me were like, I don't know about this.

Now, you might wonder, at what point did my team say, this isn't gonna work? It wasn't actually my team. They didn't come and say, this isn't gonna work. Well, they did, and here's what happened.

The one person that had the one technology that made me, the one commitment that had charged me millions of dollars actually had a problem. And the problem was they were feeding us data that was not real because the technologies that realized they hacked into them was feeding them bad data, instead of fighting with them to teach him a lesson. Now that business eventually went away, that one failure point should have been enough for me to say, no chance am I doing this? But I was too excited and caught up with the idea I could be the one that was known for innovating it.

That's the fallacy going against the most obvious things that are right in front of your face because you believe you can make it happen. Now, ultimately, when they showed me that our data was wrong and that the supplier of the data was broken, there was nothing else I could do. It wasn't like I could blame them. I'm like, there's no chance we can build a business and make it profitable.

If all this data is bad and we have to run manual systems against data systems to double check the data system with manual says, no way. So after five years, the amount of money I spent, if I would have just taken that money and done 1 or 2 little different things, I've realized now, oh, the impact could have been massive. But I did learn a lot about what not to do. At the same time, I was building a huge business and sold it for the most amount of money ever paid, and I learned a lot about what you can do.

And I do reflect back on that. And I think, you know what? I've saved so many business owners from making their $8 million mistake, and they pay me to give them my pain so they don't have to. That eight millions paid me back in spades, because people that are doing what I did can relate to what happened and be like, I ain't doing it.

And thank you. I paid you for your advice. I'm going to change. What I'm doing now.

Makes me feel better about my experience, makes them feel great to know that I had it. And we're making money now together. But the main point here is there's a difference between commitment and stupidity. Commitment is staying focused on your goal while being willing to change your approach and analyze and look at things.

Get recommendations and suggestions from other experts. The stupidity is ignoring every single warning sign and doubling down on something that's clearly a red flag. So here's what you need to do before you commit to your next big, hairy, audacious goal. First, find a few people in your life who think differently than you.

Not just people that have a different attitude or different opinion. They actually have to have experience in the thing you're trying to do. If you don't know those people, go build relationships with them before you try to do something and then ask the right questions. The quality of your questions will always determine the impact of your results.

Somebody you can ask great questions to to synthesize the information, coming back to determine if you want to do it or not. And second, set a deadline for yourself. If you're trying to lose weight, start a side business, learn a new skill. Give yourself six months.

If you're not seeing real progress in the deadline, either change your approach, move on, or find somebody else better to help you. No matter how much money you've sunk into it or how much time you put into it. Here's the fact if you're not getting results, something isn't working. Next is mistake number two, the hiring trap.

Look, I'll give you a perfect example. I would use the example of business owners we work with that hire the wrong person, but I actually hire the wrong person recently. And this is the whole point. No matter how skilled you are, you're always going to hire the wrong person at different points in time.

The difference between a novice and a skilled person isn't are they going to hire wrong people too? It's how long do they let them hang around once they recognize they're the wrong person? And I have a standard rule now. If someone demonstrates I cannot depend on them.

If they cannot duplicate like we need to do this. Got it. We need to do it by tomorrow. Understood.

I need the information back. Yes, you'll have it. And it's like, okay. Yeah, great.

And then it's like, where's the information? Where's the data? What happened with the. Oh yeah, I forgot.

No no, no. After a while that I'm like, I can't trust this person. I gotta get him as far away from me as possible. So once I have lost confidence in somebody, I view them as a liability and I need them out of my surroundings because otherwise I'll be depending on them.

And then who am I going to be mad at? Isn't that going to be them? It's when I look in the mirror, I'm like, you're an idiot. You knew this.

You just keep doing it. I don't know why. And I have the whole conversation with myself. But see, I'm trained to have the conversation with myself because I've had enough problems that I'm willing to confront myself.

But see, the novice is unwilling to confront themselves. What they want to do is blame everybody and everything around them, which means they can never actually fix it because they are the problem. For example, a 24 years old, my boss's boss calls me and says, can you come up to the front office? So I go up there, I'm like, yeah, hey, what's going on?

He's like, I need to have you help me with something. I'm like, yeah, sure. Your boss has missed every target for the last year. Uh huh.

Yes. Huh. Can't argue with that. We need you to help us fire her.

I need to fire my boss. Hey, he's as old as my dad. And I was a kid at the time. I'm like.

I don't feel comfortable with that. And they're like, go bring him up here. We'll fire him together. So we did, and they sent in the interim, we want you to run the 29 salespeople.

So I'm like, cool, okay. If that's what you want me to do. So the next morning, I have an all staff meeting with my 29 people, and I fire ten of them. Later that afternoon, I get a phone call from HR that says, can you come up to the front office?

And the VP and the head of HR were sitting there like, dude, we put you in charge temporarily and you fired ten of your 29 salespeople within five hours. What's wrong with you? And I just, like, looked at him and said, look, you fired my boss, and I'm assuming you fired him because he didn't fire the people that should have been fired and they were lagging on the team. So I just eliminated the ten that I knew were the biggest problems because we eliminated the noise and the confusion.

So let me give you an example of something. Once you have context and you have contrast, context is, for example, who are your best producing people? Contrast is what are they doing better than somebody else? I took over the sales team.

My older brother was on the sales team. My older brother was a sub performer. So I go to my older brother and I'm like, this is what we need to do and here's how you need to do it. He starts telling me, you're my baby brother.

Don't tell me how to do it. I'm gonna do the way I want to do it. Do you know I've been doing this longer than you? And I'm like, yeah, that's why you're the older brother and I'm the younger brother and I'm the boss because I got more done.

That was what my brother's story was. I also had other employees that had stories. I've been here longer, I have more experience, I have an education, blah, blah, blah. The truth is this when you have context of what works and you contrast that to people who aren't using it and they're not working, you just have to eliminate those people, no matter how uncomfortable it is.

And the true definition of leadership is making other people success easier. And if people don't embrace that, do more, create more, innovate more, hit better targets. For example, context is when you only have one friend, one relationship, one opportunity, and you have no idea if it's actually good or if it's just settling. Contrast gives you the confidence and information you need to make the hard choices without second guessing yourself.

I want to give you a simple, simple example. You go out and you see a product you like and you're like, man, I love this product. So you go and you buy the stock of the company that builds the product, and then it goes to zero because you're the only one that loved it. You're the only one that bought it.

But because you liked it, you bought it. You thought it was going to be great versus what are the ones the most people use? What's the value they create for people? Everyone had a Nokia flip phone in the 90s and I bought one and I loved it.

And my mentor said, did you buy the stock? No. You mean everyone you know is running around with the same phone that innovated a space and you love it, but you didn't buy the stock if you want to be an investor. The very thing you and everyone else loves and is using.

So think about that analogy. Let's just say when Apple came out and you could buy a share for $0.20. So here's what you do.

The next time you're trying to decide something like who to spend your time with or who to hire, don't stick with just one friend group. Put yourself in a different environment with different people doing different things, and get to watch and observe and see what's going on in that environment for 30, 60, 6090 days. And when you're hiring or promoting someone within your own business, pay attention to who lifts you up, who might be working later nights and delivering bigger projects, who's focused on becoming better and who's actually showing you they're willing to help out.

In fact, just tell people you need them to help for a few hours on a Saturday and you're going to buy some pizza, but you need them to come into the office and it's just voluntary. Whoever's willing to help you see who shows up, you'll be surprised who doesn't show up. When the contrast becomes clear, you'll see some people pushing you forward and you'll see others dragging you back. The decision of who to hire and keep and promote starts to become more obvious.

And here's the bonus when you surround yourself with people who hold high standards, you naturally raise your own standard. And that's how you avoid the hiring trap and actually surround yourself with people who help you grow, help you scale, and help you develop your business. And the last mistake Ambiguous is the bad advice trap. So let me show you an actual pattern so you understand what I'm saying.

That literally keeps every business owner stuck when you're somewhere between 1 and 3 million and you're struggling to stay in business, who do you talk to? Well, most business owners go to business owners that are between 1 and 3 million because that's who they know. And they ask them, how are you doing? And what did you do and what are you doing next?

And most of those conversations turn into everything that's wrong. Well, you know, it's so hard and you can't get good people and it's hard to make money and it's hard to get along with your partners and all these things that people sloth around in. So if you're asking other business owners and you're not asking how big's your business? Because if you talk to a 10 or $25 million business owner or 100 million, they're gonna tell you something entirely different than a 2 or $3 million business.

But people tend to gravitate to each other, become friends, and 98% struggle with exactly the same things that fail at 3 million or less. Why they failed. I'll tell you the same three things couldn't make money. No demand for product or service.

Couldn't hire good people now. Contrast that to going to someone who built five different businesses from 0 to 25 million and sold them. What they tell you is going to be entirely different than what anybody else in your sphere of influence is going to even remotely say to you. Now, I'll give you my own personal mistake.

When I was building my first company and I was stuck at 62 million. I started talking to all my buddies that were at ten, 20, 50 and asking them, hey man, if you were me, what would you do? Hey man, if you were me, what would you say? They weren't me and they hadn't done what I had already done.

How the hell can they give me advice on fixing my problem? I would never talk to somebody that was at or below me. Because John Maxwell talks about the lid. You're the highest.

Everybody's below you. So why would you go to people below you to fix something they've never done before? This is what's wrong with our education system. This is what's wrong with school.

That's where you're getting your information from. So here's the thing. If you want to ask right people, right information to get the right data to take the right actions to drive to the right results. There's a way to do it.

For me, it's when I changed who I was talking to, and then I would go to my mentors. I had built big businesses and who were wealthy, and I would share my list with them and ask if they knew of any resources that could help me better my situation. And then successful people always point you to what they learned or how they overcame problems that they had. And then as I started only talking to people who were actual examples to where I want to go, taking data from them specifically on how to fix the thing I was struggling with, and then deployed it and then asked them if I did it right, is when I became hyper successful.

Now here's the problem. When you don't know how to tell good advice from bad advice, and you're willing to listen to whoever will listen to you and give you their opinions, you start making decisions based on feelings and loyalty and non-facts and opinions of people who don't know more than what actually works, because I created a universal law where there's confusion, there's failure. So if you're getting all this data and nobody has any certainty around it, so now you're going to go try new things and it fails.

You'd be like, I told you, none of this was going to work. And this creates a confidence spiral for you and everyone around you. And when you start tracking what works versus what doesn't work, and creating a plan for duplicating and replicating best practices to get results. And you only talk to people who have gotten the results and how they got those results.

Everything changes because your context and your contrast, how to get there becomes higher and more elevated. So then does your ability to succeed because your perspective grew, your wisdom grew, and your doingness grew. And when you're doing this grew, your results grew. And that is where confidence comes from.

So here's what you need to do right now. First, write down the names of the five people that you spend most of your time getting incentivize from. And if they haven't achieved what you're trying to achieve, cross them off your list. It doesn't mean you can't be nice to them.

It doesn't mean you don't still love him. It doesn't mean they're not your friends. It has nothing to do with this. It means you just aren't going to be asking or taking advice from those people.

And then second, just start tracking your decisions you make and the actions you take and what those results are. When you see something failing, stop doing it. Third, find people who've actually done what you're trying to do, build real relationships, reach out to people and connect and offer to go to an event or go watch them at their office or their business. Look, reach out.

Make yourself relevant. Do something nice for somebody. Give them a hand before you ask for one so they're willing to help you do the things you've never done before. Just get close enough that they'll answer the questions you have when you need guidance.

And that's how you stop getting stuck in the trap of bad advice.