From: alexhormozi
Making the first $100,000 is often considered the hardest amount of money to make in entrepreneurship [00:00:09]. This sentiment is echoed by figures like Charlie Munger, Warren Buffett’s business partner, who stated that “the first hundred grand is a bitch” [00:00:30].
Reasons the First $100k is the Hardest
1. Limiting Opportunities to “Time for Money” Vehicles
When the goal is set at $100,000, individuals often limit their thinking to opportunities that primarily involve selling their time for money [00:00:48]. This approach is inherently constraining because personal time is finite [00:01:21].
In contrast, aiming for a much larger sum, like 100k approach by 100 to reach 100,000 [00:01:29].
2. Lack of Leverage
When starting a business with limited capital, there is often a lack of leverage [00:03:04]. This means individuals have to do everything themselves, leading to significant inefficiency [00:03:08]. This initial phase requires learning every aspect of the business to generate the first dollar [00:03:19].
Most businesses operate on arbitrage, buying something at a lower price and selling it higher [00:02:41]. In a service business, this might involve buying labor and selling it at a higher price by adding value through training or systems [00:02:48]. Without money, this leverage is impossible to achieve, demanding immense personal time and effort [00:03:08].
The Transformative Impact of the First $100k
Despite the challenges of becoming successful, achieving the first 100,000 in the bank provided a significant sense of relief and security, akin to having three and a half years of financial runway [00:01:34]. This milestone represented a 100x increase from a starting point of 10 million in the bank didn’t fully replicate [00:02:00].
It’s normal for the beginning to be hard, but it gets better as one starts to think differently [00:02:24].
Leveraging Success: Beyond the First $100k
Once the initial $100,000 is achieved, new opportunities arise. This capital allows for:
- Hiring Help: Paying people to perform tasks, freeing up personal time [00:03:41].
- Investing in Growth: Funding advertising, improving marketing materials, or setting up more efficient systems [00:03:43].
- Gaining Leverage: With capital, one can “move the world a lot faster” by employing teams for outbound sales or advertising [00:03:51].
Strategic Outsourcing and Skill Development
The process of growing a business involves “piecemealing out pieces of your day” by outsourcing lower-value tasks [00:04:28]. For example, administrative work like scheduling might be outsourced for a low hourly rate, freeing up valuable time [00:04:46].
However, a common mistake is outsourcing without replacing that time with higher-value work [00:05:07]. To grow, entrepreneurs must continually engage in higher and higher-value, higher-leverage activities with the time they buy back [00:05:22]. This is key to scaling a business.
Thinking Bigger: Unlocking New Vehicles
To achieve goals like 10 million, it’s essential to consider different “vehicles” or business models [00:05:32]. If one doesn’t know these vehicles, research existing opportunities is crucial [00:05:38].
For instance, in the United States, a phlebotomist certification can be obtained in one day, allowing individuals to make $25 an hour – more than triple minimum wage [00:05:52]. Such “mini certifications” can immediately provide more leverage on time for those starting a business with limited skills and resources or working a job [00:06:12]. This highlights the importance of seeking out and leveraging knowledge that others might be “ignorant” of [00:06:05].
Skill Stacking and Raising the “Baseline”
Viewing the entrepreneurial journey as a process of skill stacking increases personal value [00:07:52]. Failures are then seen not as setbacks, but as lessons on the path to success [00:08:00]. Each acquired skill raises one’s “basement” or lowest possible earning potential [00:07:04].
For example:
- Sales Skill: Knowing how to sell can ensure an income of at least $250,000 a year, as one could always sell cars [00:07:13].
- Marketing Skill: Combining sales with marketing allows for the generation of demand at will, potentially raising the baseline earning to $3 million a year [00:07:31].
The speed of skill acquisition depends on deliberate practice, volume of work, and seeking mentors or experts [00:08:31]. Paying to acquire valuable skills can significantly accelerate the learning process [00:08:56]. This is part of a broader blueprint for becoming a millionaire.
The “Busy and Broke” Conundrum
A key principle is that “you can’t be busy and broke” [00:09:12]. If busy, one should be making money [00:09:16]. If broke, there should be time to invest in income-generating activities [00:09:20]. If someone feels busy and broke, it often indicates wasted time [00:09:34]. This mindset helps in overcoming initial setbacks in entrepreneurship.
Conclusion
The first $100,000 is challenging because it often requires a direct trade of time for money and a lack of leverage [00:09:41]. However, by biting the bullet and putting in the effort, individuals can then level up their skill set, pay for accelerated growth, and outsource lower-value work [00:09:52]. This process builds a foundation of skills that can lead to identifying and capitalizing on much larger opportunities, ultimately fostering an entrepreneurial mindset for 100 million [00:10:06]. It’s one of the strategies for becoming a millionaire to achieve first online business success.