From: alexhormozi

The first $100,000 in business is often cited as the hardest to make, a sentiment echoed by figures like Charlie Munger, Warren Buffett’s business partner [00:00:30]. This difficulty primarily stems from the initial lack of leverage available to new entrepreneurs [00:02:38].

The Challenge of the First $100,000

When a goal is set at 10 million [00:00:58]. Selling time makes scaling impossible, as time is a finite resource [00:01:08].

Early in a business journey, entrepreneurs lack leverage [00:03:04]. This means everything must be done by oneself, leading to significant inefficiency [00:03:11]. The entrepreneur must wear all hats, learning every aspect of the business to generate the first dollar [00:03:17]. This initial phase demands immense time and effort [00:03:24].

Acquiring Leverage for Growth

Once the first $100,000 is accumulated, a crucial shift occurs: the ability to acquire leverage [00:03:41]. This financial cushion allows entrepreneurs to:

  • Pay people: Delegate tasks and hire individuals to perform functions [00:03:41].
  • Invest in operations: Fund advertising, enhance production quality, or improve services [00:03:43].

Business fundamentally involves arbitrage—buying and selling at a difference [00:02:41]. In a service business, this means acquiring labor at one price and selling it at a higher price by adding value through training or systems, where the sum of the whole is greater than its parts [00:02:48]. Money provides the ability to facilitate this arbitrage more effectively, enabling faster movement and output [00:03:51]. This newfound financial leverage is key to scaling a business [00:03:50].

Strategic Outsourcing and High-Value Work

With leverage, entrepreneurs can strategically outsource lower-value tasks to free up their time for higher-value activities [00:04:30]. For example, administrative work like scheduling and answering phones might be the least valuable and can be outsourced for a low hourly rate, buying back valuable hours [00:04:46].

“People will outsource certain work that they’re doing but they will not replace the time with higher value skill so then they basically just pay people and then stop working and make the same amount of money which can be cool but if you want to grow then you’re going to need to continue to work and just do higher and higher and higher value higher leverage time in the time that you buy back.” [00:05:09]

This allows for a continued focus on tasks that provide greater wealth creation and growth, transforming the business model from selling time to strategic investment [00:05:22].

Skill Stacking as Personal Leverage

Beyond financial leverage, developing a diverse set of high-value skills acts as a personal form of leverage. Each acquired skill adds to a “building of skills,” raising the baseline earning potential [00:07:02]. For instance, learning how to sell could establish a minimum earning potential of 3 million a year [00:07:31].

“Your work works on you more than you work on it.” [00:08:10]

Failures are reframed as lessons, contributing to increased personal value [00:08:00]. Skill acquisition is accelerated through:

  • Volume of work on a specific skill [00:08:31].
  • Deliberate effort and practice [00:08:34].
  • Seeking mentors and experts to gain knowledge faster [00:08:52].

The Time-Money Trade-Off

Initially, making money often requires trading time for money [00:09:09]. However, as leverage increases, the dynamic shifts. A key principle is that one cannot be “busy and broke” [00:09:12]. If busy, one should be making money; if broke, one has time to trade for money [00:09:16]. Conversely, if one has money but is always busy, they can trade some money to buy back time [00:09:27].

Conclusion

The journey to significant financial success often starts with the arduous task of earning the first $100,000, primarily through time-based efforts [00:09:41]. This initial achievement, however, unlocks the ability to acquire and apply leverage—both financial and through accumulated skills [00:09:52]. This allows for scaling, delegating lower-value work, and focusing on high-impact opportunities. Building a foundation of skills and strategically utilizing leverage transforms an entrepreneur’s potential, enabling them to identify and capitalize on opportunities ranging from millions to billions of dollars [00:10:06].