This is an Entrepreneur’s Superpower

Welcome back, all you beautiful people. Today, I want to share with you one of the most high level, valuable skills that a CEO, founder, entrepreneur can develop. And I think just by being aware that this is a skill or a mindset, a framework that you need to have in your arsenal, I think just being aware of it pays massive dividends in actually developing that skill. And this didn’t occur to me, actually, until very many years into my entrepreneurial journey. We were at this impasse at escape climbing. And I’ve told this story before. This would have been back in 2016, 2017. Up to that point, escape climbing, and that was just a.

Manufacturing climbing, produced rock climbing holds, if you’re not aware of that. We were doing about 300,000 a year in top line revenue, very small company, about three employees. And my business partner had started this company about a decade earlier. And it was a nice lifestyle business for him. It kicked off really good, healthy margins for him to live off of, and he was very satisfied with it. And then he had a very similar revelation that I did. I had mine a little bit earlier, a couple years before when I was building a different business, when a mentor told me, hey, listen, you do the world no favors by playing small. And just like having this lifestyle business that supports you but doesn’t necessarily make a meaningful contribution to the world, it’s not going to do you any favors in 70 years from now when you look back and wonder, could I have done more with this, with this potential that I have? And so Ryan, my partner, you know, we had a conversation, and he’s like, he wanted to scale, he wanted to play the game at a bigger level.

And to do that with escape meant a lot of investment into infrastructure, into machinery, into people, into warehouse space, because manufacturing is very, very capital intensive in those ways. And we had to do the, the mental jujitsu in a lot of cost benefit analysis, trying to determine what’s the right amount to invest into what areas, into what machinery, how much do we want to grow? Like, all those questions, and it was hard because we had never asked ourselves that question before. And I know for myself, when I was building, say, like the window washing company as an example, there’s no capital requirement, really there. You grow as much as you produce in cash flow, and you hire the new person as you have more demand, more lead gen coming in, you keep hiring to fill that demand. Right? And so it was much, it was a much easier business model, and we found ourselves having to do a lot of mental jujitsu and a lot of calculating of like, is this worth the expense? Is it not worth the expense? And this is when it really started to become clear to me that there are two primary costs in every business, in every situation, in every decision that you’re going to make as an entrepreneur. You have the capital cost, you have the price of the thing, and then you have the cost of missed opportunity, or the opportunity cost, as it’s known. In economic terms, opportunity cost is a very interesting idea, which is just to say you only have a limited number of resources. We’re going to be talking about this in another episode coming up very soon is one of our most important jobs as an entrepreneur is the allocation of scarce resources.

You only have so much capital, so much energy, so much time, so much team bandwidth that you can deploy against an opportunity. So by saying yes to this opportunity, it’s going to mean that you can’t say yes to something else or you can’t do it with the same resources, right? Because those resources are allocated over here. So we’re constantly having to weigh the scales of, is this the highest and best use of my limited resources? And the problem with opportunity cost is it’s very subjective, because we. In the, in the, in the. When we’re driving down the road of life through the windshield, opportunities do not look like opportunities. They just look like risk. They don’t actually look like opportunity until they get in the rear view mirror. We’re looking backwards.

We have hindsight, we have, you know, 2020 vision. We can say, oh, that was an opportunity. Should have invested in Apple back in 1986, right? We can say that only after the fact. But in the beginning, when we’re looking forward, we’re like, I don’t know, Apple is on its last leg. Steve Jobs is gone like this. This company doesn’t seem to be doing well. It just looks like a risk, right? And because opportunity is subjective and it doesn’t look like opportunity until it’s too late and we tend to devalue it. Whereas the cost of capital, we can put a very strict, like, oh, that.

That’s a hundred thousand dollar investment, a million dollar investment in that machine. I can put that on a spreadsheet, and I know how much that’s costing me. Right. You feel that in a very visceral way. And so we tend to overweight the cost of capital allocation rather than the cost of missed opportunity. And our job then is, as entrepreneurs, is to become experts at determining the true cost of things. The true cost of things. It’s not to say that you should not invest a capital or that you should invest a capital, or that you should go for every opportunity.

It’s not that your job is to weigh the pros and cons across the spectrum of probability to determine what’s the, the best course of action, given your context, what’s the true cost associated with this line of action versus that. And the better you get at this, the better you will be able to build your businesses in a way that’s sustainable, that’s stable, and that doesn’t cost you your sanity. So I’m not going to go too deep into the details today of like, how, like some mental models that you can use to determine true cost to like, get to the first principles of this. I’ve done a number of episodes on this in the past. This is something that we talk a lot about. This is one of the core offerings of the beyond the apex accelerator coaching program. So I do a group coaching program. We just launched it, and we work with five, six, seven figure entrepreneurs who are all looking just to add a zero to their revenue in the next year.

And this is one of the very first things that we focus on is how do we get better at determining true costs of things. Things. Because once you have that skill, now you have the ability to look at different paths before you and your business and be able to discern which one has the highest likelihood of leading you towards your desired end state. So if you’re interested in that, go to beyondtheapex.com, comma, go apply for that. We only take in a very limited number of entrepreneurs. We want to make sure that it’s a good fit, that we are certain on our end that we can deliver the results that you are seeking. And so we turn away a lot of people. But we’d love to meet you, love to hear about your business, your opportunity, and see if there’s any way that we can help.

And if not, just keep consuming the free content and we’ll see you in the next episode. But until then, stay hyper focused, my friend.