Ramit Sethi wasn’t always financially savvy. In fact, the first big check he got went in the stock market and he immediately lost half.
After that, he made it his mission to learn how money really worked and founded I Will Teach You To Be Rich, which is, frankly, a little hard to describe.
It’s a New York Times’ bestseller and blog offering free and paid online courses that over a million people worldwide rely on to do things like find their dream job, earn $1k on the side, or negotiate a lower rent.
Ramit will even help you start and grow your online business with GrowthLab… which is what decided to interview him about — launching and scaling a business.
Future entrepreneurs, pay attention. Current entrepreneurs, take notes. Non-entrepreneurs, why are even here? Just kidding, you’ll find this interesting, too.
Hey Ramit, thanks for sitting down with us. Let’s start this thing off with a simple question: Is every business scalable?
Sure, you can make any business scalable. But if you’re asking that question, you’ve probably been infected with Silicon Valley groupthink.
Your first goal with a business should be to generate profit. Not to worry about whether it’s “scalable” or not.
There are a few cases where you should think about scale from Day 1 — like when you’re building a 2-sided network — but in general, too many founders worry about scaling to $100 million without even generating $1,000.
Here’s an example: If you’re an amazing stylist, you can start an online consulting business. I know a celebrity stylist who charges $5,000/day. (Back when I used to do consulting, I charged $3,000/hour.)
To scale, you can hire more people, do group sessions, or package your services into a book or product. Or you can keep it small — whatever you want.
How do you know when your business is ready start growing? And how do you make sure that you don’t do that too quickly and end up imploding?
Great question. First off, revenue solves most problems.
Growth, on the other hand, can be tricky. A lot of people want explosive growth, but a really seasoned entrepreneur knows that sometimes you intentionally apply the brakes.
For example, I know a hardware entrepreneur who sold too many items, which sounds great, but then he had a cashflow crisis.
In our business, we once had an upsell offer that was converting too well. Almost 45% of people were taking it, but later canceling. We decided to get clearer about the offer and the number dropped to about 20% — but they stayed.
So here’s how we think about growth. We want to grow our business like a rock climber scaling a mountain: Deliberately and methodically. Each time we reach a new level, we anchor ourselves in — THAT’S our new baseline for future growth. What we DON’T do is recklessly sprint, without setting any anchors in case we fall.
Simple guidelines for growth:
When 10 people tell you they’re interested — literally, they say, “Take my money, please!” — you know you’re onto something.
When you can sell without discounting or substantial refunds, you know you have a great product.
When you can look at your entire business system and see the knobs and numbers to tweak — like how adding 30% more traffic will trickle down to profit — you have a serious business ready for substantial scale.
At the same time, how do you make sure you don’t grow too late, miss your window, and end up driving for Uber because you were too scared to take that next step?
There’s nothing wrong with working at an amazing company and building incredible skills.
If you decide to start a business, there’s a balance of hustling vs. being calm and collected.
First, I never care about being too late. There’s always room for the best. For example, there were thousands of personal finance books before mine came along. But I took a fresh perspective (on automating your money) and suddenly there was an entirely new market.
Same for starting a successful online business.
When you’re starting, you have to hustle, like when you’re finding your idea and generating your first revenue. But now, I’m not a hustler. I’m a CEO.
Avoid reading entreporn. Instead, take a few successful entrepreneurs out to coffee and learn as much as you possibly can. Then decide if you want to start a business.
How do you know which part of your business should get the most resources/scale first?
This is the art and science of growing a business. Some founders hire a designer in the first 3 hires. Here’s what I recommend:
My first hire was an assistant. A really good one. She saved me over 25 hours a week and helped build some serious systems into my life.
Next, I hired customer service. They did the same thing and helped our customers.
Then I hired an amazing product person and technology help. Both of these areas have been instrumental in growing our business.
By the way, count on getting lots of your first hires wrong. It’s fine, it’s normal, and you can’t avoid it. You’ll get better over time.
What skills do you need to grow a business? Are there any underrated tactics and skillsets — like sending consistent emails or getting better at copywriting — that you would say are key?
There are tons of posts on A/B testing your email headlines, but very few on mastering your inner psychology.
The more my business has grown, the more I’ve realized how important my inner psychology is.
For example, the first time I tried to sell something, people called me a “sellout.” They complained about price. They told me my material sucked.
And that was for a $4.95 ebook! It was incredibly demoralizing.
What about the first time someone asks for a refund? Or quits? Or steals your ideas?
(Hint: Why are you so afraid to email your subscribers more than once a week?)
To improve your inner psychology, I would read books on leadership, dating and relationships, and sales. Lots of memoirs, too. I loved Shoe Dogs and Creativity Inc.
If I had to say which is the most underrated skill, I’d have to say copywriting. I spent years studying it, we’ve generated millions of dollars using copywriting, and I’m still amazed by the masters. Learn it.
What’s your opinion on fundraising and investors? How do they factor into all of this?
VCs and investors are great tools for growth. My co-founders and I raised millions of dollars for our last company.
But for this one, I bootstrapped it 100%. I love the freedom of being able to invest 3 or 5 years ahead and know we can spend the time to build the best company.
Many of our readers are future or first-time entrepreneurs. Any advice for getting to that first $100k?
1. In order to find a great business idea, do your customer research. You should be talking to real people on the phone, via 1-on-1 emails, and in person at least 15 hours/week. Everyone reads Lean Startup but few people do the most important thing in the book: Actually talking to real people.
2. If you can’t find them during research, how will you find them during sales?
3. An MVP (minimum viable product) can be as simple as a hand-drawn piece of paper, or a Google presentation. Stop overcomplicating it.
4. Avoid all the gimmicks you see out there. Most contests, social media tricks, and even A/B testing “hacks” are worthless. Write great content, build an email list, engage your readers, and sell unapologetically.
5. It’s really hard to build a large business on a $5 product. It’s also hard to have a $5m week selling $5 products.
6. People are happy to pay a lot for products that change their lives. We sell a $2,000 product on how to find a dream job. That’s a big promise. We couldn’t sell “how to eat hot dogs” for $2,000 — it’s just not that important.
7. Watch what people do, not what they say. True in relationships. Even more true in purchasing decisions.
Ramit Sethi is a New York Times bestselling author and CEO of GrowthLab.com, where entrepreneurs go to launch and grow their online business. He writes for over 1 million readers/month on business, careers, negotiation, and psychology.