Sanchez was arguing that entrepreneurs have trauma-bonded over how hard business is, when the real problem is that most small businesses aren't profitable enough for the difficulty to be worth it. It sits inside her wider pitch on the episode: don't start a business, buy one. She puts the SBA loan failure rate at under 13% over ten years against roughly 90% for startups.
Yeah, it's really just another liability that you have to pay for every single month and that holds you to a job maybe that you don't like or something that you are not sure you want to do. And so when you have a lot of money, great, own houses. And I know that sounds elitist, but when you don't have a lot of money, I would bet on yourself all day and increase your cash flow so nobody can own you.
You alluded to this when you talked about sort of the motivation for this book versus the first book. Like owning a business can trap you as easily as it frees you. And I know that founders I talk to, I'm sure you hear this all the time too. Like, if I known how hard it was, I never would have started this. You know, is it better sometimes not to know how hard it is?
Well, one, I think that we have all gotten sort of trauma bonded over entrepreneurship. It doesn't sound very fun if I come on here and say, actually, business is going pretty good. We're making a lot of money. I'm having a good time. Things are going well. It's kind of gross. And so it's almost like the reverse of the casino. In the casino, they only tell you when they win. In business, they only really like talking about the difficulty or hardships or when they've raised a bunch of outside venture capital. And so I think for most small business owners, yes, it's hard, but they kind of love the game. Like it's an addictive game to play. The problem is that they aren't profitable. Everything's more fun when you're making money. And so if the average small business owner makes $65,000 a year, well, that's less than minimum wage in California and less than even the median income in the U.S. And so we've got to figure out how to have profitable businesses because then the pain and difficulty is a lot easier to manage.
What are the, I don't know, the mistakes or the traps that folks who are, you know, running their own businesses are running themselves into. It's not that they're not working hard. They're not working on. The right things?
Yeah. If you look at the, you know, dispersion of returns, basically the top 10 to 20% of companies, they're like 30x more profitable than the lower companies. What we've seen is that most business owners, they don't run on systems. And even I see it in my business. I mean, I just had to let go of two employees. And the reason why, these are execs, serious people making hundreds of thousands of dollars a year because I couldn't get them to use a system. They wanted to cowboy it because cowboying it as a business owner feels good.
By cowboy it, you mean sort of just like wing it. You just make the decision based on what you're feeling like.