For a long time, every time I sat down with Garrett Gunderson I wanted the script. Tell me the exact steps and I'll go do them. He kept telling me none of it would work until I fixed what was going on inside. I hated that answer, and some days I still do, but he was right.
Garrett is my business mentor and my friend, and in our workouts he's my tormentor. I sat him down on camera and asked the questions I know a lot of business owners have about growing and scaling a business. You can watch the full conversation below, followed by what I took away from it.
The Short Version
- Most owners trying to scale are either too stingy or too reckless with cash.
- The cheapest hire usually costs more than they save.
- Can't afford employees yet? Start with contractors, part-time help, apprentices or volunteers.
- Keep spending on what's productive until it stops working. Never borrow to consume.
- Get great at one thing before you add the next.
- You can't scale past your own limitations.
The Two Money Mistakes Owners Make When Scaling a Business
The first thing I asked Garrett was what owners get wrong with money when they try to scale. He said it splits about down the middle.
"Half of them are stingy," he told me. "They try to do too much on their own to save money." The other half are reckless and move too fast, before they have the cash flow to support the extra infrastructure. He called them two sides of the same coin, and which one you are mostly comes down to mindset.
Why the Cheapest Hire Usually Costs You More
I asked him why so many owners are stingy about hiring. They'll get the cheapest employee, get the worst work, and somehow think they saved money by paying less.
Garrett pointed to Steve Jobs, who talked about how one amazing employee can far outproduce a B or C team. You might save 30% on paper, then lose it cleaning up messes or watching the wrong hire wreck your culture. "They just think about price," he said, "not thinking about value."
How to hire when you don't have the money yet
Start with independent contractors, part-time help, apprentices and volunteers. Worst case, do the extra work yourself and push for positive cash flow until you can afford that person. And before you max out a 401(k), buy too big of a house or go get a new vehicle, Garrett says to get the employees first.
Should You Reinvest in Your Business or Pay Yourself?
Some owners never take a paycheck, and it becomes a habit. Others treat the business like a lifestyle bank account and keep pulling money out for the next thing and the next trip. Their employees notice, and they stop trusting the owner.
Garrett's approach is to pay yourself a salary and some distributions. Then put the rest wherever it makes the biggest difference, whether that's your pocket or your people, processes, technology and marketing. He's two years into a new venture and isn't taking money out of it. He built the infrastructure bigger than they needed so they could grow faster. In two years, they've gotten to where his last business took 10 years to reach. You have to feed the business, he said, but you also need a plan to turn it into personal wealth eventually.
Productive Expenses vs. Consumptive Expenses
I grew up with a mega scarcity mentality. I'd read Garrett's book before I ever met him, and his thinking was the opposite of what I'd always heard. Don't spend anything, pinch your pennies and live small. I used to see every expense as bad. He taught me the difference between a productive expense and a consumptive one, and I've shared it with a lot of my friends since.
He explained it with an ad campaign. If someone puts in a dollar and gets $2 back, a budgeter would still cap what they spend on marketing. Garrett would tell them to keep going. If they put in a dollar and get 10 cents back, stop. "Why would you eliminate productive expenses?" he said. "You increase them till they're no longer productive."
Consumptive expenses, like concerts, trips and UFC fights, add to your life instead of your business. Garrett's fine with them if you pay cash. His rule is to never borrow to consume.
Productive expense
Brings money back into the business. Keep increasing it until it stops working.
Garrett's example: an ad campaign that returns $2 for every $1 you put in.
Consumptive expense
Adds to your lifestyle. Fine when you pay cash. Never borrow for it.
Garrett's examples: concerts, trips, UFC fights.
If you're not sure which side of that line your ads are on, a good place to start is your CAC payback period.
Even knowing all this, I still have a hard time making the next big investment when something's working. Garrett told me what gets him comfortable is a vision that speaks to the core of who he is. His big media investment is building content his kids and grandkids can watch someday and reaching people he couldn't reach otherwise. In the first 30 days with the firm he hired, they picked up 22,000 new followers, more than they'd ever gotten in a month. And because the stakes are high, so is his commitment. If you're weighing video for your own business, I wrote about why video works for Utah businesses.
When You Outgrow the People Who Got You Here
A lot of owners, and I was one of them, come in thinking scaling will be a straight line. You don't learn otherwise until you go through it.
Garrett has hired the wrong people and kept people too long. Early on he hired his buddies because they were convenient. As you grow, you start seeing who really belongs, and what gets you to one place might not get you to the next.
His answer is to create accountability and structure, and people usually self-select out. When his company grew, his first assistant got more responsibility and realized she liked the small, boutique version of the job better. Another time, right as they were gearing up for bigger moves, one of his coaches said he wanted to work more like 30 hours a week. Garrett fired him. When the coach asked why, Garrett told him, "You wrote the ticket."
I've never gotten good at firing people myself. Every time I've done it, I've been at home feeling like the worst person ever. You can ask my wife. But each time, it was the right decision for what the business needed.
Why Doing Too Many Things Keeps You From Scaling
In his 20s, Garrett had tons of real estate, a hard money lending fund, a commercial building and several businesses. It was fine until one started going bad. Then all of them suffered because his attention was split, and his health and his family paid for it too.
He thinks a lot of owners take on too much because they're scared of getting good at one thing and having it get hard. The next project becomes the excuse for why the last one didn't get done. He once told me to build a river before you build a stream, and don't build five streams that could dry up at any time.
"When people tell me they're a serial entrepreneur, I'm like, yeah, you're distracted."
Garrett Gunderson
Having multiple things going on is fine. The question he asks is whether any of it is world class. To scale, you have to prune.
Scale to a Size You Still Enjoy
Garrett told me about a construction owner who went from about $30 million in revenue to $100 million in a few years. The owner called it a nightmare. He was cleaning up messes from subcontractors who didn't do their job, and he was taking home less money than he had a few years earlier.
Garrett once sold a business doing eight figures for less than he could have, because he didn't like the direction it was going. Staying would have left him "unhappy and wealthy," he said. "I wanna be happy and wealthy." Now he's scaling to a size where he still knows all 14 of his employees well and gets to hang out with clients at events.
You Can't Scale a Business Past Your Own Limitations
This is the part I fought the longest. "Business owners can only go as far as their wounds that they've never healed from," Garrett said. He told me about a partner of his who does really well and is still anxious, because he built the business on anxiety. "If you build it on anxiety, anxiety stays with you."
I felt called out on that one, because I know exactly why I do marketing. I lost my first fitness business because I was told I didn't know how to market. I was 25. One day the money got taken out of my account and put into theirs. An attorney told me that unless I had $50,000 or $100,000 to fight it, I was going to lose. I didn't even have a hundred dollars. From that day on, I decided I'd never be in a position where I couldn't get my own customers. I enjoy marketing now, and I think I'm pretty good at it, but that's a trauma response, right?
So I asked Garrett how owners keep from becoming the wealthy, anxious guy. He pointed to mentors and coaches, and to working on your nervous system so you're not stuck in fight or flight. Some of that is as simple as box breathing, working out or getting outside for a hike.
He's been preaching this to me for a while: you never get to scale past your own limitations. It's probably the best advice I've ever gotten. When I work on myself, things start to free up. More sales, better opportunities.
What to Work on Next
When I asked how an owner who's already doing well figures out what to focus on, Garrett kept it practical. Hire for the things you don't want to do so you can spend your time on what you're best at. Then work on how you manage cash flow, improve margins, build systems and create leverage. And build the format around what you enjoy, because then you'll do it.
That one's personal for me. I've been making videos for 15 or 16 years and never went all in, because I didn't know what I'd do with them. Garrett pointed out that Joe Rogan started out just interviewing his friends. So I've committed to going all in on media. For more on the tactical side, I put together 12 strategies for sustainable business growth.
Want Help Scaling Your Utah Business?
Garrett's ad example is a good test for your own marketing. If a dollar in is bringing back two, you should probably be spending more. If it's bringing back 10 cents, you need to know that before you spend another dollar.
Fiture Marketing is a Utah marketing agency that builds customer acquisition systems with paid ads, video and landing pages. If you want a second set of eyes on where your marketing dollars are going, book a free strategy call.
Book Your Free Strategy CallFrequently Asked Questions About Scaling a Business
What's the biggest mistake business owners make when scaling?
Garrett Gunderson sees two opposite money mistakes. About half of owners are too stingy and try to do everything themselves to save money. The other half are reckless and grow faster than their cash flow can support.
How do you hire when you can't afford employees yet?
Start with independent contractors, part-time help, apprentices or volunteers, and do the extra work yourself until the business has positive cash flow.
What's the difference between productive and consumptive expenses?
A productive expense brings money back into the business, like an ad campaign that returns $2 for every $1, so you keep increasing it until it stops working. A consumptive expense adds to your lifestyle. It's fine if you pay cash, but never borrow to consume.
Should a business owner reinvest profits or pay themselves?
Garrett pays himself a salary and some distributions, then puts the rest wherever it makes the biggest difference for the business. You also need a plan to turn the business into personal wealth eventually.
Why do businesses stall when they try to scale?
Owners often spread themselves across too many projects or run into their own personal limits. As Garrett puts it, you can't scale past your own limitations.