How the top 1% make their money

Summary

El guion del video destaca que la mayoría de los millonarios se hacen en bienes raíces, mientras que los magnates lo hacen en capital privado. Expone el proceso de generación de riqueza empleado por estos individuos y cómo acelerar el valor en un negocio. Compara la simplicidad del modelo de bienes raíces con la complejidad y potencial de altos rendimientos del capital privado, enfatizando cómo la reducción de riesgos y la mejora de la fiabilidad de un negocio pueden multiplicar su valor. Aborda también la importancia de la paciencia y la persistencia en el crecimiento empresarial para crear riqueza de generación.

Takeaways

• 🏠 La mayoría de los millionaires se hacen en bienes raíces, donde la apreciación del valor y los ingresos de arrendamiento son formas principales de generar ganancias.
• 💰 Los bilionarios suelen hacer fortunas en private equity, donde hay más formas de generar dinero y se pueden adquirir negocios a precios bajos debido a la ausencia de deudas.
• 📈 El valor de un negocio puede acelerar rápidamente a través de mejoras estratégicas, como la adquisición de nuevos clientes, aumento del valor de los clientes existentes y reducción del riesgo asociado con el negocio.
• 🤔 La inversión en bienes raíces es un modelo de negocio simple, pero tiene un límite superior en cuanto a la ganancia potencial, a diferencia de las inversiones en private equity que pueden generar retornos de 10x o más.
• 🏢 En private equity, se pueden realizar mejoras en un negocio que lo transforman de un riesgo en un pilar de valor, aumentando así su valor y atractivo para los inversores.
• 💼 Los negocios pueden ser adquiridos por un precio bajo y, con el tiempo y las mejoras apropiadas, pueden valer mucho más, lo que genera una gran diferencia en el valor de mercado.
• 📊 El crecimiento orgánico y la reducción del riesgo son claves para aumentar el valor de un negocio, ya que esto atrae a los inversores y mejora la percepción de estabilidad y confiabilidad.
• 💹 La re-categorización de un negocio, como la incorporación de tecnología para mejorar operaciones, puede aumentar su valor y múltiplo en el mercado.
• 🌐 El tamaño de un negocio también afecta su valor; los negocios más grandes tienden a tener un 'premium de tamaño', lo que significa que obtienen un múltiplo mayor por cada dólar de beneficio.
• 🕰 La antigüedad de un negocio también es un factor de valor; un negocio con una historia de crecimiento y estabilidad a lo largo de los años es percibido como más valioso.
• 🔑 La paciencia y la persistencia son fundamentales en el crecimiento de un negocio; la dedicación a una sola empresa a largo plazo generalmente resulta en un mayor valor y éxito que el constante cambio de oportunidades.

Q & A

¿Por qué la mayoría de los millionaires se hacen en bienes raíces?

La mayoría de los millionaires se hacen en bienes raíces debido a que es un modelo de negocio simple y confiable. Comprar una propiedad, asegurarse de que tenga inquilinos que puedan cubrir el pago de la hipoteca y esperar el aprecio del valor de la propiedad a lo largo del tiempo son las principales formas de generar ganancias.

¿Cómo se pueden generar ganancias en una inversión de bienes raíces?

En una inversión de bienes raíces, se pueden generar ganancias a través del aprecio del valor de la propiedad y del alquiler que se recibe de los inquilinos. El aprecio puede ser natural o forzado, este último ocurre cuando se realizan mejoras en la propiedad que aumentan su valor.

¿Cuál es la diferencia entre el aprecio natural y el aprecio forzado en bienes raíces?

El aprecio natural es el aumento de valor que ocurre con el tiempo sin intervención directa, mientras que el aprecio forzado es el resultado de mejoras realizadas en la propiedad, como reparaciones o renovaciones, que hacen que la propiedad sea más valiosa.

¿Por qué la inversión en bienes raíces es considerada una buena opción a largo plazo?

La inversión en bienes raíces es considerada una buena opción a largo plazo debido a que la tierra es un recurso limitado y la población sigue creciendo. Esto sugiere que, en general, el valor de las propiedades seguirá aumentando con el tiempo.

¿Cómo se pueden generar ganancias en una inversión de capital privado?

En una inversión de capital privado, se pueden generar ganancias a través de la compra de negocios a precios bajos, la mejora de su desempeño y la posterior venta a un precio más alto. Esto puede incluir la adquisición de tecnologías, la expansión a nuevos mercados o la contratación de personal clave.

¿Qué es el aprecio forzado en el contexto de un negocio y cómo afecta el valor del negocio?

El aprecio forzado en un negocio se refiere a la transformación de un riesgo en un pilar de valor, mejorando aspectos negativos del negocio que antes disuadían a los inversores, y convirtiéndolos en factores que aumentan el valor del negocio.

¿Por qué los negocios pueden valorarse más altos que las propiedades en el ámbito del capital privado?

Los negocios pueden valorarse más altos que las propiedades porque ofrecen la posibilidad de un crecimiento ilimitado y la capacidad de cambiar radicalmente su valor a través de estrategias de mejora y expansión, algo que no es posible con las propiedades inmobiliarias.

¿Qué factores determinan el múltiplo de valoración de un negocio en el capital privado?

El múltiplo de valoración de un negocio se determina por la cantidad de beneficios que genera, la fiabilidad y crecimiento de esos beneficios y el riesgo asociado al negocio. Un negocio con beneficios crecientes y confiables generalmente obtiene un múltiplo más alto.

¿Qué es el 'EBITDA' y por qué es importante en la valoración de negocios?

El EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) es un término utilizado para referirse a los beneficios antes de intereses, impuestos, depreciación y amortización. Es importante en la valoración de negocios porque permite a los inversores evaluar la rentabilidad operativa de una empresa sin tener en cuenta factores financieros y no operativos.

¿Cómo la edad de un negocio puede afectar su valoración en el mercado?

La edad de un negocio puede hacer que sea más valioso, ya que un negocio con una larga historia de éxito y crecimiento es percibido como más estable y seguro en comparación con uno que es más nuevo y cuya sostenibilidad a largo plazo es incierta.

¿Qué estrategias pueden implementar los propietarios de negocios para aumentar el valor de su empresa antes de una venta potencial?

Los propietarios de negocios pueden aumentar el valor de su empresa a través de la reducción del riesgo, el aumento en la fiabilidad y el crecimiento de los beneficios, la mejora en la categorización del negocio, la expansión orgánica y la adquisición de otras empresas para lograr un crecimiento inorgánico.

Outlines

00:00

🏠 Inversión en bienes raíces y apreciación de valor

El primer párrafo explica que la mayoría de los millionaires se hacen en bienes raíces, mientras que los billionaires suelen surgir del sector de la inversión en capital privado. Se describe el proceso de generar dinero y el ejemplo de la compra de una casa como inversión inmobiliaria, destacando dos formas principales de generar ganancias: apreciación del valor de la propiedad y rentas de los inquilinos. También se menciona la diferencia entre la apreciación natural y la apreciación forzada a través de mejoras en la propiedad. La sección resalta la sencillez del modelo de negocio inmobiliario y su potencial como inversión a largo plazo, aunque advierte sobre los riesgos asociados a la creación de valor en bienes raíces debido a factores como el crecimiento de la población.

05:01

📈 Diferencias entre bienes raíces y capital privado

El segundo párrafo compara la inversión en bienes raíces con la inversión en capital privado, enfocándose en la mayor variedad de estrategias y oportunidades de valorización en el último. Se discute cómo los negocios pueden ser adquiridos a precios bajos y cómo pueden valorarse en gran medida en poco tiempo debido a factores como la adquisición de nuevos clientes, la expansión a nuevos mercados o la obtención de patentes. Se argumenta que, a diferencia de las propiedades, los negocios pueden experimentar un aumento dramático de valor debido a la 'apreciación forzada', donde se convierten riesgos en pilar de valor, lo que puede multiplicar la valoración de la empresa.

10:03

💼 Ejemplos de inversión en capital privado y su potencial de ganancia

Este párrafo presenta un ejemplo hipotético de cómo una inversión en un negocio con ingresos limitados puede convertirse en una fuente de gran valor si se implementan cambios estratégicos. Se resalta que un inversor en capital privado puede percibir el potencial de un negocio que, aunque no es altamente valorado inicialmente, puede incrementar sus ingresos y, por lo tanto, su valor de mercado significativamente en un corto período de tiempo. Se discute la importancia de la identificación y transformación de riesgos en pilar de valor, y cómo esto puede generar retornos de inversión extremadamente altos.

15:05

🔑 Claves para incrementar el valor de una empresa

El cuarto párrafo profundiza en las estrategias para aumentar el valor de una empresa, abordando aspectos como la reducción del riesgo, la obtención de un múltiple mayor y la mejora de la confiabilidad de los ingresos. Se menciona la importancia de la contratación de personal clave, la actualización de operaciones de ventas y la optimización de precios y marketing. Se enfatiza que pequeños cambios pueden tener un impacto significativo en el valor de una empresa y que la percepción del riesgo por parte de los inversores直接影响 la valoración de la empresa.

20:05

🚀 Creación de riqueza a través de la inversión en capital privado

Este segmento del guion destaca cómo la inversión en capital privado puede llevar a la creación de riqueza a gran escala, a través de la adquisición de negocios con un potencial de valorización no reconocido. Se discute cómo los negocios pueden ser adquiridos a precios bajos y, con la implementación de mejoras estratégicas, pueden aumentar su valor de mercado dramáticamente. Se argumenta que, a diferencia de la inversión en bienes raíces, donde el valor puede tener un límite superior, en el capital privado es común obtener retornos de inversión de 10 a 50 veces o más.

25:06

🤝 Invitación a eventos y oportunidades para valorizar negocios

El sexto y último párrafo del guion ofrece una invitación a eventos y talleres que la empresa acquisition.com puede ofrecer, con el objetivo de enseñar a los propietarios de negocios cómo aumentar el valor de sus empresas y potencialmente convertirse en una empresa de la cartera. Se sugiere que la participación en estos eventos puede ser un paso importante para aquellos interesados en el mundo del capital privado y en la maximización del valor de sus negocios.

Keywords

💡Millonarios

Millonarios son personas que tienen una gran cantidad de dinero, generalmente más de un millón de dólares. En el video, se menciona que la mayoría de los millonarios han acumulado su riqueza a través de inversiones en bienes raíces, lo que indica que esta es una forma común de generar y aumentar la riqueza.

💡Bienes Raíces

Bienes raíces se refiere a la propiedad inmobiliaria, incluyendo casas, edificios comerciales y tierras. El script destaca que la inversión en bienes raíces es una forma sencilla y común de hacerse millonario, ya que el valor de la propiedad puede aumentar con el tiempo y generar ingresos a través de alquileres.

💡Apreciación

La apreciación es el aumento en el valor de una propiedad inmobiliaria o un negocio a lo largo del tiempo. En el video, se describe cómo la apreciación puede ser 'natural' o 'coercitiva', donde la segunda implica realizar mejoras en la propiedad para aumentar su valor.

💡Arrendamiento

El arrendamiento se refiere a la práctica de obtener ingresos de un activo, como una casa, alquilando a inquilinos. En el script, se menciona que los propietarios de bienes raíces pueden obtener ingresos regulares de los alquileres, además de la apreciación del valor de la propiedad.

💡Billonarios

Billonarios son individuos con una fortuna de al menos mil millones de dólares. El video señala que la mayoría de los billonarios han acumulado su riqueza a través de la inversión en capital privado, lo que implica una mayor complejidad y oportunidad de retornos más altos.

💡Capital Privado

El capital privado se refiere a la inversión en negocios no cotizados en bolsa, a menudo realizando mejoras y operaciones estratégicas para aumentar su valor. El script resalta que la inversión en capital privado puede ser más lucrativa que la en bienes raíces debido a la capacidad de transformar negocios en valor.

💡Arbitraje de Valor

El arbitraje de valor es la práctica de comprar un negocio o activo por menos de su valor real o potencial y luego vendiéndolo a un precio más alto. En el video, se discute cómo los inversores en capital privado pueden realizar arbitraje de valor al identificar y mejorar los negocios con un potencial no reconocido.

💡Multiples de Valor Corporativo

Los múltiplos de valor corporativo son una medida de la relación entre el valor de mercado de una empresa y un indicador financiero como los ingresos o la utilidad. El script menciona que los múltiplos pueden aumentar el valor percibido de una empresa y son un factor clave en la valoración de negocios.

💡Crecimiento Orgánico

El crecimiento orgánico es el aumento en los ingresos y la utilidad de una empresa a través de sus operaciones normales, en lugar de adquisiciones. En el video, se argumenta que el crecimiento orgánico, al mejorar la percepción de la estabilidad y el potencial de una empresa, puede aumentar su valor.

💡Riesgo

El riesgo en el contexto del video se refiere a la incertidumbre sobre el rendimiento futuro de una inversión, como un negocio o una propiedad. Se destaca que la reducción del riesgo, al hacer que una empresa parezca más segura y predecible, puede aumentar su valor y, por lo tanto, su múltiplo de valor corporativo.

💡Empresas de Capital Privado

Las empresas de capital privado son firmas que invierten en otros negocios, a menudo con el objetivo de mejorar su desempeño y luego venderlas a un precio más alto. El script describe cómo estas empresas pueden identificar y maximizar el valor de negocios con potencial no alcanzado.

💡Valor Corporativo

El valor corporativo, también conocido como valor de la empresa, es la estimación total de lo que una empresa vale. En el video, se discute cómo factores como el crecimiento, la reorganización y la reducción del riesgo pueden aumentar el valor corporativo de una empresa.

Highlights

La mayoría de los millionaires se hacen en bienes raíces, mientras que la mayoría de los billones se hacen en capital privado.

El proceso de generar dinero en bienes raíces involucra apreciación de valor y rentas de inquilinos.

La apreciación forzada en bienes raíces se logra mejorando la propiedad para aumentar su valor de mercado.

Los negocios en capital privado pueden crecer en valor de maneras más diversas, como la compra de empresas a bajo precio o la expansión de mercado.

La volatilidad de los negocios puede ser un riesgo, pero también una oportunidad para el capital privado para incrementar el valor.

El capital privado busca invertir en negocios con pocos riesgos y potencial para el crecimiento acelerado.

Los negocios pueden ser adquiridos con muy poquito dinero y transformarse en valiosas inversiones a través de estrategias de capital privado.

La escala y el crecimiento orgánico son claves para aumentar el valor de un negocio en el ámbito del capital privado.

La reducción del riesgo es fundamental para elevar el múltiplo de valoración de un negocio.

El capital privado puede influir en el múltiplo y los ingresos antes de intereses, impuestos, depreciación y amortización (EBITDA) de un negocio.

La re-categorización de un negocio, como hacer que un negocio de servicios se convierta en uno tecnológico, puede aumentar su múltiplo de valoración.

La edad y la estabilidad de un negocio son factores importantes para su valoración en el mercado.

El tamaño de un negocio puede influir en su valorización, con una prima por tamaño para las empresas más grandes.

La paciencia en la inversión y la construcción de un negocio a largo plazo puede desbloquear grandes ganancias en el capital privado.

La capacidad de un negocio para asumir deuda y su flujo de caja son cruciales para su expansión y valorización.

El crecimiento orgánico y la adquisición de otras empresas son dos rutas para el crecimiento de un negocio.

La re-categorización de un negocio puede ser un inversión valiosa que genera un retorno en el múltiplo de valoración.

La escala y la antigüedad de un negocio son factores que pueden obtener un premio por tamaño y confianza en el mercado.

La persistencia y la ejecución a largo plazo de un negocio a menudo superan a la búsqueda constante de nuevas oportunidades.

Transcripts

the majority of millionaires are made in

real estate the majority of billionaires

are made in private equity and the point

of this video is to walk you through the

moneymaking process that they use to

make tons and tons of money for

themselves tons and tons of money for

their investors and most importantly

accelerate value in a business so let's

walk through an example that everyone

probably understands so if you were to

buy a house and you wanted to use this

as a real estate investment then you

make money on this in two main ways one

is that the value of the house goes up

so let's say it's worth one million it

becomes worth two million great we had

appreciation the other is that you get

checks for $1,000 a month from the

tenants right but the point is is that

you're going to get paid every month for

some sort of production from a renter

and the house is going go up in value

now if you just did your own house then

you're just not paying this or you're

just paying the bank for your mortgage

and what not and you're pretty much just

going to make your money in appreciation

there are some things that you can have

appreciation that's just happens over

time the other is kind of forced

appreciation which is where you fix the

stuff you clean the windows you add a

kitchen you you know you do work right

and then it increases the value of the

thing because somebody else might be

more likely to pay for it or buy it all

right very very simple now the thing

about real estate and why I think it

makes so many millionaires it's a really

simple business model like you buy the

house you put a certain amount down you

take a loan for the rest as long as you

put a tenant in that can cover that now

I'm obviously simplifying this but

that's because that's the point I'm

simplifying it for the point of a video

plenty of people have lost their asses

in real estate but because it is a

reliable thing they're not making any

more land and they do keep keep making

more people over time as long as

population growth continues uh real

estate will be a really good investment

okay now that is a big ass risk

because of how population growth has

been happening look at Japan's real

estate market for example because their

population has declined we take some of

these things to be true we assume that

humans are going to always have more

humans but that's not always the case

okay now our second example is let's say

that we have a business so let's see if

I can make a really simple business

storefront all right we'll make that my

little business storefront right that

looks is that kind of business no all

right there's my business if you don't

like my drawing deal with it um so the

interesting thing with private Equity is

that there's more ways that you can make

money number one is you can buy

businesses with a much wider range like

a house isn't going to go for sale for a

dollar but businesses do sometimes get

given away for free more or less and

that's also because there's no debt a

lot of times people buy houses they have

debts that they have to pay back and

that kind of fixes pretty hardcore where

people's kind of bottom is they're like

I'm not going to lose money on my house

like fine I won't make money but you

have to at least pay the bank back of

course the market still dictates prices

but I think there's still a strong line

that people will hold in negotiations

which slows down uh crashes in real

estate whereas a business can go from

being not valuable at all to 12 months

later being worth hundreds of millions

of dollars let's say it's a technology

or let's say it's a patent that goes

through or some sort of pharmaceutical

thing that I'm giving you extreme

examples because you're like wait a

second how's this apply to my business

well if you didn't have a way to

reliably get customers and then all of a

sudden you find a channel that reliably

brings you customers that makes

something that isn't valuable incredibly

valuable right or you hire one key

person in the business that expands a

new territory for you makes something

that was once a risk and the thing is is

that a lot of times businesses

accelerate in value kind of like the

forced appreciation here when you build

in a kitchen or you build in a a bathtub

or something the forced appreciation in

business sometimes takes a negative and

then turns it into a positive and so

what was once a risk then becomes a a

pillar of value and so when you're

thinking about accelerating value in

business and this is what we do at

acquisition. comom is that we think

through what are all of the negatives

what are all of the risks associated

with this business and then if one by

one we can flip the risks

into pillars of value then we take we

get we kind of get counted twice so

instead of a negative discount on our

value it becomes a pro uh and adds to

the multiple and so this is kind of the

big difference with private Equity

versus the house right with a house you

can't change the neighborhood right

maybe the neighborhood can slowly change

over time but you can't take it and then

put it in Manhattan right it's just

going to be where it's going to be you

can fix a couple things so there's

there's kind of an upside limit to real

estate you're not going to get a 100x

deal in real estate but you can get a

100x deal in private Equity all the time

and that's why the people who amass

fortunes the richest people in the world

know how to reliably create 10x 50x type

returns and at least in their careers

especially the best ones have had

multiple of these 20 X's 50 x's in big

big bets and so let me walk you through

how that would actually happen so let's

say you've got a business that's doing

three million bucks a year all right and

let's say he's doing $1 million in

profit this business is not going to be

valuable like not that valuable all

right so no Institutional Investor is

going to want to buy this it's too small

I mean it makes money maybe it requires

the founder so there's keyman risk

there's a bunch of other things but like

fundamentally this isn't going to be a

super attractive business now a retail

investor meaning like some doctor or

lawyer who's local might want to buy

this business as a a retirement asset

for themselves not knowing what the

they're doing and then lose their asses

so someone could give you money for it

because they don't know what they're

doing but it doesn't mean that it's

actually worth anything it just means

that you pulled one over on someone all

right so the thing is is that a good

private Equity investor realizes that

this is not worth much to a potential

acquire today but could become very

valuable with a few small moves and so

if all of a sudden this business starts

doing let's say $12 million a year which

would be a million doar a month and then

it gets to somewhere in the neighborhood

of call it $5 million in profit okay

this is now a much much more valuable

business and so here's this is the this

is the magic this is how it works is

that you could pick this up for almost

zero dollars you wouldn't have to pay a

lot to get a business that does a

million dollars in profit depends who

you are but fundamentally like you might

have you might do some seller financing

put some money a little bit of cash in

just million dollars a year in profit

you might put five 00 Grand down like as

a show good faith but the thing is this

thing is riddled with risk right a $3

million top bu business probably has I

don't know 10 15 employees like not a

lot of people and so it's it's not very

reliable it's very volatile and so it

just screams risk and so risk means

fundamentally the multiple that you

ascribe to a business's profits is a

direct correlation to the risk you

ascribe to the business so saying that

in the opposite way is How likely you

think

it will continue to make money if if

nothing happened and so if the owner

leaves that's a material change to the

business how long do I think this

business will keep making money when

this person leaves if I think it's

absolutely guaranteed there's no way

this business doesn't make money even

after the the person leaves then he's

going to get a high multiple in the

business his his revenue and profit are

very valuable because they're really

secure on the other hand if it's like I

think this could maybe burn down in 6

months then it might get a 0.5 multiple

or just realistically a zero multip the

business saying I'll just take it over

for you I'll take it off your hands for

you right now the thing is is that

sometimes the difference between these

things doesn't actually take a ton of

work it takes some expertise but like

not necessarily a lot of time and so if

a company's doing these numbers it's

like all right well we probably need to

hire a CEO we need hire a COO probably

need to have bring in some sort of

director of marketing to run s of the

some of the uh the datto day for it we

probably need to you know update sales

Ops uh in the business we'll probably

update pricing because they're probably

mispriced right and because we update

pricing we can now spend more on

marketing which gets us more sales right

and we just we we run that little CIT

and sometimes something like this can

happen in like I don't know 12 to 24

months not not a very long time in terms

of time periods but here's the crazy

part here's the crazy part this business

is basically worth

nothing this business and let's say that

it's moderately risky so it's not it's

not like this is not a bank it's like

they're probably not going to go out of

business not even going to cover that

but like 95% of Banks Banks are actually

a very very stable business and they

make a lot of money um there's way more

restaurants go out of business than

Banks I'll just put it that way all

right but let's say that this business

gets an 8X multiple and this would be a

$40 million business

okay so in what world do you know that

you can go from something that cost you

no money to 12 to 24 months later having

something that's worth $40

million not many and so fundamental this

Arbitrage that exists here because it

doesn't take many steps or much time to

create huge step UPS in value that is

where private Equity investors make

their money this is where business

owners who know how to play the game get

filthy rich and the thing is is that a

lot of people are just very intimidated

by this this word and these Concepts but

this is all it comes down to is that 99%

of transactions are going to be some

sort of

multiple when I when I say multiple of

eida eida is just a fancy word for right

now just call it profit but in the

private it's earnings before interest

taxes depreciation and amortization

which is just the earnings before this

is the part that matters earnings how

much money you make before all this

other stuff so if you made money and

then you get taxed in different

differently in different states would

you say the business is worth more or

less well I could incorporate a

different state okay well then I want to

know the earnings before the taxes right

well I just bought this piece of

equipment and like if I didn't buy the

piece of equipment we'd have more profit

cool well then I want the earnings

before the depreciation that you're

going to apply right that's that's the

idea here okay and so there's that means

that there's two big two big variables

that we can influence with a business

the

multiple and the iida so basically if we

can increase how much profit a company

makes and how reliable that profit

is and growing

then we're going to get a higher

multiple all right and so let's say we

have two

businesses all right we'll say two

businesses business number one let's say

they're both the same size let's say

they're $10

million in Topline revenue and let's say

we're they're $3 million in

profit so let's say we have two

identical businesses here this business

is purely transactional meaning it's

one-off transactions there there's no

recurring Revenue there's no annual

revenue retention it has one way of

getting customers it has a Founder Who's

integrally involved in delivery and

marketing and operation so all three

aspects of the business so running the

day-to-day the running making sure the

product's good and making sure we're

getting more customers so one guy's

involved in all of it and they're going

down they used to do 20 million and six

and now they're at 10 million and three

all right so this is our $10 million

business so is this growing no would you

say that this is reliable in the future

that it's going to continue to happen

well the thing is is that this business

is basically unsellable like it's not

that it's worth nothing it's just that

it's worth nothing to someone on the

outside the thing is to the to the guy

on the inside who's making $3 million a

year there's value to the business

there's just not value to anybody else

and so that's the key here is that when

you're thinking about building the

business it's I want to make this

valuable for anyone not just valuable

for me so if you own a a barber shop and

you make 200 Grand a year from your

barber shop but you're involved in the

DayDay there's nothing wrong with that I

mean you're meant to work forment to

work right but it's just that I haven't

built it so that it can be worth

$200,000 a year to somebody else if you

can build it like that then now you own

an asset that has intrinsic value to the

marketplace now let's go through SE this

other one so this one this guy's worth

zero I don't know what that was there

this is worth zero dollars

unsellable to this guy so this one last

year they did five million this year do

10 million and they're pacing 20 million

for this this upcoming year they'll do

three million this year but they'll

probably do six million or seven million

next year um it's all annual recurring

Revenue we think that the margins are

going to expand as they get B because

they're going to have economies of scale

um and so we've got profits going up we

don't think the Market's going anywhere

it looks reliable and it's growing well

this thing might get a 12x

multiple and so then this thing might be

worth $36

million and so then you're like wait how

can these two businesses with the same

size and the same profit worth such

dramatically different amounts because

fundamentals of value creation how

reliable is this money that I'm going to

be making and how much of it is there so

if you have a lot that's not reliable

then you're going to get a small

multiple and a big number if you have a

small amount of profit but it's super

reliable and it's growing then you're

going to get a big multiple on a small

number and if you got a ton of profit

and it's super reliable and growing

really fast then you're going to get a

monster multiple like fundamentally

that's it that's how it works so here's

one of the other big things that people

don't get with private Equity is that

with a house you can't build a house

from scratch I mean you can build a

house from scratch but it's going to

cost you money but a business you can

start with nowadays almost nothing you

can start selling your time and you

start making some money you start paying

other people all off cash flow in the

business which the business can start

for free and so you can have something

that literally costs you Zer that

becomes worth

billions and there is no piece of real

estate on Earth that you can build for Z

doar and then it will someday be worth

billions and so the reason that private

Equity makes more money than real estate

at the highest levels is because it

requires more skill because there are

more skills required in order to do it

now to be fair this is in some ways just

as strong as an advocate of real estate

is that it's a simpler business model

now people still lose money in real

estate all the time just got to look at

the forums people lose money all the

time in in real estate when they get

greedy but in terms of reliably giving

people returns over years and years and

years it has worked provided population

continues to grow so if you are going to

buy real estate try and buy it in areas

where people are continuing to either

move to or have more kids so

fundamentally there's only three ways

that you make money in a business or

make a business more valuable number one

is you increase the number of

customers number

two is you increase their value which

I'll just say as LTV or lgp depending on

how you say which is how much they pay

you over time third is decreasing risk

right which is increasing the

reliability of the business over time

and so whenever you're allocating money

or time in your business it has to

Circle up to this is going to get me

more customers this is going to make

them worth more or this is somehow going

to decrease risk and if you can't very

clearly State how you know it's going to

get your customers how you know it's

going to make them worth more how you

know it's going to decrease risk then

you have to ask yourself is this the

best use of my time money and effort and

this is where I think most people do

this instead is that they then spend

money on stuff that's worth nothing and

that's why a lot of people don't get

rich when they try to is that they don't

know where value value gets created and

so you either have to make more money or

you have to make the reliability of that

money more valuable and you make money

by getting more customers making them

worth more and then you decrease the

risk associated with that in the future

so you're like okay well I want I want

to have that big amount of profit but I

want a massive multiple associated with

my business so let me just give you a

couple of kind of like the big leager

ways that people think about this

ais.com is a family office that

functions like a private Equity Firm and

we look at lots of different businesses

and one of the easiest ways that we have

for companies to get into the portfolio

is that we can meet you at one of our

workshops and so we run workshops

occasionally at our headquarters here in

Vegas and so if that sounds interesting

my team will be there we can give you a

whole bunch of things that you can do to

make your company more valuable and

maybe someday become a portfolio company

in the meantime you can go there

acquisition. click scale and maybe we'll

see you here so number one is how much

debt your company that looks like pet

doesn't it how much debt your business

can carry and so that's going to be a

function of cash flow all right and so

if you have a lot of cash flow meaning

that you could take distributions in

huge amounts every month then it means

that your business can support a lot of

cash flow which means it can support a

lot of debt so unlike you know with your

first home there's like these fixed

amounts that banks will say you have to

put 20% down and if it's commercial real

estate you have to put 35% down whatever

it is right they're they're these fixed

amounts that they say you have to put

down in order to limit their risk but

the thing is is that with businesses

it's varied based on how much cash flow

a business has right and so a business

that has almost no cash flow like it's

going to be able to take on almost no

debt and one that has tons of cash flow

can take on tons of debt right and a

disproportionate amount the second thing

is organic growth so this is the stuff

that I teach on this channel right which

is like Marketing sales pricing all

these things that we do this is all

considered organic growth inorganic

growth is when you buy other companies

in order to grow and you combine balance

sheets all right but if you are growing

as a business that's going to give you a

bigger lever on your multiple meaning

you're get you're GNA get more for it

because if they know or they believe

that you're going to consistently grow

20% a year no matter what for the next

five years then they know that the

business is going to double in five

years so if they did nothing they're

going to more than double their money

because they're not going to buy 100%

with cash they're going to buy it with

debt so if you double a business and you

put 20% down then you could fourx or

five extra money on the business because

of the leverage that debt gives you this

is all why these multiple levers

increase how much you get paid so the

third one is categorization which

appropriate for letter C here if you are

a business that is categorized as let's

say a traditional service business right

but you're able to build some technology

into your business that allows your

staff to get 10 times more done or

handled 10 times the customers then you

have something that would be called Tech

enabled service right or sometimes even

a true SAS business and so Tech enabled

Services have higher multiples than

traditional services and SAS companies

have higher multiples than Tech enabled

services and so how you categorize the

business if it's just moving one step

over which is okay let's just look at

our delivery let's just invest in a

little p technology so that we can get

categorized differently it might cost

you a hundred grand to get some

streamlined processes and Tech in place

to help 5x 10x the delivery and if

that's the case then you got a $100,000

investment that might give you three

more turns on your multiple three more

turns being like you go from a five

multiple to an eight multiple and let's

say you make a million dollars a year

it's like well that had three million to

your Enterprise value for a 100 Grand

it's a 30X return so like this is how

you have to start thinking about it

within the business it's like oh this is

totally worth it so should I take this

$100,000 put in my pocket and then put

in the S&P 500 well if you're a business

owner you can put it right back into the

business a way that you know you're

going to get a good return on Capital so

categorizing what type of business your

business is really in next one is a size

premiums this is one that a lot of

people don't understand when you buy

Wholesale in your real life if you buy

one roll of toilet paper or you buy 20

rolls of toilet paper the 20 rolls of

toilet paper are going to be cheaper

because you bought bulk you bought

wholesale right businesses are actually

the opposite if you put a ton of profit

together you get a size premium so a

business that does a hundred million

dollar a year in profit it's worth a

hell of a lot more than a company that

does $100,000 a year in profit and a big

part of that believe it or not is that

the people who have the most money in

the world have so much money and this is

very hard for like you to probably grasp

if you're not familiar with this but

like the people at the top black rock

Blackstone you know like all the all the

big guys all right State Street all that

stuff they have so much money that they

have minimum check sizes so I was

talking to a friend of mine at um one of

the banks I'll just put it that way

and their minimum check size now is 150

million so not Enterprise Value that's

just the minimum so if you have a $300

million company they have to buy at

least half or they're not interested

because they need to be able to write

checks of 150 million or greater because

they have so much money that they can't

waste time writing checks smaller than

that and so they pay a premium for

operators to go in and gather a bunch of

assets together so they can write one

check I know this sounds insane but this

is how people make gobs of money is

understanding this other world all right

and so this is why people are like man

I've got you know keyman risk in my

business I'm like dude you make a

million dollars a year of course you

have ke risk it's a tiny business like

this isn't where you solve that we solve

that when you're at once you get to an

Institutional level which by the way is

about five million in profit per year is

where institutional investors like begin

to really take notice of a business

below that you're not really going to

get much and at the five million Mark

you might get somewhere in the

neighborhood of like 20 to 40 somewhere

in there but like if you cross 10

million it gives you a size premium you

get a little bit more on the multiple so

not only do you have a bigger amount of

profit you also get more for that profit

so it's like a double multiplier effect

and this is why people talk about

patience all the time it's like you

could sell a day for 25 but maybe if you

waited a year and got your five million

to 8 million in profit and you shorted

up a couple things you go from having a

$25 million sale to a $75 million sale

for one more year of work so $50 million

of Enterprise Value 3x what you would

have gotten paid for one more year of

work and this is how that compounding

unlocks these huge numbers in private

Equity e is age so to further on my

little uh my little speech there on uh

on patience the age of the business also

makes the business more valuable and so

think about this way imagine there's a

business that's one year old that's

doing these numbers and then a business

that's do it's 10 years old and doing

these numbers well you'll probably feel

more confident buying the 10-year-old

business because you're like it's been

around for 10 years like it's not going

anywhere so the managing partner APG

said this to me and I never forgot he

said a business always becomes more

valuable every single year until it

doesn't and then it's worth

nothing and it was such a profound

statement which is basically like as

long as you keep growing no matter how

slowly or even even even maintain and

the business dayss around the business

is more valuable so $10 million business

at year five then $10 million year six

it's a little bit more valuable year six

because it lived another year but the

moment it goes down a little it's worth

nothing because no one wants to touch it

unless you have distressed asset experts

and I'm not going to get into that all

right and so when you're thinking about

your business it's like okay I want to

create lots of cash flow in my business

I want to have lots of organic growth I

want to grow I want to sell more I want

to Market more I want to make sure that

my price is good I want to get

efficiencies within my organization so

that can get categorized as a better

type of business that has generally

higher multiples I want to get it big

enough that I get a size premium so that

I get more for each dollar of profit in

terms of Enterprise Value and I want to

keep doing this for a long time and if I

do all this stuff I can make

generational wealth in a in a number of

years and so no this is not the get rich

in six weeks stuff this is like get rich

next six six years is but the thing is

that six years at least for me now is

like not that long six years is not that

long like you're still pretty much

you're in the same decade that you're

currently in right and so when I think

about like that I'm like most people

simply can't wait 6 months for anything

and I was telling one of the one of the

business owners here the other day about

this is like the woman in the red dress

I talk about it all the time because

it's this it's been the hardest thing

that I've struggled with in my

entrepreneur all the things that's been

the hardest and once you stick with

something for five years you get it

you're like oh I understand now now it's

not just saying you had a business for

five years because some of you guys I'm

looking at you do six other

things all the time and you have the one

business that makes you money and you

never paid all the attention you should

be paying it to because you're always

busy thinking about these other

opportunity vehicles that could be

better when in reality think about the

logical extreme here one guy starts a

new business or new side hustle every

six months think about the other guy

does one business for 50 straight years

never does anything different who makes

more money you already know let's say

you're four years into your business

okay and you say man I have this

opportunity that I could be doing so

much more money okay that's fine but for

you to do that that means you're going

to miss out on your five of your current

business all right now what you're

really missing out on is not only are

you missing all of all of this right but

the new business has to be able to do

that year one now maybe the new business

does half of that year one which is

great but again now year two let's say

you're you're a little higher there

that's okay but this is what you're also

missing out on the line that would have

been off this graph right here

is that this is the second year and this

is the second year from when you made

the decision and this is what people

miss out on this is what people don't

get this is why people stay poor is they

can't stick with stuff because a

mediocre opportunity executed to

Infinity is going to do better than an

inferior opportunity that you

consistently switch to over and over

again and so the reason that these

things create more Enterprise Value is

that most of these take time even in the

recategorization would take work in time

almost all of these take time and so if

you just think about the logical exam of

what your actions lead to you can

reverse into the present of what actions

will I get the most return for my effort

and that is how you can

create a lifetime of generational wealth

and if this stuff about focus is hitting

for you I made a whole talk on this at

my headquarters here in Vegas to a group

of business owners about it check it

out e