I Reverse Engineered the Perfect Business

Summary

Скрипт видео раскрывает стратегию создания ценного бизнеса, подобного шедевру Моне Лизы. Автор делится опытом развития компании Gym Launch и превращения ее в лицензионное предприятие с более чем 5000 местоположениями. Он подробно объясняет методы увеличения стоимости бизнеса, включая увеличение числа клиентов, повышение маржи и уменьшение риска. Также обсуждается внедрение автоматического отслеживания метрик, важность растущих и прибыльных финансовых показателей, а также необходимость аудиторской готовности финансовой документации для привлечения институциональных инвесторов.

Takeaways

• 🎨 Создание идеального бизнеса, или 'мастерпиеса', требует интеграции всех необходимых компонентов и исправления недочетов.
• 🚀 Успех компании 'Gym Launch', который вырос с нуля до 4,4 миллиона долларов в месяц за 20 месяцев, сопровождался значительными проблемами, что показывает, что быстрый рост не всегда означает отсутствие проблем.
• 🤝 Важность инвестиционной банковской朋友的 консультации для оценки стоимости бизнеса и определения его слабых мест перед продажей.
• 📈 Основные переменные, определяющие стоимость компании, включают количество клиентов, общую прибыль от каждого клиента на протяжении его жизни в компании и риск, связанный с будущей продолжительностью и ростом бизнеса.
• 🛠️ Необходимость создания сильного руководства, способного управлять компанией без участия владельца, для увеличения ее стоимости и привлечения инвестиций.
• 💰 Понимание разницы между получением оплаты за работу (зарплата) и получением дохода от владения активами (капитал).
• 🔍 Внимание к тому, что 'A-игроки' стоят больше 'B-игроков', но приносят гораздо больше ценности, что является вложением, окупающимся в долгосрочной перспективе.
• 🌐 Необходимость разнообразия в клиентской базе для снижения риска и увеличения привлекательности бизнеса для потенциальных инвесторов.
• 📊 Важность автоматической системы отслеживания ключевых показателей эффективности (KPI) для принятия более обоснованных решений и повышения ценности бизнеса.
• 📈 Основы успешного бизнеса - это высокая кассовая ликвидность, прибыльность, рост и хорошая история успеха, способствующая привлечению инвестиций.
• 📝 Важность готовности к аудиту финансовой отчетности для снижения риска и повышения ценности компании в глазах инвесторов.

Q & A

Что означает аббревиатура 'MOSI Lisa' в контексте видео?

В видео 'MOSI Lisa' - это игра слов с известным произведением Леонардо да Винчи 'Мона Лиза'. Здесь автор использует это название для иллюстрации идеи идеальной или 'мастерpiece' компании с некоторыми 'несовершенствами', которые он затем исправляет.

Какие три переменные влияют на стоимость компании, как поясняется в видео?

Три переменные, которые влияют на стоимость компании, - это увеличение количества клиентов, увеличение выручки от одного клиента на протяжении его жизни (Lifetime gross profit) и уменьшение риска, то есть предсказуемость и возможность продолжения текущих результатов в будущем.

Что такое 'значение ускорения' (Value Acceleration) и как оно связано с видео?

Значение ускорения - это теория или методика, разработанная в компании Acquisition.com, которая помогает превращать бизнес, который просто приносит деньги, в чрезвычайно ценное активо, которое может изменить жизнь владельца и его семьи с финансовой точки зрения.

Какую роль играет 'личный бренд' в контексте продаж бизнеса?

Личный бренд владельца компании может быть сильным активом, но при продаже бизнеса важность заключается в том, чтобы отделить личный бренд от бизнеса, чтобы новый владелец не зависел от имени владельца при получении прибыли от компании.

Что означает 'необходимые изменения' в видео и какие они включают?

Необходимые изменения в видео относятся к спискам пунктов, которые нужно исправить или улучшить в компании, чтобы увеличить ее стоимость. Они включают в себя создание сильного руководства, увеличение числа клиентов, повышение выручки за один клиентский цикл и уменьшение риска для инвесторов.

Какие действия автор предпринял для 'разделения' своего личного бренда от бизнеса в видео?

Автор начал снимать рекламные ролики с генеральным менеджером, чтобы постепенно передать бренд-ассоциации от себя к другому лицу. Он также начал делегировать задачи и отпускать контроль над некоторыми аспектами бизнеса, чтобы его присутствие стало необязательным для функционирования компании.

Что такое 'негативная подписка' и почему она важна для компании?

Негативная подписка означает, что если компания не приобретет новых клиентов, ее доход продолжит расти из-за существующих клиентов, которые увеличивают свой общий вклад в бизнес. Это важно для создания компании, которая не только устойчива, но и растет со временем.

Какие '9 C' являются ключевыми для создания стимулов к продолжению оплаты подписки в видео?

Девять 'C' включают потребление, залог, стоимость смены, выбор, контроль, сообщество, контракты, общение и причины, которые являются основными движущими силами, удерживающими клиентов в подписке и увеличивающими стоимость компании.

Что такое 'разнообразие клиентской базы' и почему это важно для стоимости бизнеса?

Разнообразие клиентской базы означает, что компания не зависит от одного крупного клиента или группы клиентов. Это уменьшает риск для потенциальных инвесторов, так как потеря одного клиента не приведет к катастрофическим последствиям для бизнеса.

Какие действия автор рекомендует для достижения 'автоматизированного отслеживания метрик' в видео?

Автор рекомендует выбрать платформу для отслеживания данных, определить ключевые показатели, назначить ответственного человека для управления системой и разработать план для определения и улучшения 'ограничивающего фактора' в бизнес-процессах.

Что означает 'готовность к аудиту финансовые отчеты' и почему это важно для продажи бизнеса?

Готовность к аудиту финансовые отчеты подразумевает, что финансы компании проверены независимой стороной, которая подтверждает их точность. Это увеличивает доверие инвесторов и упрощает процесс продажи бизнеса по более высоким ценам.

Какие минимальные требования к размеру бизнеса автор считает оптимальными для привлечения институциональных инвесторов?

Автор считает, что институциональные инвесторы обычно не интересуются компаниями с ебитдой меньше 5 миллионов долларов, так как для них не стоит тратить время на анализ и покупку компаний с меньшим потенциалом роста и размером.

Какие действия автор предлагает для увеличения ценности компании в видео?

Автор предлагает увеличивать число клиентов, увеличивать выручку от каждого клиента, уменьшать зависимость бизнеса от одного клиента или группы клиентов, а также обеспечивать стабильный рост и прибыльность компании.

Что такое '9C' в контексте рекуррентной выручки и какие они?

9C в контексте рекуррентной выручки - это девять компонентов, которые увеличивают вероятность продолжения оплаты подписки клиентами. Они включают потребление, залог, стоимость смены, выбор, контроль, сообщество, контракты, общение и причины.

Какие действия должны быть предприняты для достижения 'готовности к аудиту финансовые отчеты' в видео?

Для достижения готовности к аудиту финансовые отчеты необходимо иметь финансы, которые соответствуют общепринятым стандартам учета (GAAP), иметь профессионального бухгалтера, который может проводить аудит, и получать подтверждение качества выручки от независимых аудиторов.

Что означает 'EBITDA' и почему это важно при оценке стоимости компании?

EBITDA - это сокращение от 'Earnings Before Interest, Taxes, Depreciation, and Amortization' (Прибыль до учета процентов, налогов, амортизации и списания). Это показатель, который показывает финансовое состояние компании, исключая влияние финансовых заемов, налогов и других факторов. Важно при оценке стоимости компании, так как инвесторы часто используют EBITDA для определения ее рыночной стоимости.

Какова целевая аудитория для контента автора видео?

Целевая аудитория для контента автора - владельцы малого и среднего бизнеса.

Outlines

00:00

😀 Создание ценного бизнеса

В первом параграфе автор делится своим опытом в создании бизнеса, называемого 'Gym Launch', который превратился из гимназии в успешный лицензионный бизнес. Рассматриваются ключевые элементы, необходимые для создания 'мастерпиеса' бизнеса, таких как автоматизированное отслеживание метрик, высокая денежная ликвидность, прибыльность и растущая стоимость компании. Также автор упоминает о значении уменьшения риска для увеличения стоимости компании и вводит концепцию 'метод ускорения стоимости' из 'acquisition.com'.

05:02

🤔 Влияние оператора на бизнес

Второй параграф посвящён роли оператора в развитии бизнеса. Автор сравнивает опыт двух различных операторов и их влияние на рост и прибыльность компании. Один из операторов не смог увеличить доход, в то время как другой, более опытный, способствовал росту и улучшению финансовой ситуации. Также обсуждается важность наличия сильного руководства для привлечения инвестиций и увеличения стоимости бизнеса.

10:05

💰 Внедрение A-игроков и их влияние на бизнес

Третий параграф фокусируется на важности найма лучших специалистов (A-игроков) для роста бизнеса. Автор объясняет, что A-игроки, хотя и требуют большей зарплаты, в то же время могут генерировать в пять раз больше прибыли, чем B-игроки. Также здесь подчёркивается, что A-игроки ценят свою стоимость и могут требовать большей зарплаты, что является нормальной практикой для компетентных сотрудников.

15:07

📈 Развитие маркетинга без участия основателя

В четвёртом параграфе автор рассматривает процесс разработки маркетинговой стратегии, которая не зависит от личности основателя. Он описывает, как передал свои знания и навыки генеральному менеджеру, чтобы тот мог продолжать развивать бизнес без него. Также здесь обсуждается важность постепенного перехода и создания ассоциации между новым лицом и брендом.

20:08

🔄 Создание множественных надёжных каналов приобретения

Пятый параграф посвящён созданию и использованию нескольких надёжных каналов приобретения для увеличения числа клиентов и снижения риска. Автор делится своим опытом с 'Gymwatch', где использовались различные каналы, такие как платные рекламы в Instagram и Facebook, а также холодные звонки. Также здесь подчёркивается, что наличие нескольких каналов приобретения может спасти бизнес в случае сбоя в одном из них.

25:10

🔄 Увеличение числа клиентов и снижение риска

В шестом параграфе автор обсуждает, как увеличение числа клиентов и снижение зависимости от одного источника приобретения улучшают стоимость бизнеса. Он даёт советы о том, как постепенно развивать новые каналы приобретения, не забывая поддерживать основной, и о том, что не следует убивать бизнес в попытке спасти его, избегая слишком быстрого расширения.

30:12

🔒 Создание постоянных и регулярных доходов

В седьмом параграфе автор фокусируется на значении постоянных и регулярных доходов для роста и устойчивости бизнеса. Он объясняет разницу между бизнесами с одним клиентом, который платит раз в месяц, и теми, где клиенты платят регулярно, что приводит к существенному увеличению стоимости компании. Также здесь рассматриваются различные аспекты, которые могут увеличивать 'липкость' подписки, такие как потребление, залог, стоимость смены, ограничение выбора и другие.

35:13

👥 Разнообразие клиентской базы

Восьмой параграф обсуждает важность разнообразия клиентской базы для снижения риска и увеличения стоимости компании. Автор предупреждает о проблемах, связанных с зависимостью от одного крупного клиента ('кита'), и объясняет, что разнообразие клиентов, как школа рыб, лучше для бизнеса, чем иметь нескольких крупных клиентов, которые могут 'наплыть' и затем 'уплыть', создавая нестабильность.

40:14

📊 Автоматизированное отслеживание метрик

Девятый параграф выделяет важность автоматизированного отслеживания ключевых метрик для принятия обоснованных решений и улучшения бизнеса. Автор подчёркивает, что большинство бизнесов не собирают достаточно данных, что приводит к неэффективному управлению. Здесь также приводится пример реального мира, демонстрирующий, как автоматизированное отслеживание метрик позволяет ответить на вопросы о текущем состоянии бизнеса в реальном времени.

45:14

📈 Бизнес с высокими денежными потоками, прибыльностью и растущим историей

Десятый параграф затрагивает концепцию бизнеса с высокими денежными потоками, прибыльностью и растущей историей. Автор объясняет, что такое успешный бизнес, который не только имеет высокую прибыльность, но и способен генерировать денежные потоки после повторного инвестиций для поддержания конкурентоспособности и роста. Также здесь подчёркивается, что растущий бизнес с хорошей историей привлекателен для инвесторов.

50:14

📑 Готовые к аудиту финансовые отчеты

В эпилоге автор упоминает важность подготовки финансовой отчетности к аудиту для снижения риска и повышения привлекательности бизнеса для потенциальных инвесторов. Он рассматривает уровни подготовки финансовой отчетности, начиная с базового учета и заканчивая аудит-ready финансами, которые подтверждают объективность предоставленной информации о прибыльности компании.

Keywords

💡бизнес-мастерpiece

Бизнес-мастерpiece в контексте видео относится к идее создания идеального и ценного бизнеса. Автор использует это понятие для описания процесса превращения обычного бизнеса в что-то выдающееся и привлекательное для инвесторов, подобно тому, как Мадонна Мозе и другие величайшие произведения искусства ценятся и восхищаются во всем мире.

💡автоматизированные метрики

Автоматизированные метрики в видео означают систематический сбор и анализ данных о бизнесе для принятия более обоснованных решений. Это включает в себя такие показатели, как количество клиентов, выручка и расходы. Автор подчеркивает важность отслеживания этих метрик для определения эффективности бизнеса и для улучшения его ценности.

💡клиентская база

Клиентская база - это группа людей или организаций, которые покупают или используют продукты и услуги компании. В видео упоминается важность диверсификации клиентской базы для снижения риска и увеличения стабильности доходов. Например, автор не рекомендует иметь одного клиента, который составляет более 20% от общего оборота, чтобы избежать проблем, если этот клиент прекратит сотрудничество.

💡повторяющаяся выручка

Повторяющаяся выручка описывает доход, который компания получает постоянным и регулярным образом от своих клиентов. Автор рассматривает ее как ключевой фактор для создания стабильного и быстрорастущего бизнеса, поскольку она обеспечивает предсказуемость и устойчивость финансового положения компании.

💡риск

Риск в контексте видео описывает вероятность возникновения негативных событий, которые могут повлиять на стоимость бизнеса. Автор обсуждает различные аспекты, связанные с риском, такие как зависимость от одного крупного клиента или отсутствие автоматизированного отслеживания ключевых показателей, которые могут снижать оценку инвесторов о ценности компании.

💡инвестиции

Инвестиции в видео рассматриваются как финансирование, внедрение или развитие бизнеса с целью получения прибыли или увеличения его стоимости. Автор упоминает, что для привлечения институциональных инвесторов компания должна уменьшить свой риск и увеличить свою ценность, что может потребовать значительных инвестиций в людей, процессы и технологии.

💡управленческая команда

Управленческая команда относится к группе людей, ответственных за ежедневное управление и стратегическое руководство компанией. Автор подчеркивает важность наличия такой команды для того, чтобы бизнес мог продолжать развиваться и генерировать прибыль даже в случае отсутствия основного владельца или основателя.

💡аудитная готовность финансовой отчетности

Аудитная готовность финансовой отчетности означает, что финансовые записи компании подготовлены и структурированы так, чтобы они могли быть легко проверены независимым аудитом. Это важно для увеличения уверенности потенциальных инвесторов в точности финансовых данных компании и для повышения ее общей стоимости.

💡EBITDA

EBITDA (Операционная прибыль перед учетом интересов, налогов, амортизации и вычетом) - это финансовый показатель, который измеряет эффективность компании в генерации прибыли. В видео автор упоминает EBITDA как важный показатель для оценки стоимости бизнеса и как мильниевой показатель, который многие институциональные инвесторы ищут при покупке компаний.

💡множественные каналы приобретения

Множественные каналы приобретения означают использование разных способов для привлечения новых клиентов и увеличения их базы. Автор рассматривает это как стратегию для уменьшения зависимости от одного источника трафика или клиентской базы и для обеспечения устойчивого роста и высокой стоимости компании.

Highlights

The concept of the 'mosey Lisa' as a metaphor for a business with imperfections that can be perfected.

Importance of having an automated metric tracking for a business to increase its value.

The journey of Gym Launch from zero to 4.4 million dollars per month and the challenges faced.

The three variables affecting a company's worth: number of customers, lifetime gross profit, and risk.

The significance of a leadership team in place for a business's day-to-day operations and growth.

The difference between creating a job and creating an asset in a business.

The process of transitioning from a founder-dependent business to one with a strong leadership team.

The value of hiring A-players and their impact on a business's performance and value.

The importance of having multiple reliable acquisition channels for customer base expansion.

The strategy of creating recurring revenue streams for business sustainability and growth.

The concept of 'net negative churn' and its role in increasing the value of a business.

The benefits of having a diverse customer base to mitigate risk and increase business value.

The necessity of audit-ready financials for proving the profitability and reliability of a business.

The impact of having a business with high cash flow, profitability, and growth on its valuation.

The process of identifying and fixing the imperfections in a business to increase its enterprise value.

The importance of storytelling in business to attract investors and highlight growth potential.

The strategy for scaling a business by focusing on high-margin products and services.

The value acceleration method developed at acquisition.com for transforming a business into a valuable asset.

Transcripts

this is your business it's a masterpiece

right I call it the mosey Lisa but it

has a few imperfections let me show you

like this one diverse customer base and

when we want to reverse engineer

building the perfect business or a

masterpiece business we have to take all

these pieces that something's missing

and then put them back in the right

place for example automated metric

tracking High cash flow profitable and

growing with a good story multiple rival

acquisition channels and a lot more so

you might be wondering how I know all

this well a long time ago in a galaxy

far far away I started a company called

gym launch and gym launch basically

turned gyms around and then eventually

became a licensing business the license

over 5000 locations but here's the crazy

part we went from zero dollars

to 4.4 million dollars per month in 20

months and it also sucked and that's

what people won't tell you it got so bad

that Layla and I and my wife were

walking one day and she says let's just

shut this thing down I was like wait

hold on this might be worth something so

I called an investment banking friend of

mine and I said hey if I were to sell my

business like do you think I could get

anything for it and he's like oh

millions of dollars

I was like wow that sounds amazing he

said wait but not right now there's a

ton of things wrong with it that you

have to fix in order to get an

Institutional Investor to want to invest

the kind of money that you would want to

make an exit and that's what began this

journey of figuring out how to take

something that just makes money into an

incredibly valuable asset that can

change your life forever and your

family's life from a financial

perspective and everything about to show

you in this video is something that we

developed at acquisition.com called the

value acceleration method now you've

probably heard of big companies like

Netflix and Amazon and Microsoft being

worth two trillion 5 trillion one

gazillion dollars how does that even

come to be like how can something be

worth a certain amount we talk a lot

about value provide value to people make

valuable content but when we're talking

about value within a business the person

we're providing value to is the investor

who's going to buy a share of it so

there's only three variables that are

really going to affect how much a

company is going to be worth one is

increasing the number of customers if

all else Remains the Same if you 10x the

number of customers you will 10x the

value of the business sometimes more the

next is something I call Lifetime gross

profit which means the amount of profit

that you generate from these customers

over the lifetime of their stay with

your business and so if I want to make

more money I'll either have to get more

customers or make them worth more so

then what's the third variable because

this is pretty much all it takes to grow

a business which by the way is what it

is you divide that by risk How likely is

it that this will continue in the future

those are the three variables that you

have to increase or decrease the value

of a company and all these three things

put together equal a term called

Enterprise Value so take out your

notepad because each one of these 10

things unlocks another level of

Enterprise Value in your business and

you when you get them all right you make

a lot more money so let's start with

piece number one leadership team in

place running the day-to-day

so for each one of the ten that I'm

about to go through I'll explain what it

actually is how I learned it and then

how you can tactically execute and fix

these things so you can increase the

value of your business so a leadership

team in place running the day-to-day

means that the person who owns the

business can leave the business and the

business can not only maintain but also

grow in their absence now the thing is

is that most small businesses the

business owner is the reason the

business even exists and if the business

owner leaves so does the business the

problem is if you leave and the company

goes down then it means that no one else

can buy it and as much as this is

uncomfortable for a lot of entrepreneurs

many people own businesses that are

worth nothing I mean that not as an

insult but more so because what they did

was they created a job that pays well

that they have other people who help

them and they pay those people to help

them but they haven't created an asset

and so always remember to say you get

paid for what you do you get Returns on

what you own if you want to become rich

you increase your paycheck if you want

to become wealthy you get wealthy from

owning assets all right that's the big

difference so let me give you a tail of

two different businesses that we have in

the portfolio that try to solve for this

risk the first one ended up just saying

hey I've got this buddy of mine in my

network he's never run anything like

this he's just run little like odd job

type businesses and I'm gonna have him

come in and be the operator of my

significantly larger company than this

person has ever run and we were very

vehemently against that but we sit in a

minority position and so we say listen

if that's what you want to do I'll

support you but I want to voice the fact

that I don't agree with this but once

the decision is made we will support it

to the best of our ability now I'm not

going to tell you what happened yet

second scenario is a company where we've

continued to grow it it had plateaued at

a point where we saw we really needed to

help the two Founders and bring in a

more seasoned operator and so this is

Brick and Mortar chain we took somebody

who had taken a brick and mortar chain

from 100 to 2000 locations open over a

span of 10 plus years had a lot of

experience opening locations negotiating

leases managing build outs getting

vendors in line on timelines managing

Capital allocations so that we can

actually roll out at the same Pace

making sure profitability across all of

them ensuring quality assurance I won't

get in any more of that but somebody who

knew what he was doing guess what

happened so we've got our sad operator

and our great operator who come to the

business so with the first instance what

happened afterwards the business

plateaued costs continue to rise because

this operator didn't understand how to

manage cash flow manage profitability

basically got more people into the

business without increasing any kind of

Revenue which then basically ate up all

the profit in the business and this

business was not profitable for nine

months it lit it just broke even for

nine months and this was a very

profitable business prior to this in

this scenario with the more seasoned

operator this business continued to grow

at the same Pace but the profitability

increase expanded at a dramatically

faster rate with this new person in

there and so they even had a period

where he said hey I think we should just

focus for this entire quarter on making

all of our locations just more

profitable we don't even need to open

more and dramatically increase the

profitability of the entire business

overall and that's the difference

between having an experienced operator

and an inexperienced operator and if I'm

a buyer and I'm looking at the business

and I say okay these Founders are going

to disappear imagine the founder

disappears here I'm like I have no

desire to buy this thing right versus

here I say well gosh I can see when this

guy came in I could see what it

increased based on his decision making

and his experience wow I feel like

there's way less risk which means this

is more valuable so let's talk about

what you can do number one let me tell

you one of the mistakes that I've made

so many times early on in my career is

that I thought an operator was someone

who managed systems and organization

that's not what it is at all an operator

somebody who can lead the business it

has to be someone that you aspire to be

like that you admire in different ways

and it should be people that everyone on

your team could look up to because that

is what is going to allow you to step

out of the Limelight a little bit so

that they can actually take some of the

load off of you and let me give you the

litmus test for knowing when operator is

good or not if you feel like you have

more time now and you have way more

bandwidth they have helped you if they

try to tell you to do all of these new

things that you weren't doing before

they are arguably hurting you so the way

that you have to look at this as a

business owner is the difference between

local and Global meaning if I tell the

sales team that they have to put notes

in the CRM that actually increased how

much stuff they do on a local level but

by them doing that I decreased all the

work in the rest of the company globally

and so if an operator comes in and says

everyone has to do all these things you

have to zoom out as the owner and say

does this decrease work globally or is

this

just giving us more stuff to do and a

good operator tries to use as few

systems as possible to decrease work

across the entire company

whereas a bad operator will feel

entitled in saying why aren't these

people filling out their checklist

they're not finishing the tasks that I

gave them to do it's because they add

things without removing them and so from

low to high you'd have a manager you

might have a director

of Ops you might have a VP

of Ops and then eventually you'd have a

COO all of these fundamentally do the

same thing just at different levels of

an organization I would always prefer to

start lower most people over title it's

one of the biggest problems that small

business owners have they over

credentialize people and then people

beat their chest and get their ego

involved and then you don't have room to

bring people above them because if you

have somebody you're like oh this

person's been with me since day one and

something realistically they're probably

not a COO right they're probably a

manager or maybe a director of

operations and one of the sad truths and

this is just data is that if you 10x in

size the likelihood that you have the

leadership team you had at 1X when you

were at 10x is virtually non-existent

people develop skill sets and those

skill sets are good at certain seasons

of the businesses growth and then they

don't fit anymore

and the only way for that person to stay

on the ride you have to have a growth

mindset and many people don't have a

growth mindset you do because you're

watching this but most people don't it's

a much smaller percentage of people who

are willing to do that one and then also

just because of the the churn and burn

of business in life and moving locations

and families and drama and whatever that

they actually are there with time you

have to always prioritize the business

because the business is what feeds

everyone all the wealth that you want in

your entire life is on the other side of

a few hard conversations and so it's a

skill you're gonna have to develop

number two is hire for a purpose all

right so you should have a clear idea of

why this person is coming in you want

someone to come in with a clear goal or

a clear problem to solve and this makes

the interviewing process a lot easier

you don't have to give hypotheticals you

can just say hey this is my business

these are the stats this is the problem

how would you attack it and if you ask

that to 10 people the way someone

answers the question and the way they

talk through it logically should give

you some insight into how this person is

going to work with you a lot of times

entrepreneurs just hire people that they

think they would be friends with but

then you hire a lot of people like you

and then you still need the people who

are not like you to actually run the

business look at track record and

experience and how comparable or

relevant the experience is as one of the

number one predictors that they're going

to be able to help you go to where you

want to go so this applies for a CMO a

CFO a CPO meaning head of product all of

those C Dash O's all of them you still

want to think this way which is like can

they do the thing more than are we going

to be best friends and when we're

thinking about replacing the day-to-day

we've got risk you've got getting more

customers and you've got making them

worth more so you can actually think

about that in terms of leadership so you

say okay if I were to leave would we be

able to get more customers next month

and the month after if I weren't here

well if the answer is no then all of the

leaders that would make that happen

would be check box one

the second check box would be making

sure customers stay and continue to pay

and maybe increase how much they pay

over time if I leave is there somebody

or multiple people who are going to make

sure that that happens if the answer is

no

then you need to check that box off and

for us at gym launch for example

my limits test is always if I step away

does the company continue to grow for

six straight months without me jumping

back in which means that if they come to

you with a problem you have to say you

have to solve it they probably already

know what you would do and they can just

make the guess and a lot of times I

would ask what do you think I'm going to

tell you they're like well I think you

told me to do this I'm like so what do

you think like I think we should do that

great do that right and so that's how it

can develop over time so number three is

that a players know their value an a

player costs 25 more than a b player but

a players produce five times more than b

players and so being willing to pay a

little bit more to get way more value is

one of the single best investments you

can make in business that being said if

you are bringing a players on expect

them to want more also expect some of

them to negotiate pay some of the best

people I've had have tried to negotiate

pay when they came in and that's okay I

actually had to have a conversation with

one of our bigger portfolio CEOs because

he had amazing talent person that we

found he was like dude she's trying to

negotiate if you said if she loves this

job why doesn't she just take the job I

was like a players know their value and

it's now he said the all-time best hire

has ever had and he almost didn't hire

good Founders know that it's about the

size of the the pie not the shape of the

slice the founder of the company when

they go public has on average 12 percent

of the equity in the business when they

go public all right now most people

would say that if you founded a company

and then it went public that you

probably are very very wealthy so those

Founders understood something that maybe

you didn't and definitely something that

I didn't when I was earlier on which is

that it's about how big you can make the

pie and the more people who are

incentivized to grow the pie the bigger

the Pie Gets Jeff Bezos doesn't have 100

of Amazon Warren Buffett has 30

something percent of Berkshire Hathaway

Elon has 20 percent of SpaceX I'm going

to ask you a visual question would you

rather have this slice of pie

or that slice of pie so it's not about

the shape of the pie it's about how big

it is

and that's what we ultimately care about

and that was a big belief that took me a

long time to break as a small business

owner I wanted to not give anything away

but it's amazing how much more

discretion or effort you can unlock when

people feel like owners all these things

put together go to create the first part

of the mosey Lisa so let's talk about

piece number two marketing without the

founder

so this is me marketing thy business and

sometimes even being in the ads and the

videos and making the content whatever

it is that is not an asset that is a job

this

if I still own it and still happening is

an asset that's the difference and this

is what the investment banker friend of

mine was explaining to me he said well

number one you don't have a leadership

team in place because it's just you and

your wife number two is that urines

every single ad if you leave how do we

know we're going to still get customers

I had you step by step fix this with my

own business so that somebody else could

own it I started

filming ads with my general manager so

we'd film ads together and he told me

later that the first time we filled ads

he was like terrified because of course

she wasn't going to be as good because

I've been doing it for a decade right

like I've been recording ads for my gyms

five years before that and then I've

been recording ads for gym launch for

another five years so like it been a

while that I've been on camera pitching

stuff and so I would record all the ads

and then he would follow me and do the

exact same ones and when we started

running them surprise surprise mine

still did better but we still ran the

ads and he still came with me to do the

ads in every session and guess what

happened next he got better and over

time he would start having ads that

outperform mine and the way that we

transitioned it was I did them and then

I would do some with him and then those

were the ads we ran in the beginning

only Alex and then Alex plus kale Kale's

my CEO he's still there two Alex kale

separately to kale so that was the

transition we went through think about

this from a branding perspective

brand is about associations and so if

people associate me with this brand what

I need to do is transfer that

Association to someone else and so I say

hey we're in this together and we run

ads together and so people are like the

brand Alex this person brand Alex this

person and then eventually you can

remove Alex and you have that person in

the brand this process just from here to

here took about 12 months and you might

be like well Alex like you have a

personal brand why are you doing this

well there's a couple things one is that

you can separate your personal brand

from your business for example you've

got Andy frisella has Andy frisella and

he also has first form and they are

somewhat different right you've got

vaynermedia and you've got Gary

vaynerchuk you've got Alex from Mosey

you've got acquisition.com but I

actually have another level of removal

because all of how I actually make money

is not ads for me it's companies that we

own I can sell the assets that we have

in our portfolio without it affecting me

like somebody who buys one of our

companies is going to be like well Alex

doesn't come with a deal well I don't

actually influence the business I

influence how I get deals you're always

going to be you and so your personal

brand is always going to stay with you

for the rest of your life you should

want to make sure that it's not

intertwined with your primary source of

making money mind you that's if you want

to sell if you don't want to sell then

don't worry about it just go make money

it's fine not a big deal so I don't know

about you but I think we got the corner

of my hat done

and Mosey Lisa getting a little a little

feisty so the third part of the mosey we

said that my Investment Bank and Fred

said that I didn't have and needed to

fix was delivery without the face of the

founder

okay so you're not in the ads anymore

but if I'm the one delivering service to

customers or I'm key to the delivery and

so you can think about this in two

different ways one is I'm literally

there doing the things as if you are the

face and people come for your expertise

in some way then this can be difficult

now sometimes it's just your expertise

is innate in why the product is good so

like if you're a software designer and

you're just a genius software designer

or you're like an amazing editor even

though your firm may sell this and it

doesn't actually have to do with you if

you own the customer relationships for

example like they only work with it

because they love you or they love your

way of Designing things those are all

different examples of why a Founder

would be used in delivering any risk

factor for somebody else coming in so

what do we need to do

ah

rip my head off we need to uh make this

with cool man

there you go a lot of people think that

when they're going to replace themselves

they need to find one person to replace

them but finding another human being who

has lived your exact life is impossible

but it's much easier to find two or

three people or five people who've lived

portions of your life in different areas

so that together

we're gonna make this look even weirder

you have a Hydra of people who can

deliver value to the customer now here's

how we did it I started edifying

different people now how I did it was we

called them subject matter experts so I

found people really get one component of

what I did I might say this guy is my

subject matter expert of sales this

might be my subject matter expert of

retention this might be my subject

matter expert of marketing and so what

happens is people will identify that

person as an expert in that particular

area but not necessarily overall now

they still could be good overall but how

you brand them within your world matters

number two the people that I did put

even more edification into had equity in

the business which also means that

non-competes hold weight if there's

equity and to give you an idea of how

involved I was in the beginning to give

you some hope if you're like man what

easy for Alex right the first 400 days

of gym launch I did a q a for 90 minutes

every single day so I just said hey if

you want my help

I'll hop on with you but I say this to

say that like I had a huge amount of

demand to show you how much of a

contrast this was from day one today

whatever it was and put yourself in the

shoes of the buyer the investor why

would I want to buy a business where the

guy who's literally delivering all of

the values like hey can you just pay me

for the next six years of value I'm not

going to provide

no of course not right it wouldn't make

sense I will pay you for all the value

that your company will provide to

customers in the future if it doesn't

require you and that's why this affects

the risk factor within the business

remember this little variable we got

customers

because remember if you lower the risk

the lower you make the bottom fraction

the bigger the overall value so a

mistake that a lot of Founders will make

is that they'll start selling kind of

time with them one-off things they might

do if you're in the beginning and you

make money do what you got to do survive

don't get me wrong I'm just talking

about how to maximize Enterprise Value

it's really just more you doing a job

and getting paid for it which is fine

it's just not wealth creation it's

income creation so Point number one is

that it might not be one person but many

people who end up fulfilling Your Role

within the company number two is that

you want to edify each of those people

to the customers in their respective

places number three is that you want to

transition me less than them and then

eventually adjust them and then number

four if they're high enough up then you

can consider giving them small slices

now mind you what I'm saying giving

Equity I'm not saying like give 10 I'm

saying you can give a half a percent or

point one percent do these people said

that they're still tied into the

Business Delivery without the face of

the founder

boom next up we have this part of the

background of the mosey Lisa but

incredibly important multiple reliable

acquisition channels so right now if

your business looks like this if one day

someone comes in and this just snaps and

you have no way to feed your family over

here all your family they all die

because you can't eat right very sad so

we don't want to do that what we want to

have

is multiple

lines

in the water that's you know a Fisher

with lots of fishing pole sticks yeah

all right so there's two elements to

this you've got multiple

and you've got reliable and both of

those make up the fact that you have a

more valuable business the idea here is

that you want to know that you are not

going to have your line snap because you

get a ban on some platform if all you do

is run Facebook ads if for some reason

tomorrow Facebook says I ban you because

I'm the god of media and I don't want

you to make money anymore and your

entire business dies that's a

significant risk the same degree if you

make content on YouTube and that's your

primary way of getting customers YouTube

can cancel you or let's say that you

have a emailing method that gets

customers in the door if you're doing

outbound well yet again if for some

reason you have you know your whole

domain gets shut down and then your

deliverability tanks now mind you all of

these things have Solutions

entrepreneurs are problem solvers it's

like well then I create a new alternate

YouTube channel or I create a new a

Facebook account under my wife's name

and that one we were able to run or I

spun up a new domain so that I could

deliver emails like there's obviously

service students around this but the

more of them you have that are

consistently getting customers the less

likely an invest just going to think wow

this can go from 100 to zero overnight

all of these things decrease the risk of

the business and so for us at gymwatch I

had Instagram paid ads I had Facebook

paid ads as my only two channels right

but what ended up happening believe it

or not was that during covet these

actually didn't perform Super well for

me and so I had to find another way to

start marketing and so I actually had a

guy from a competitor company approach

me and he's like oh I work at a gym

company that I hadn't heard of and I was

like huh that's weird I was like well if

you don't mind my asking like what kind

of Revenue guys doing is like oh we do

about 10 million a month and I was like

okay so you're telling me that there's

another person in my exact space that's

doing more than we are and I don't even

know who they are

I was incredibly intrigued and I was

like well how do you guys get customers

he said oh we're all outbound

and so of course I was never getting

cold calls from them because I'm not a

gym owner right but he had a team of 30

plus guys who were cold calling emailing

to get customers and I was like well do

you think you could build out the

outbound system here and he's like yeah

I'm pretty confident he's like it would

take me like you know some time but I

think I could do it and I was like all

right well here's the deal I'll give you

the job offer but you're going to start

your own department and it'll just just

be you and you're gonna have to start

everything from the ground up and so the

long story short is that 12 months later

it was 50 of our Revenue by doing that

and by mending this we had Outback

as another method and because we had

three different ways of getting

customers the acquiring company was like

okay I feel good and it wasn't just like

oh we get five percent of our customers

from this half our customers came from

outbound half of our customers came from

inbound and they were like

this looks stable and the thing is is

that over time this has been a lifesaver

because sometimes stuff does happen ads

get disapproved one of your top Setters

goes on vacation or the manager is not

doing a good job who you just put in

there like there's things that can break

on either of these but the more that you

have that are reliable the more reliable

the entire business is overall and that

decreases risk which increases the value

of the company and doing this provided

you don't drop on your main Channel

because of your split Focus also

increases the number of customers you

get so this having multiple acquisition

channels both increases number of

customers and decreases risk which is

why it can be incredibly valuable it is

however one of the most time consuming

and focused draining things you can do

as a business owner and if you think

about timing somebody give you tactic

number one is that one one one offer one

Avatar one channel and that's until you

hit one million dollars per year if

you're not there don't worry about this

you're not trying to build your a

valuable Enterprise yet you're trying to

make money which is fine once you're

here I still say just increase how much

you're doing of these once you get to

about here

you can consider getting another Channel

going and oftentimes if you do it right

you can have the other channel support

the primary Channel if I said I wanted

to start making content if I have

content content supports outbound

content supports paid ads and sometimes

content itself can become paid ads and

so these things do work together

synergistically it just takes resources

and my recommendation is if you're going

to start it start with someone else

doing it so that you don't stop doing

your main job so number two is what I

just went over which is

the first thing that I'm going to do

after I have something working

is more and better okay we have paid ads

can we do more paid ads can we spend

more money can we make more ads we make

our ads better can we introduce

different callouts going to introduce

different hooks can we create different

value can we get a more voluminous

Cadence of recording in place that would

be ways of doing more if I was doing

outbound more would be more calls more

dials more Setters whatever

better is improving the scripts

improving the training improving the

offer we give them on the phone this is

the lowest risk way of growing the

business we already know it works let's

do it more or let's do better to the

point where I think my team is probably

tired of me saying more better and

number three is don't kill your business

in trying to save your business if you

decide to go after the second Channel

understand that it's going to take a

long time and so if your main Channel

drops while you're trying to start your

other channel you basically create the

problem you're trying to solve you want

to one be patient before you do it and

be patient once you start number two is

look at progress

more than outcome that's what I would

highly encourage you to do because it's

going to take time so like even if

you're starting paid ads the first thing

you'll be is like are we getting clicks

great if you're getting clicks then it's

like okay are we getting opt-ins great

if we're getting opt-ins and can we get

scheduled okay are they showing okay are

the people who are showing the right

types of people okay yes great if

they're not okay what do we need to do

to tweak in the targeting or should we

get the messaging across the whole

funnel okay we're getting on the phone

with the right people but they're not

buying okay then we need to add some

more friction we need to add some more

selling aspects Etc right look at the

progress not the outcome because if you

look at that you might think wow this

took two months and we didn't even make

any sales the thing about this way let's

say it costs you ten thousand dollars a

month to invest in a new way to get

customers and it takes you six months to

make your first sale let's say a sale is

worth a thousand dollars well that costs

sixty thousand dollars but when you do

get that first sale you got a ten to one

return on that once you got all the

tweaks done well in that next month you

could spend 30 grand and make 300 and

get 5x on your initial investment think

about this as investing in a machine

that prints money of course it's going

to cost across time and cost money to

create the machine but the machine will

pay for itself over and out which is why

business overall gets higher returns

than anything else because there are

very few other machines we can put a

dollar in and get 10 Baht or put a

dollar in and get 100 back in a month

but business you can but it costs money

and time to figure it out my third Point

here is that I would say use others and

of course there's examples where you

could say okay I started this one

channel I got a leader in place and I'm

going to figure out this next Channel

that's a way of doing it as long as that

person continues to run the thing

without you the way that I have

preferred to do this over time is that I

will bring someone else in to start the

thing and I will consult and give

feedback but I want them to own it so

that I don't just create another problem

that I'm going to have to solve in the

future which sometimes means that it's

going to take longer and I have to make

sure I'm focusing on the progress as

long as every week we're moving towards

this we'll get there and

if you're looking at well okay well

which one would I do next which is a

great question all right which is number

four my recommendation is look at where

people in your industry already acquire

customers so if you are a directory

consumer brand and you sell something

that is weight loss focused well then

paid ads is a huge source for people in

that industry and you can be confident

that if it's paid ads and it's in this

media type for businesses of your size

like don't look at Weight Watchers and

be like well Weight Watchers is running

a Super Bowl ad so I should try that

probably not the best first step right

but if you're looking at other people

who run local gyms and you can say okay

well companies of my size in the space

are able to acquire customers here

profitably so if they can do it so can I

and that's kind of how I look at it

until you've like done this multiple

times just look at what other people are

doing and you can iterate off that hey

real quick guys if you're a brick and

mortar chain you've got two three five

locations and it's a working model

that's doing at least a million dollars

a year profit maybe two three five

million dollars a year we're super

interested uh to partner with you and

help you scale and take you to the moon

so if that's you go to acquisition.com

we'd love to talk with you provide some

value and if it makes sense

invest and take it to the moon so with

that being said enjoy the rest of the

show multiple reliable acquisition

channels like content

ah tile number five is reliable

recurring Revenue

so let me illustrate visually why this

is so important in a normal business

what might happen is you would sell a

customer this month and they're worth a

thousand bucks and the next month you

sell another customer is worth a

thousand dollars you make another

thousand dollars this month and guess

what month three you do the exact same

thing and make the exact same amount of

money that is what most businesses do

which is why they are not valuable now

let's say the exact same scenario except

in month one you sell a recurring

customer a customer who buys this month

he buys them next month he buys a month

after that well in month two we're still

going to sell another customer

so we're gonna sell that customer and

guess what he's going to do he's going

to pay the next month too

in the third month we're going to sell

yet another new customer boom now if

you're comparing the before and after

here of old Way new way this is just

three months now imagine 36 months or 60

months this thing would be this high and

this would just still be the same and so

when you see a business that's plateaued

it's because they sell the same amount

of customers every month and those

customers are worth the same amount to

them and they do not grow they've hit a

point of homeostasis recurring Revenue

businesses if designed properly will

continue to compound and so this is why

it takes time to build big things and so

one of the biggest breakthroughs that I

had in my business career was

understanding not that you should have a

subscription and why it's not just about

having a subscription because let's say

you get a subscription everyone cancels

after the fourth month so this is the

fourth month but every month after this

we're going to have the same Revenue so

this is going to stay the same because

they're all worth four months so I'm

gonna stair step up to four months and

then I'm gonna plateau again what you

really want is something called net

negative turn it's a fancy word but it

basically means that every single month

if you acquired no new customers you

would still make more money so an

example of this would be something like

Salesforce which is a company that's

valued at a gazillion dollars and the

reason for that is let's say that this

month they have a hundred customers now

they may lose one or two customers this

month but the remaining 98 customers

become more valuable to them than next

month than they were that month because

those businesses grow and the better

designed a business model is the more

aligned your customers outcomes are with

your own outcomes and so for Salesforce

they're like okay well if you have more

seats or you have more email contacts or

more Revenue that's flowing through the

software we get a bigger percentage of

that and so the remaining growth that

they tie themselves to they get their

claws in you allows them to continue to

grow and so when they acquire customers

think about this if a customer to them

might be worth a million dollars how

much can they spend over our customers

unlimited that's the difference here is

that we want to have Revenue that will

not only stay but also grow

and that's kind of the two levels of

this like Netflix doesn't really have a

lot of expansion Revenue besides you

getting add-ons for your family or

whatever right but they just hope that

you never cancel and that's more common

in consumer businesses in B2B businesses

because you have way fewer customers you

want to usually have much more expansion

Revenue opportunities tied in in a way

that not only gets them to not cancel

but actually buy more so remember

earlier we talked about Enterprise Value

so Enterprise Value is the value of the

business but usually the value of the

business is measured by a multiple on

earnings meaning how much money did this

business make this year or the last year

and what is the multiple that we'd have

so if I made a million dollars in profit

and I said the company was worth five

million dollars then it would be a 5x

multiple right and so in public

companies they call them price to

earnings ratios let me show you some

companies that you may have heard of so

you've got Netflix here you've got

Amazon here a little Jeffy B and we got

a little Billy G little Microsoft and so

you might be like oh all of these

companies are super valuable and they

are but you might not know how much more

valuable investors value them compared

to their earnings and that multiple is

purely based on on how reliable they

think the future revenue of the company

is and How likely it is to continue to

grow so Netflix right now trades at 44

times earnings man wouldn't that be nice

if you made a million dollars in profit

someone paid you 44 million what a steal

Microsoft trades it 29 times earnings a

little less kind of interesting good old

Jeffy B is getting 310 times earnings

now there's a couple things here part of

the reason that this is 310 is because

Amazon actually runs slim margins and

that's by Design because they continue

to reinvest in growth and they look at

their Returns on Capital and so

investors know that at any time if they

wanted to make the business more

profitable they could they choose not to

make it super profitable which then

compresses the amount that is being

multiplied for this value so there is a

little bit of a game to this in terms of

understanding why the multiples are so

high but when us as business owners

you're probably not going to be in any

one of these scenarios realistically

you're probably looking at one to four

times earnings if you're a small

business owner that's doing less than 10

million a year if you're doing over 10

million a year and over two million

dollars a year in profit then sometimes

that multiple can move up again it

depends on some of the other factors

we're talking about today which is and

you check all the boxes then you do own

an asset that's valuable and that's the

point of this whole thing part of the

reason that Amazon also has a higher

multiple is that Amazon has a lot more

expansion opportunities so think about

this they have Amazon Prime in their

home Marketplace but then they also have

like AWS and they've got Prime video

they could literally sell everything so

they have tons of expansion

opportunities Netflix has significantly

fewer expansion opportunities and so

it's not valued as highly and that's

mostly just because they only really

have one core thing and the other piece

is how defensible is this How likely is

it that another Netflix gets created

well we already have proof of that

you've got Disney plus you've got HBO

Max they used to be this category King

they're the only person then everyone

else is like oh wait we can just go hire

Production Studios and stream stuff too

we need to get a couple big Brands

models Disney was like we'll get Marvel

and Star Wars and then they weren't the

dominant they were just a channel

whereas Amazon it's virtually impossible

to recreate what Amazon's done and so

they also have this big competitive mode

around them which makes it almost

impossible for anyone to beat them at

their game and so they have this base

way of holding on to all their customers

and then all they're going to do over

time is just add more and more and more

ways like buying Whole Foods to make

money from their customers but there are

nine C's of recurring Revenue when I

think about this is like how can I

increase how sticky it is or How likely

someone is to continue to pay me for

whatever I have number one is

consumption are they actually using the

thing that they are paying for right one

of the interesting things I found out in

the gym world is that almost everyone is

willing to pay for a gym membership that

they use and almost no one is willing to

pay anything for gym membership that

they don't the next is collateral think

about a storage unit they've got your

stuff like you have to keep paying them

a payment processor has all of your

customer data and they process all of it

they make it very difficult for you to

take your credit card info which is

encrypted from their payment processor

to somebody else's and so they have

collateral they have some of your

and so they force you to keep paying

them so that they keep making money the

next is cost of switching is there a way

that I can make it difficult to leave

don't think how do I make my customers

life harder more think how do I make my

thing so much better better that they

would lose all of these benefits if they

left if I have 10 friends in a community

and I pay for that community and then I

leave and I meet with them in person on

a regular basis I'm going to lose that

so there's a high cost of switching next

is choice I don't want many other

choices like what I have available for

them if you have a patent or you have

some sort of trade secret that makes it

difficult for other people to clone what

you have so your n equals one of the

only option that someone can have next

is control the money flow this is more

in a B2B scenario but if I have the

ability to control the money flow that's

why I like payment processing and

software always tries to get the ability

to process your payments for you Uber

process their payments for their drivers

doordash does for the restaurants if you

can control the money flow you have a

lot more leverage for them to stay with

you the next is a softer one all right

which is cause Charities movements

things that you associate with if you

have two different options and you're

like you know what this one does a lot

of good in the world I align my identity

with their values I want to continue to

pay there and I hinted at this one

before but Community right like

Community is a way to increase the

stickiness around whatever the recurring

membership you have is right whether

it's a gym or it's an online

subscription if there is a community now

you might be like well there's no

Community around Netflix

you're right but do you think that

there's a community around stranger

things hell yeah there is right and you

want to be able to say on Monday morning

dude did you see the new episode of

stranger things it was wild right and so

you commune with other people about the

content next is contracts and that's the

same ideas as commitments right so if I

say hey you're signing up for 12 month

membership here's the contract that's

your commitment then you're going to

have stickier recurring Revenue than you

are if it's just months a month you can

cancel whenever you want and the last

one I'll give you is communication which

is literally just talking to your

customers more regularly so in the gym

world we figured out that when we said

we're going to run events on a regular

basis belly Blaster big booty boot camp

or whatever it is our churn would

decrease leading up to the event because

they had something to look forward to

but then after the event it would go up

and so what do you do you just always

have something for people to look

forward to and you communicate that

regularly so I give you nine ways to do

recurring Revenue there are more but

that's a good place to start do you

think we've checked this one off I think

so this looks like a nice green corner

that was anticlimactic so our next one

is part of my bicep or Mosely Lisa's

bicep diverse customer base

so having a diverse customer base let's

imagine that this is your customer base

you've got all these little fishies here

and then all of a sudden one day boom Mr

whale comes along and says I want to

give you so much money because you're a

small business owner you're like man I

gotta win this whale I want to make this

money and hey don't get me wrong by all

means go whale hunting but the thing is

is that this actually materially changes

your entire business and your business

strategy if you continue to acquire

customers here and then you have to keep

delivering on and hire more people to

deliver for this whale you've kind of

got this weird business and if I'm a

buyer then you really don't have this

business these are almost irrelevant

it's like having only one customer and

if that whale all of a sudden gets sick

or just doesn't like you or one of your

reps say something rude and he says I'm

going to swim away then you're sad and

then you're like what do I do and now I

have all these people that are over

hired for et cetera et cetera and so if

you have the choice between this with a

couple of little fishies underneath or a

whole school of fishies then as an

investor you're going to want this

because it's more diverse if I lose one

fishy it's not really going to kill me

and I can go get another fish but if

you're thinking what else could I do

well I'll tell you yeah

[Music]

if you decide that you want to do this

whale thing and you realize that whales

are worth more and you actually enjoy

the process more then go get a whole

bunch of whales you will still get a

diverse customer base of huge clients

and these are some of the most valuable

businesses is if you can get 10 or 20 or

100 whales then everything's based on

percentage of Revenue whale is relative

if you get Google as a customer they're

a will but if you have Google and you

have Amazon and you have Netflix all the

other big companies then all of a sudden

they're just little fishies too it's

just you have a way bigger Pond for your

fishies to be in and so the idea is that

you want to have no one customer be

greater than 20 of your Revenue ideally

for me I don't like anyone more than

five percent of my Revenue as much as

the short-term revenue of having a whale

come along sometimes these guys can

Cannonball and create too big of a wave

in your business that might actually

sink your ship and so the risk that

we're trying to address here is what if

one customer leaves so let's say you've

got a hundred dollars whatever you can

put whatever zeros you want on this all

right this is your business today and

this

is your profit cool I told you that what

if a whale is 30 of your business here's

Mr whale it's like a worm anyways now Mr

whale leaves so does your profit

and then all of a sudden you're breaking

even so even though the customer was

only 20 of your business it might be a

hundred percent of your profit and so if

you can lose 100 of your profit by

losing one customer that's super risky

and so that is why I prefer to keep it

at five percent

or less of all my Revenue coming from

one specific client or customer I think

there's two big decisions you have to

make when you're thinking about

diversifying customer base one is do you

take the wheel on to begin with because

it may create too many waves in your

business that you basically have to

create a business around the whale that

if the whale leaves you then are left

with all these costs that would sink the

business if you didn't have them so you

become really reliant on them so

decision one is whether you take the

wheel on decision two is that if you

take the whale on are you going to then

go get more minnows or you're going to

go get more whales because it might make

sense if you say hey strategically I

think it makes sense for us to go up

Market go after higher value customers

and have fewer of them and so I'm

willing to build this infrastructure for

this one customer so that I can have 10

more of them that makes sense and so if

you said this is my business this is my

avatar this is my Niche this is who I'm

going after then a big part of focus

means saying no

and sometimes a big shiny whale is just

another woman in the red dress who's

trying to distract you from your

ultimate goal because fundamentally if

you had a business that just served that

one Avatar you should just go 10 exit

this will create all of these

difficulties that will distract you from

the main thing I don't think there's

anything else to add here so let's stick

this puppy on diverse customer base

before

upper arm piece in reality number seven

automated metric tracking

every business needs to have metrics

because if you don't have data you can't

make good decisions and you'd be amazed

how much smarter you seem if you have

data to support what you do it's one of

the first things that we do when we work

on a portfolio company is get this stuff

in place so that we can make better

decisions for the future and ultimately

give that data to an investor who might

ultimately want to buy it for

significantly a higher multiple in the

future so what I'm going to do is

demonstrate this in the real world to

give you an example and call my director

of brand this could go horribly wrong

what's up all right pop quiz test number

one uh how many registrations do we have

right now for uh the book launch event

we have

34. almost 292 000.

that sounds nice thank you guys uh how

many uh how many Affiliates how many

people are promoting the book on our

behalf uh it's over ten thousand I think

it's ten thousand eight hundred and

something as of yesterday as of this

morning

as of this morning yeah I can get it I

have so 10 800 as of this morning all

right that's you know we're two hours

away from that real-time stat so

there you go 10 813. okay thanks man I

appreciate you

so that idea is automated metric

tracking and so he would only be able to

say that if he actually had dashboards

in front of him that would allow him to

answer those questions if he didn't he'd

have to be like I'll have to get that to

you tomorrow and I'll have to look at

three different Google Sheets and then

count manually how many people are doing

x y z right and the thing is is that the

more difficult it is to collect data and

report on data the less data you end up

reporting on which means that you have

few and fewer pieces to make decisions

off of and so I'm often Amazed by how

little data is collected in most

businesses because I'm like how are you

making any decisions and for the most

part the answer is they're just guessing

which is a terrible way to make

decisions so one of the best things you

can do is switch from a big

conglomeration of Google Sheets

to actually fully integrating some sort

of CRM into your business and this is

where the things like Salesforce and

HubSpot and some of these other

platforms exist is to help

small businesses become medium-sized

businesses it's worth paying well to get

it implemented in the business so you

know data of what's going on in real

time so you can make real-time decisions

automated metric tracking affects how

many customers you get lifetime gross

profit per customer and the risk

associated with everything because if

you don't have tracked metrics you won't

know what your lifetime gross profit is

you won't know uh where your customers

are coming from or what percentage of

Revenue each customer is worth or what

your cost per lead is and so if you

don't know what the basics are then how

can you make the advanced moves if you

don't even know what the basics are how

do you improve them and so the first

thing if you want to do a gross business

is know what current state is but again

I'm amazed at how many people don't even

know what's going on in their own

business if I'm like hey how much profit

you make that's something they're like I

don't know I'm like that's Friday you

should know these things you can tell

how skilled someone is at anything based

on the number and quality of the metrics

they track a lot of like marketing

Founders if you're really good promoters

are like oh our product's amazing and

I'm like cool what's your time to Value

what's your turn which your onboarding

you know process and I start collecting

you know asking just for stats around

product and they're like we have a low

chargeback rate and I'm like that is not

what a good product means if I said hey

what's your customer impression what's

your cost per lead what's your

conversion rate and they're like oh I

got that you need to be as in depth

about your product and your delivery as

you are about your acquisition and if

you know the quality and quantity of

stats on the front end you should be

paired in terms of how nuanced you are

on the back end because the people who

are really good are that nuanced and

that is my biggest indicator if I'm

interviewing for roles by the way of

knowing if somebody's good or not if I'm

interviewing for a sales manager for

example and I say hey you know what

metrics you'd be tracking he's like I

like to go by feel you know manage the

vibe of the team I'm like that's not bad

that's fine but like what metrics do you

track and they're like you know closing

percentage and uh you know cash

collected I'll be like okay cool that's

a great start versus I have a guy who

comes on and says show rates I like to

count offer percentage I like to count

uh what types of objections we're

getting on our nose I'd like to count

number of uh calls required to close I

like to have cash collected I like to

have cash as a percentage of total

ticket value I like to know what my

speed to contact is I like to know what

my speed to close is in terms of first

Contact until they close all of a sudden

I'm like okay this guy gets it he's

looking at a number of different

variables that are highly quantitative

so that he can then make far more

targeted improvements in the process so

that we can make more sales this is

actually supposed to be for another

video but I'm going to show you this uh

in real time so this was actually a

before and after of one of our portfolio

companies and so what we did we said hey

let's track data and so then we started

tracking data and then they were like oh

gosh these are our stats and we're like

okay cool now let's improve it so to

make these improvements for example for

the show rate we have a huge checklist

of like 22 things that we do many of

them are automated that we can do to

increase show rates and boom 50 to 70

now you might think oh that's a 20

Improvement that's not a 20 Improvement

that's a 40

Improvement on the original number so

like wow that contributed a lot here

from close rate we then started going

through our drilling process to train

closers and our scripting process so we

can get to the sale faster so we can

close a higher percentage people and

that showed in the numbers so from an

improvement perspective this was 14 but

14 of 27 is a 50 Improvement in sales

and then the bottom is the end result so

one of the things that I have is no

silver bullets many golden babies it's a

game of incremental improvements for us

at acquisition.com because we work the

same types of companies we know what it

takes to improve shell rates like we

have all the best practices and we just

say here's the 22 things we do and we're

going to implement all of them one by

one and that's the result with close

rates we're like these are all the

things that we have to do in the

business and one by one we take them off

and so it becomes very clear what the

next step is because you know if you do

all of those things the numbers will go

up why do we feel that way because we

have evidence so number one pick the

platform that you want to start tracking

the data number two pick the data like

what data do you want to actually track

some people call it kpis I don't really

care pick the data that you want to

track number three person so you're

usually going to have somebody who's

going to be implementing this platform

in your business someone needs to own it

you need to have one chest to poke or

throat to choke or whatever you want to

say and then four game plan and the way

that we do this is we operate off the

theory of constraints which is we look

at these numbers right so let's say that

we had just collected so we picked our

platform we picked up the data that we

wanted to pick and we had somebody who's

making sure that this is happening okay

cool which of these do I feel like we

have the highest likelihood of improving

the fastest right this is going to be

the constraint of the business and the

way that you see what the constraint is

you can add five percent or a fixed

percentage to any of them and see which

one of those will actually yield the

most throughput meaning if I had five

percent here five percent here five

percent here five percent here which of

those five percent increases actually

changed this number the most and the

answer in this instance would be this

one which is the lowest number so if I'm

looking at this and my my next lowest

number would be cash collected and the

number after that would be show rate and

so I would usually attack it in that

order so that I could have the biggest

bang for the buck for the things that I

do which one of these is the smallest

that's the one where if I if I make an

incremental change it'll actually yield

the most outcome forearm

we're getting close we've got ourselves

a nice corner piece of the MOSI Lisa

which is high cash profitable growing

with a good story

so let's do a little physics lesson Sir

Isaac Newton's first law of physics was

an object at rest will remain at rest

and an object in motion will remain in

motion until another force is acted upon

it and so it's much the same with

businesses you want one that's already

in motion because you know that it's

more likely that a growing business will

continue to grow than a business that's

not growing will start growing because

you have to exert Force to a business

that isn't moving in order to get it to

move stay a business that has high cash

flow means that it kicks off cash in

excess of what it needs to reinvest in

the business to remain competitive and

grow the second is that it is profitable

now you can have a profitable business

that doesn't create a lot of cash flow

for example if I deliver services and I

have to wait 90 days in order to get

paid then I might be profitable on paper

but not produce a lot of cash Because by

the time that cash hits I have new

liabilities that I'm incurring and

growing is that a business gets bigger

every month or every year right pretty

simple there and ideally with a story

because if you have a story investors

like anybody else our customers and they

like to hear stories as well so let me

give you a very complex visual of what

this looks like you want a business that

goes like this

and not like this I'm not saying that a

company cannot be valuable if it doesn't

have a high in every cash or it's not

profitable HubSpot for example I'm

pretty sure isn't profitable and it's a

public Trading Company worth hundreds of

billions of dollars I also try to cater

my content to my audience which is 99 of

business owners aren't Netflix or aren't

HubSpot or aren't venture-backed with

tons of money that are hyper scaling

most of them are like us are self-funded

in one way or another or have friends

and family who invested in their

business to help them grow and those

people have lives and I will say this is

that we hear all of the Netflix stories

and the HubSpot stories but we don't see

the graveyard of the many others that

didn't make any cash flow for six years

seven years and they never quite became

HubSpot and so the founder spent seven

years of their lives never really took a

paycheck out of the business and then

ended up with nothing and so for me

especially if I'm investing in a

business I'm a cash flow investor I want

to see how much money does this thing

kick off after we have to reinvest in

the business to keep it competitive and

even with companies that have high

demands on Capital I'll give you an

example like we we love brick and mortar

businesses so like by the way if you

have brick and mortar chain we Crush

those those have very consistent Returns

on Capital meaning it cost me a hundred

thousand dollars to open a facility and

I make five hundred thousand dollars a

year and profit back and then I say okay

cool well that's an amazing return on

Capital how can we take that 500 and

then open five and even in those

situations with an insane return on

Capital I would still usually recommend

that the founder take a fixed amount out

of the business on a monthly basis to

de-risk them now it's a 100 personal

choice because risk and how much you're

willing to expose yourself to is

personal but for me I'll tell you a

quick story when I had my gyms I

invested 100 of all my profit to open

new locations I then decided after a few

years that I didn't want to be in the

gym business in that way anymore and so

then I basically fire sold my gyms to

then start gym launch and so I could

have

made a lot more profit during that

period of time and I could have sold

them for a lot more than I did but

because when I wanted to sell them I

wanted to get rid of them and so I think

in total I think I made like 250 or 300

000 from the sale of six gyms which

is not a ton of money I'd put way more

that just into building the gyms I

encourage Founders to take cash out I

still prefer to put human first and say

I I'm willing to sacrifice a little bit

of growth for you to like take care of

your family for example we started

talking to a company which is a teeth

whitening chain in 32 locations by the

time we actually ended up closing the

deal I think this is probably like four

months

um end to end which is actually pretty

decent in terms of timelines they had

grown by 30 percent in that period of

time right and this is what made them

attractive to us as an investor is that

they had they were high cash flow they

were profitable and they were growing

and they had a cool story about how they

wanted to continue to see growth and

this is my bread and butter and I will

be excited to tell you what happens in

12 months with these guys because I'm

very confident about our Playbook but

it doesn't cost a ton of money to open a

teeth whitening Studio relative to the

amount of profit that they kick off and

so because of that Arbitrage we get

really good Returns on Capital meaning

instead of investing in the stock market

and putting you know 100 in and getting

ten dollars back I could put a hundred

dollars in here and because of also how

quickly they become profitable like how

quickly can I pay off a new location

well I could pay off a location in two

months

okay well then that means that I can

compound six times in one year off of

one location now when you have 32

locations and that's why they have so

many so quick

it can it can get really big really fast

so when you're building a story for a

company you usually want to track the

story to a trend meaning like AI is a

trend right now here's how AI will help

us or how AI will not affect us is a

great way to demonstrate a story around

why somebody should expect to continue

to see growth in the business so like if

I have a haircut chain I could probably

make a strong argument that people are

going to still need to get their hair

cut now if I'm in a design firm I might

have a harder time arguing that AI is

going to not affect my business or flip

side I am going to try to put myself out

of business and say we're fully leaning

into Ai and we've already you know cut

headcount by 50 and 10x productivity

using these tools and so now we're even

more profitable than we were before with

higher cash flow so the idea is you want

to track the trends that you align with

that will give you Tailwinds to get one

of these stories and not one of these

I'm going to give a little a little nug

here one of the first things that I'm

going to give you a little Insider

secret that I do when I go into a brick

and mortar chain which is probably my

favorite thing to invest in is I look at

their whole product Suite

so that means the products and services

that they sell out of the facility and

I'm going to look at two things I'm

going to look at Absolute gross profit

and I'm going to look at gross margin so

what's the percentage right those are

the same thing once a percentage what's

an absolute amount and in general

I look at what percentage of our sales

are coming from each of each of our

products and then I think okay this one

has the highest gross profit and the

second highest gross margin but we sell

it the fifth most often

how can I recombine these things so that

it becomes the first thing that we sell

most commonly in the highest volume and

sometimes just making these types of

tweaks can make massive differences in

the amount of profitability and cash

flow the company generates and so this

is just one golden bb that we do in the

process if you don't know what your

gross profit is and your gross margin is

on every product you sell and what

percentage of your sales come from each

do that and then reorganize your sales

process to emphasize the ones that give

you the most gross profit and gross

margin and maybe consider down

regulating some of the ones that don't

weird green tile

High cash flow profitable story of

growth

next tile audit ready financials

whoa exciting

I'm gonna make this one a little bit

shorter because I know this is where

people's eyes glaze over but if you

think about audit ready financials from

a risk perspective if I'm a buyer and

you say this is what your profit is

and I have no way of proving that that's

your profit you could just make up a

number if you have an audit ready

Financial it means that a third party

will come in and go through all your

numbers they will calculate their own

measure of profit and it matches yours

if that's the case then you have audit

ready financials a lot of times Founders

think that their profit is a lot higher

than it really is their Banker their

accountant oftentimes works for them and

as crazy as it sounds if you make the

profit look better for the founder they

are happier with you having a third

party or making books that are third

party ready for audit and getting

something called a quality of earnings

allows you to say to an investor these

have been validated this is like a blue

check mark in terms of this is really

what I say it is so let's talk about

this in levels

level one have financials in general all

right this sounds silly and in the

beginning oftentimes you're just going

to Outsource it you're going to have a

third party who's an accountant or a

bookkeeper in the beginning before you

have an accountant who's just going to

handle your books number two is you're

gonna actually upgrade to an accountant

uh who's going to be doing this and

oftentimes this comes when you go from

cash based accounting

to gap which it just stands for

generally accepted accounting principles

that's all it is right cash is just

money in Money out like so if I sell a

three-month contract for 30 grand and I

collect 30 grand today cash based

accounting shows that we had thirty

thousand dollars in Revenue today Gap

says that we have ten thousand dollars

in Revenue today as it's recognized over

three months and then ten thousand next

month ten thousand the month after right

and so Gap Smooths out a company's

financials Gap a cruise for the cost and

the revenue throughout the year so that

you can see over year over year how much

money is increasing right it makes it

easier to analyze the business level

three of this is that you have audit

ready financials and this could be

in-house or out of house that you uh

that you get this set up I've switched

my perspective on this I used to be all

about uh in-house accounting and

in-house financials now you do need

somebody who's in charge of that

function but it just depends a lot on

the business if you have a service

business that doesn't require a lot of

capital expense meaning you have to like

invest money in forecast cash flow thing

like that you don't need as advanced of

a person for the business if you have

something that's like manufacturing you

need a very good Financial arm because

they have to manage cash flow out to

collect Goods invoices that are coming

from customers as things are getting

delivered payroll in between and you're

managing a lot of moving Parts while

also putting out orders for six months

from now for stuff that you know you're

going to need in forecast so like it

depends on the needs of the business but

I will say this one of our portfolio

companies scaled over three years they

went from you know a couple million

dollars a year to a couple million

dollars a month and we got to this

Plateau point and I was talking to the

the CEO and he's like I just don't know

where the profit's going like I just I

don't know if I have enough cash to open

more locations or not I just like how

many should I be opening he's like I'm

just really struggling right now and I

was like okay I want you to pause I want

you to feel this feeling right now I was

like it's because you don't know you

don't recognize this pattern and I want

you to recognize it for the rest of your

life which is the feeling you have right

now is a lack of Finance like you don't

have the finance function built out and

you don't have the support of Finance

leaders because if you did then you

would know what percentage of cash flow

you could put towards it and how many

locations you could have given the

growth rate that you want but since you

don't know that lack of knowledge that

feeling of uncertainty is because you

don't have that thing it would be the

same as like I don't know where my next

customer is coming from it's like you

have a lack of the marketing function

and I bring this up because you may feel

this right now and if you feel that way

it might be because you're missing this

I know this one is the most boring but

it's important and you will literally

not sell your business for anything

that's material if you do not have this

audit ready financials

5 million plus in ebitda

damn it

the reason that this particular number

is important is that most institutional

investors do not want to buy companies

that are smaller than this and that's

usually because to get to 5 million plus

in ebitda and ebit is just a fancy word

for profit for the sake of our of our

video today because usually to get 5

million plus on eBay you do have a

professional management team it's not

common to have a company that is doing

that kind of profit and doesn't have a

true management team that can run

without the owner this is more of a

volume or size requirement when you have

a billion dollars you're never going to

buy a million dollar business the time

it takes for you to even analyze the

business is not worth the time and I'll

tell you a fun secret it takes about as

much effort to help grow a one million

dollar business as it does to help grow

a 20 million business same effort

arguably less because you have more of

an infrastructure which is why people

buy bigger stuff now just to give you

some stats around this the S P 500 has

gone from 12x to 18x historically and

then today it's 23. if you made a

hundred million dollars in ebitda then

you'd have a 2.3 billion dollar

valuation as a company the reason I

think this is so important is that a lot

of small business owners overestimate

the value of their business to them

because they're friends amongst their

friends they are the richest people they

own a business that makes money but in

the world of business when you're

compared to Google

that's what they make in the first like

minute of the day right is your entire

Year's revenue and I share this stuff

because I made these mistakes too and I

mistook the fact that I put years of

time and effort into a business for it

being valuable you might be thinking

well how long does it take to improve

this stuff like if I'm not a million or

I'm at 2 million like how long does it

take to improve well if you have the

right tools and systems and the right

plan the right who the what and the how

you can get the right outcome pretty

quickly I actually have my team print

out our stats for this so our portfolio

company on average within the first 12

months we increase Revenue by 1.8 x so

if you're making 10 million by the end

of 12 months you're making 18 million

not bad profit increases by 3.01 X on

average so you're making two million

dollars in profit at the beginning 12

months later you're at

6.03 million dollars a year in profit

I'm going to show you a little something

that I haven't talked about publicly the

reason that I look for companies that

are at least a million usually two at

minimum is that most of the companies

that I like taking on are in that two to

five to the six range the reason for

that is because I can come in and do the

things that I know I can execute our

show list checklist our closing

checklist our content checklist like

this into a business we already know

works and then go from five million

dollars to quickly plug these holes that

I'm talking about and then unlock 50 100

million dollars of value you might be

like well is it like a one-trick thing

not really because it looks like within

the first 24 months so two years the

average revenue increase goes to 2.8 x

on average and the average profit

increase is 4.7x on average that 2

million dollar profit company becomes a

9.4 Million Dollar ebitda business think

about the value difference here maybe it

was worth 6 million when we came into it

two years later at nine let's say it

trades at seven so that would be worth

63 million that is fundamentally real

data on context of how value can be

unlocked all that to say if you know

what to do then it just comes down to

doing it a lot of people spend a lot of

effort on things that are not the

bottleneck now this was an example of I

think a month difference or two months

difference well it's like boom well

that's a double great what are we gonna

do for the next 22 months right well

we're going to work on other parts of

the business this is just the sales and

show rate stuff and we've become more

and more disciplined with this we only

go after businesses that were like oh

yeah we know exactly what we're going to

do so that we can mitigate our risk big

picture zooming all the way back out if

you have a company and you want to make

it more valuable you need to sell more

customers you need to make them worth

more and you need to make it more likely

that it continues to happen without you

which is why when you're making your

MOSI Lisa Masterpiece with your best

business getting a capped deltoid AKA

getting big enough and having five

million plus in ebitda makes you a

significantly more valuable company and

when you check each of those 10 boxes

you make the business Masterpiece that

can create the generational wealth you

ultimately had and it's not about

selling more it's not about making them

worth more it's about making sure that

those never stop happening and it

doesn't matter if your business looks

like this

or like this

or like this and so if we see that this

one and this one are missing then we say

great we're going to go unlock 10

million dollars in value by putting

these right back in whatever the holes

in the painting are the nice thing is

that the end result always looks the

same we know what the mosey Lisa looks

like and all we have to do is paint by

colors to fill in the gaps and that's

how we made the companies a lot more

value