The Formula for Creating a $100M Business

Summary

The speaker recounts the intense journey of scaling a business from zero to 4.4 million dollars per month in just 20 months. Despite the success, they faced overwhelming challenges managing every aspect of the business. After considering selling, they learned their company could be worth millions but required significant improvements. The speaker introduces the 'Value Acceleration Method' from acquisition.com, explaining the three key variables—customer count, lifetime gross profit, and risk—that determine a business's value. They offer ten strategies to unlock enterprise value and transform a profitable business into a highly valuable asset.

Takeaways

• 🚀 Rapid Growth: The business grew from zero to 4.4 million dollars per month in 20 months, illustrating an incredible growth trajectory.
• 🤯 Overwhelming Responsibility: The founder felt like a 'genius with a thousand hands,' managing every aspect of the business, which was emotionally and physically draining.
• 🎯 Constant Adaptation: The business required constant attention to marketing, customer service, and operations, likening the experience to a roller coaster of emotions.
• 🧘‍♂️ Seeking Help: Despite success, the founder felt isolated and unsure, seeking advice from masterminds and coaching groups to navigate challenges.
• 💡 Realization of Value: The business was worth millions, but there were significant issues to address before it could attract institutional investment.
• 🔍 Identifying Issues: The founder recognized the need to transform the business from a simple money-making venture into a valuable asset.
• 📈 Value Acceleration Method: Introduced a method to increase business value by focusing on customer acquisition, lifetime gross profit, and risk mitigation.
• 📊 Understanding Business Value: The script explains how a company's value is determined by the number of customers, their lifetime value, and the risk of future cash flows.
• 💼 Enterprise Value (EV): The concept of Enterprise Value is introduced as a key metric to measure a company's overall value.
• 🔑 Unlocking Potential: The script suggests that by addressing 10 specific factors, a business can unlock higher levels of Enterprise Value.
• 📚 Actionable Insights: The founder is set to share actionable strategies in a video that can potentially transform a business's financial outlook.

Q & A

How did the speaker's business grow in terms of revenue within 20 months?

The speaker's business grew from zero dollars to 4.4 million dollars per month within a span of 20 months.

What challenges did the speaker face during the rapid growth of their business?

The speaker faced challenges such as managing every aspect of the business with their spouse, dealing with the emotional roller coaster, and feeling overwhelmed by the responsibilities of hiring, firing, training, and customer management.

What was the speaker's initial reaction when feeling overwhelmed by the business growth?

The speaker felt like a 'dancing bear on camera,' constantly needing to create more ads and drum up business to keep up with customer demands.

What made the speaker consider shutting down their business?

The speaker and their wife, Laila, considered shutting down the business due to the immense pressure and feeling of being unable to handle the situation.

What advice did the speaker receive from an investment banking friend regarding their business?

The investment banking friend advised that the speaker could get millions of dollars for their business but highlighted the need to fix several issues to make it attractive to institutional investors.

What is the 'Value Acceleration Method' mentioned by the speaker?

The 'Value Acceleration Method' is a strategy developed at acquisition.com to transform a business that merely makes money into a highly valuable asset, which can significantly change one's financial life and that of their family.

According to the speaker, what are the three variables that affect a company's worth?

The three variables are increasing the number of customers, lifetime gross profit, and risk, which is the likelihood of the business's continued success in the future.

What does the speaker mean by 'lifetime gross profit'?

Lifetime gross profit refers to the total profit generated from a customer over the entire duration of their engagement with the business.

How does the speaker relate the concept of 'Enterprise Value' to the value of a company?

Enterprise Value (EV) is the total value of a company, taking into account the three variables mentioned earlier: number of customers, lifetime gross profit, and risk, which together determine the company's worth.

What is the significance of the 10 items the speaker mentions for unlocking levels of Enterprise Value in a business?

The 10 items, although not explicitly listed in the transcript, are implied to be key strategies or factors that can enhance the Enterprise Value of a business, leading to increased financial success.

Outlines

00:00

🚀 From Zero to Million: A Roller Coaster Journey

This paragraph details the author's rapid business growth from zero dollars to 4.4 million dollars per month within 20 months. Despite the financial success, it highlights the immense challenges faced, such as managing every aspect of the business, dealing with emotions, and feeling overwhelmed. The author describes feeling like a 'dancing bear on camera' due to the constant need to generate business through ads. They reached a point of considering shutting down the business but realized its potential value with the help of an investment banking friend. This led to the development of the 'Value Acceleration Method' at acquisition.com.

📈 Understanding Enterprise Value: The Three Key Variables

The second part introduces the concept of Enterprise Value (EV) and its significance in assessing a business's worth. It explains that EV is determined by three main variables: increasing the number of customers, improving lifetime gross profit, and managing risk. Using an example of a food cooking business, it clarifies how customer acquisition and profit margins impact the overall value. The author references Warren Buffet's principle of discounting future cash flows to present value. The paragraph emphasizes that mastering these variables can significantly enhance a company's value, ultimately leading to substantial financial gains.

Keywords

💡Revenue Growth

Revenue growth refers to the increase in income generated by a business over a specific period. In the video script, the speaker describes how their business went from zero to 4.4 million dollars per month in 20 months, illustrating a significant revenue growth. This concept is central to the video's theme of business expansion and value creation.

💡Emotional Roller Coaster

An emotional roller coaster is a metaphor for a situation that involves rapid changes in emotions, often between positive and negative extremes. The speaker uses this term to describe their experience managing the rapid growth of their business, feeling like a 'genius with a thousand hands' yet also overwhelmed by the constant need to respond to various business demands.

💡Value Acceleration Method

The Value Acceleration Method is a concept introduced in the script that outlines a strategy for increasing a business's value. It is developed at acquisition.com and is the main focus of the video. The method likely involves the key variables discussed in the script, such as customer numbers, lifetime gross profit, and risk, which are essential for understanding how to grow a business's enterprise value.

💡Lifetime Gross Profit

Lifetime gross profit is the total profit a business expects to make from a customer over the entire duration of their relationship. The script uses the example of a food cooking business selling meals to illustrate this concept, emphasizing that increasing either the number of customers or the profit per customer can significantly impact the business's value.

💡Investor

An investor is an individual or entity that commits money to an asset or venture with the expectation of obtaining a profit. In the context of the video, the speaker discusses providing value to investors who will buy shares of the business, highlighting the importance of understanding investor perspectives when aiming to increase a company's worth.

💡Enterprise Value (EV)

Enterprise Value, often abbreviated as EV, is a measure of a company's total value, often used as a comprehensive indicator of a company's worth. The script explains that increasing customer numbers, lifetime gross profit, and reducing risk can enhance the Enterprise Value of a business, which is a key takeaway for viewers interested in business valuation.

💡Risk

Risk, in a business context, refers to the possibility of an investment losing value. The script mentions that risk is a factor in determining a company's value, stating that the likelihood of a business continuing its performance into the future affects its valuation. Reducing risk can therefore increase a company's perceived value.

💡Mastermind Groups

Mastermind groups are gatherings of individuals who collaborate to help each other grow, often used for brainstorming and problem-solving. The speaker mentions attending these groups but feeling out of place as the 'biggest person in the room,' indicating a lack of guidance appropriate for his business's scale.

💡Investment Banking

Investment banking refers to a specialized area of banking that involves helping companies raise capital by underwriting or acting as the client's agent in the issuance of securities. The speaker consults an investment banking friend to understand the potential sale value of his business, which leads to the realization of the need for business improvement to attract institutional investors.

💡Exit Strategy

An exit strategy in business refers to a plan for the owner(s) to cease operations and withdraw from the business. The script describes the speaker's contemplation of selling his business as an exit, which sparks the journey of enhancing the business's value to make it more attractive for potential buyers.

💡Institutional Investor

Institutional investors are organizations such as banks, insurance companies, and pension funds that invest in securities. The script points out that to attract such investors, a business must be well-prepared and have reduced risks, as these investors are looking for stable and valuable assets to invest in.

Highlights

The company experienced rapid growth from zero to 4.4 million dollars per month in 20 months.

The founder felt overwhelmed managing every aspect of the business alongside his wife.

The constant fluctuation in business led to a roller coaster of emotions for the founder.

The founder felt like a 'dancing bear on camera', needing to constantly generate new business.

A crisis point was reached where the founder and his wife considered shutting down the business.

An investment banking friend valued the business at millions of dollars, sparking interest in selling.

The business needed significant improvements to attract institutional investors for a sale.

The journey began to transform the business from a money-making entity into a valuable asset.

The 'Value Acceleration Method' was developed to increase a business's enterprise value.

Three variables affect a company's worth: number of customers, lifetime gross profit, and risk.

Increasing the number of customers can exponentially increase the business's value.

Lifetime gross profit is the profit generated from customers over their entire relationship with the business.

Risk assessment involves evaluating the likelihood of the business's continued success.

Warren Buffett's concept of discounted future cash flows was discussed in the context of business value.

Enterprise Value (EV) is calculated by considering the three variables of customers, profit, and risk.

Ten key strategies were developed to unlock higher enterprise value in a business.

The video promises to reveal these strategies for transforming a business into a highly valuable asset.

Transcripts

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 because at the time I felt like the

genius with a thousand hands I was in

charge of every single apartment with my

wife and we were basically doing

everything while trying to managing and

Lead while seeing the company and hiring

and firing and training and onboarding

and dealing with more customers who

could possibly handle obviously what it

felt like for us was this constant

roller coaster of emotions and I felt

like a dancing bear on camera because

every time customers would start going

down and be like oh I gotta go make some

more ads I gotta go get on camera I

Gotta Go drum up some business and so

this thing felt like this rocket that I

was holding on to and I was sweating but

until I hit a wall and I didn't know

what to do and every time I went to

these like masterminds and coaching

groups I was by far the biggest person

in the room and so I was like what do I

do I don't know where to go it got so

bad that Laila and I 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 you

could get millions of dollars for this

business and I was like wow that sounds

amazing so wait but not right now

there's a ton of things wrong with it

that you'd 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 and the

question is how does that even come to

be like how can something be worth a

certain amount right and so we talk a

lot about value provide value to people

make valuable content right 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 in terms of your ability to

influence it 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 a lifetime gross

profit which means the amount of profit

that you generate from these customers

over the lifetime of their stay with

your business for example if I own a

food cooking business and I sell meals

for ten dollars and I said sell 10 meals

on average somebody my lifetime Revenue

would be a hundred dollars but if I only

make a dollar on each of those meals my

lifetime gross profit would be ten

dollars 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 meaning How

likely is it that this will continue in

the future and so if you listen to Uncle

Warren he talks about the value of a

businesses is taking all the future cash

flows that it will ever generate

discounted into the present right and so

these are the things that are all the

cash flow that it's going to generate

for the rest of its time this is the

discount to the present and 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 or what a lot of people call

e v 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