I Reverse Engineered the Perfect Business
Summary
TLDRСкрипт 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
😀 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'.
🤔 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.
💰 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.
📈 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.
🔄 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.
🔄 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.
🔒 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.
👥 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.
📊 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.
📈 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.
📑 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.
Mindmap
Keywords
💡бизнес-мастерpiece
💡автоматизированные метрики
💡клиентская база
💡повторяющаяся выручка
💡риск
💡инвестиции
💡управленческая команда
💡аудитная готовность финансовой отчетности
💡EBITDA
💡множественные каналы приобретения
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
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