Dan Martell - November 27, 2017


How Do You Build a $100M Startup in 3 Years？


Episode Stats

Length

9 minutes

Words per Minute

210.97752

Word Count

1,977

Sentence Count

80


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

Transcript

Transcript generated with Whisper (turbo).
00:00:00.000 After this video, we'll be right back.
00:00:11.420 How to build a hundred million dollar startup in three years.
00:00:15.120 Now, I know that's a huge promise.
00:00:17.080 Wait with me, I'm gonna walk you through exactly
00:00:19.780 why I'm talking about this video and how to do it.
00:00:21.680 I mean, maybe you just wanna build any kind of business
00:00:24.620 and you feel like all the growth options are confusing
00:00:28.220 and how would you do this and how would you fund it
00:00:30.000 To me, it's like even how do you do it in a way that doesn't
00:00:33.000 turn you into a stress ball?
00:00:34.740 I'm going to unpack that big question and tell you where it
00:00:38.180 came from and build a sequence for you to just understand
00:00:42.080 you can do it.
00:00:43.480 These are the items that need to be true.
00:00:45.820 And I think it's really important as a founder to
00:00:47.420 understand the different aspects of a business model to really
00:00:51.380 dissect what would it take to build that level of velocity
00:00:55.460 and volume in your business.
00:00:56.620 Now, I've been fortunate enough to spend a lot of time.
00:00:59.060 I lived in San Francisco for five years.
00:01:01.100 I've been around entrepreneurs
00:01:02.560 that have built companies that fast
00:01:04.840 and I understand the economics and the valuations
00:01:08.600 and the structure that's required to get there.
00:01:11.140 Now, for me, it came from one of my coaching clients.
00:01:13.400 I had a guy that recently sold his company
00:01:15.740 and wanted to get on a call with me
00:01:17.380 because that was the question.
00:01:18.380 He emailed me, I want to build a $100 million company
00:01:21.720 in three years, how would I do that?
00:01:23.620 And I was like, I didn't dismiss it
00:01:25.220 because the guy just sold his business.
00:01:26.720 so I knew he was capable of building companies,
00:01:31.000 but I was like, what an interesting thought experiment.
00:01:33.620 So I kind of took a few minutes, wrote down some notes,
00:01:36.700 scheduled a time, and we got on a call,
00:01:38.260 and this is what I shared with him,
00:01:40.200 and at the end of it, I think he got real clear on,
00:01:43.400 oh, okay, now I know what areas I need to focus on.
00:01:46.480 Now I know what needs to be true to make this happen,
00:01:49.080 and I thought it'd be really valuable to share it here.
00:01:51.580 So the first thing is you need to solve
00:01:53.480 a huge major problem, okay?
00:01:57.180 So for you to build that kind of company,
00:01:58.720 it needs to be a problem that a lot of people have
00:02:01.980 and it has to be a major problem that they all have.
00:02:04.720 And you need to solve it in a unique and potent way.
00:02:07.520 And the reason why I say unique and potent is
00:02:09.360 because if other people are already solving it,
00:02:11.000 then you have a competitor problem.
00:02:12.960 So it has to be unique to you and it has to be potent,
00:02:15.540 meaning that as fast as possible, they have a problem
00:02:18.880 and your solution gets them the result.
00:02:20.700 That's what I mean by potent.
00:02:21.800 The time from I've got a problem
00:02:23.760 and your solution has to be as short as possible.
00:02:26.340 So that's number one.
00:02:27.280 Just has to be huge.
00:02:28.800 You have to solve it in a unique potent way.
00:02:30.840 Some people call that product market fit
00:02:32.880 but it's more than just product market fit.
00:02:34.440 It's literally like the fastest to product market fit
00:02:37.240 in a non-competitive space.
00:02:38.680 So that's big challenge number one.
00:02:40.820 Not impossible but needs to be solved.
00:02:43.260 Two is you need to build a growth engine.
00:02:45.360 So when I talk about growth engines,
00:02:47.320 my whole strategy is around marketing
00:02:50.120 or demand or attract, and sales or conversion,
00:02:54.880 and getting people essentially to buy.
00:02:57.000 And what you need to do, and this is the key,
00:02:58.620 to build that level of growth,
00:03:00.240 100 million in three years,
00:03:01.720 you need to build a repeatable, scalable marketing engine
00:03:05.260 so that you need to be able to invest in a channel
00:03:07.060 that's untapped and unlimited,
00:03:08.860 or to some degree, predominantly unlimited,
00:03:11.800 and the payback period, and this is why it's an engine,
00:03:14.800 that the amount of money you spend
00:03:16.300 and the time you recuperate that investment,
00:03:18.640 So if you spend $10 to acquire a customer,
00:03:20.700 you need to get that as fast as possible.
00:03:22.680 Most people on the small business side,
00:03:24.740 just so you know, in the software space,
00:03:26.380 they'll spend about $180 to $200 to get a free trial
00:03:30.120 into their product.
00:03:31.220 So you need to be able to recoup that quickly,
00:03:33.820 ideally 30 days.
00:03:35.320 Some companies take them 16 months.
00:03:37.960 On average, it's about 10 to 12 months.
00:03:40.120 So you wouldn't be able to do 100 million in three years
00:03:43.340 if the payback period took, I would say,
00:03:46.000 literally longer than 60 days.
00:03:48.260 You wanna make that as fast as possible.
00:03:49.900 That's the second thing that needs to be true
00:03:51.500 is just a growth engine from a marketing and sales
00:03:54.260 and velocity of payback period to your investment.
00:03:57.440 The third thing is you're gonna need
00:03:59.100 to build the best team, okay?
00:04:01.240 And the reason why is you are not that good.
00:04:04.000 Like, I get that you could be the most incredible founder
00:04:06.640 in the world, but you are not gonna be able
00:04:09.180 to hold the amount of balls in the air
00:04:11.960 and juggle them at the quality level that's required
00:04:14.920 to be able to scale up the customer accounts
00:04:16.880 to support those customer accounts,
00:04:18.380 to build out the product, to build out the engineering team,
00:04:21.160 all those different aspects, the financial structure,
00:04:23.460 the dashboards, et cetera.
00:04:24.720 Again, I'm game, you can do it, three years, 100 million,
00:04:27.760 but you're gonna have to build the world's best team
00:04:30.260 in each specific function of your business, okay?
00:04:33.560 So that is, you know, how do you recruit,
00:04:36.200 how do you compensate, how do you bring them together?
00:04:38.200 That's gonna be a big challenge that you need to develop
00:04:41.380 that skill around finding, recruiting, convincing,
00:04:45.400 leading, supporting, delegating,
00:04:48.540 all these things that come around the people side,
00:04:50.600 that's gonna be required.
00:04:51.640 So that's the third big thing.
00:04:52.800 The fourth is you're gonna need to raise money
00:04:54.840 and here's why.
00:04:56.640 A lot of people, they feel like,
00:04:57.980 well, if I can get customers to pre-buy the software,
00:05:01.580 then I've got a positive cash flow situation
00:05:03.580 and that might be true on the initial cost,
00:05:05.920 your cost to acquire a customer,
00:05:07.080 maybe your marketing cost
00:05:08.420 and then if you can get them to pre-buy enough,
00:05:10.020 then it has a positive cash flow
00:05:12.320 but that doesn't hold true
00:05:13.460 and you gotta start investing in the team.
00:05:15.600 One of the biggest line items typically
00:05:17.860 for a software company is their people.
00:05:20.440 So it's not marketing typically,
00:05:22.340 it's gonna be the people.
00:05:23.340 So if you wanna, if you've got an ability
00:05:25.980 to get a short payback period on your growth engine,
00:05:28.440 on the marketing side and your sales,
00:05:30.000 that doesn't support your ability to hire top talent
00:05:33.220 at scale to be able to get the people
00:05:35.520 to run those different divisions.
00:05:36.960 So raising money to invest in marketing,
00:05:39.580 to invest in your team is gonna be critical,
00:05:41.720 especially if you use a partnership strategy
00:05:43.760 to acquire customers,
00:05:45.020 because that's a really viable strategy.
00:05:46.860 They're gonna wanna get paid in a short amount of time
00:05:49.500 for getting those new customers
00:05:51.040 to allow you to keep that ramp.
00:05:53.460 The other thing I told them is,
00:05:55.200 map out three years, $100 million revenue business
00:05:58.240 and work backwards.
00:05:59.240 The amount of revenue growth you would need to do
00:06:01.440 on a month-by-month basis is alarming, is crazy.
00:06:05.220 Not impossible, but you map that revenue growth
00:06:07.920 to the investment that's gonna be acquired
00:06:09.640 and that's the amount of capital
00:06:11.480 that you're gonna need to raise.
00:06:12.640 So a lot of people think like,
00:06:13.520 oh, I could just bootstrap this.
00:06:14.820 There's no frickin' way.
00:06:16.320 You know, I've grown a business 150% year over year,
00:06:19.260 compounded, and I know the sound that makes.
00:06:21.760 It's this big, swishing, sucking sound of cash.
00:06:24.520 When you grow a business at scale,
00:06:26.820 whoosh, it takes capital.
00:06:29.200 So making sure that's part of the strategy
00:06:31.400 is gonna be critical, because without it,
00:06:32.740 you're not gonna be able to keep the growth.
00:06:34.160 Even if you've got everything else working for you,
00:06:36.400 you won't be able to sustain it.
00:06:38.240 Finally, the fifth thing is you gotta build the business
00:06:40.800 in a way that can be sold.
00:06:42.100 So a lot of founders, they find growth channels,
00:06:45.540 they find team members, but they don't build it
00:06:47.940 in a way that's sustainable.
00:06:49.480 You know, they might find a loophole inside
00:06:51.980 of some Facebook API or some LinkedIn thing
00:06:54.840 or some scraping email outbound system or whatever it is.
00:06:58.460 I've seen every variation possible,
00:07:00.560 but they're not sustainable.
00:07:02.280 So you need to build the business where the comp structure
00:07:05.020 for your executive team, where the marketing channels
00:07:07.260 that you're using are not gray area,
00:07:09.560 where the product allows it to sell itself.
00:07:13.300 Those things are required and if you don't do it right,
00:07:16.000 then you're just gonna build,
00:07:17.060 you can actually hit the 100 million in three years
00:07:18.900 but then the whole thing's gonna come falling to the ground.
00:07:20.940 So that filter of saying,
00:07:22.140 can I build it in a way that's gonna be sold,
00:07:24.240 is gonna allow you to actually build the right business.
00:07:27.220 Now here's a tip, okay?
00:07:28.580 Because to me it's like, okay, you wanna do this,
00:07:31.380 I love the ambition, let's go do it,
00:07:32.920 here's the pattern, here's the big challenge
00:07:34.620 you're gonna have to overcome.
00:07:35.820 The tip is, and the question I asked to this individual
00:07:39.560 was would you dedicate your life, the rest of your life,
00:07:43.560 25 years, 30 years of your life,
00:07:46.640 if you knew that you only had a 50% chance
00:07:49.260 of being successful in that business?
00:07:51.680 And I love that question because it gets really clear
00:07:54.280 for what's required.
00:07:55.380 I know you think you're gonna build this thing in three years,
00:07:57.740 it's gonna be a huge business, but what if it's not?
00:08:00.520 And what if those three years ask everything of you,
00:08:03.960 your health, your relationships, your family,
00:08:06.620 your mental capacity, what if that just sucks
00:08:09.360 everything out of you and still,
00:08:12.320 you don't even come close to hitting that.
00:08:14.240 Is it worth it to you?
00:08:16.000 Are you willing to dedicate your life with a 50% chance?
00:08:18.940 And that question will help everybody get clear of
00:08:21.580 why do you want to build a hundred million
00:08:23.380 a year business in three years?
00:08:24.600 Is it the right strategy for you
00:08:25.880 and where you're at in your business?
00:08:27.020 Is it doable based on your skill sets,
00:08:28.880 your background, your experience
00:08:29.940 with the things I just mentioned?
00:08:31.180 But I think it's an incredible question.
00:08:32.780 So first thing, you need to solve a big,
00:08:34.560 major problem in a unique way.
00:08:36.620 Second thing is you've got to build a growth engine
00:08:39.360 attracts people and allows the payback period to be short.
00:08:42.200 You want to put together a world class A player team to run
00:08:46.600 and manage and lead every different function in your
00:08:49.100 business.
00:08:50.100 The fourth thing is you're going to have to raise money to fund
00:08:51.740 that growth and then fifth, build in a way that the business
00:08:56.040 could be sold so that you're not building a house of cards.
00:08:58.920 That is my feedback for you, those that are ambitious enough
00:09:02.220 to go on that plan.
00:09:03.180 As per usual, I want to challenge you to live a bigger life and a
00:09:05.880 bigger business and I'll see you next Monday.
00:09:08.120 If you like this video, be sure to subscribe to my channel
00:09:10.200 for other growth strategies for your startup.
00:09:12.140 I'd also invite you to join my newsletter
00:09:14.020 for private invites, exclusive contests,
00:09:16.760 and other free training, and if you're ready to keep going,
00:09:18.900 I got two videos queued up for you.
00:09:20.780 I'll see you next Monday.