How to Make Money Like The Top 0.001%
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Summary
Most people think getting rich is about making a lot of money, when in reality it's about owning a business that's worth a ton of money and knowing how to increase the enterprise value, which just means how much somebody's willing to pay to buy your business. And today I'll show you exactly how to do it.
Transcript
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Have you ever wondered how the top 0.001% make f**k you money? It's not from a salary,
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it's not from investing, and it's definitely not from real estate. It's from being a business
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owner. I know this because I went from broke at 24 to selling my first company for millions at
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28. Since then, I've built and sold multiple software companies and now own a portfolio on
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track to be worth a billion dollars in the next three years. Most people think getting rich is
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about making a lot of money, when in reality, it's about owning a business that's worth a lot
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of money, and knowing how to increase the enterprise value, which just means how much
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somebody's willing to pay to buy your business. And today, I'll show you exactly how to do it
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step by step. Step number one, make your revenue predictable. Kind of simple, but buyers will pay
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top dollar when they can count on your income, meaning that your revenue becomes predictable,
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and it just keeps going sideways or ideally up,
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a buyer's gonna pay more for that kind of business
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It's why telecom companies are worth so much money
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as a contract to the people that bought home from him.
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This is what the money people call durable revenue.
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So step number two, make more money on the stuff you sell.
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It's the money you keep after you've paid for the cost of the service or the product.
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My kids sell lemonade and they will take your credit card and swipe it on their square device
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and they will charge you two bucks for that glass.
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They only paid 25 cents for all the stuff that goes into it from the cup to the lemon
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So that means that they make $1.75 of gross margin.
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see the best companies focus on increasing their gross margin everything is around a conversation
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to do that because the more you get on gross margin the more profit you have left over so
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here's how you can increase your gross margin number one decrease your costs for example if
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you look at ai and automation many service businesses could automate a lot of their back
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office costs their people to deliver the service to make it even better from a gross margin point
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of view if you buy things that are part of what you sell you can go find a different supplier
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maybe negotiate higher volume for a lower cost all that hits the bottom line from a gross margin
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point of view number two is you increase your price this is literally the go-to move if somebody
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bought your business tomorrow the first thing they would change is your prices but you can
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pretty much increase your prices until you notice your sales conversion drop a little bit and i get
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it if you raise your prices less people will buy but people will buy if you market properly if you
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build the brand properly if you deliver a quality product or service trust me the problem is not
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that people won't buy it's that you haven't built enough demand to overcome putting your prices up
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and this one is gonna sting and could be quite scary big piece of advice is that drop the
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unprofitable clients again if somebody bought your business tomorrow they would probably fire the
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lower 10 of your clients that aren't profitable the ones you gave early deals to the people that
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the ones that are outside your target market today,
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which creates more demand to buy your business,
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which means the price goes up everybody looks at like revenue as how cool businesses how much
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money they make but to me revenue is just vanity profit is sanity keeps the lights on but ebitda
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is value earnings before interest tax depreciation and amortization is a fancy word that buyers will
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look at because the bigger your ebitda the more they're willing to pay you on multiples but what
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a lot of people don't know about making your business more valuable is that profits die if
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if you have customers leaving through the back door.
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If you have a bucket and there's massive holes in the bucket
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the water flowing out is your customers churning.
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Nobody's gonna buy you because it's an empty bucket.
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is because they can't see it, they don't track.
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I've got 100 clients this month, 100 clients next month.
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They don't go, oh, we lost one, we lost two, we lost three.
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Most businesses are losing 100% of their customers
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Imagine I had a grocery store for the first few years.
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I had a lot of people buy and my revenues are good,
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because they came in and they didn't have a certain product
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And eventually I burned through the whole population
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because I don't have anybody else to sell groceries to
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is I don't got the shit in my grocery store.
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And when it does, it's not gonna sell for a lot.
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The more customers you keep, the more profits will stack
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because each customer's gross margin stacked up over time
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Think about going to the beginning of time in your business
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and every customer you got kept buying from you,
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First, we gotta track monthly reoccurring revenue.
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Essentially, we need to look at the trend closely
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from the existing customers will show you that.
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And did those customers buy from you again the next month
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then you can measure what's called your growth ceiling.
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I will tell you the growth ceiling into the future
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when you will stop growing based on your current numbers,
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If that sounds like Chinese to you, I'll make it simple.
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I'll ask you those four questions, those four numbers,
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to fix it. So now that you know who's churning, the way to fix it is very simple. You have to get
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your customers to value as fast as possible. I call this time to first value, TTFV, ideally within
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seven days. But honestly, I call them quick wins. I want to do it in the first interaction. If you
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join my gym, I want to get you a plan and some wins as fast as possible. If you sell social media
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stuff, give them a cheat sheet that they can use tomorrow shooting their reels. Even if you do
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long form YouTube, it got them a result. It got them value. And last but not least, we need to
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implement a cancellation capture flow. Every customer that leaves is leaving with information,
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feedback to make your business better. If they leave without you capturing that information,
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you're missing the opportunity to learn. Speed of growth to make your business valuable is speed of
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learn. If you get that information from the customer when they leave, then you can implement
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the fix to get the current customers to stay longer which is going to make your business more valuable
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so remember first off we got to track so we see the trend second we got to make sure that we get
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them to value fast and third is we have to make sure if they leave we know why so we can make the
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product or service better remember how we talked about durable revenue this specifically lowering
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your churn making the revenue more predictable getting customers results faster will make your
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business easier to grow which makes it more valuable a sticky customer base makes the business
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safer to buy. Okay, so now that the bucket isn't leaking, let's make sure we make more money from
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those existing customers. Step number four, increase the amount of money your customers
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pay you over time. The money people in the industry, they call this lifetime value of a
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customer. Essentially, if somebody buys from me once and they keep buying from me over a period
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of time, I'm going to look on average what a customer spends with me. That becomes the lifetime
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lifetime value of a customer. If over time, somebody pays me $100 in the state for three
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years, then I make on average $3,600 by that customer. That's a lifetime value. The reason
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we want to know this is because a buyer that wants to value your business is going to look
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how much you spend to acquire a new customer. If that number is low, what you spend to get the
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customer and what you make is high, then that is a very good business to buy. So there's two parts
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it it's how much they spend and how long they stick around keep spending i mean if i sell stuff
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to people that have babies they might only buy from me for two or three years that's fine they
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might also spend 15 or 20 000 in that period that's a lifetime value have you ever wondered
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why netflix is worth 521 billion dollars it's because they have subscriptions and over time
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their customers actually spend more money it's kind of crazy you might have started with netflix
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and it was nine bucks and maybe you got somebody else's password so you paid zero what happened is
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netflix over time figured out hey i could charge more right there's a little bit of pricing power
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and if we stop people sharing their accounts with everybody their cousins and their dogs
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then i can get those people to pay and that's why netflix has grown their subscription base
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and the lifetime value of a single account that's why they're worth so much money so here's how you
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can increase lifetime value of a customer first add other things that they buy or give them a
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reason to upgrade we got to think about usage based pricing if you think about it if you use
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software you might have an account for you but if you want to add a team member that's a per seat
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pricing if it's other devices like netflix those are called screens so they might let you have
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seven screens if you want to go to eight you got to pay a little extra essentially you might be
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giving too much away to your existing customers and you have to create reasons for them to want
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to upgrade so just look at what everybody's using on average and just create some parameters around
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their usage so they have upgrade paths so you can make more money from the customers because
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they're using your service more see if they're getting more value they should be paying more
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for it most businesses are being too generous and that way they're not capturing more share
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of wallet is what it's called then the second thing is we want to monetize additional services
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think about if you have a gym maybe you ask yourself what does a customer do before they
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they come into the gym or what do they do after they leave my gym? Well, before they probably get
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dressed. Do I sell any clothes? Is there any type of product that I could sell in the gym that would
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get them to buy from me so they don't go to somebody else? Maybe after they go to the gym,
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they decide they want to go have a smoothie. Maybe I should have a smoothie bar. When I think about
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it, I ask myself, what does my customer do three minutes before and three minutes after they use
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my product or service? Those are opportunities for me to monetize additional services. Last,
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If somebody's coming to your gym six to seven times a week,
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You think about like Dropbox, the file storage software.
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If I have 100 customers that buy from me this month
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and they spend $10 with me, well, that's $1,000.
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If those same hundred customers the next month,
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I lost like 10, but the 90 that stayed spent more
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then I've increased the lifetime value of my customers
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will make your business very valuable to a buyer.
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The reason this makes your company more valuable
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is because it turns your business into an annuity.
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if they can become more valuable to the business
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because you figure out how to create these upsells
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They know they'll be making more money over time
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Creating a business that can do that, very valuable.
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Step number five, don't put all your eggs in one basket.
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This is what the money people call concentration risk.
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for 60% of your revenue, that's concentration risk.
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I had a partner that wanted to give me more business
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and I told my dad and he said, whoa, don't do that.
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then they may get up to 60, 70% of your business.
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what happens the day you don't do what they ask you to do and they take their time paying your
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invoices and all of a sudden you grew to meet their demand and then you can't cover your expenses
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because they stop paying your invoices guess what they're going to do they're going to buy
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your business from the bank that's the risk you run when you have one customer generate too much
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of your revenue or one marketing channel be the primary one a lot of businesses only have one
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marketing channel Facebook they don't realize if Facebook shuts down their ad account their
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business goes to zero. They don't realize that if this key person that everybody loves, that
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everybody works with, if that person left your business, you wouldn't have a business. Concentration
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risk. Concentration risk isn't just about how you get your money. It's about where your leads come
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from. It's about how you deliver that service. It's about where you even get the supplies to
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deliver the product to your customers. If you only have one supplier and they know that, that's going
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to be a risky proposition for a buyer. So here's what you need to do to de-risk or lower that
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concentration risk. First thing is you got to keep your top clients under 15% of your revenue. Ideally,
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your top three customers shouldn't be more than 30% of your total revenue. The reason why is that
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I've never seen a scenario where one customer leaving, you know, maybe you won't make profit
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the next month or the second month, but eventually you'll replace them and you'll get back into normal
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business. It doesn't create a scenario that makes you unprofitable and not be able to cover your
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expenses. In my world, I don't want any one marketing channel to be more than 40% of my lead
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generation. I have a business and at one point, Instagram was 85% of our lead generation. And I
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went to the CEO and I said, we've got six months to bring that down below 40%. And he did. He went,
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he activated other channels, he tracked it, he made it a reward for the team if they could accomplish
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it. So that way, if something happened to my Instagram, which it did because somebody reported
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as fraud because that's what happens when you build a large channel and it gets locked out for
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the three four five days that we're trying to fix it with instagram we didn't skip a beat in the
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business because we weren't reliant only on that channel the reason why this is important is
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because diversification makes your business safer to run it takes that single point of failure away
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and that's what buyers are looking for safety in your operations now that we're in a safer position
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let's clean up the way you run your business step number six write down how everything works
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some people call these standard operating procedures sops other people call them
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checklists or systems i like the analogy of playbooks because it's a sports analogy so
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we call ours playbooks essentially i want a playbook for every department in my company
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that explains exactly how we think about how we measure how we operate how we review the
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operations the plays of that department if you don't have them written down then a buyer won't
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trust that they're going to be able to take the business from you and operate it because there's
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nothing documented. It's actually why most entrepreneurs are stuck to their business and
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they can't get free or they haven't built a business that's worth anything to anybody else
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is because they didn't take the time to just write it down. You have to make it easy for somebody to
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come in cold, go through your playbooks, understand exactly how you make your secret sauce. That way
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they can keep making your secret sauce, which means the revenue will keep showing up. McDonald's
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can open a store in Japan and have a 14-year-old kid make a Big Mac that tastes exactly the same
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as the one I bought in New York City. How crazy is that? Why? They have a playbook for how the
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Big Mac is made, where the product is sourced, how the bun is toasted, how the beef and the
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whole thing comes together. Any person, anywhere in the world, same result. And that's why they're
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worth billions of dollars. So here's a simple way for how you can build your playbooks. First,
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and talking out loud what I'm doing, how I'm doing it.
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The cool part is then I can use a tool like trainual.com,
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You can upload that video and it will create using AI
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Why does this increase the worth of your business?
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now you can move to the most important step of the process,
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which is number seven, build a leadership team.
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A leadership team is one of my favorite things to build
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What's my job as a CEO if I'm not making all decisions?
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One is vision, two is money, and third is people.
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and the better you do at picking the leadership team,
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because they know they're gonna have to replace them
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you will have a business that you may not even wanna sell
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Steve Jobs used to say, you know, it's easy to hire somebody and tell them what to do.
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It's hard to hire somebody and have them tell you what to do.
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What's harder is to find people to tell you what should be done.
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When I hire somebody to take over a department or a company, I give them the keys.
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If the emails come in, I'm sending them to you.
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I'm going to empower you to make the decisions.
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You want it to be like a sports team where every person plays a position.
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They collaborate with the other people and everybody expects to win.
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This is where you realize you can't possibly play all the spots yourself and you have to
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have team members that come on to help you win.
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So here's how you actually build a leadership team.
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First, we got to start by hiring somebody to help run operations.
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At the end of the day, you're probably best doing marketing and sales.
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Having somebody start to manage the operations and really lead that, own it, finance, recruiting, technology, all the internal stuff, that's key.
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Once you've got that, then you look at marketing and sales as leadership positions, but you want to stay on them until you build a machine that they can run.
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Then you have somebody generating the leads and then closing those leads because somebody else is running the sales team.
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That starts to get you free and build a leadership team that makes the business predictable.
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The mistake people make is they track the results
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I also have 500 for managers, 5,000 for directors
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as long as they let me know that they did that.
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I do that because it pushes the decision to fix problems
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down to the people that have the most information
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and it doesn't make me the bottleneck of all decisions.
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on a weekly basis, you have to hold a leadership meeting.
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to the vision of the business, to the goals for the quarter,
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and help them work with them to solve the problems,
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that reduce the risk to a buyer and even frees up your time to focus on growth the reason why
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this is so valuable is buyers value companies with proven leaders already in place i just gave you
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a master class in creating real wealth how the 0.001 of the people actually make their money
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by owning a business that's valuable to somebody else it can feel like a lot i get it but i'm going
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going to encourage you to consider this follow the steps look at what areas in your business
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are missing and just choose for the next 90 days to fix one of those if you do that every 90 days
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over time maybe in a year you'll build a business that's incredibly valuable not only to you
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generating massive profits but most importantly valuable to somebody else see your active income
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how much you make every month is money that's cool what's creating the most value though is
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what's called enterprise value. And it's the value of the asset called your business to somebody
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who's willing to buy it. That'll make you rich. And remember, if you want to access to my gross
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ceiling calculator, just click the link below and I'll send it over to you. Now, if you want to
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learn how to build a business that runs itself, click the video and I'll see you on the other side.