Dan Martell - May 25, 2026


Understand These, and You’ll Understand How to Get Rich as F＊ck


Episode Stats


Length

17 minutes

Words per minute

193.31645

Word count

3,334

Sentence count

175


Summary

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

Transcript

Transcript generated with Whisper (turbo).
00:00:00.080 If you know these seven principles, you will get rich,
00:00:03.200 whether you're broke or you make money,
00:00:05.360 but you know you should be making more,
00:00:07.120 this video will fix both.
00:00:08.920 I learned seven principles of success
00:00:10.760 that took me from dead broke at 24
00:00:13.160 to being a multimillionaire by 28 in four years.
00:00:16.720 And these principles aren't just some generic advice,
00:00:18.880 we'll leave that for the other people.
00:00:20.600 Each one has a number that's gonna make it crystal clear
00:00:23.720 on how you act on each and every one.
00:00:26.720 Starting with principle number one,
00:00:28.440 know what you're building.
00:00:29.680 The idea is this, can you get a business
00:00:32.200 that can generate profits without you?
00:00:34.720 It's very simple.
00:00:35.800 If you vanish, poof, tomorrow,
00:00:38.640 would the whole thing collapse?
00:00:40.600 Would it slowly decay?
00:00:42.620 My rule is I always build a business so I can sell it
00:00:46.060 because whether I do or don't,
00:00:47.600 a company I could sell is a great company to run.
00:00:50.740 So what metric should you measure
00:00:52.700 so that you know that what you're building
00:00:54.600 is the right thing?
00:00:55.780 It's called enterprise value or EV,
00:00:58.080 and here's how you calculate it.
00:00:59.460 The first thing is we have to take your yearly profits,
00:01:04.100 then you multiply it by the industry multiple.
00:01:08.780 This is the average amount of money that buyers,
00:01:11.940 if you build something that people wanna buy,
00:01:13.700 will pay on the profit.
00:01:16.540 The less risk the business has, the higher the profit,
00:01:20.220 the better the multiple.
00:01:21.740 So it's called durable revenue.
00:01:23.700 So for example, let's use real simple numbers.
00:01:26.560 If you're making 500,000 in profit each year, okay,
00:01:30.720 you have a business that does 1.5 million
00:01:33.280 and it's 30% profit,
00:01:34.840 that's a half a million dollars in profit.
00:01:36.880 You then look at the industry average,
00:01:38.540 let's call it an agency, and it's got a three X multiple,
00:01:41.980 then that means your business to a buyer
00:01:44.140 could be worth $1.5 million.
00:01:47.440 That's your enterprise value.
00:01:48.840 That's why when you're making decisions
00:01:50.440 about growing your business, you wanna think,
00:01:52.000 can I invest some of that profit back into the business
00:01:54.500 to increase my enterprise value?
00:01:56.120 because you can take that from one five
00:01:58.380 to three million fairly quickly.
00:02:00.280 So now we know what we're building and how to build it,
00:02:02.680 but what makes a business more valuable than another?
00:02:05.400 Principle number two, keep what you make.
00:02:08.120 This is what separates a 2X business from a 10X business.
00:02:12.220 It's not what you make, it's what you keep.
00:02:14.920 Every dollar that you keep
00:02:16.480 after you pay all your expenses
00:02:17.900 makes the business more valuable.
00:02:19.460 Some people have big revenue and tiny little margins.
00:02:22.620 And to me, that revenue is just vanity, right?
00:02:25.340 You can hit 10 million in revenue and still wake up broke.
00:02:29.020 Those people show up in my DMs every day
00:02:31.080 because they don't know this.
00:02:32.960 Until you actually know how to keep every dollar
00:02:34.960 that you're making,
00:02:35.660 then you're just flying blind in business
00:02:37.540 and you're not creating wealth.
00:02:39.160 You're not being efficient.
00:02:40.420 The metric that aligns the most
00:02:42.520 with how much you keep is gross margin.
00:02:44.740 So essentially we have revenue.
00:02:46.600 How much money do you make per month?
00:02:50.860 Then you gotta subtract the cost, okay?
00:02:54.060 To deliver everything that came with the item
00:02:58.100 or the services, how much did that make, okay?
00:03:02.260 That's per month.
00:03:04.060 And if you do that,
00:03:05.200 if you have revenue minus cost of deliver,
00:03:07.460 that equals gross profit,
00:03:10.020 which is different than profit.
00:03:12.280 Look, profit is typically your revenue
00:03:14.220 minus all your expenses.
00:03:16.460 This is gross profit on just the things sold.
00:03:19.100 So to get our gross margin number,
00:03:20.760 what we gotta do is take our gross profit, okay?
00:03:23.940 I know I'm asking you to do math.
00:03:25.880 Stay with me.
00:03:26.480 We're gonna have some fun.
00:03:27.800 Divided by our revenue,
00:03:30.240 how much money did I make that month, okay?
00:03:33.240 Times 100, because it's a math equation,
00:03:36.520 and that equals our gross margin.
00:03:39.740 So for example, if my revenue for the month is 50K, okay?
00:03:44.660 And my cost to deliver was only 10K,
00:03:47.960 that means my gross profit, pretty awesome,
00:03:51.160 equals $40,000.
00:03:53.940 Cool. Now I take the 40K and then I divide it by my revenue, which is 50K. And then I multiply
00:04:02.640 by that hundred. So I get the number 80% gross margin. Your accountant has probably never been
00:04:09.040 able to explain this to you. And you're like, I don't get it. My rule is gross margin for any
00:04:14.900 business I'm involved in never falls below 70%. Now, if you own a restaurant, you're like, well,
00:04:20.220 that's freaking awesome. I don't get it because average food costs in a restaurant, the margin
00:04:24.620 is about 23%. It's different for every business, but that is where I like to stay because the
00:04:30.360 higher the gross margin when I'm building a business, the more profit I usually have at
00:04:34.780 the end of the month, which means the business is more valuable to increase my enterprise value.
00:04:39.480 So knowing your margins is step one, but understanding all the principles to apply
00:04:43.620 it to your business, that's a completely different thing. So if you want my internal
00:04:47.100 scale your business workbook with the exact steps that I walk all my coaching clients through for
00:04:52.320 free, just DM me the word YouTube workbook on Instagram and I'll send it right over.
00:04:56.900 So having large margins is awesome sauce, but the large margins won't feel very good if you can't
00:05:03.140 maintain them, which brings us to the next principle. Principle number three, you got to
00:05:06.740 plug the holes in the bucket before you fill it. If you're losing clients faster than you can bring
00:05:12.200 them in, there's a point where you will just be banging your head against the ceiling. See,
00:05:17.700 most entrepreneurs that see clients leaving just go, oh, I have a marketing problem. I gotta go
00:05:22.080 run more ads. I gotta get more people to show up. Wrong move. If you just pour water into a bucket
00:05:27.980 with massive holes in it, you can't pour enough water fast enough to fill that bucket up. And
00:05:33.160 that is what people often do. How about you keep the customers you have or sell more to them versus
00:05:39.440 trying to find some new ones. Do you know it's seven to eight times cheaper to sell something
00:05:43.980 to an existing client than it is to go find a new one? So where should you put your effort and at
00:05:49.040 what level? The metric that helps you plug the holes in that bucket is called churn rate. So
00:05:53.980 here's how we calculate it. Super simple. So first thing is we need the clients that we've lost that
00:05:59.680 month. Okay. Clients lost. How many this month did you lose? Okay. In the month. Then we divide
00:06:06.320 that number by the total amount of clients we had at the beginning of the month, not the end of the
00:06:12.580 month, beginning of the month. And to make that a percentage, like always, we multiply it by 100
00:06:16.340 and that equals your churn rate. So for example, let's say you had three people leave. At the
00:06:24.800 beginning of the month, you started with 100. That would mean times 100, you would have a 3%
00:06:31.920 churn rate most businesses should be at three percent monthly churn okay now obviously every
00:06:39.040 business is harder to calculate this if you have a restaurant you have an agency you have a retail
00:06:43.040 store it's a little different but you can still look at the transaction volume you can look at
00:06:47.140 the average purchase rate you can figure out through the data what yours is and honestly just
00:06:52.240 look at like how often are people buying from you again and again if you never lose a customer
00:06:56.840 think about it it's graph okay and on the top side you have how much you're growing but on the
00:07:01.180 bottom side, you have how many customers you've lost. If you grabbed all those people underneath
00:07:05.520 that line and you put it on top of the customers you currently have, that's how much bigger your
00:07:10.600 business would be if you never lost a customer. For most businesses, that could be two or three
00:07:14.800 times bigger. Now we know how many clients are leaving. The next thing we need to know is what
00:07:19.300 are those clients actually worth? Think about this. The client you already have is worth way more than
00:07:25.300 the one you're chasing. Most founders are out there spending all their time and energy trying
00:07:29.220 to chase new customers and not realize that the ones that they have now could be worth a lot of
00:07:33.340 money if they knew what that was worth. I'm a big fan of always growing what you've got before you
00:07:39.280 go chase what you don't. And the metric that tracks what each one of your clients are worth
00:07:43.540 is lifetime value or LTV. Here's how we calculate it. It's a super cool, simple formula that nobody
00:07:50.060 teaches. So what you do is you take the average revenue per client per month. Okay. How much is
00:07:57.800 that number, and then you divide it by the monthly churn percent, okay? And that will give you your
00:08:09.360 lifetime value, okay? Aren't you curious what your customer's worth? I am. I'm curious for you.
00:08:16.020 Let's say, for example, a customer pays you 100 bucks a month, okay? Divided by, let's say you
00:08:23.120 have a 2% monthly churn, 0.02, then that means your customer is worth $5,000. You see why this
00:08:33.440 gets exciting? Because instead of losing customers and you keep them, they get worth more and more
00:08:38.400 and more. And when you do that, guess what goes up? Enterprise value. I know it all stacks together.
00:08:44.640 Okay. The important note is that churn is the drag on this number. Okay. Obviously what you
00:08:49.240 paid every month is important but most people don't realize that if they can cut their turn
00:08:53.160 in half they double the value of their customer with no extra effort same price twice the value
00:08:59.080 so yes you can get more value from your existing clients but you still have to grow the business
00:09:03.240 and every time you do that it does cost you something principle number five know your spend
00:09:08.440 here's the thing it doesn't matter if you're a professional speaker a coach a restaurant a retail
00:09:13.720 store, sell stuff online. Before you ever get paid, a client costs you money. Okay. Think about
00:09:20.480 it from an ads point of view. Maybe you got to pay a sales commission. Maybe you had to do a
00:09:24.080 promotion, a marketing thing. Maybe you had to pay to go on a radio station. There's cost that goes
00:09:28.900 into making the market aware of you before somebody ever gives you money. And most founders
00:09:34.740 and business owners never tally up what a single yes from a client actually costs. The richest
00:09:40.140 operators I know, know this number cold. Broke ones, they guess. And if you can't price the yes,
00:09:47.340 you can't price growth. The metric that tracks how much a client costs is called the customer
00:09:52.440 acquisition cost or your CAC. So first you have to take everything that you spent to get a customer
00:09:58.920 and know what that means. So that is your cost to get a client. I'm talking the ads,
00:10:07.500 the sales commission, the software that you had to pay for those teams. And that's how much you
00:10:12.140 spent that month. Then you divide how many new clients you added that month. Okay. Not leads,
00:10:20.300 not trials, actually paying clients that gave you money. And that will give you your CAC,
00:10:26.740 your cost to acquire a customer. Let's say for example, you spent $10,000 in expenses that month
00:10:33.820 to acquire customers and you got,
00:10:36.300 you would divide the number by 20, 20 new customers,
00:10:39.640 that means every one of them costs you $500.
00:10:44.180 So your CAC to acquire customers $500.
00:10:47.300 Isn't this cool?
00:10:48.500 Now you can evaluate opportunities to grow the business.
00:10:51.720 So if somebody comes to you and they say,
00:10:52.940 hey, I can get you new customers for a hundred dollars.
00:10:55.340 You say, well, that's cool
00:10:56.940 because right now I'm paying 500.
00:10:58.380 If you can get it for a hundred, that's a steal.
00:11:00.180 Let's run it, let's try it out, right?
00:11:01.980 But if somebody came to you and said,
00:11:03.100 hey, I can get you a customer for a thousand dollars,
00:11:05.320 you might go, how about no?
00:11:07.720 So here's a pro tip.
00:11:08.880 There's another metric called the CAC payback period,
00:11:11.340 meaning how much do you spend
00:11:13.200 and how quick can you get it back?
00:11:15.140 So let's say a customer pays me a hundred dollars a month
00:11:18.020 and my cost to acquire a customer is a hundred dollars a month.
00:11:21.000 That means that I can grow unlimited
00:11:23.380 with a 30 day credit card to pay back.
00:11:26.280 See what I'm saying?
00:11:27.540 But if I have to spend $500 to get a customer
00:11:30.760 and I only make that money back after six months,
00:11:33.580 the faster I grow,
00:11:35.320 what you hear is the sound of cash flying out of your business
00:11:39.820 because you've got to finance that growth.
00:11:41.960 Even if the customer's worth $5,000 to you,
00:11:44.800 you want to make sure that the speed
00:11:46.780 that you can get back the cash
00:11:48.700 that you spent to acquire the customer
00:11:50.860 is as fast as possible.
00:11:52.320 So that's why a lot of companies charge setup fees.
00:11:54.940 They try to get you to increase your average order value.
00:11:57.700 they try to get you to pre-buy something before you use it
00:12:00.740 because that cash finances the acquisition cost.
00:12:04.420 Because if not, you have to finance other people's value
00:12:07.980 that you're delivering with your business
00:12:09.780 and that's just not a fun place to be.
00:12:11.460 Okay, so now you know how much a customer's worth to you,
00:12:13.840 that's awesome.
00:12:14.980 But what if you're trying to grow
00:12:16.360 and spend money to acquire customers,
00:12:18.020 but they can't find you?
00:12:19.600 Which brings us to principle number six,
00:12:21.640 tighten your funnels.
00:12:23.140 Every week, new people know about you.
00:12:26.220 They find content, they talk to somebody,
00:12:28.320 they're referred to you,
00:12:29.580 and they walk into your business, your website,
00:12:32.900 and they wanna buy from you, they raise their hand,
00:12:35.260 and yet somehow, somewhere is a long process
00:12:37.420 that they wanted to give you money.
00:12:39.620 They weren't able to do that.
00:12:40.860 It happens in my businesses.
00:12:42.140 There's broken links, people text me them.
00:12:44.140 It's just a normal thing in business.
00:12:46.080 The problem is is that most founders
00:12:47.740 don't even see it happening.
00:12:49.360 So the metric that tracks how many clients
00:12:51.820 that come through your funnel and drop
00:12:54.520 is your conversion rate.
00:12:55.600 So here's how we calculate.
00:12:57.160 First, you take your funnel
00:12:58.900 and you break it into all the separate steps
00:13:01.480 that are involved.
00:13:02.320 Think leads, qualified, booked, showed, and closed.
00:13:06.120 That's usually the big ones, right?
00:13:08.040 Each stage is a new yes.
00:13:10.400 If the person doesn't go from stage one to stage two,
00:13:13.360 it's a no.
00:13:14.200 At the end of the day, the conversion rate
00:13:15.420 is the total amount of percent of people
00:13:17.120 that started and finished by giving you money.
00:13:20.060 So at each stage that says yes, those are called survivors.
00:13:22.920 So we wanna count at each stage
00:13:24.640 how many people survived that question?
00:13:27.180 So if you have 100 leads and then 40 people qualify
00:13:30.480 and then 10 people book, eight people show, 5% close,
00:13:34.400 that means your overall conversion rate is 5%.
00:13:36.960 So now you got your funnels figured out
00:13:38.620 and you look and you go, hmm, where should I focus my time?
00:13:42.280 You need to figure out which step is broken
00:13:44.320 and then go attack that step.
00:13:46.180 So this allows you to know
00:13:47.380 where you should be focusing your time
00:13:49.060 so that you can improve the business the fastest.
00:13:51.360 And then next we have principle number seven,
00:13:53.300 know how long you can go every month that goes by where you don't make any money then it has
00:13:58.420 to come out of pocket it's why when people start companies they usually empty out their savings
00:14:02.900 account but at a certain point you're gonna run out of energy and time to grow this business if
00:14:07.780 you're not making any profit you need to know how many tries how many months do you have ahead of
00:14:12.420 you so that you can calibrate each decision experienced founders the best know exactly how
00:14:18.260 how many months they have left.
00:14:19.580 Your P&L, your profit and loss statement,
00:14:21.480 it's an autopsy after the fact, not a diagnosis.
00:14:25.020 Your business could be done in 30 days
00:14:27.080 and you haven't done anything about it
00:14:28.320 because you didn't even know.
00:14:29.600 The metric that tracks how long your business has
00:14:31.740 until it has to shut its door
00:14:33.420 is called your burn rate and runway.
00:14:35.340 Okay, so the first thing we need to do
00:14:36.440 is figure out what is our burn rate.
00:14:38.380 So essentially you take the cash out,
00:14:39.860 which is a negative number because it's gone.
00:14:42.100 Then you add the cash that's coming in,
00:14:44.440 this is your sales, any kind of revenue,
00:14:46.520 That's really important.
00:14:48.380 And that's a positive number.
00:14:50.020 And then whatever is left over,
00:14:51.740 that may be a negative number,
00:14:53.360 and essentially that is your burn.
00:14:56.080 And for example, if you're spending 40 grand,
00:14:59.120 and the money coming in is only 20K,
00:15:02.420 then that means that your burn per month is negative $20,000.
00:15:07.200 So that means every month that goes by, you lose $20,000.
00:15:11.200 So now we need to know how much cash is in the bank,
00:15:14.000 cash in bank, right?
00:15:17.380 Minus your burn, okay?
00:15:21.440 Equals how many months your runway, okay?
00:15:24.860 Essentially, how many months can you continue this way?
00:15:30.160 Okay, in the business world, I call this default debt.
00:15:33.180 How many months before your default debt?
00:15:35.500 Now, if you're making more than you're spending, game on.
00:15:38.860 But what happens is oftentimes we make investments,
00:15:41.560 we make bets and we can make that ratio get flipped again,
00:15:44.900 even if at one point we're making more than we're spending.
00:15:47.840 So for example, if I start the business
00:15:49.620 and I somehow get $100,000 together
00:15:52.560 and I'm burning every month 20K,
00:15:54.600 then that means I have five months of runway,
00:15:57.760 five months until I'm at zero,
00:15:59.740 five months until I'm default debt.
00:16:01.720 At minimum, you obviously wanna make that number
00:16:04.020 as far as possible into the future.
00:16:06.440 If you're two to three months away,
00:16:08.160 take massive, crazy, high volume action
00:16:10.940 because one bad month can actually make this number
00:16:13.480 a lot closer than you think.
00:16:14.880 And one way I do this so that I'm never surprised
00:16:17.540 is I do a daily cash report.
00:16:19.380 That means every day I get how much cash came in,
00:16:22.120 how much cash went out, and I'm paying attention to it
00:16:24.840 so I can create a rhythm or a pulse on my cash.
00:16:28.420 So those seven principles,
00:16:29.840 if you follow them and you focus on them,
00:16:31.680 you will increase the value of your business
00:16:34.040 more than anything else.
00:16:35.340 Now you know what levers to pull to improve it.
00:16:38.380 What I wanna ask you below in the comments is let me know,
00:16:40.420 of those seven which one did you feel you need to go calculate and go come back and calculate it
00:16:46.180 this week i don't need to know the answer but i need to know that you did the work the truth is
00:16:50.820 the winners aren't the smartest people in the world that are like so genius level iq they're
00:16:55.220 the ones that know their numbers they know what to measure and they know how to fix them and remember
00:16:59.940 if you want my whole workbook on how to scale your business that includes this and a bunch of
00:17:04.420 other stuff just go find me on instagram and dm me the word youtube workbook and i'll send it right
00:17:08.740 over. And if you want to learn how I would go from zero to a million dollars about starting
00:17:12.860 from scratch, click here and I'll see you on the other side.