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

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.

Dan Martell - May 25, 2026

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

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