How to Build a Business From $0 to $1M (the easy way)

I'm going to share with you the seven steps to start a business from scratch with no money you don't have to be rich or have money from your parents to follow these steps and make more money than you ever imagined I know this is true because I went from being broke in rehab to building and selling three companies and becoming a millionaire by age 27 using this exact process the first is to pick a business model with high gross margins most people ask the question what business should I be in what they should be asking

is how should the business work which for most people brings up the question what is gross margin if you sell a product for $5 but it cost me $1 to make then my gross margin is $4 or 8% what you don't want to be is in let's say a restaurant where the margins are only 45% you want to be on the upper end of 70 80 even 90% gross margin or 97% like software information companies and to do this you need to understand the different business models you can start so I've put together four business

models that are the most in demand today first is a product business with about 60% gross margin these are companies like Pila and Lomi which I'm an investor in I sit on the board of or laundry sauce which I'm an investor in or prime which my kids drink non-stop the key is is to build a great product that people love and then focus on brand and distribution the second business is either an agency or services and those have typically around 70% margin and they're the best ones to start think Vayner media think NP digital think

iag with Iman thing producti Services anytime you get paid to do Services the only cost you have for the most part is yourself and maybe some marketing and sales cost and that's where you get the margins and you can scale it because you can ramp up marketing and sales to get the customer and then have other people deliver on what you sold the third is coaching or Consulting and typically those are about 80% gross margin because there's no cost and if you have the right business model you can do one to many so companies like

SAS Academy which I own that coaches software CEOs pbd Consulting from Patrick B David you had gym launch with herois and you have all these people currently using school to build these massive communities so that they can monetize their information it's a great business model to start if you have the skills to get results for other people the fourth is software or SAS software as a service which is really about reoccurring subscription for software companies with 90% gross margin think HubSpot Dropbox notion pick really any boring industry and there is a software that somebody built

for that industry that makes them a ton of money it's the one that I was fortunate enough to get introduced to when I was 17 when I taught myself how to code and the internet came along in 1997 and I've built my whole empire on the back end of software but you just have to choose which one you want to do for most people they're going to start with Services just sell anything to a stranger that they pay you to do and you get started today which brings us a number two which is to find

a huge pain when I say huge pain I mean not a vitamin not something that could make something better in the future but actually a pain somebody has where it is a painkiller and they would pay anything to relieve that pain the key is to solve it in a unique way honestly most businesses are only making incremental improvements so if you want to start with doing an agency or Consulting just make sure that you have a way to explain what you do that is unique create a name for it it's the methodology that's why they

call them productized services so the key here is to not try to reinvent the wheel there are existing businesses that solve problems for customers the truth is is most people when they start they just try to be the lowest priced option my brother did this he started a Home Building Company and he said I'm not going to work with real estate agents I'm just going to build a really cheap house and sell direct and it turns out he built something because it was so cheap that it was ugly people said it had no curb appeal

so what you want to do though is figure out how can you pick one problem that is a real pain not nice to have like a vitamin but a painkiller something where their hair is on fire you know where they need to get something done and you show up and you explain to them what you do in a way that sounds unique if you can do that then you're going to get demand the more pain the customer has the higher the potential for sales what most people do is they start really low and they do

something very basic and they Solve It For Broke people problem is is rich people spend money to save time and broke people spend time to save money so most people won't value what you're doing because they don't value their time so sell to rich people people because it's better so how do you do that you have to present yourself better you need to find people that have problems businesses companies that are actually successful and they want to grow faster are way better than companies that are struggling and trying to figure out how to win so

you want to design your product or service in a way that is so clear and so valuable that as soon as you start working with one customer they tell another one and another one that is actually called Product Market fit where the product is so good your service is so good that the market pulls itself into you if you think you're the best baker the best cleaner the best marketer the best whatever then just make sure you position yourself to solve a real pain for a rich customer and you will have product Market fit by

doing it this way you'll ensure you get a thing called VW or viral Word of Mouth marketing meaning that one customer turns into two customers turns into four customers turn into eight customers because you actually deliver on the promise that you said see most people are trying to sell vitamins they're trying to sell things that are kind of make things better but not really it's like selling a left-handed Golf Club to a right-handed golf player you could maybe they have a friend but it's not easy if you actually say no we do snow removable within

10 minutes from the snowfall if it's over 2 in very clear very easy people will pay for that especially if nobody else is willing to show up and make that commitment which brings us to number three which is to create a faster money turnaround some people call this the cash conversion cycle but I like to simplify it it's just money turns around faster so in my 20s I actually almost went bankrupt because I didn't understand this I was building a business I was growing and I got to a place where the more I grew the

more cash it took and even though I had started with a bit of money it quickly ran out and I caught myself in a place where I had a cash Crunch and I couldn't make payroll and I couldn't afford to hire the new people I was supposed to hire to deliver on the contracts I had signed ended up having to sell my receivables go to essentially a business loan shark to get the cash required to pay my team and buy the stuff I needed to deliver on the rest of the contract that pain created a

completely different perspective for me when I look at businesses to make sure that I design the business model in a way that doesn't require a lot of capital what I'm about to share with you nobody talks about but if you get this right will allow you to have unlimited growth without having to raise a bunch of money from the bank or investors so if you spend $100 today to grow your business through sales or marketing but they're only paying you like $30 a month it'll take you 3 months to eventually pay back that amount of

money it costs you to get that customer and that takes a while so if you grow really quick where are you going to find all those $100 to be able to finance that growth so what you want to do is change the business to get it to a place where ideally you get it back within 2 months or 60 days or even better in 30 days this is what's called the CAC payback period the cost to acquire a customer and how much time it takes to pay it back if you're only getting paid back after

90 days after getting the customer you won't have enough cash velocity to fuel your growth in your business without putting a bunch of money on credit cards lines of credit it's the bank or investors so what I like to do is to Define my payment terms so I get as much as I can upfront to finance the growth meaning that I put it on the customer either I charge Upfront for a full 3 months or 6 months or I might even get them to put 50% down just to close the contract even if I don't

start for 3 months so it covers my cost to staff up the team or whatever cost I might have to incur to get new inventory to deliver on that order see the idea is to improve your cash flow so growth doesn't require more money great businesses if you want to grow without having to raise money you need to be on top of your invoices on top of your receivables so that you don't have delinquent receivables cuz if you don't get paid right away the chances over 60 90 120 days that you're going to see that

money it goes down every month that you didn't get paid which brings us to number four which is to Manufactured demand the last thing you want to be is the best kept secret so you want to get in front of any medium possible to have people be aware of your business I'm talking going to events news paper blogs today it's podcasts it's collaborations it's webinars see you can't sell to an empty room so if there's nobody there then you can't build your business so where do you find these people and that's why I put together

the four Ps of demand generation and the last one is my favorite the first P stands for publish not only social media so publishing content helping education-based marketing to attract your customers but it's also creating articles that might be found in search engines or search engine optimization the second is paid you know so think Facebook ads the reason why I like paid is because it's fast you can create an ad in the next 3 minutes that you put in front of your ideal customer now it may not work at first but it is very fast

so you can get some feedback the third p is PR so think podcast or getting featured in magazines Public Relation this is where you want to tell your story for how you started your business what makes you unique what your big vision is and those podcasts or that PR is going to get you in front of some new audiences the fourth p is partners and it's absolutely my favorite this is where you find other people that sell to a similar customer as you're going to sell to and you collaborate with them you might do a

joint webinar they might send an email to their list on your behalf and they could become an affiliate where you give them a piece of that business but Partnerships are the fastest way for you to grow your business without spending any money upfront and only pay them when you get paid by your customers which brings us to number five which is to implement the buyback Loop most businesses fail or stay small because they don't understand the simple concept see entrepreneurs typically spend time to save money instead of spending money to save time so that they

can invest that time in things that make them more money just look at your time today and ask yourself like where are you creating leverage where are you investing your time to either make the business better get more customers improve your sales process or are you just stuck doing it doing it doing it that's why I created the buyback Loop where I have these three distinct steps anytime you feel the pain of growth so the first one is a for audit we want to audit our calendar for time and energy things that suck our energy

and cost us little to have somebody else do and learn the skill of delegating to other people or honestly delete some stuff you just have to say no to the second part is T which is for transfer Define what you need to give to somebody else record yourself doing it and then delegate it to them and have them create a process based on what they saw in the video which allows them to be trained without taking any of your time the third step is to fill which is look at your calendar and go what skill

do I need to acquire to actually grow what beliefs are holding me back what character traits do I need to invest in to become more see if you fill your calendar with the new time you got with things that make you better you'll be able to make the business better not by just spending more time but by you becoming better so that you have more to give the business and your customers most people end up hiring other people to do the thing they could do which costs a lot of money instead of just taking all

the stuff anybody could do out of their calendar cost a little bit of money those little things just seem like so underneath anybody else to do that they would just rather keep them because it makes them feel productive when it's actually interrupting their energy and their ability to focus all those errands are running around and all those little details and those hundreds of emails and all the calendar stuff like just have somebody else deal with that so you can do the thing that actually makes money which is doing the business part for a customer whatever

that is then that increases to make you better to hire other team members to buy back more time so that that you don't end up building a business you grow to hate which brings us to number six which is to run the replacement ladder when I moved to San Francisco in 2008 and saw these 20-year-olds building billion dooll companies I asked myself like how did they learn to do this what's different about their philosophy of building companies that obviously I had figured out at the time I realized it's the way they sequence their hires to

give them the most time back at every stage of their business and this is when I came up with the idea called the replacement ladder and it's all about hiring and what order so that you as the owner end up building a business that can grow without you and it's completely backward from how I used to build businesses at the bottom of the ladder we have admin and maybe right now you're feeling a bit stuck in your opportunity to grow it's probably because you're still holding on to your email and your inbox and this is

where if you let that go and have somebody else that you collaborate with to handle all these messages are coming out throughout the day so that you can focus on delivering the value for the customer inste being caught up on administrative tasks that is a huge opportunity to get free the second rung on the ladder is delivery this is where you might be feeling a bit stalled because you're like I've got momentum but I can't seem to grow and it's probably because you have nobody to help you with the customer and this is my favorite

place to hire because it allows me to do only the thing I can do for the customer and have somebody else that helps with onboarding and support the third rung of the ladder is marketing and this is where you might be feeling a little bit of friction you're about to break off but you still can't grow consistently it's like up and down up and down feast or famine and the reason why is because when you have no business you start doing marketing to get more customers and then once you get customers you get too busy

to do marketing so you stop doing marketing which means eventually you run out of customers what you want to do is hire somebody that can run a marketing system focused exclusively on traffic to your website and the campaigns that they need to execute to get you new leads and customers the fourth rung is sales and sales is where you start to feel some freedom because at this point you have somebody else that's getting you leads you have somebody that's going to now talk to those leads and you have somebody can onboard them into your company

while you're on vacation as long as those sales people are dealing with all the calls and all the follow-ups it is a beautiful stage to get to with only four hires the last hire is leadership and this is where we get into the feeling of flow but not if we don't hire the Right leader and for me that person needs to own strategy and the outcomes how do we execute towards that goal and then do I own those outcomes the number whatever it is typically for most entrepreneurs they want to hire somebody around operation so

they can get free of the running of the business so they can be more creative Visionaries and work with their best clients the replacement ladder is one of the fundamental concepts that most entrepreneurs never learn and the truth is is the most expensive thing in your business is anything that takes you away from making money which brings us to number seven which is to trct Top Talent here's the truth you can't build a business on your own it takes other people this might sound controversial but you build the people and the people build the business

I remember one time I was working with a client and they were were absolutely torn with their team because there were some underperformers there were people that started talking back one person was kind of running the business and telling them that they knew better and they felt like they couldn't do anything to change a situation cuz if they did the person would either quit or they leave and they didn't have another option it was better to deal with the craziness than it was to have a hole in the business and not be able to make

payroll so this is why I share with them that they needed to build a talent engine and there's three core steps to make this engine work so you never feel like you are hostage by your team the first part to the engine is acquiring Talent see most people don't realize there's actually two funnels in a business there's a customer funnel and the talent funnel and if you can get the customers coming in at the same Pace as you hire the talent to deliver that's when business gets really fun and most businesses don't have a person

dedicated to or a contractor available to continuously hire as the business grows and if you don't it's going to be hard for you to let somebody go knowing that it's going to take you 2 3 4 12 weeks of trying to interview and hire instead of just having a person dedicated to it on your team or somebody you hire to manage that hiring so getting Talent on the team should be something you invest in and part of the business the game in business is how fast you can Source worldclass Talent people meet my team and

they go what's this magical Pond that you go fishing in for these Talent I'm like it's not magical I just have a process I have a system for hiring step two to the engine is training the talent if you get people on your team then you need to train him I remember one time friend of mine say well what if I spend all this time to train my team and then they leave and I'm like what if you don't and then they stay it's kind of funny but it's true at the end of the day

your ability to develop your talent as a leader will unlock your business growth so that's why I'm a big fan of a few key strategies number one is the camcorder method any work I'm doing I record because I know someday I don't want to be doing that work so then I'll have the recordings to give to somebody else so that they can watch the recordings and take over that work without me having to train them other thing I like to ask myself is what does a 10 out of 10 look like what's the criteria for

the work so that when I give somebody else the work to do they have this checklist of things they need to look for to make sure that it's done to the right standard that you would be happy with the third big idea is to have the team create the standard operating procedures see most business owners do it backwards where they sit down for a weekend and they write everything up to have a checklist whereas when I give somebody a camcorder or recording of the work I was doing then I ask them to create the checklist

so I can see two things one I get the work done the checklist but I also get to see if they understood what I was saying in the video so it shows me if they got it now the overall hack when it comes to training and coaching and really leveling up your team is to focus on principles not activities see when somebody does something wrong I don't attack the thing they did wrong I asked myself what principle did they violate this kind of like belief I have about how we should act and then I use

the principle as the opportunity to coach them up to a higher standard because that principal will take care about 15 other moments that they might have done something wrong instead of having to address every time they did something wrong individually I just point to the principal the principle would be as simple as we always keep our environment clean so then I don't have to talk about all the different things where it's unclean there you know the principle is their environment it's your environment keep it clean the third stage of the engine is to retain Talent

the easiest way to do this is with asking them a simple question that most people never ask what is their 5-year goals and I always go to personal or professional I want to know you know yes professionally how much money I'm making what's your title like what's your vision for your life but also on the personal level do you want to buy a home do you want to be in a relationship what are some of the big goals personally you want to do so that you can understand them and explain to them how your goals

in your business map to their goals for their own life then they're personally motivated themselves to become better so they can help the business but also indirectly help themselves achieve those goals so you need to ask them where they see their life in the future and then continuously remind them how the work today aligns with their goals for themselves my favorite thing to tell my team is work harder on yourself than you do in the job I want to invest in their development as a person because I know that investment shows up in the work

because they see how the business creates the path for them to be successful if you want to learn where I spend 99% of my time click the link and I'll see you on the other side