How to Make Money So Fast It Feels ILLEGAL

you guys want to hear something absolutely insane I made more in a year than the CEOs of McDonald's Ford Motorola Yahoo and Ikea combined as a kid in my 20s believe me no one was more surprised than me and so I'm going to show you how to make money so fast it feels illegal the first way to make money so fast it feels illegal is to understand value creation I want to tell you a story I sent my father a picture of our largest annual event that we held in our company which licensed to gym

owners um we had a room of 700 plus people and he said oh that's awesome that's so many people uh how much did they pay to be there and I said $42,000 a year and he said oh my God he said do they know that they're paying that much and I was like yeah they're aware it's not like I'm magically siphoning money from their accounts and um it was like okay uh now rather than respond and be like really you know mean about it I was like well let's walk through this I said if you

were able to pay a dollar and get $5 back would you do it and he's like well it would depend I said it would depend on what he said well what's the what's the likelihood that the five to one actually happens I said that's just the average so some people are below average some people are about aage he's like okay that feels like a fair bet well what would I need to do I was like great question you'd have to dedicate probably 10 plus hours a week to fully kind of implementing a new model within

your business he was like okay how long would it take between when I started and when I got those types of results and I said about a year he was like okay well then yeah I think I would do it and so that thought process was kind of the first big unlock to making so much money that it should feel illegal which is that you can't sell out of your wallet you have to sell off of the value that you're creating for someone else we were able to charge significantly more and profit significantly more than

everybody else in my space and so everyone else in my space was charging literally a tenth of what I was able to charge or I prefer to say command from the marketplace and the reason that was able to happen was because I use something called the value equation all right and so the value equation has four components and I'm not going to go super deep on it but I'll just walk you through it real quick so you've got the dream outcome which is what's the big thing that people want so in this instance it'd be

they want to make more money in their gym they might want to lose weight they might want to have a fixed their relationship they might want to look cool in front of their friends whatever the next is the perceived likelihood of achievement or the equal opposite of that is risk How likely is it that when I buy this thing I get what I want which when he asked the question well How likely is it this is what he's teasing out the next question is time how long is it going to take between when I start

and when I get and the longer that is the less valuable the thing is and then you have effort and sacrifice which is how hard am I going to have to try what am I going to have to start doing that I don't want to do or stop doing that I do want to do to be clear the reason that I I made this value equation is because for so long many people and you probably heard them in conent are like provide value create value but I was like what does this even mean how does

one create value and so I set out to try and figure out what makes me want to buy stuff and so in a hypothetical example you'd want something that would be immediate it would be no effort it would be guaranteed and it would be exactly what they want the way they want it that would be the most valuable version of whatever you could sell and then you would say let's say that our average is $100,000 of value all right now in a B2B setting it might literally be that because it's a monetary outcome and if

it's a B to C setting selling to Consumers then we have to abstract the value of what fitting back into your high school Gams is worth to you or looking good on prom night or just feeling good every single day whatever but we have this Roi uh and then we have some sort of discount that we're going to apply to it which accommodates risk right one is it's in the future I would pay less for something that is uh that is guaranteed and immediate then not guaranteed and at a delay so let's say I sell

tables right so this is a retail product and you you would immediately think oh this is probably highly commoditized well I'm not so sure think about it on the lowest end you can buy a foldout plastic table from uh Lowe's or Home Depot for probably 50 or 100 bucks I haven't checked plastic table pricing recently on the flip side you can buy a $20,000 handcarved wood table both of them allow you to put stuff on top of it and eat right and so the idea is how can we position our thing separately from other people

now if the dream outcome for that table is not okay I just need to have something that I could put stuff on top of the dream outcome might be when people walk into my home they feel immediately impressed so now we're actually relating this to status so this is a business because B2B is actually pretty easy it's just this is how much money it is and then the rest of your time is trying to make it easier for them less risky um and faster thiss is consumer sometimes you need to spend a little bit more

time on translating what this status increase might mean for them and how meaningful that is or the reverse how terrible and painful it's been to lack this status right and so if we have this big expensive nice table then we say okay here's the status now the risk of this not happening this is where we might show trends of this being a hot thing that many people understand the value of so the risk of them not getting the status is lowered the time is like hey I can have this at your house by the end

of today that would be something like wow this could happen right in time for this dinner party I have or my boss is coming to my house and then effort and sacrifices don't worry we have a white glove service that we'll make sure that we can fit it into your doorways even though it's this massive thing and we will assemble it there for you you just need to say yes right now and it will be there by the end of the night and you can have dinner on it when you have your guest tomorrow right

now we've tied them buying to all of the value components to getting them to then be willing to spend $20,000 because it's not about the wood it's not about the table it's about how much status is worth to them within this context and they get to keep it forever right and so this is how we have to unpack what we're selling so that many of you are selling tables and pricing like it's a plastic table but you're then trying to half do the work but then you can't make the margins work with the white glove

because people say I only want to pay $100 like well I would deliver it and they're like oh I have to assemble this too and all of a sudden they're they're combating you when if you just had charged more and positioned it differently you could then give them all these other things that they want anyway and the reason this is so important is that price is the single largest lever on profit so let's say we've got a before all right which is that you sell your tables all right and you've got an after this obviously

works for services or whatever else you sell all right and so let's say you charge $100 for your table and your cost uh for that table is uh is I'll be extreme here we'll say it's $50 okay now let's say that you have other costs like marketing and sales and other stuff like that that amounts to $30 all right so that means that your net profit is going to be 20 bucks when you sell a table gross profit is 50 net profits 20 okay now let's say that we reposition our table as this amazingly valuable

thing that is now a $1,000 table okay now our cost on this the table itself might be 50 but let's say we include some of those perks let's say we've got the hand delivery uh and things like that okay well let's say that the delivery is going to be another $200 uh for one of your guys to go out there uh and and use the truck gas whatever so now we got $250 here okay okay got it and then the other costs maybe maybe your cost of uh sales goes up a little bit to sell

this you got to get more leads okay so we'll call it 130 all right so now what are we actually making in net profit for this table so we got 3 380 okay I wish I had done easier math but I think it's 620 here all right so $620 in profit and so this is how you can get unreasonably wealthy in a very short period of time by simply repositioning what you sell based on the value provide someone else rather than the cost that it costs you and so to put this in context this is

a 31x increase in profit and so I I'll tell you this quick story there was a guy that was in the same exact space as me that paid me for a Consulting day years ago and when I looked at his numbers what was fascinating was that he was actually selling the same amount of people per month as I was and so he was spending the same amount on marketing he was had the same number of sales guys and he was closing roughly the same amount as we were and so what what was interesting about this

and this was a massive lesson that I learned is that CAC or the cost of getting a new customer in an industry as long as you're proficient at marketing more or less is actually not that different um that you'd be surprised I look at a zillion companies every year and between Industries like a local plumber and another local plumber it's not going to be that different and so the big difference though is that we were able to make somewhere in the neighborhood of about eight times uh more money per customer than this guy was but

here's the crazy part we were making somewhere near of 50 times more profit and it's because of this so we had eight times more money but then it resulted in so remember this is just this is a 10x right so this is a 10x increase in price but it resulted in a 31x increase in profit and so this is why price is such a strong lever on how much you make now where it gets competitive is if somebody else can do something just like you and do it for less but there was a I think

a Mackenzie survey where they looked at uh a number of companies and 85% of them competed on price and only 1% of them won on price so it's literally the worst possible strategy you can have because there's only one person who wins lowest price Dan Kennedy said this famously there's no reward you get for being the second cheapest competitor you just lose a lot of money right and so there is however a benefit to being the most expensive person and that's going to be a direct correlation to the amount of value that you can provide

any individual person and so again it's about thinking how much is this worth and then can I deliver it to them and can I eliminate the risk make it faster and make it easier for them so that I can get less discount on the value that I think it can provide that person now the 2011 version of this is selling out of their future Wallet not today's wallet so instead of selling a product based on and this is in a B2B setting um how much money someone has it's about how much money you can make

them and how much that is worth to them and then the ways that we pull apart that value so let's say it's a $100,000 of value there's going to be a discount that's going to be applied to that $100,000 based on How likely it is which is the risk it's going to be based on how long it's going to take which is the time it's going to be how how easy it is how much work they're going to have to put in and then fundamentally the dream outcome which if they want to make more money

that one's clear now if you have a b Toc business a business consumer business then you have to translate what looking amazing On Prom Night means to someone financially or how much pain they've been in for not having the specific solution in their life and so if I buy stuff and it gets to me faster I'm willing to pay more for it if someone I buy stuff and they guarantee it or they make it risk-free or they show me tons of proof I'm more likely to pay for it and pay more for it if someone

says oh you don't have to do anything versus you have a ton of work associated with it I'm more willing to pay for it and then the dream outcome is just making sure that I actually want this thing versus something else and so this actually operationalizes what we can do as business owners how do we make it faster how do we make it easier how do we make it risk-free and the way they want it so that was the first of the three kind of beliefs that I had to break in order to make crazy

money in my 20s the second way to make money so fast it feels illegal is to sell in a fast cash conversion cycle and if you don't know what that is I'll explain it right now this is what allowed me to have $1,000 in my bank account in December of 2016 I had a th000 bucks in my bank account after losing everything for the second time uh actually that was the first time I lost everything and then I lost everything again I think 3 months months later so just figuratively imagine I didn't have a lot

of money now 10 months later I was able to put in $10 million in sales and bank I think something probably close to Six Million in profit all right now here's the crazy part is that how can you get this to equate to $10 million in such a short period of time well the first thing is we got a 100 to1 return on our advertising and so every dollar that I put in so I put I put $1,000 in ads I made $100,000 and then I put that $100,000 into ads and I made 10 million

and that is fundamentally what happened and so the constraint of the business no longer was acquisition but the reason that was not the constraint meaning it wasn't the thing that blocked me from growing was that we had figured out something that I call client financed acquisition which is just a fancy way of saying using your customers's money as a loan to get more customers so let me explain so if someone walks into your business right today and let's say it cost you $100 in marketing to get them to buy something from you all right just

keep it really simple so it cost me $100 to get this guy now let's say that my thing costs $100 okay now you think oh I broke even but that thing just like the table is not going to be 100% margin not likely and so if it's like the table then I only make plus 50 on this but I minus 100 because I had to pay this 100 to get them in the door so I'm actually 50 right now for my first transaction now should I do this transaction uh unless I have something else to

sell not really because it means I'm spending 100 to make 50 bad deal now if this person's going to spend three or four more times over the next however many months then yeah it's a good idea but it's still going to take me time and I'm still going to lose money up front now for me to do this whole thing I got to do it a different way and so this kind of enters the new way of doing things which is I would acquire the customer for $100 same guy right now he's smaller for whatever

reason um and this time I say okay how can I get this guy to not only pay for himself that's point one that's breaking Evo and getting customers but point two is I need to get him to be able to buy me my next customer and so if I know my ex customer is also going to be $100 then it means I want him to pay himself back so I need a hundred all right then I need my next customer so I need another 100 and then I need to make sure I get my my

cost of my table back which is 50 all right so I need to make $250 uh on this transaction for me to then be able to use this dollars to then go get my next customer and then I repeat this process over and over and over again and then that results in this massive amount of money because if you had a machine that for every dollar you put into it you got $100 back out what would your marketing budget be it would be everything you had and so here's the crazy part is that this these

types of returns pretty much only exist in businesses like this type of Arbitrage which is why if you look at the wealthiest people in the world they own assets they own businesses that generate cash flow because the most significant Arbitrage that exists is what it cost to get somebody to buy something from you and if you have a well-designed business how much you can make from that person and so think about this as every business is a little mini investing machine and so you pay X to get customers uh you get y do back and

then instead of waiting a year for 10% improvements on the S&P 500 you can wait one day and get $100 back and so why would you invest in anything else well the richest people in the world don't they're highly concentrated in the businesses and industries that they understand well and so this concept of client finan acquisition was the big unlock that I had and I have in four times in my life have I gone through what I would consider a wealth warp where I had a material change in my net worth in a very short

period of time and most of the money that I've made has been in short periods of time and then followed by kind of like level sets for a while and then I figure out something else and then I get a huge step up in income so if you're you're like man we've been stuck for a while you're usually just this far away from figure out what that constraint is now it could have been Capital so for me I didn't have any money and so this solved my Capital constraint now what did did not solve it

didn't solve my people constraint it didn't solve my you know hiring didn't solve didn't solve uh didn't solve you know keyman R I didn't solve any of those problems but it gave me enough cash to be able to solve those problems in the future so let me put this in perspective for you my weight loss business which was my my actual gyms which are called United Fitness all right United Fitness I was able to open up a new location every 6 months off of the cash flow no money out of pocket using this exact same

process and so I would put $5,000 down I would sign a lease I would begin spending money on Advertising like $100 a day and for every $100 that I would spend I would get somewhere that they of $2500 to $3,000 back immediately and so in the first week I would then order the equipment and the next week I would order the flooring and the next week I would set up the lobby and get the painting done and by the fourth week IID made around $100,000 which is roughly what it cost to open the business and

give me six weeks of payroll so that by the end of the promotion that I was selling which was a sixe challenge at the time I would have something they have 20 or $30,000 of recurring Revenue at that gym but it cost me almost no money out of pocket because I let my customers pay for my gym for me I would say I will spend $5 a lead close one out of five leads on a $500 thing and so I would pay 25 bucks to get a customer and make 500 back and then I would

take the rest of that to go get another 25 spend another $25 to get another customer get another 500 and then that's how I was able to finance the growth of the gyms and that's how at 23 years old and then 24 and then 25 it was six locations and again the constraint was no longer cash it was trainers it was managers it was salespeople that's what limited my growth this was the first time I discovered this concept and then I was like oh man I should do this again and so then I started gym

launch 1.0 which is where I flew out from location to location and I would make $100,000 at the gym but then I didn't have to pay for the buildout and I didn't have to manage the JY afterward so I could just take $100,000 it was just me with a little fold out table probably $100 from Lowe's um and then just a stack of contracts and I have videos of me going through just random places and selling all day every day for 21 days straight and then eventually I taught that system to other people but the

average amount that I'd spend in advertising in those markets was someone of like1 to $5,000 and I would make upwards of $100,000 in that first month and so this is what allowed me to go from again zero to doing 32 plus launches in like 18ish months now the third time that this wealth Alchemy occurred for me was when gym launch transitioned to licensing now in the licensing business this is when things got even Wilder because I had fewer operational constraints to scale and so here I had to keep scaling more and more sales guys because

I had to fly them out which was actually a tough value proposition for them they apparently had wife and kids that wanted to see them go figure um and so when I switched to licensing which was just showing people how I was filling these gyms that's where we went from the zero to $10 million in sales in 10 months all right that's what's that's almost crazier in my opinion than the second the second full year of business we did we did around 16 million in iida all right that means profit all right and we did

26 million TopLine in revenue and again this is coming from somebody who had then lost it all because I have made some bad bets in my life and you're like okay well it must have only been a fluke that time well the next business I started was Prestige Labs which is our supplement company went from zero 1.7 million per month this was at the launch this was month one all right and then I had Allen which Allen went from zero to 1.7 million per month weirdly that it was the same number um in six months

so these types of numbers only can occur when you remove capital or money as a way of scaling as a thing that blocks you if you had unlimited money which if you set up the way that you acquire customers correctly you can if you think this video helped you make more money or would help someone else make more money it would me in the world to me if you shared it as a DM or send it to them as a text so they could watch it and get the benefits too and Associate those benefits with

you so what you really want that math to work out to is that you want two times CAC plus cogs to equal 30-day cash collected all right uh which is basically gross profit so you're like okay that sounds like a really complex equation I'll say it in in plain English you want to make two times as much as it cost you to get a customer and deliver on that customer within 30 days based on the amount of cash that you generate from them in excess of the cogs right and so if we have let's say

$100 remember to get the customer and then $50 of cogs right then we want to make sure that we can have $300 I actually did the math wrong before this is why equations are useful right we want to make sure we make $300 on that first customer so that in the first 30 days and you're like why is he thinking about 30 days the reason I'm so obsessive about 30 days is because that is the amount of time that anybody can get interest rate free cash and so everybody has access to a credit card and

it doesn't matter what your limit is even if it's a $500 limit that you start out with which is typically what they'll start most people on a $500 limit guess what you can do you pay it off tomorrow and so if you can get it within that period of time you'll only be limited by that card now if you can do it in seven days then you can repeat the cycle uh four times in a month if you can do it every day then you repeat it 30 times in a month right and so very

quickly based on your speed of collecting the cash back which is called the cash conversion cycle you can accelerate your growth I honestly think the reason that most businesses don't do this is because they believe in narrative that because other people in the industry don't do it they can't and I think that that belief keeps many business owners poor the amount of businesses that I've we've gone into and been like uh okay well let's just get people to prepay three months at a time they're like no we it's industry standard to to do services and

then collect a net net 60 and I'm like yeah well that's their standard we don't have to do that well why don't we just give them incentive to pay and they're like well what if what I'm like what if what what if they say no well they say they're saying no today sometimes too might as well like collect more when we do it and then we say hey we we happen to build quarterly and with that convenience we also give you a 5% discount which of course we baked into the price anyways right or we

add some sort of onboarding process that normally people might charge separately for or that we add in so that we can collect more cash up front and I'm willing to give a significant amount of things up front so that I don't have my cost of getting customers as anything that gets in the way of me growing a business I never want my ability to get customers or money to get them to be the thing that limits my growth and I think that's the reason that all these businesses that I just explained went from zero to

million plus per month within a year and I'm saying within a year as a softa most of them within 6 months if you want to make more money ask to get paid sooner so think about this so if you if you are uh a minimum wage employee right then you do work and then you get paid afterwards at a delay right now if you're a contractor sometimes uh you can do work and get paid but usually you get paid and then you do work if you're a surgeon you get paid and then months pass and

then you do the surgery if you're an insurance company you get paid and then you may not have to ever work at all and if you're the church you get paid off of someone's income their Topline of royalty that goes straight to the church now royalties happen the same way leans do so if you if someone owes you money you can take a lean off the top you skim off the top and so basically your position in What's called the capital stack is predicated on your leverage in the situation and so if it's up to

you you might as well choose to to get paid sooner now you might be looking at this and thinking yeah but how do I get all of that cash up front how do I get people to actually spend more money with me faster well it comes down to one you can either raise the price of your thing or two you get people to buy more stuff immediately and so one of the big misconception business owners have is that they're afraid of making offers and so I want to be very clear you don't want to try

and force someone to do something people don't like to be sold but they do love buying right I mean think about how much money Amazon makes people love buying and so what we want to do is make offers when it's convenient for them to take them and so an offer only doesn't work if it's something that they don't want or you presented at the wrong time or you know Advanced version 3 they don't it's not being delivered in the way they want it to be delivered all right and I'll tell you a quick story about

that so when I was in the in the weight loss business we discovered that there were some customers that would come in and they didn't want to buy gym services and I was like okay well that's lame but I then figured out hey why don't I in invite them to a nutrition seminar and so invite them to nutrition semart even though they said no to our services think how crazy this is they come in virgy memb said we Tred sell them they say no I say hey can I just help you with your food and

they say sure then they go to the nutrition seminar and they buy more than the people who bought gym services on average and so I was like oh we just needed to make them a different offer to solve the same problem so they wanted to lose weight still they just didn't feel like sweating they wanted to take supplements and eat differently fine so learning to make multiple offers to a customer is not only benefit beneficial for them because you help them solve the problem in more ways it's also beneficial for you because you get more

cash up front and so thinking through how do I get someone to buy because there's something that people enter called a hyper buying cycle so if someone makes any kind of new decision especially if it's like okay I'm now somebody who's going to start taking care of their lawn hey I'm I just bought this new car hey I I'm going to run a marathon there's these little cycles that people enter there's these buying windows and what a traditional business owner would say let's say somebody who runs a marathon they they sign up for the marathon

and then they go to The Running Store when they go to The Running Store they have to buy some shoes now the store owner says oh I don't want to offer them you know fancy socks or an i iPod wristband or new tank tops I don't want I don't want to seem like I'm being pushy but what are they going to do they're still going to go buy that stuff because they have to get the whole thing and so there's this natural problem solution cycle that continues over and over and over again within every customer's

purchases provided the first problem is solved with the first purchase and then that then opens up the next problem so once you have your shoes what else do you need you're going to need socks once you have socks what you're going to need you're going to need shorts once you have shorts what else you need you need a tank top that doesn't you know rub on your on your on your underarms you're also going to need an iPod carrier all of these different things you're also going to want the number thing you might want a

coach you might want an app you might want a hydration thing like there's there's supplements there's all these different things that stem from this and everyone's afraid to ask so just make the offer available and if they choose not no worries if you're like if you go buy something and then the thank you page says hey would you want this too if you're offended by that well the business doesn't really care I put it that way because other people won't be abended by it and will be happy that you made it available and more convenient

for them so ultimately you're providing more value and you're getting rewarded for it yeah and and at each one of these uh upsells that you might want to include you still think through each of the value equation components so you still think what's the dream outcome they ultimately want how do I make it risk-free for them how do I do it faster and how do I make it easier so number one we're charging as much as we possibly can because we're doing it based on value not based on cost the second thing we're doing is

we're structuring our economics of the business how we upsell how we downsell so we can generate more cash in the first 30 days so that we can get enough to pay for this customer and the next customer and delivering for both of them in that same time period so that cash and getting customers is not limited the business and the third way to make money so fast it feels illegal is to understand wealth Alchemy and ignore taxes or kind of just play the game the right way so let me walk you through an example so

let's say that you give away free trials of your thing okay cool makes sense we give away free trials and let's say a free trial of your thing cost $100 to get someone to start fine now let's also for simple math say the trial is $100 per month all right we'll keep this really simple all right that's the price that's our free trial after the conversion okay now let's say that we get uh one out of uh three people who start a free trial to become a customer okay that means that it's it's going to

cost us $300 right this times three to get a customer okay now let's say that we know one out of three customers becomes a permanent customer meaning once they get on our subscription they never leave which should mean that our permanent CAC is somewhere close to $900 okay now if our price here is $100 a month then that means that the annual revenue anual recurring revenue is $1,200 per year okay so we pay $900 to make $1,200 per year Well if you had a stock that you could buy for $900 and then it and then

it sent you back $1,200 uh within 12 months you probably be like that's a great investment now if it kept doing that you'd be like it's unbelievable investment well let me show you how much more wild this can really get now let's say that we have this let's just say this is a software company all right so if it's a software company let's say that it trades at 10times Topline which is fairly typical for like a B2B SAS business as long as you have good retention metrics which is why this is so important permanent C

permanent customer so if we know that then it means that we're actually making $122,000 in Enterprise Value which just means how valuable the business is that can create this kind of money now here's where it gets even nastier is that this is tax-free and so you get paid this money but you also get this it's not either or it's an and so when I figured this out I was like oh this is how people just make stupid money really fast and so let's let's work this out okay I want to make $120 million let's say

that was my goal okay so $120 million I would have to how many $112,000 customers in terms of Enterprise Value would I need well let's go look all right so I need 10,000 customers of this of this $900 times 10,000 to get my $120 million Enterprise Value here so let me ask you a question does 10,000 time 900 so you're telling me if I pay $9 million I can make this year an increase of 1220 million in asset value taxfree and and make $12 million in Revenue that I add for the 9 million and so

walk through this in sequence with me you spend 9 million you get back $12 million in annual revenue and that $12 million of annual revenue is worth1 120 million that you paid zero taxes on that is the game this is the wealth Alchemy this is how it works this is how these software companies that IPO at three billion how in four years it goes from you know nothing right to a multi-billion dollar thing if you look at how much it cost them to get customers you're like like when I understood this I was like oh

it's literally just a massive Arbitrage between the permanent cost of acquiring customers relative to the annual value relative to the Enterprise Value multiple and then those three things spit together is what creates this massive discrepancy between what you put in and what you get out which because of my fancy fancy t-shirt here I will show you is the definition of Leverage and so the reason that there are two symbols that are woven into the acquisition. comom logo which is supply and demand and a full Crome for leverage is that you get more for what you

put in and so if you have two businesses right so let's let's let's paint this out let's say we had a different business that we did the same thing but let's say that we actually these types of businesses whatever business it was traded on bottom line and so if the business uh was doing 12 million let's say that it's doing $3 million in profit whatever this new other business is okay it's doing $3 million in profit and let's say that we get a uh 7x multiple on the on this uh on this eida which is

fancy word for profit which means that we have $21 million now if I paid 9 million for 21 million would I be down for that probably I mean it's still a 2 point something X is not bad but this is why picking a good opportunity vehicle because in both of these situations you still spent $900 per customer you still make the $1,200 per year but the big difference was how much is that $1,200 per year worth yeah and so let's dive into this permanent customer concept for a second this concept took me so long to

grasp as an entrepreneur what every business owner needs to focus on is how do I not lose customers and the reason for that is that let's compare two businesses all right so let's say you've got business a and business B okay so business a acquires 100 customers year one and loses 100 customers and the next year they double their acquisition they double their marketing in sales they acquire 200 customers and then year three they you know they lose all 200 and then they they they add another 50% acquisition they do 300 customers in year three

okay so it's a 300 customer business now company B sells 100 first year now second year they do aund they keep their first 100 but they don't increase their marketing and sales so now they have 100 from last year plus 100 to this year and then the third year they have 100 from two years ago 100 from one year ago and then 100 this year both of these businesses A and B have 300 customers but which company would you rather own this one absolutely no question so why is that you want time to be on

your side not your enemy because time is going to pass no matter what and you want a business where no matter what happens it just keeps growing so you can sell the same amount of customers you could even not sell customers and still make money and so this is a far less Risky Business and as a result of that if you recall the value equation from earlier an investor is valuing a business fundamentally on the same things which is How likely is this to occur how much effort and sacrifice is this going to take what

is the time delay between now and when this becomes this ultimate thing right and so the same process is still done obviously at a slightly more complex scale but when we're thinking about permanent customers this compan is turning customers into permanent customers company a is just a churn Factory they sell something once and people don't like it and they leave which means the only way to grow this business is market and sell more but that is only a one-way Road at some point you sell through all the customers within a given base and so it

would behoove us to spend more time just figuring out how to not lose people so that 10 years from now what like as we keep going because this this map would continue this guy is going to slow down right it being able to double Marketing sales every single year is tough but just keeping the customers you had for 10 years significantly easier but people don't focus on it because it's not as sexy but this is where the real leverage occurs and this is where that wealth alchemy that I was referencing earlier this is how you

get stupid RIT and so let me give you a real word example so Starbucks do you want to know what their LTV per customer is $114,000 that's how much they make per customer and that is why Starbucks makes so much money so you think about these like high ticket businesses and stuff that's all around B2B whatever they're making $14,000 per customer from like everyone and so what does it cost to get somebody to to buy a cup of coffee I promise you significantly less than $144,000 and this relates back to my very first point that

I was telling you where I had another company that was in the same space as me the cost to get a customer for Starbucks to get somebody to buy coffee is probably similar to a Dunkin Donut it's probably similar to another random you know coffee shop down the street the difference is that they had engineered their model such that people wanted to keep coming back that they became recurring or reoccurring customers so the difference there really quickly is recurring means it's no subscription like Netflix reoccurring means that you buy on a regular basis so you

might buy Coca-Cola for example or whatever one of their products that you like you're probably not on a subscription for it but you buy it when you're out at restaurants or you buy it when you ship it to your house whatever or you just buy a Costco when you're there from a distribution center either way you are a reur customer for them and so figuring out what is my cost of a permanent customer and all you have to do is figure because a lot of businesses have this is you say okay let's say you're an

agency a super high- turn business typically okay there are some customers that have been with you for a long time and we will I will consider somebody who's been with you two plus years as a permanent customer within the context of what we're talking about now you might figure out and this is why this is so important that there it's only one out of every 10 of your customers becomes a permanent customer well then you say okay well how much does it cost to get a customer multiply by 10 this is actually the recurring base

that we're trying to build everyone else is just sifting through the you know the wheat from the the the shaft I think is what it's called Uh to get the just get the kernels right the main the main part and if you want to be smarter about it you can say huh well it takes us 10 customers to get these ones but what if these customers look and smell walk and talk a little bit differently than the other nine well I'll bet you if we changed our advertising and attracted only those types of customers we

would be able to get a higher hit rate on that so even if our CAC for this specific Avatar doubles but we get it to one out of three it cost us $600 to get a customer rather that $1,000 and we're still winning overall and so the big picture here is that number one we have to sell off a value we have to use the value equation to make things less risky faster and easier for the customers once we do that we are decoupled from a race to the bottom price War number two once we

know what our premium price is we want to pull that cash forward and speed up the cash conversion cycle so that capital or money is not the limiter of the business and so we can get customers on demand and we can do so profitably we're literally getting paid to get new customers they pay us they finance our acquisition which why I call it customer Finance acquisition and then finally we understand the game of wealth Alchemy which is of the customers that we acquire what percentage of them become permanent customers and they become the reoccurring Revenue

base within this business and then that reoccurring curring Bas is what we are going to be valued on and then what is that value multiple and so then we just look at the Arbitrage between what it costs us to get a permanent customer versus what our Enterprise Value multiple is going to be which is until the day you sell it growing taxfree and so I'll show you one last little hack here that I think is important so let's just say in this business it's in the original vehicle so you can just forget about this little

side Stu so it's in the original vehicle and let's say that we've got $3 million in profit for this business it doesn't matter okay so we have 3 bucks in profit in this business and let's say that you live in a high tax state and you get tax 50% for tax reasons so you're going to take home 1.5 million after taxes now you're really butt hurt about this because you're like what the heck government you're taking half of what I made but if you added $112 million to the business and you spent this money to

do that what did you really increase will you increase your personal net worth by $120 million and so so if you had 120 million plus the 3 million that you made in cash flow and you only had to pay 1.5 million on 123 now you're paying I don't know 1.5% in taxes when I realized this it fundamentally shifted how I played the game I I I I was really obsessed with tax strategy and trying to maximize all these loopholes when the biggest and most obvious one is just build something valuable and as long as you

keep building it and you don't want to cash it out all of that growth is taxfree and compounds and the the the clue that I got on this was realizing I was like this is before Elon moved from California so I was like elon's in California I was like Zuckerberg is in California and I looked at the the Forbes list said all these people in the US were in California but I was like but California has the highest taxes how is this possible I was like oh they understand something about wealth creation that I don't

understand what is that and that was when I dove deep and understood this level of wealth creation or what I like to call now wealth Alchemy if you like this video you'll love these