ah this is the blueprint to becoming a millionaire and I'm going to walk you through the levels to becoming one level one is the fundamentals of wealth creation and we're going to start with what even is a millionaire it's someone who's net worth excluding their primary residence is an excess of a million do assets minus liabilities for example let's say you own a $1 million house and you owe $500,000 on it if you had nothing else saved up in your bank account which would hope that you did but let's just say you had nothing else saved up in your bank account then your net worth would be 500k in this instance you would not be a Millionaire right now let's call this a $1 million house and then you owed nothing on it your net worth would be a million dollar now there's a difference between having a liquid net worth versus a net worth a liquid net worth is assets that you can trade in and out of so if I had million dollars in cash in my bank account versus owning assets that were worth a million dollars those are different things and you might be wondering how does Alex have any Authority to speak on the subject I'll tell you why I became a millionaire in my early 20s I had my first cash million in my bank account when I was 27 and I cross $100 million in that worth by age 31 so I became a millionaire a 100 times in a row so I can tell you how to do it at least once and I've helped over a hundred other people create Million Dollar Plus net worths uh over my career and those are just the ones that I know about let alone all the people in our community have done a lot better than that and so we go to step two in this little journey of ours which is equity because there's two ways that you can become a millionaire you can earn your way there or you can own your way there and the faster way is to own your way there and that's what I'm going to walk you through so I'm going to walk you through both examples of earning your way there which is how I first thought it was versus owning so if I want to earn my way to a million then I'm going to need to make $2 million over X period of time and then divide that by two because of taxes to get to my $1 million let's say making $200,000 a year and I make $200,000 a year for a decade that's assuming that you saved 100% of your income you'd be able to earn your way to $1 million in liquid net worth on the other hand you can own your way meaning that you own assets either you know which could be businesses or real estate which are probably the two most common assets that people own that are trying to invest when I say invest when you are an entrepreneur you are investing you're just heavily indexed on one stock which is your own let's say that I create a business uh that gets to $250,000 per year in some instances I might be able to sell this company if it was truly automated and had a a team of people that worked without me needing it I could sell this at probably a four times multiple and this is again that would be a very good multiple for a business that is doing that kind of profit because this is actually a small amount of profit for when we're talking business sales but that would get us to a $1 million net worth all right because we own 100% of this business that makes $250,000 a year in profit without us working at all and we could sell that for $1 million and so you can see the difference here it's like okay well one of these takes 10 years this one is just how long does it take me to automate the creation of $250,000 a year and so what's interesting here is that almost the actual income between the two is almost identical but as soon as you achieve it you almost already have the the net worth because here time is working against you because you have taxes and you have your living expenses that are cutting out of this every single year whereas here you get the multiplier without your living expenses with time being an ally for you which takes us to the next step on our journey don't diversify diversification is for weenies diversification to quote Uncle Warren is a hedge against ignorance you only diversify if you don't know what you're doing the more you know the less risky it is I actually am approaching diversification from a focus perspective which is what's the one thing that you're going to invest your most valuable resource because when you're early on you don't have that much money so your most valuable resource isn't your money it's your time and your attention there's two ways we can allocate it V1 we do little allocations like this I'm going to look at crypto I'm going to look at day trading I'm going to look at forx I'm going to look at flipping houses I'm going to look at long-term investing in real estates I'm going to look into Airbnb I'm going to look into starting an ATM business I'm going to look at you get the idea right so let's say this is you and this is your time and attention that you have to pursue any new opportunity so you say I need seven income streams because the average millionaire has seven income streams so I'm going to spread myself thin between seven different opportunities and while I do that I'm going to be multitasking trying to fill different cups at the same time with different colors and I'm somehow going to wait until one of these things takes off right I have to see which one of these will work but the reality is it's not which of these ones will work any of them could work if you put the work in but you have to reach a threshold once you get to the top the extra cash starts spilling over and you actually have a profitable opportunity which one of these cups is closer to spilling over you going in on one thing or you spreading yourself between seven and the reason that this myth continues to proliferate is because it's absolutely true that people who are the wealthiest have multiple income streams but what's not true is about how they got there the wealthiest people in the world go all in on one income stream and they keep adding it up over and over and over again until it overflows and then once it overflows because they're making so much money from their one opportunity they then start diversifying back between the other different ways but they made their wealth focusing on one thing and then they maintain their wealth by Distributing it you don't make money by by splitting your attention up you make it by focusing on the one thing that matters most B2 you say what do I really like well I do have experience doing this one thing and so I'm going to ignore all of these other opportunities and just go all in on one thing the reason I'm such a big advocate of focusing your attention on one thing is that this is where you get disproportionate returns because I think it's very arrogant to think that your 10% of your attention where you're not even that good at business to begin with spread between 10 things is somehow going to compete against somebody who's putting all of their effort on one thing but here's the fallacy that most people who are starting out don't get they think I'm going to try all of them and see which one works out or rather I'm going to try to start multiple things and see which one takes off but the reality is that all of them could take off or none of them could take off but it's solely based on which one you work on so it's not which one will work it's which one will you work on you want to go as fast as possible through the I have no idea what I'm doing phas so you can get to the I do know what I'm doing faas and I understand the risks that are associated with this and that's why I don't want to diversify because I actually get outsize returns here there's five stages that you go through as an entrepreneur when you're considering a new opportunity phase one is called uninformed optimism this is where you are uninformed but you're like man this opportunity sounds so great look at all these people making all this money and so then you dive in and then you get to something called informed pessimism you're like oh wow this isn't as easy as I thought there's all these other things that they didn't talk about in this ad or in this highlight reel that they show me on this YouTube short about this person that made $1,000 a day going from nothing from her home right so then what happens next is you keep working on it and then you get into the valley of Despair sad face sad face this is where most people quit and this is what most people do now dot dot dot dot dot dot dot dot dot they find another one of these things to get into and they go all the way over back here because the think oh no this one has doooo on this side of the fence so I'm going to go to the other side of the fence where the grass is green but what they don't realize is when they get into that side it's completely made of manure and that's why the grass is so green right there's poo on both sides you just didn't know about it until you got there all right and so what happens is people keep repeating the cycle over and over and over again and they never make progress and so here's the thing is that when you do find something that you're like you know what I kind of like this okay this is harder than I originally thought I need to keep learning wow this is actually really hard there's a lot more pieces to this than I understood at the beginning I guess this is why everyone isn't rich and then something magic happens you then start to have informed optimism you now start to realize you've wrapped your arms around whatever the opportunity is or whatever thing you're pursuing and you're like okay I haven't gotten there yet but I understand the math I understand the process of getting where I am to where I'm trying to go and ultimately this is what I'm trying to do with this blueprint for you is it if I can help you tackle as much of this or at least compress the time that it takes you get here that's a big victory for me and then you finally get to the Final Phase which is achievement which is you actually accomplish externally what you set out to and most newbies fall out between here and here and then start this process over again so most people only relive this over and over and over again without ever making it to here which then naturally leads you to here because then you have no desire to diversify because you now get it and what do you do when your hair you reset the you reset the Target and you say this is where I want to go next and because you've been through this process once you understand that you know what me going after this 10 times bigger girl sounds amazing I'm going to find out there's some stuff that sucks there's going to be a period where it's going to really suck and it's going to feel hopeless cuz I don't see how how to get through it I'm going to keep chugging and then understand how to get there and then I'm going to get there I'm going to repeat the process so now we go to the last part of level one of becoming a millionaire the long game if I told you to build the tallest tower you possibly could in 10 seconds here's what you might do boom 5 4 3 2 one time right now imagine I told you to build the tallest building you possibly could in 10 days you would probably say you know what I can probably get some more boxes how flimsy is is this right like how stable is this do you think this is going to last a long time probably not so I might build it piece by piece from the ground up with more stable bricks from day one and I would keep doing it this way right and I'd keep adding and keep adding and keep adding and then when 10 days came I might be five stories high and so the reason this is such an important frame shift for people is that the fact that they're in a rush causes them to build the thing they want to build differently the fastest way to get to this tall is to build it the exact way I did earlier stack it end to end up to this point but if I then said I need you to build something that's 10 stories tall you would never get there and what happens is people get stuck right they get stuck at this level and they can't add another one on top and they stay here and they're like why can't I get my million doll business to $10 million and it's because you built it wrong to begin with and so as much as this sounds painful sometimes the fastest way to to get to 10 million is to start back at zero and build it right to begin with I talk so much about long game about making sure that you're building it the right way because this thing is never going to last and so the hardest thing about building something right is that in the beginning you need to have something to sell need your amazing valuable thing and then that's a megaphone it's terrible but then you need to advertise it to let people know about stuff and then you start making sales but the problem is that people get to this point and then think oh I need to do more marketing and sales right because that's what made me money but the problem is the more you market and sale the more people actually find out that this is not a gift and this is actually a big pile of and so what happens is now you've got people who buy this thing and tell their friends this thing stinks and then over time it becomes more and more expensive for you to advertise because your reputation stinks and so the right way to build it is to understand that you you have to build the thing first and then you got to let people know about it but then you don't crank on this you keep fixing this thing until this guy becomes a happy camper and tells his friends and until that happens you keep making this thing better and this is the same thing as if I did this and just kept gassing it that's me vertically building the tower and then reaching a Max that I can't go past anymore versus building it so that I get people to say wow this thing's amazing and so then they also tell people for me so that when I get to that point I actually built it with a huge base of foundation and I can keep stacking on top of it and that's the difference in terms of mindset and perspective of how you actually build something that's going to last and then along the way with your team and the people that you hire rather than saying hey I just need a body in the seat I just need a person to do this thing you're like who here has talent and I might interview 20 people for one role rather than three so I get the right person if you feel stuck all the time and you can't make progress you usually need to go back to the beginning and realize that you built a vertical business that had no Foundation to begin with and now we have our foundation built for level one of wealth creation level two is all about the actual tactics of getting to making your first million and it starts with finding a hungry crowd let me explain what I mean by find a hungry crowd this guy started a business selling hot dogs and he was given One Wish from a genie of what competitive Advantage he would be able to have the first thought he had was like maybe I'll make my hot dogs cheaper the genie shook his head and was like no he's like hm what if I made my hot dogss taste better and then Genie said no don't waste your wish on that maybe I'll just make mine the fastest cooking so I can serve the hot dogs faster the genie said that's not what you want to waste your wish on the genie looked at him holding the hot dogs in buns in hand and said it's not about the hot dogs if you want to build an amazing business you want to put your hot dog stand on the best corner in front of a starving crowd because if your hot dog stand is on the corner it doesn't matter how cheap they are how good they taste how fast they cook the moment that hungry crowd walks out and sees your hot dog stand you're going to sell it every time so right off the bat I want to talk about two key Concepts when it comes to finding a hungry crowd one is that we have to understand that the market is always going to be the strongest variable in how much money you make right if you're selling toilet paper during coid you're going to sell out right because it didn't matter how good your toilet paper was there was a starving crowd and so Supply demand which is one of the reasons that we have it as our logo it is the strongest force in all of economics and business it is the core thing that everything else is built on and so you have to understand that the market is number one if I was trying to sell services to newspaper companies well newspaper companies are decreasing by 25% per year compounding negatively in the wrong direction the next lever on this is the offer that you give people right if you have a superior offer then if you're in a normal Market that'll be the next lever that you have if I say hey start for free and I only get paid if you get some sort of result and it's a truly free lowrisk amazing value and you get results tomorrow offer then you're going to sell 10 times 100 times more than than someone who just has like a you pay me and maybe you get results and maybe you don't type of service or product the final thing is your ability to persuade ideally go after a really big Market with an amazing offer and be a hell of a Persuader but the thing is is you can be terrible at persuading and have a terrible offer and say you can only buy my toilet paper in 80 roll chunks or I'm not going to sell it to you and still sell out during Co but if it's not Co then it's how can I make the toilet paper offer that I have significantly more compelling and if all the toilet paper offers look the same then it just comes down to how well I can persuade people to buy mine that's concept one when it comes to finding a 100 Crow concept two is the four things that I look for when I'm actually trying to find that market number one is I want people who are in pain you want to make sure that the people that you were selling to are in desperate need they don't want but must have the thing that you were selling the second is that they must have the ability to buy so purchasing power so a friend of mine had a business where he helped people who are unemployed fix their resumés so that they could get a job now you might be like oh wow tons of pain absolutely but the problem was he kept trying to grow this business and he couldn't grow it because they were all broke cuz they didn't have a job the third factor that I look for is easy to Target because at the end of the day even if you have somebody using lots of pain who can buy your thing if you can never find them it doesn't matter because they're never going to buy your things they'll never know you exist and so if I have the choice between two different marketplaces and one of them is like nurses incredibly easy to find or something that is way harder to find like psychedelic Aztecs in you know Croatia way harder to Target and you know what they might have a huge pain and lots of purchasing power to buy my thing but if I can't find them it's irrelevant the fourth point you want to have is that you have a growing market now I gave the example earlier about the newspapers right so believe it or not a good friend of mine actually had a business that sell a REV share model to newspaper so he was an amazingly persuasive guy he had an amazing offer off which is zero risk he just said like let me get a percentage of the revenue that I bring to you all right so these two things were completely maxed out but he couldn't figure out why his company wasn't growing every year he was beating his competitors and gaining more customers than they were but still slipping away in terms of his ability to grow and it was because the entire Marketplace as a whole was shrinking and so you want to make sure that you have all four of these things you can't just have three of them or two of them or one of them you need to have all four and so when you're thinking about what thing you want to sell start with who you want to sell it to so you have your hungry crowd now what do you do one Avatar one product one channel this is the simplest formula to getting $2 million plus all you have to do is find one person that you want to help it's just making sure that you're very clear on the one very specific person that you are going to help that is the Avatar the next thing is you want to give them one product and the reason I say it's one product is that a lot of people over complicate their businesses too early they're like man if I want to double my business I should sell them three things right and then I'll get them to buy more stuff but the thing is is that if you're under a million dollars you're just adding a ton of complexity when you don't even have that many customers and so most times you'd be better served sticking with the one thing that you're selling and saying how can I sell three times as many of the exact same person and that becomes the problem that you solve but most people get confronted with these issues and then go for the easy route and again this is like that building where you can add something on top really quickly but it doesn't create the skyscraper that you want instead you want think how can I do more the third variable here is channel now it doesn't matter what channel you're currently acquire customers on you can hit a Million Dollar Plus on literally any channel that you advertise on without going onto new channels so if you do Outreach is then you reach out to people 10 to one to get customers whether that's cold calls cold emails DMS you can expand and continue to get more customers with that one channel if you post content you can keep posting content on whatever Channel you're on and just do it better post more cont content post better content and by doing so you increase the amount of customers still with only one money-making product or let's say you're running ads obviously if you're running ads you can just spend more money on the ads provided you're doing it profitably and if you can't expand past a million dollars a year profitably with paid ads you have a business problem or you have a pricing problem you don't actually need to add another Channel because then it again complicates your business because you're like okay well I'm currently doing you know 500,000 a year on YouTube you know what I'm going to do you might think oh I'm I'm going to start doing cold emails right as my next way of getting customers well that majorly complicates your business when you're this early on now you might be thinking wait shouldn't I have diversity of of how you acquire customers I thought you said that was a good idea it is but you're so small it doesn't matter yet because you're not looking at a potential acquirer who's going to try and look to decrease risk for you you just need to get better at doing the one thing that you do well cuz you're really probably not that good yet and as terrible as that may sound it's probably real all right and so the fastest way to get to the million is to build it right from the get-go and not over complicate your business which means you pick one Avatar one product and one channel that you focus on until you get there so now we go back to our tactics of building our first million dollars the next thing at level two is our offer now I wrote an entire book on this thing $100 million offers it answers the question what should I sell and it's because that's the most common question that I get asked every single day for people who trying to start a business which makes sense what am I supposed to sell so I call this the value equation now fundamentally you've probably heard all over the Internet you need to provide value you got to give value right but the question is what is value and after doing a lot of studying of figuring this out between our portfolio companies it actually comes down to four variables variable number one is the dream outcome what the dream outcome is for whoever the prospect that you pick is the way that you can compare two different dream outcomes is how much more valuable they think one outcome is versus another if I were to talk to a 30-year-old man and say hey I can help you lose weight or I can make you a millionaire most guys would value you being a millionaire more than let's say being handsome there are different outcomes that people will ascribe different values to and that's just a very extreme example well let's use the weight loss example and let's switch it to women if I have one ebook that helps someone lose weight and then I've got a one-onone personal training program that have someone lose weight it's the same dream outcome so then what then determines which one is more valuable because the ebook might be 50 bucks and be overpriced and the personal training might be $5,000 and be underpriced how can you make that discrepancy because there's more value let me explain the next one is perceived likelihood of achievement meaning when I buy How likely do I think I will get what I want through buying if I buy a $50 ebook on good meals that I can cook that are healthy maybe I'll get some food that I might like in here and I can feel a little better about myself but they don't realistically think that they're going to all of a sudden transform their entire body from a $50 ebook now if you sign up for personal training for a year you probably have a way bigger perceived likelihood of achievement and so you value it higher now both of these elements the dream outcome and the perceived likelihood of achievement are the things that you want to increase in your communication with a prospect you're saying it's really really likely that you're going to get this thing that you really really want the next two variables of the equation are the painful side of the equation which is what does someone have to give up in order to get it so the first thing that we have is time and there's two elements of time there's micro and macro micro is how long is this going to take every day there's a certain amount of time that's going to take on the micro for them to experience the result right so if I'm talking about the lady who's doing personal training she might have to go to the gym three times a week that's going to take time she might have to prepare food that's going to take time that's on the micro level on the macro level how long is she going to have to do these micro commitments in order to get the macro result that she wants she might have to lose 50 lbs and it might take her 18 months so macro the goal is I want this to be as little as possible micro time and I want this to be as short as possible on the macro so that when I say hey you're going to get the dream body you want you absolutely know that you're going to get it and it's it's going to happen really really fast so the next thing is effort and sacrifice effort is what you have to start doing that you weren't doing that you don't want to do as a result of the purchase sacrifice are things that you have to stop doing that you wish you could do but can't do anymore as a result of the purchase and so for our lovely young lady she's going to have to sacrifice margarit a Mondays and taco Tuesdays she's no longer going to be able to get to do that even though she wants to do that she's G to have to sacrifice sleeping in on the weekends and she's going to have to start waking up early and working out and eating food that she doesn't like and so effort and sacrifice tend to be dual sides of the same coin whatever you have to start doing you typically have to stop doing something else the top side we try and increase the bottom side we try and decrease we want to get it to zero because if you think about this in a hypothetical extreme the perfect offer that would have the absolute most value would be the biggest most compelling dream you can possibly imagine that you're absolutely guaranteed to get instantly with no effort so if I said you can click a button on my website and then look down at your abs and then have a six-pack that would be the hypothetical extreme value now people can get that through personal training changing their diet and waiting 12 months but because of this the value is significantly decreased because there are costs associated understanding all four of these variables is how you craft offers that get people to say yes and give you money because often times the most expensive part of the offer that you have isn't the money it's the other things that they have to start doing as a result of the purchase those are called hidden costs if I have a marketing agency okay and I do content for people all right and when I start doing content I say okay it's going to take us 60 days to ramp up we're going to start having two calls a week for an hour you're going to have to fly out to my studio and we're going to record and it's going to take 60 days before you're going to start seeing any kind of traction imagine that offer comp compared to somebody who says you don't need to do anything I can just draw stuff on my own immediately start posting and your phone's going to ring today we shoot which one's more valuable it's still the same core services but how we wrap them make them probably 10 times more valuable than they were before and that's why I understand these variables and making the right offer is so compelling on your road to your first million and the reason this was my first book Is that offers is about strategy offers is one of the largest levers that you can pull with any business because it actually affects all departments when you change the offer it changes how you Market when you change the offer it changes the sales script the sales process when you change the offer it changes what you deliver it literally affects everything and so for us we always try and nail this with our portfolio companies at acquisition. comom to be clear we don't sell coaching we invest in businesses and buy them and for context our average portfolio company over the first 12 months 1.8x is revenue and 3.01 X's profit and over their first 24 months they 2.8 8X revenue and 4.7x profit meaning that they disproportionately drop the increase in Revenue to their bottom line because we make sure that the thing that we are selling is as valuable as humanly possible so the next on our journey of wealth and riches and glory and status and all things amazing is marketing and sales and if you think about this from a sequence perspective you have to make the thing and then you have to promote the thing now the making the thing is $100 million offers which should I sell the next question is who should I sell it to AKA getting leads and you get leads through advertising which is the concept of my second book $100 million leads and then you get them to buy but the thing that people mess up is that they then think okay I'm going to do more of that but what you actually need to do next is you go back to here and you fix the product and keep making it better and then you promote it more and then you come back and fix the product and make it better and it becomes this virtuous cycle so if we need to understand how to Market and sell then it means that you have to have one advertising method there are eight ways you can advertise there's four that you can do and then there's four that other people can do for you you can do warm Outreach which is reaching out one to one to your friends you can post content one to many but to people who know you you can run paid ads which is doing one to many to strangers or you can do one to one to strangers which is cold Outreach and if you're like man no one's buying my thing I can guarantee you that you're not doing enough of these core four period that's it because these are the only four things that you can do to advertise the next next thing is that you can get referrals from customers which are lead Getters next you can have employees who help do the core 4 for you you can have agencies who run the core for for you make content for you do Outreach for you all of those things you can hire another business to help you with and then finally you've got Affiliates which some people call influencers some people call endorsements but it's somebody who already has an audience already has a business and that you compensate in some way to do the advertising for you the core for to let other people know about your stuff these are the eight ways that you can advertise anything to anyone and the nice thing is when you're starting out for your first million just pick one once you pick the advertising method that you want and let's say you're using lead Getters you have to learn one of the core four to then get lead Getters and that's okay that's fine that's part of business these will always give you more leverage than the first four and that's okay but you have to start with these first so let's assume that you're just going to stick to the core four in the beginning because you're like I don't want to involve other parties which I recommend especially if you're starting out and you're like you know what I'm going to post content that's what you're going to do that's your your method all right now you're going to have all these people who like your posts comment on your posts DM you personally when you make content that they find compelling or interesting and say hey I love your help on whatever this thing is then you transition into sales now it's so important for Founders who are starting a company to be integrally involved in both of these processes the reason you want the founder to be integrally involved in the beginning is one it's cheaper and especially when you have less cash that makes sense two these are skills that you're going to that are going to be required for you to succeed over the long so you're going to want to understand them at a tactical level because when you bring someone else in in the future these lead Getters whether it's employees agencies Affiliates or whatever you can teach them the right way to do it and when they say hey that's not possible you be like no it is let me show you how and then you have a litus test of who's legit and who's not who's going to help you on your journey whether you're hiring them or you're incentivizing them it works the same when it comes to the sales side we want to get into a choreograph process knowing what step one through letter Z of the process looks like to get someone from I think this might be interesting to giving you money but if you don't know what you're doing first you have to throw stuff on the wall and see what sticks and a lot of it's just going to be your gut in the beginning and figure out whoop that didn't work whoop that didn't oh that one actually got a response all right that's step two and you keep trying until you get to step three and then you keep trying until you get to step four until eventually somebody gives you money and then you backtrack and say what happened to this person that do these steps great now I'm going to try and recreate that as many times as I can and then that becomes your process and that process repeats at each micro level too because that might be three or four steps to get to the conversation where someone might give you money and then what do you do in that conversation well when I ask this question first and this question second and this question third it's more likely that they ultimately buy and so if you don't follow a script in the beginning you better make one because if you're going to eventually get out of sales which you should if you want to scale then you're going to be able to teach somebody else how to sell too and one of the biggest issues early on is that the founder is the most convicted about the product and you should be it's your company but people who come after you are never going to be as charismatic or as convicted in the thing that you have as you are which means you need to follow a process to maximize the likely that the prospects that they speak with ultimately purchase the next level in our blueprint or journey to wealth the mountain of Mordor and by Mordor I mean more money is paying yourself how much should you pay yourself when should you pay yourself of all the topics we're going to talk about today this is probably the most subjective and the reason for that is because it underlines one key concept that is 100% personal which is risk tolerance which is how much risk are are you willing to take individually one of the regrets that I have earlier on as I continued to double down on my gym chain was that I took all the profit from each gym and I kept putting it into the next gym and I basically took nothing out for the entire time now that's super risky I was living on nothing living cheap I was eating cheap I had a cash car that I owned outright and I just put everything I had spend every hour of my day growing my business eventually though I ended up losing all the money from selling all my gyms and was left with nothing and if I had taken out some cash during that period of time I would have had to benefits benefit number one is that when you really try and take out cash flow from the business you'd be amazed at how much cash flow just magically appears and so I like having bank account PRS be a good personal goal for every entrepreneur even if the increment that increasing is small it does two things one it forces you to take cash out of the business so it forces cash flow the second is that it forces you to decrease your spending personally and I have a strong belief that as you're coming up learning the discipline to spend less if you increase the cash for that you take out of the business and you spend less over time then your bank account has nowhere to go but up and I can promise you that when you have a very full bank account business decisions become less stressful and when you make less stressed decisions you make better decisions I do believe in taking some money out of the business along the way because let's be real you're going to live a long life and then you're going to die and if you double down every single minute until the day that you died you'd build the most Enterprise Value you live a really shitty life so at some point you have to balance the investment versus consumption of life itself or the fruit of your labor that is why I'm a Believer in at least allocating a certain percentage of the cash flow from the business to you personally a healthy way of thinking about this that we have for some of our uh heavy Capital intensive businesses meaning like brick and mortar chains which is one of the biggest parts of our portfolio this is one back of napkin way that you can use 33% goes to you 30% goes to growth which is new locations and then this is rainy day this is Cash reserves for the business cash reserves for you and this is for new location another way of doing it is something called a watermark we know that we need to grow two locations and this is a proxy it doesn't have to be two locations you could be hiring two people hiring two reps it doesn't matter two more developers if you're a software company it works the same two more per month cost $ X we have y profit so all we do is we say whatever the profit is at the end of the month we subtract this and then we have a watermark above which we always leave in the account and then everything else we distribute this cash flow that's a different way of doing it this is a little bit more aggressive if you want to maintain a certain growth rate this one is a little bit more flexible it really depends on you and your tolerance for risk and that's one one thing that I'd say I pride myself on in terms of our ability to help portfolio companies and newer Founders who are creating their first kind of generational wealth is these are hard conversations to have and a really important conversation to have and you want somebody who isn't a financial adviser who's trying to get you to take as much cash out so that they can invest and get their 1% fee you want somebody's on the same side of the tables You' be like I get where you're at I can see where your wealth is and also sees over the next 24 36 60 months what it looks like for us to just have that one big bloop so you never have to work again we're now approaching the second level the Pinnacle of our second level which is setting goals and I think this is a really disinterested topic most people think like oh I need smart goals or specific go B I'll show you how I do that all right so rather than focusing on outcomes we focus on activities so the goal shouldn't be what happens but the goal should be what we do I I had a buddy of mine they started doing 10 grand a month 20 grand a month 30 grand a month and then he would fall off and I was like why do you keep falling off he's said well I make the money and I hit my goal so then I like ease off the gas p and I said it's because you're defining your goals the wrong way I see you as not hitting your goal every time you're not doing the activities and so I said make the activities the goal and then you'll hit it every time and more and so then he flipped how he saw his own success into simply at the end of the day did he do all the things that he said he was going to do at the beginning of the day and then you can actually control your inputs because inputs are what Drive outputs don't make the goal outputs say what am I going to do that would be unreasonable that I don't hit these outputs so for example my inputs might be and this is one of my favorite ways we're thinking about like advertising is something that I call the rule of 100 so the rule of 100 simply states that if you do 100 primary actions over 100 days you'll usually get the first result that you ultimately want now you hook people by saying you're going to get the first result you want but the key point is that you're doing 100 actions and one of my little monitors that I would share with you is count in hundreds all right so when a lot of people are like man I did the thing how many hundreds did you do if I was doing more reach outs I'd say cool reach out to 100 friends a day if I'm doing cold reach outs i' say cool reach out to 100 people a day if I'm making content cool make 100 minutes of content every day if I'm running ads i' say run $100 a day and each of those are activities that we can say these things will Drive these outputs they make that the goal and so at the end of the day you can say yes I did it or no I didn't do it not did I make a sale because no matter what even if you didn't make a sale today you should still do your 100 inputs so that you can make two sales tomorrow so the second con I'm going to talk to you about when it comes to goals is how we actually set goals for portfolio companies and it's not the way that you think but it is something that you're going to recognize because we actually use the scientific method and here's how it works four simple boxes one is what problem are we try to solve a lot of times we spend the most time on this part of this because a lot of times people are like oh I think we need to redo our logo why what is that going to accomplish what constraint are we alleviating right because for us we back our goals into the constraints of the business because let's say that conversion rate on our homepage is not a problem well then why do we need to redesign the logo oh we don't one of my favorite ways to solve problems is decide they not a problem to begin with so this is column number one which is what problem we're solving the second is what's our hypothesis which is an if the end statement X then y so what that means is I say my hypothesis is if our website is low conversion that's the problem that we're solving my hypothesis is that if we redesign the website we will then get increased conversions and then all we have to do is say how do we measure X and Y how do I measure that we redesign it I could say yes or no I did it or I could say that we hold a split test every Monday that we run over the quarter that would be the X that's something I can say yes or no we did and then why my conversion rate let's say we're at 10% and then I would say is it greater than 10% yes or no and then finally the last thing is did we do it and then did it work we figure out the problem we're solving we figure out what our hypothesis is to solve it we determine how we're going to measure whether or not we did or whether or not it happened and then we say did did we do the thing and then did it happen because we could not do the thing and then it wouldn't matter and we'd have to repeat it later and solve the problem why are we not doing this thing but if we did do the thing then either it improved it or maybe we redesigned the website and the conversion rate didn't improve so either that might not be the constraint or hypothesis was wrong and so this allows you to iteratively improve the business so we covered the fundamentals of wealth creation and we talked about how to create our first mil and now we've got it and now level three we're going to talk about stay rich and get even richer getting rich once so uh one of my mentors uh was ex Goldman Sachs and Chloe one of his mentors at Golden Sachs told him you should only have to get rich once and I heard that saying it's really stuck with me is if you play the game right you should only have to play it once and then after that you should be paying with house money the whole time and never take bets that you would lose the farm over in other words never B the Empire on a pot of gold if this is the very first pass in $100 Milli offers outside returns often come from betting against conventional wisdom and conventional wisdom is usually right given a 10% chance of 100 times payoff you should take that bet every time for you're still going to be wrong nine times out of 10 we all know that if you swing for the fences you're going to strike out a lot but you're also going to hit some home runs the difference between baseball and business however is that baseball has a truncated outcome distribution when you swing no matter how well you connect with the ball the most RS you can get is four in business every once in a while when you step off to the plate you can score 1,000 runs this longtail distribution of returns is why it's important to be bold Big Winners pay for so many experiments that's from Jeff BOS so if you do hit it out of the park you shouldn't want to have to bet everything on it again to keep staying Rich when you get that one winning bet or that one winning ball that comes and you knock it out of the park you shouldn't you should be able to win for good and so that's why one of my favorite saying when it comes to wealth building is that fortunes are created through taking huge risk with small amounts of money but for fortunes are preserved by taking small risks with lots of money so we talked about why you should only have to car which once and if you are going to swing for the fences you still need to be very sure that once you hit it you never bend it all on black again which then leads us actually to our next one people sobody to explain a concept called the quad marketing calendar all right so you think about this as internal and external to your business now you got prospects on this side we got customers candidates we got employees and so you actually need to be Marketing in all four directions at all times most people spend all their time advertising here they say okay I'm going to spend all my resources advertising to get prospects and then they convert those prospects over this money line and then turn those prospects into customers but the problem is if you own only advertis in this direction who's going to deliver the thing to these customers well you need employees which means that you also need to be advertising to get candidates to turn into employees and so this is ultimately the dual-sided nature of advertising because as you grow the left side you need to also grow the right side if you want to continue to get these customers to buy again and again and again then we also need to advertise in this direction to the customers to get them to buy again and again so we advertise your prospects any customers we advertise to get customers to become repeat customers we advertise the candidates to turn them into employees and we advertise the employees to get them more engaged and to keep them engaged and and keep educating them so they can Ascend up and provide even more value to our customers UL the Enterprise Value company so if you ever feel like you're a genius with 1 th000 hands it usually you're really good at advertising and turning prospects into customers right but you're really bad and turning candid into employees and then training employees to get to become even better and so the more you advertise here the more you feel like you have to do because you have no one else helping you out so let's say we've got our genius scenario we've got an Enterprise scenario so if you're the genius with 1 th000 hands right and you're making $5 million Top Line and $2 million of income every year you make $2 million which adds a million after taxes to your net worth this is a while like before right but here's the difference between the example I'm explain now what I was talking about before in this instance you add the million dollars to your business but you also have a probably $10 million asset as a business if this thing truly rubs value EV is short for Enterprise Value so there is no Enterprise Value here because it's just a genius with 1,000 hands you're just doing with a th000 helpers here you own something that provides value to a group of customers that you can sell to somebody else because if if you require no work in order to provide the value it means it require someone else to do no work to provide the value which means it becomes a more valuable asset and so if I took a business for genius with a th000 hands making $2 million a year and I didn't increase the revenue and I didn't even increase the profit but I simply remove the genius and make the structure of the business genius the people who work inside of it and the processes the systems that they follow genius then I add $1 million the net worth of the person who owns it and so one of the fastest ways to create wealth is make the thing that you have reliable is to make it risk-free and make sure that it will last and so even if it took you two years to do that for you to get $10 million of Enterprise Value or or net worth gain you'd have to make $20 million of income to get to that same 10 million but meanwhile while you're building it you're still also making money in this scenario which is what we basically do for the majority of businesses that we have at acquisition. is that we often take business as doing 2 million 3 4 5 Etc and then then take them to this side and say hey let me show you what looks like at 10 with a 7x multiple and so now you go from a one or2 or $3 million net worth to a $70 million net worth and that is how you get wealthy this is how you get rich now I want to be clear you can absolutely get to million a year in profit with not a lot of people or even just on your own because with the increas of AI and Automation and things like that like we're going to see more big companies with fewer and fewer head count but until the day until General AI comes in and just crushes everyone people are still required to get to where you want to go so if you want to not just make a million bucks or a couple million bucks and you want to get to 10 20 50 $100 million and Beyond you got to get the people side right and now we go to the reputation side ooh a fun one imagine all these flowers as different life experiences that you've gone through if you look at them all here this isn't a bouquet this is just a lot of r things put together now when we do this and we combine them all we now have something much closer to a bouquet and when you put all of your personal life experiences and your skills and your character traits together you create a bouquet and in other words you create a reputation but a bouquet doesn't really exist all we did was we Associated things that were separate and then we put them together and so you can strengthen your reputation by putting more and similar types of experiences together so you're like oh he's got a strong interest in this thing now if every single one of these would be different and some of these were weeds it would be a lot harder to understand what is the point of this thing and let's say that you had a drunk driving accident right all of a sudden how different does this bouquet look which shows you how one negative experience in your life can actually affect how people see the rest of everything else and so when we're thinking about brand or building a reputation I like to think of as what flowers do I want in my bouquet and which things am I ultimately trying to emphasize or not include at all and what associations are going to be ones that strengthen this and width are going to be ones that break it apart so reputation is a different word for saying what a brand is and a brand is simply an association between something you know and something you don't know when we're building a brand you want to associate all the things that you want someone to think about you with the thing that they don't know yet which is you now for me the more my personal brand has grown the more I have transposed acquisition. comom association with me and so now when my team goes out to the airport and is wearing a hat that says acquisition. comom people are like dude can I buy that hat from you because they've gotten value for my videos in my books they see an association with that value and they want to pay for it but if this just had a random shape on it they would have no desire to pay 50 if this actually happened one my director of HR the airport and a random person came up was like can I pay you $100 for the hat and she said no obviously because that's not how our brand Works got to earn it so the idea is that that is fundamentally how braiding works if I'm Louis Vuitton right I'm going to do the world's worst Louis Vuitton symol right if I'm Louis Vuitton what do I do I get Kim Kardashian to wear my clothing or carry my purse and then lady who doesn't have status says man I want to be like him but I can't buy Kim so I buy the thing that I've associated with Kim and then when I wear it I'll have the status by proxy from her and that's fundamentally how the luxury Market works but it's also how every Market works now why do Brands drop celebrities when they make a racial slur or they get into an accident or they get arrested for fraud because that becomes an association that people do know and then they don't like and so they say I don't want to associate our with that and so they say we're going to break this Association and so when you're building a brand it's being very particular about what and who you want to associate with if I have a porn star next to me and I have a porn star co-host you're going to think very different things about me even if the material is exactly the same you might be like that's flawed welcome to humanity and psychology right doesn't matter about whether it's flawed or not I can just tell you that this is how it works and so when you're building a reputation especially in the bdb or the BC space you want to provide value right we talked about value creation earlier and so it means that you want to give things that people want you know fast and easy way for them to consume that's risk frea and so when we do that you compound customer Surplus the street word for that is Goodwill which is what amount of value did someone get in excess of what they paid for so let's say I paid a doll for something and I feel like I got $5 worth of value right everything here between the two lines is customer Surplus or what we like to call Goodwill but the interesting thing about this is that if I do this over and over and over again these things aren't additive in my experience they've been multiplicative meaning if I keep providing something good and that's why it's so hard as a brand to decide when do I want to monetize something because the thing is is that the next time you provide even more value when people think that you're going to monetize they love you that much more and you get that much more reach and more Goodwill so that the next time and so it's basically reinvesting but rather than reinvesting Capital you're reinvesting Goodwill because what I can tell you is that Goodwill compounds faster than Revenue you can build a100 million brand in 3 years and to build $100 million in Revenue might take you way longer than that and that's because if you just focus on providing Goodwill at scale you get a disproportionate return The Rock was able to overnight build teramana into a 6 bill billion dollar company simply based on his brand and qu a beauty buil her beauty line into a billion dollar brand Conor McGregor with proper 12 billion dollar brand George Clooney billion dollar brand and so they understood this concept which is that this will grow faster and so they disproportionately invest early into this so that later they can monetize and do the right hook the big bloop to the audience and to quote Uncle Warren it doesn't matter how much Goodwill you have any number no matter how big it is multiplied by 0 equals z so if you make a bet in the investing world that you then lose all the money and you had 30 years of good investing make and you go all in on one bet and you lose you lose it all you undo 30 years of good decisions with one bad decision and that's the thing a lot of people calculate when they think about their personal brand if we're going back to these flowers like I had earlier if I have this one broken flower it forever affects the way this bouquet looks imagine you gave this to your wife or your girlfriend and you said hey here you go you'd be like it's such an eyesore that it distracts from all the other flowers that you have and so that's why making sure that you never risk your reputation to make the short money so that you can let the Goodwill keep compounding let the party keep going is one of the smartest and hardest long-term business decisions cuz believe me if I start an only fans tomorrow I'll bet you probably make a lot of money it's like but it would be like this broken flower and it would permanently affect how people perceive it and the brand that I also want to buil so now we finished reputation and we're going to talk about compounding one of those big fancy words for investing about how to get rich and stay richer compounding is when something multiplies unto itself all right so if I have a $100 and it compounds at 10% a year next year it'll be at $110 the year after that I add 10% of this number which is on 121 right and then the next year 133 and so forth and so you notice that even though the time between these intervals remain the same the actual amount that we're growing continues to rise proportionally to how much we have which is how Uncle Warren can have a$1 billion and still make another $15 billion this coming year right is because he understands the power of compounding and they call it the eighth wonder of the world and in the last decade waren Buffet has made more money than he made over the rest of his career and that's because the longer you do it the better it guess which is why some of these early wealth building fundamentals are so important compounding only unlocks if you have a long-term perspective because this early first four years I mean decent but not bad but if you do that over 30 years it becomes unbelievable and it's also why you have to not diversify because if we were then splitting this up and saying you know what maybe I'm going to stop this we're interrupting the compounding process and Equity is one of the single greatest compounding Vehicles because you can reallocate Capital within the same vehicle right and a simple example of that would be like if I have 10 locations and I can grow by 10% every month then I go from 10 locations to 11 locations and next month I get 12 locations next month I get 13 and by my 20th month I can open two locations I get to 22 then 24 and it compounds because by that time you'll built out the infrastructure ructure to sustain a faster pace so Panda Express they added 600 locations this year they had 2,000 at the beginning of the year that took them 45 years to get to this is one year they grew more in this one year than they did in any prior year before that and that's why you just have to stick with it for a long period of time and this is one of the things that people don't realize about restarting when you go from year 10 to year 11 you might be incredibly bored with your business but if you go from 100 million to 110 million you grew by 10 million and even though this new thing might sound more exciting in year 1 the liky you go from 0 to 10 million year 1 is really unlikely and so this is where all of the compounding is unlocked even though it's incredibly boring but if there's one thing I can have you write down boring is what makes you rich one of my favorite codes for Charlie longer is that the money isn't made in the buy or the sell it's made in the weight and the weight is the hardest part because you have to sit with your hands in your pockets and decide that the original plan that you had was a good plan and the hard part of the plan is sticking with the plan not doing the plan like deciding that you're going to work out isn't hard deciding that it's going to be 3 days a week for the year is it hard it's continuing to do it for that entire time is what makes it hard and I wanted to find a term for you that has been really helpful for me which is patience right A lot of people like be patient be patient what does that actually mean being patient simply means needs figuring out what to do in the meantime is I make this video I being patient for my stocks that are growing right now while I'm making this video I'm being patient for the cup that I want to lose some fat while I'm making this video right now I'm being patient for some of our portfolio companies to capitalize on the reinvestments that we're making right now but I'm making a video and so what you have to do is that when you stick to the plan Sometimes the best thing you can do is ignore and let it be which means that you don't interrupt the compounding process and there's a famous study that studied patient and impulse control and there's a one big learning that I think all of us can learn from so there was a test called the marshmallow test they took little kids and they can put a marshmallow in front of them and they wait 30 minutes and then they can eat the marshmallow now if they eat the marshmallow during the 30 minutes they didn't get a second marshmallow if they able to wait 30 minutes and not eat the marshmallow then they would give them a second marshmallow at the end so they got double the reward simply for waiting 30 minutes now what was interesting is that they studied the difference between the kids who could resist and the ones who could and obviously long term they figured out to the people who could wait and delay gratifications the ones who were more successful but the strategies that they used to delay was not that they stared at the marshmallow and used their Whow the kids who were successful did a number of different things some of them went to a different side of the room they just distanced themselves from the marshmallow itself some of them started singing songs to themselves other of them took the marshmallow and put it in their pocket so they couldn't see it anymore and so so the big thing is that they had the skills to figure out what to do in the meantime and so the more skilled you are the more ways you can win and that's why building skills is so important and it's so important because it allows you to be patient it gives you something to do in the meantime while you allow your master plan to come to fruition without thinking that you're smarter than you are to begin with so this concludes almost the get rich for Die Trying sex AK level three of wealth building so let's oh wait Alex you laugh that b box excellent observation that brings us to the very last level which could even be above the levels the level above the levels on the business not in the business you know what I'm saying enjoy your W let's talk about it in my opinion there are really just two levels of w level one is that you have all of your personal needs taken care of the second level of wealth is the unlimited level of wealth which is that you just always want to keep using money to make more money and that means that you've progressed from solving your personal needs to playing a game and so I think what a lot of people is they can never figure out what enough is for them and there was a period in my life earlier on where I was like okay let me figure out all these rich people things I bought a Bentley I was like let's go out to all the nicest restaurants every single night but the thing is is that to live like the 1% it's actually not that expensive if you fly private and it cost about $50,000 per month if you want to eat out every night of the week at the nicest restaurants of you know $500 dinners every single night it's 15,000 a month if you wanted to let's say lease a Lamborghini or something payments are probably 5 grand a month right on top of that let's say you want to go and buy designer clothing so that's another $115,000 per month let's say you spend $5,000 a month on a nutritionist and another $55,000 a month on therapy and performance coach whatever all right let's just call it a cool $100,000 per month of expenses oh we forgot to where we live let's let's live something of ball let's put another 50 Grand a month on here so $150,000 a month is just under $2 million a year in income now that's after tax right so maybe close to 4 milon a year in income now that's a good amount of money it's actually not a lot in the massive scheme of things and what I mean is that you can ball out all the way balls to the wall for the rest of your life on this level of income what I would encourage you to do is actually figure out what is good for me maybe it's worth it to taste these things and see which of them you actually enjoy and I think it was really doubtable for me to buy the belly and realize I didn't care and then just I gave it back 6 months later I sold it back at a lost so I think the big tldr here is that you need to figure out what your personal dream list is and a lot of people have these huge goals like I want to be a billionaire it's like why because you can just make this for the rest of your life and ball out but real real you can probably live incredibly comfortably on $50,000 a month like still 1% living unbelievable wealth looking stuff for for $50,000 a month after taxes so I think if you put what does food look like right what does travel look like what does clothing look like what does experiences look like what does Health look like and you start putting an actual number to it you realize that what you actually need to satisfy your personal needs just to give you less than you originally thought and so that brings me to the next level of this which is the game itself now there's a reason that my podcast is called the game and it's because at this point I play the game because I enjoy the game and so the whole concept of enjoying your wealth is not about not working and I think this is one of the big myths you might feel that way now because you hate what you do and the fact that you hate what you do is one of the reasons they might not ever get the wealth you want and so it's not about not working it's about getting addicted to freedom and freedom again doesn't mean you don't work it means you have the option to work and so I believe that humans are our best when we do work that's worth doing when we have purpose that we derive from the effort and the toil that we put in every day and you get weaker when you don't have an opposing Force that's as strong as you if you lift weights and you never lift even close to your maximum you eventually start losing muscle and I think it's the same thing with mental strength unless you're continually raising the bar you eventually attri it's use it or lose it and so most of us want to become the best versions of ourselves and in order to become the best versions of ourselves we have to increase the difficulty of the level that we're playing on imagine playing a game that You' beaten 100 times and then you put it on the easiest level it gets boring we think we want easier but we don't we want to do things that we enjoy more and enjoyment and easy are not necessarily the same thing and so if we're trying to enjoy our wealth it's finding the things that we can lose ourselves in for the rest of our lives and being okay with the fact that that thing May shift over time in terms of what it looks like or what it feels like and if you fast forward all the way to the end of the movie as a reminder you die and you can't take any of it with you and so even if you if you finish your life with this big pile of money at the end you still have to push it over the edge of the cliff right where it just falls off to other people whose hands are here because you're yeah and so reminding myself of that fact every single day reminds me that the whole point of the game is to play the game and by playing the game we win the game because the best games in life and I'll finish with this the best games in life are infinite games not finite games and I'll tell you the difference the point isn't to get married the point is to stay married when it comes to business the point isn't to win at business the point is to stay in business and literally keep playing and so when we think about the greatest games that we play as humans we have to take this infinite frame or we fool ourselves into a false finite prison that we keep wondering why we don't feel like we're winning when we get to the Finish Line because we never realized that there was no Finish Line to begin with and the fact that we were playing the game secured our Victory by its very nature and so this realization helped me reframe how I thought about spending my time so that I could enjoy my wealth the point for me is to stay in business and see who I can become in this process the point is for me to see what does it look like at 20 years of marriage with health it's not that like cool I've been training for 20 years I'm in decent shape I wonder what it looks like when I'm healthy at 50 because if you're only in shape for 6 weeks of your life or 6 months of your life or even 6 years of your life who cares if you only have a good marriage for a few years of your life who cares if you only in business and then go out of business really quickly and you get out of the game who cares and which is why the biggest Hiway that you can have and this is from Winston chal you win as long as you never quit and so that's how you enjoy your life and your wealth and there's your blueprint
