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The first thing I want to get into is we've broken these sessions into three distinct parts. So the

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first part is we're going to talk through where I want to do something for you as a leader, as a

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CEO of your organization. And I know that for some of you, you're the plus one, which by the way,

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Jeremy, you can bring someone along with you next time. So you can do that. And then the second

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portion of it is to really get into a little bit of laser coaching, some hot seats, really get into

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where your issues are, what you're working on. And we'll try to pick a couple of those as we go

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through. And then the last piece is we're going to go through the Edge workshop component. That is,

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how do you keep the Edge going and the training you've already installed in your team? And how do

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you keep that going? Because there's a lot of value that happens in the second time round.

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So they go, oh yeah, we know this. Yeah, they may have heard the content, but we don't necessarily

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know this. And I think, Jenny, you've been through it four times, maybe, or five. So,

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yeah, four or five times. And I think that because we keep adding new materials to it,

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we've completely redesigned the Edge and everything to do with it. So I want to take

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a second and explain to you exactly what that is. So this first little bit, we're just going to do

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a little admin piece before we jump right in and to get into the nuts and bolts today.

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So the first thing is that there are now two distinct components. There's the inner circle,

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inner circle, which is this call, which is two hours once a month. And so the inner circle is

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going to be 10 meetings, but also two in-person meetings. So there'll be a track day in Atlanta

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for anyone who's been on a track. It's going to be a lot of fun. We'll do probably go-karts,

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but we can do other go-karts or actually exotic cars, whatever you want. That's my wheelhouse,

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my hobby to introduce you to that, but it's just a cool hangout day. We will do a short team thing

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so we can do a write it off as training. So it'll be a tax deductible event for you.

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And then we'll do a West Coast thing, whether that will be in Anaheim or maybe even Santa

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Barbara. We'll pick that up exactly what we'll do there, but we'll do them one in about August and

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one in about December. We'll give you more details as we firm up the nuts and bolts.

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But I know that last year we tried to get together and weren't able to do that. So

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this core group, there'll be people joining. We've also restructured the team side, the team

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training side. So the team training, instead of just being 40 straight weeks, which you guys went

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through that way, well, I think all the teams over time have all gone through it that way.

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Now we've divided them into modules and a module is designed to last one month. So each module

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will last one month. And Dee, I wonder if you would bring up that on just the list of the

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modules on the website, if somebody wants to sign up for this. So we can just see the module list

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on the website and then you can screen share while I'm talking. Just give it some visuals.

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And so what we've done is we've taken these. So now you can run any module in any order

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that you want. It's not like one through 40 anymore. So you can cherry pick as the CEO,

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hey, I need this next. And by the way, we'll probably be adding more modules. So

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Dee is sharing for us there. So if you look at the Edge training now, you'll see there is now a

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library of nine modules. So now the module one really goes through the whole journey to prime,

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building culture of trust, what are we doing, triple bottom line. And then module two will go

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through the whole productivity unleashed, cognitive control, cue books, deep work,

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all that stuff. And then module three will be the whole transformative thinking. So it'll be

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about decision making, six hats, being a change agent, that stuff. Module four, all around

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innovation, unleashing innovation at every level of the organization. Five will be about relationships,

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the whole thing about wearing the different hats and managing different three types of people,

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all that type of stuff. And then module six, mastering business growth, the whole thing of

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courage, strategy. You guys remember all the scaling options, the 10%, the 100%, the 10x

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growth, all that sort of thing. And then the growth accelerated module seven is really the

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whole where we really tweak, how do we upgrade our meeting, set our people free, maximizing

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contributions, how do you take your contribution to the next level, dealing with necessary endings.

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Module eight talks about the art of effortless work.

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So the whole Kaizen making work effortless.

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And nine is really around flexibility.

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And flexibility is really leveraging playbooks

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and black box modeling, that type of thing.

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So these are the nine modules.

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So here's what I would,

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and the modules do work on,

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they do build in each other.

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So rather than, oh, you have to start on one and end in 40.

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Now you can start, thanks for doing that, dear.

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I appreciate that.

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And so now you can start

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and pick any module that works for you.

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What we're gonna do on the CEO call though,

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once a month is I'm gonna talk to you about a module.

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It doesn't have to be the module you're on.

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I'm just gonna pick a module that we're doing next.

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I'll do them in order one through nine each year.

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And, but different CEOs will now be able to join anytime.

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So it's not like, oh, there's the January intake.

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Oh, I missed that.

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You know, so now they can join any month.

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And some will actually only join the inner circle.

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They won't necessarily be buying

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the edge portion for their team.

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So this gets a lot of flexibility.

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So this call, this meeting is now the core meeting.

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This is the main thing.

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This is, last time I threw this in as a freebie extra,

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just to make sure you guys are getting

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the most benefit out of the program.

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And then it turned into its own product.

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And thank you for signing up.

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I appreciate that.

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We do have a separate team now, separate from Brilliant,

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that are running, that's running I-49.

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So, you know, obviously I have Dia helping me

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as our VP of business development.

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And Dia just joined me in January.

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She took some time off after quite a few months, was it?

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Six or seven or eight months,

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whatever it was from last year.

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And Jenny is wearing two hats here.

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One is as the leader of the BP team.

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Since we restructured Brilliant Perspectives,

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Jenny has taken over to running that team.

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I still oversee that team, but she really runs that.

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Bridget is here also with two hats.

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Let me, sorry, let me finish Jenny's second hat.

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The first one is running the BP team,

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but the second one, she's also gonna be our live coach.

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So in addition to the fact that your team

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can go through the video training on their own

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and get the worksheets and all that stuff,

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every Friday, Jenny will be available for live training.

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And having done it four times

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and being a person who's actually doing it

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still right in there, it's very practical.

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It's not a theoretical coach who went through a course.

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You know, she really does the work

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and deals with it every day

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and has hired a lot of people into that mode

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and trained a lot of people.

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So I'm really thrilled that Jenny's wearing that second hat,

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her I-49 hat to help us be a live coach.

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And then Bridget and I, as many of you might know,

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now run a church together with Graham and Teresa Cook,

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which we launched last year.

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Bridget really runs the whole community side of this.

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So she's here with also two hats

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as one of the owners of I-49,

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but also as somebody who leads that initiative.

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So on our side, we're all wearing multiple hats doing this.

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So this group, what we want you to do,

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so a couple of real upgrades.

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One is there's a brand new app coming out for the Edge

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and the app will have two groups.

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It'll have the inner circle group

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where you can connect with other CEOs and leaders,

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people on this call.

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You can interact, go live, drop questions,

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and only the CEOs see that.

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So we can talk at that level.

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And then the other group is the Edge.

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And if you click into it,

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it will literally show you each of the modules

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and you can open the modules and see,

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rather than just seeing 40 items.

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That all just got finished like an hour ago.

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So when you called me, Robin, that's what was going on.

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So we wanna make that,

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we're just waiting for final approval from Apple.

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But if you go to myedge.group, excuse me one moment,

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you can see the app.

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You just have to log in.

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I think I have all of you except maybe Rich,

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I don't know if I have you in yet.

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You can just send your email address,

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we'll add you into the app.

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In the meantime, you can access the app

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through a normal web browser.

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So until you wait for the iOS or the Apple,

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the Android rather, and iOS apps,

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they'll be approved soon.

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Okay, there we go.

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I think this is my sixth training session this week.

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So little draggy, but I'm with it guys, I'm with it.

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You'll inspire me and get me going.

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So that'd be awesome.

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So the app is gonna be.

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new, and then from time to time we're going to bring special guests. So I said there were three,

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there's the training time for you, then there's the laser coaching time, and then there's the

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talking about how to help your team with the edge training, get the most out of it. The first one

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from time to time we'll bring in guests. So I've got a couple of really awesome guests that I've

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been talking to and I've lined up. And just to give a quick sampling of that, we'll have guests

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like Bill Loftus, who is an investment banker, he's got a pretty large staff. Bill and I've been

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friends for quite a while, and Bill is on the buy side of investment banking. In other words,

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he buys companies for his clients, and they range from I think as small as 30 million up to I think

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a billion dollar deal. So he does a lot, and I asked Bill would he come and tell us what is it

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private equity firms or buyers are looking for, what are some of the red flags, and really help

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you build value. And we're going to touch on some of that today. Joe Senna, many of you know about

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Joe. Joe is the retired Deloitte and Touche senior partner for international tax. He does all my tax,

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he does all the businesses we work with, and Joe is just an amazingly brilliant guy. And it's rare

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to find a CPA will actually give advice. Most CPAs won't do that because of the liability issue.

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So if you ask them a direct question, you may get an answer, but usually you don't.

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We'll bring in Paul Orson, who runs a private equity firm here in Atlanta. Barry, as many of

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you know from Sage, who runs Live Events. So she just has such a broad understanding of business.

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We have an attorney, Nick Moore, who is one of the super attorneys here in Georgia,

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also a friend of mine. And we got a couple of others we'll bring in. But that just gives you

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a quick sample on the kind of people we'll bring in. And then as we grow and get bigger, and I can

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attract better, maybe one day we'll have Simon Sinek or something, let's see. We can dream,

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we can dream. I love Simon. He's a great thought leader. Awesome. Any questions about any of this

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before we get into the actual session? All good? All good. I want to talk through a topic we've

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been working quite a bit on here at The Edge. And as we're getting ready to just massively scale

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this, we're in a position right now. And as you know, I speak to you as I counted the other day

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because we were making a lot of videos and materials. I actually wrote down all the names

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of all the companies that I've been involved with. And I've led 27 companies to date. And

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three of them I did not have any ownership in. So one of them was 100X or 828 Media.

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There were two others that I did. One was for a big petroleum company in Texas, in Houston.

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I had no equity in that. And then I led an investment group for another group here in

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Atlanta. But other than that, and that's not including all my consulting, that's not consulting

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CEOs or any of that. So it was an actual business that I had to run the business where it's not,

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well, I consulted for three months somewhere, not that, because then it's a long list.

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And what I've learned is that if you look at the spectrum of where I've gone through,

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it's technology, finance, real estate, investment, portfolios. I've been involved

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in foreign exchange trading. I've been involved with three non-profits, a school, two churches.

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And going through that process, what I found is a commonality. And when you're starting and running

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a business, you do get kind of sucked into all the detail of it. And we talk often at The Edge

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about working on the business, not always in it, and trying to take a few hours every week

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where you work on the business and teaching your team to do the same.

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And we did this little exercise and I call this little exercise, how does your business end?

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We wanted to, we ran a few, I wrote an article, which should get published here in USA Today,

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USA Today, in the next few days. And one of the things I talked through there is,

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let me help you end your business, in parentheses, well. So here's what happens,

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your business will end. One way or another, it will end. Whether you sell it, give it away or

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close it, it's going to end one way or another. So the real question is, and here's a really

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helpful exercise I'd love us to do today, is I would like to imagine that it's five years down

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the road and you're selling your business to me. I'm the buyer, we're sitting at the table,

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I'm buying your business. First question is, what exactly am I buying? That is not as easy to answer

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This is one might think you can say, well, you know, Jeremy, so

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while I have a roofing and solar business, no, but specifically,

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what am I buying your clients?

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Am I buying a technology?

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Am I buying access to that regional market?

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Because I already have access to other markets in the country, but not that one.

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So the buyer is as important as the seller in these relationships.

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And you say, well, I'm not thinking about, I just want to run my business.

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I'm not thinking about five years down the road.

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You should be.

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Here's why.

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I can't tell you how many times I've sat on both sides of the

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table as the seller and as the buyer.

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Um, and it's really sad when I see founders who've poured their lives,

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made unbelievable sacrifice, their families have paid a price, and then

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they realize, man, if just a year or two ago, I tweet this, change that,

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fix this, I could have doubled the value in one case, literally could have made

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10 X could have literally added a zero.

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If they put the thing online and made it a SAS product, software as

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a service product, rather than.

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So when you're thinking about this, this is a powerful way as a leader

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to think about what are you doing?

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What are we actually doing?

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Why did I start this business?

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What's the point of it?

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If you were just looking for a job, you know, you can get a franchise,

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you can become a franchisee.

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That's a cool job.

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A lot of people from professional world go and do that.

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They just become a franchisee.

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It's like, you know, and you've seen a lot of very senior people from

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consulting firms and so on, but like, I'm done with that stress.

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I just want to run five pizza stores, you know, or whatever it is.

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And that's fine.

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If you're looking to give yourself a job, that's fine.

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And here's the thing.

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If, if you are the person who does all the selling and all the fulfillment,

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you don't, you don't have a business.

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You just have a job, but now you can turn it into a business and there's

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a way to turn it into a business.

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And so this exercise is designed to help you cut through the noise.

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What am I building here?

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Actually, you know and you know, so as I said, the two questions, what

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are you, if I'm buying your business, what exactly am I buying and how much

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am I paying and you say, well, I don't know, but you should know you should

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have a good sense of it, or at least know what things will influence that value.

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So if I were to buy your business today, you know, and we're going to go

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through, how do you determine that?

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We can do that right now.

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And so we're not going to just keep it theoretical.

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We're going to dig into this.

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And the reason is, is as you dig out the underlying economics of what's

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creating value that somebody would buy, you'll realize exactly what it is you're

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building and may, and so I'm also going to take a moment and I'm going to put

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for this exercise, put my private equity hat on, and as many of you know, when I

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was running my own private equity firm up till six years ago you know, we get

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pitched all the time, come by my business, invest in my business, all that stuff.

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And I would say of the 20 companies that pitched us, we

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probably took an interesting one.

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And so a friend of mine who consults with CEOs here in Atlanta, he you know, I'd

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mentioned that and he said, well, I have a group of 12 CEOs.

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I work with it every, you know, and would you come and spend a day with us and, and

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tell us, you know, what is it you look at when you, when you pick up our pitch book,

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you know, cause you know, we'll write those big fat pitch books and a pitch deck

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or whatever you call it.

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So, you know, that, that, that document that says buy my business, this is the

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my, or put invest in my businesses, here's the returns and so on.

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And so it was talking to those group of CEOs.

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So they all gave me their, their, they all came to the meeting with their

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pitch, I didn't see any of them beforehand.

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They didn't send me them before and they just put them on the table.

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I picked them up.

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I turned to certain pages and I just explained what I was doing.

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And, um, it was really helpful, but I think it was very

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disheartening for many of them.

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Because what they were focused on because they were running the business,

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because they were dealing with staff issues and customer issues and product

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issues and trying to manage payroll.

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And just the stuff that makes up business is they, they were a little

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surprised to see it through my eyes.

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And here's some of the surprise elements.

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Firstly, I said to them, um, if I gave you an interview, I'd be, I'd be looking at

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the 40, 10, uh, the 50, 40, 10 principle, 50.

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So the 10% of what we, I want you to talk, you got, if we got an hour.

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So think of yourself as this, you're coming to pitch to the private equity

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firm and you have to pitch the full value of your business, they're going to buy it

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or invest in it, doesn't really matter.

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Same thing.

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The first 10% of the time, in other words, six minutes,

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you get to talk about the product.

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That's it, six minutes.

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Because at the end of the day, it's just a widget.

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From the private equity point of view,

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I don't care if you're selling pencils or barbed wire.

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Honestly, I don't care.

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I really don't because it's the other things

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that make it up that I'm looking at.

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You can be super excited about your new high-tech

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solar panel that has better power densities

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and da, da, da, da, da.

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Okay, say all that in six minutes.

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My new software, whatever.

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All right, let's assume it's fantastic and it has no bugs.

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Well, there's a few, no, no,

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let's assume it's perfect for the six-minute conversation.

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The next 24 minutes, the 40%,

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I wanna hear about your team.

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Do you have a team?

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If we took you out of the picture,

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if I'm buying your business and you want out,

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I'm buying your company and you leave, what have I got?

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So prime is that point as you go up the bell curve,

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go from success to prime.

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Prime is that point at the top of the curve

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where you're gonna get the maximum price

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because the company can thrive without you.

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That's prime.

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And prime is building yourself to that point.

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Now, if you, you know,

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let's take the Noah example here, it's a good one.

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So, you know, if Rich is brought in and Rich is now,

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I got legs for this, man.

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I wanna do this for at least another 10 years.

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And Robin says, I'm out.

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That's good because Robin's left something behind.

335
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The company can thrive without him.

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The company is heading towards prime.

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The backroom chatter that private equity people use

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behind the scenes is they say,

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we don't want the IP going home at night,

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meaning you.

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We don't want all the intellectual property

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leaving the building and going home.

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Something happens to you, it's the end of the business.

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Can't all be in your head, is what we're saying.

345
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Can't just be you.

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So the faster way you can get out of your head

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and what you do and the thing that caused your contribution

348
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gets multiplied in the organization,

349
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even if it's distributed, fine.

350
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But if you leave, does it work?

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Does it, not just can it be maintained, but will it grow?

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So that's the 40%.

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So I wanna hear for 24 minutes about your team.

354
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And it's okay if you don't have a whole team.

355
00:22:29.520 --> 00:22:31.800
Oh, we're missing a this and we're missing a that.

356
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The fact that you know what you're missing

357
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and you have a sense of profile of what you're missing,

358
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how you think you're gonna attract those new people.

359
00:22:39.600 --> 00:22:40.800
I wanna hear all that.

360
00:22:40.800 --> 00:22:44.680
Tell me how, to your little 10 man company,

361
00:22:44.680 --> 00:22:47.240
your 10 person, sorry, 10 person company,

362
00:22:47.480 --> 00:22:51.520
how are you going to attract that new CFO?

363
00:22:51.520 --> 00:22:56.520
Why would this very talented CFO leave a secure job

364
00:22:57.040 --> 00:23:00.480
in a $100 million company or $50 million company

365
00:23:00.480 --> 00:23:02.760
to come and work for your $1 million company?

366
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How are you going to attract that talent?

367
00:23:04.680 --> 00:23:07.160
Robin, you and I have talked a great deal about this.

368
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It's a challenge.

369
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And this says a lot about you

370
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and how the organization is being built.

371
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And so we ask a lot of questions around that.

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Notice we got past the fun part of whatever it is you do.

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We got past that in the first six minutes.

374
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We're gone.

375
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24 minutes in, I'm looking to see

376
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how you're gonna build a team, how it's gonna grow,

377
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how you're gonna scale.

378
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And then the last half an hour,

379
00:23:32.320 --> 00:23:36.680
which we're all the CEOs kind of lose that enthusiasm

380
00:23:36.680 --> 00:23:39.880
is we wanna know your capital structure.

381
00:23:39.880 --> 00:23:41.800
How much debt do you have?

382
00:23:41.800 --> 00:23:44.600
How many investors have you brought so far?

383
00:23:44.600 --> 00:23:46.760
How many investors have special rights?

384
00:23:46.760 --> 00:23:47.840
Do they have options?

385
00:23:47.840 --> 00:23:48.680
Do they have warrants?

386
00:23:48.680 --> 00:23:50.760
Blah, blah, blah, all the complexities of that.

387
00:23:50.760 --> 00:23:53.080
Meaning if I put my money in your business,

388
00:23:53.080 --> 00:23:54.880
am I gonna get diluted?

389
00:23:54.880 --> 00:23:57.560
Or if they're gonna get diluted, or we got a lawsuit.

390
00:23:57.560 --> 00:24:00.880
Well, if I find out you've got over 30 different investors

391
00:24:00.880 --> 00:24:04.120
in your small company, I don't wanna deal with all that.

392
00:24:04.120 --> 00:24:08.440
Because in most states, anyone owns less than 5%

393
00:24:08.440 --> 00:24:11.040
in some states, 10% in others,

394
00:24:11.040 --> 00:24:13.660
have minority right protections.

395
00:24:13.700 --> 00:24:15.100
That means we can't just decide

396
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because we have majority interest.

397
00:24:17.500 --> 00:24:19.540
So now we have all sorts of new issues

398
00:24:19.540 --> 00:24:22.780
and limited partners are protected and blah, blah.

399
00:24:22.780 --> 00:24:23.980
And I just look into that and say,

400
00:24:23.980 --> 00:24:27.660
I'm gonna put my money into that mess, I'm not interested.

401
00:24:27.660 --> 00:24:30.020
One of the big things I do when we came in

402
00:24:30.020 --> 00:24:32.060
is we bought all those people out.

403
00:24:33.940 --> 00:24:36.500
Another way we did it is, we cleaned up,

404
00:24:36.500 --> 00:24:38.500
it's called cleaning up the capital table,

405
00:24:38.500 --> 00:24:39.820
cleaning up the cap table.

406
00:24:39.820 --> 00:24:42.300
What that means, a capital table is nothing more

407
00:24:42.340 --> 00:24:45.340
than a list of all the people and how many shares they own.

408
00:24:45.340 --> 00:24:47.860
Well, that's in its simplest, simplest form.

409
00:24:47.860 --> 00:24:49.500
But sometimes people come in and say,

410
00:24:49.500 --> 00:24:52.260
well, if I put my money in, now, let me tell you,

411
00:24:52.260 --> 00:24:54.260
venture capitals or vulture capital

412
00:24:54.260 --> 00:24:56.560
is the most talented at this.

413
00:24:56.560 --> 00:24:58.700
They come in and say, we won't take a majority of this

414
00:24:58.700 --> 00:25:00.500
and we'll put in, we'll take 20%.

415
00:25:00.000 --> 00:25:04.960
cent. We'll give you the million dollars you're asking for, we'll take 20 percent of the company

416
00:25:04.960 --> 00:25:10.160
which is great because that values it at five million dollars. I'm sure you saw the math and so

417
00:25:11.200 --> 00:25:14.720
with 20 percent it's worth a million, obviously the company's worth five million.

418
00:25:14.720 --> 00:25:21.200
So I'm going to give you the million dollars and guess what we're going to do is you're going to

419
00:25:21.200 --> 00:25:28.320
hit these three milestones of revenue. If you miss the first one then we're going to go to 40 percent,

420
00:25:28.320 --> 00:25:32.640
then we're going to go to 60 percent and we'll put the extra money in, we'll put another

421
00:25:32.640 --> 00:25:36.880
another half a million, another half a million and if we put the third half a million in now

422
00:25:36.880 --> 00:25:42.960
we're two and a half million to it, we'll earn 85 or 90 percent of it. How do I know all this?

423
00:25:42.960 --> 00:25:50.240
Because I was 20, 31 years old, raised 30 million dollars for my business. I thought I was a genius

424
00:25:50.240 --> 00:25:56.080
for my technology firm and we were thought man I'm so smart and then one day it dawned on me,

425
00:25:56.080 --> 00:26:03.680
hang on, before they came in I owned 70 percent of this business, now I own six percent.

426
00:26:05.440 --> 00:26:12.240
I didn't feel so smart now. So when they sold it guess who made all the money? The money people

427
00:26:12.240 --> 00:26:20.880
made the money. So the person who did the work doesn't get the money. Okay here's good news

428
00:26:20.880 --> 00:26:24.880
before you get too depressed with that whole private equity approach because here's the good

429
00:26:24.880 --> 00:26:33.360
news. Private equity is desperate for capital. I just found out yesterday that right now there's

430
00:26:33.360 --> 00:26:42.480
one, I can't believe this amount, this is so huge, 1.3 trillion dollars. So that's one point, that's

431
00:26:43.040 --> 00:26:50.080
1,300 million million dollars. Think about it for a second, right? That 1.3 trillion dollars

432
00:26:50.080 --> 00:26:58.240
looking for investments. There are far too few businesses and way way too much money.

433
00:27:00.400 --> 00:27:07.040
Part of it is when you overprint money that money has to go somewhere and you say well where is all

434
00:27:07.040 --> 00:27:13.120
that money? You know I've been looking for money, I can't find money. Here's the thing, if you build

435
00:27:13.120 --> 00:27:18.320
really smartly over the next three to five years it doesn't matter that you're a million dollar

436
00:27:18.320 --> 00:27:24.240
business. It's what that million dollar business can sell for because you can have one

437
00:27:24.240 --> 00:27:30.880
million dollar business that sells for three million or it can sell for 13 million. You say what? Really

438
00:27:30.880 --> 00:27:36.720
it can be that different and it's got to do with how you build it. So I'm going to talk a bit about

439
00:27:36.720 --> 00:27:43.040
that for today. So this is the most serious leadership conversation we can have

440
00:27:43.040 --> 00:27:46.320
and we'll have it two or three times through the year. So every now and again you can look up and

441
00:27:46.320 --> 00:27:51.440
say what am I actually building? If you're building a non-profit you're not measuring your dollars,

442
00:27:51.440 --> 00:27:58.320
you're measuring your reach. How many people did we reach? Okay questions around that before I get

443
00:27:58.320 --> 00:28:07.360
into it. So just jump in if you've got a question. So here's Robin, did you have you were going to

444
00:28:07.360 --> 00:28:13.040
ask questions? Yeah I was going to make a comment. You said that when I've talked to people

445
00:28:13.040 --> 00:28:19.920
before and they're always thinking like this you know what's your exit strategy and it's like

446
00:28:20.640 --> 00:28:28.240
well I don't have an exit. I don't plan on ever you know just like you said but

447
00:28:28.880 --> 00:28:34.000
I think what you said is eventually I mean I'm going to die eventually I guess and that could

448
00:28:34.000 --> 00:28:42.160
end the company you know but we're not really building to sell but what I hear is if you

449
00:28:42.160 --> 00:28:49.040
build to sell then you're building a company of value rather than just a job and going through the

450
00:28:49.600 --> 00:28:54.560
the exercise. Okay let's let's take that that's a good thought let's take that thought another

451
00:28:54.560 --> 00:29:02.640
step forward. If you build it to sell you're honoring yourself way more because if you

452
00:29:02.640 --> 00:29:07.680
if I told you I'm coming to buy your business in three years time and we both agree and you

453
00:29:07.680 --> 00:29:13.440
went flat out to create as much value for me as possible if you were willing to do it for me why

454
00:29:13.440 --> 00:29:20.480
wouldn't you do it for yourself and your family? So it's not just willing to sell it's not it's

455
00:29:20.480 --> 00:29:27.120
not about the I want out it's I want to build smartly whether I keep it think about whether

456
00:29:27.120 --> 00:29:31.840
I keep it and ultimately my estate gets it like you said you die and it goes to your estate you

457
00:29:31.840 --> 00:29:37.440
want to leave as much value as possible or you sell it to your management team that's another

458
00:29:37.440 --> 00:29:42.720
good buyer right or you give it to a family member which is a lot like the other one as part

459
00:29:42.720 --> 00:29:49.040
of the estate but you just do it before you die or you sell it to a very smart buyer like a PE group

460
00:29:49.600 --> 00:29:55.200
so let me talk for a second right now over 60 percent of all the price there are 585,000

461
00:29:56.240 --> 00:29:59.600
privately owned companies in the United States.

462
00:30:00.000 --> 00:30:04.000
and what's called middle market.

463
00:30:04.000 --> 00:30:06.640
So this means companies that are between 50 million

464
00:30:06.640 --> 00:30:09.880
in revenue up to 2 billion, that's called middle market.

465
00:30:09.880 --> 00:30:12.020
The smaller companies under 50 million,

466
00:30:12.020 --> 00:30:13.640
I don't know how many there are, it's just a lot,

467
00:30:13.640 --> 00:30:15.800
because that group fails a lot.

468
00:30:15.800 --> 00:30:17.880
You know, you've got 70, 80% failure rates

469
00:30:17.880 --> 00:30:19.920
within the first five years,

470
00:30:19.920 --> 00:30:22.280
which means that if you survive five years,

471
00:30:22.280 --> 00:30:25.760
you're already like in the top 30%,

472
00:30:25.760 --> 00:30:29.680
20% of businesses anyway, so well done to you, right?

473
00:30:29.680 --> 00:30:33.160
So recognize your achievement, firstly.

474
00:30:33.160 --> 00:30:35.280
The next thing is to look at it as,

475
00:30:35.280 --> 00:30:36.920
look, even if you're gonna give it away,

476
00:30:36.920 --> 00:30:39.960
how many of you know the story of Bob Goff, you know?

477
00:30:39.960 --> 00:30:42.480
It's, what's the Thursdays he gives stuff away

478
00:30:42.480 --> 00:30:43.520
as the Thursdays?

479
00:30:43.520 --> 00:30:44.360
Thursdays, right?

480
00:30:44.360 --> 00:30:45.600
He gives stuff away on Thursdays.

481
00:30:45.600 --> 00:30:47.240
He always gives something away on Thursdays.

482
00:30:47.240 --> 00:30:48.240
It doesn't matter what it is,

483
00:30:48.240 --> 00:30:49.520
he gives stuff away on Thursdays.

484
00:30:49.520 --> 00:30:51.680
And then one time, he runs a big law firm,

485
00:30:51.680 --> 00:30:53.280
he also teaches Lord Pepperdine.

486
00:30:53.280 --> 00:30:56.480
And so he comes in and he calls his whole team together,

487
00:30:56.480 --> 00:30:58.200
and there's a big group of attorneys,

488
00:30:58.200 --> 00:30:59.920
and he calls one of the younger attorneys up,

489
00:30:59.920 --> 00:31:03.320
hands him the keys, says, you now own the law firm.

490
00:31:03.320 --> 00:31:04.160
The guy says, why?

491
00:31:04.160 --> 00:31:06.200
He says, because it's Thursday.

492
00:31:06.200 --> 00:31:09.600
So, so there you go.

493
00:31:09.600 --> 00:31:10.960
So even if you do that,

494
00:31:10.960 --> 00:31:12.800
then don't you wanna give that young man

495
00:31:12.800 --> 00:31:14.440
the best possible business?

496
00:31:14.440 --> 00:31:16.600
You don't wanna hand him a pile of debt and a bad,

497
00:31:16.600 --> 00:31:19.160
you know, on the verge of a bunch of lawsuits.

498
00:31:19.160 --> 00:31:21.400
And what is it you're giving him?

499
00:31:21.400 --> 00:31:22.800
What are you gonna give your kids?

500
00:31:22.800 --> 00:31:25.160
So there's no, there's no,

501
00:31:25.160 --> 00:31:26.480
I know there's this,

502
00:31:26.480 --> 00:31:28.520
most guys are not thinking about that.

503
00:31:28.520 --> 00:31:30.080
You should be thinking about this

504
00:31:30.080 --> 00:31:31.440
because it'll make you build

505
00:31:31.440 --> 00:31:34.080
the smartest possible business for you.

506
00:31:34.080 --> 00:31:35.400
Even if you never sell it,

507
00:31:35.400 --> 00:31:37.040
then you're honoring you and your children.

508
00:31:37.040 --> 00:31:38.680
Makes sense, so thanks for raising that.

509
00:31:38.680 --> 00:31:40.560
Okay, so let's talk about,

510
00:31:41.880 --> 00:31:44.240
let's talk about how do we value a business?

511
00:31:44.240 --> 00:31:49.080
So there are only really three ways to value a business.

512
00:31:49.080 --> 00:31:52.120
And I have a book this thick on my, from my MBA days,

513
00:31:52.120 --> 00:31:54.680
I'll save you all that, called Valuation.

514
00:31:54.680 --> 00:31:56.320
It's massively complex.

515
00:31:56.320 --> 00:31:57.640
And I've done this by the way,

516
00:31:57.640 --> 00:31:59.240
right at the level of Goldman Sachs

517
00:31:59.240 --> 00:32:01.840
and I've helped value businesses and so forth.

518
00:32:01.840 --> 00:32:03.280
So I've spent a career doing this,

519
00:32:03.280 --> 00:32:06.040
but let me make it really straightforward.

520
00:32:06.040 --> 00:32:08.760
For you as the business owner of a small business

521
00:32:08.760 --> 00:32:11.560
trying to think, what is my business value today?

522
00:32:11.560 --> 00:32:14.760
We will watch Shark Tank and they do 5X times

523
00:32:14.760 --> 00:32:17.200
the profits or whatever, fine.

524
00:32:17.200 --> 00:32:20.000
You know, that is such a unique case

525
00:32:20.000 --> 00:32:22.440
because valuation is so complex that they do that

526
00:32:22.440 --> 00:32:24.280
just because they're very smart people

527
00:32:24.880 --> 00:32:27.240
and they'll eat the whatever dumb thing it is.

528
00:32:27.240 --> 00:32:28.760
And they often are pulling out of,

529
00:32:28.760 --> 00:32:30.000
there are deals you look and you go,

530
00:32:30.000 --> 00:32:31.400
why did they pull out of that deal?

531
00:32:31.400 --> 00:32:33.520
Because they evaluated it very differently

532
00:32:33.520 --> 00:32:35.240
beyond the five times the profit.

533
00:32:35.240 --> 00:32:38.400
So let's say you have a $10 million business

534
00:32:38.400 --> 00:32:41.120
and you drop a million dollars to the bottom line,

535
00:32:41.120 --> 00:32:44.080
gross profit before the owner's earnings.

536
00:32:44.080 --> 00:32:46.320
So they'll take out your salary out of that,

537
00:32:46.320 --> 00:32:47.720
your owner's earnings,

538
00:32:47.720 --> 00:32:49.480
because if they're the owners, they would earn that.

539
00:32:49.480 --> 00:32:51.280
So they add that in, right?

540
00:32:51.280 --> 00:32:53.440
So let's say with owner, taking out owner's earnings

541
00:32:53.440 --> 00:32:54.960
there's a million dollars left,

542
00:32:54.960 --> 00:32:57.560
then they do the 5X, okay, it's worth $5 million.

543
00:32:57.560 --> 00:32:59.000
Think of all they're really saying

544
00:32:59.000 --> 00:33:00.640
is actually quite simple.

545
00:33:00.640 --> 00:33:04.040
They're saying you created a black box, right?

546
00:33:04.040 --> 00:33:05.600
And that black box, once a year,

547
00:33:05.600 --> 00:33:08.880
drops out a pile of cash, a million dollars.

548
00:33:08.880 --> 00:33:13.560
Now the question is how many advanced years am I buying?

549
00:33:13.560 --> 00:33:15.440
So assuming that,

550
00:33:15.440 --> 00:33:17.000
because the business could go grow faster,

551
00:33:17.000 --> 00:33:21.840
the next year could do two or three or four profits.

552
00:33:21.840 --> 00:33:24.560
What I'm doing is I'm buying the black box

553
00:33:24.560 --> 00:33:26.840
as it stands today.

554
00:33:26.840 --> 00:33:31.080
And I'm saying that I can pretty much guarantee

555
00:33:31.080 --> 00:33:32.840
that it's probably gonna grow up, go up,

556
00:33:32.840 --> 00:33:34.000
but it may go down.

557
00:33:34.000 --> 00:33:36.280
So let's just net that all out and say,

558
00:33:36.280 --> 00:33:37.800
I'm gonna have the same black box,

559
00:33:37.800 --> 00:33:39.920
it's gonna drop the same million dollars a year,

560
00:33:39.920 --> 00:33:44.440
therefore it's worth five years of dropping the box value.

561
00:33:44.440 --> 00:33:46.640
That's the simplest way to understand it.

562
00:33:46.640 --> 00:33:48.400
The next thing I'm trying to understand is

563
00:33:48.400 --> 00:33:51.760
how hard is it to crank the handle on the black box

564
00:33:52.520 --> 00:33:53.360
to make the million dollars?

565
00:33:53.360 --> 00:33:54.720
Do I need a team of a hundred

566
00:33:54.720 --> 00:33:56.640
or can two people online do that?

567
00:33:58.480 --> 00:34:03.480
Now, now, if it takes two people online to crank,

568
00:34:03.480 --> 00:34:05.760
that's why I don't care what the company is.

569
00:34:05.760 --> 00:34:06.960
As a private equity investor,

570
00:34:06.960 --> 00:34:09.280
I don't care whether it's widgets or whatever.

571
00:34:10.400 --> 00:34:13.719
Because to me, it's how hard is it to crank?

572
00:34:13.719 --> 00:34:15.960
How complex is this business?

573
00:34:15.960 --> 00:34:18.560
Well, there was a company in Atlanta

574
00:34:18.560 --> 00:34:22.120
that I worked with closely, it was called Aperon.

575
00:34:22.120 --> 00:34:26.560
And Aperon Technologies had 42 PhDs working there, 42.

576
00:34:28.320 --> 00:34:31.560
And they worked with major research grants

577
00:34:31.560 --> 00:34:32.679
from the US government,

578
00:34:32.679 --> 00:34:35.199
and their job was to extract arsenic-3

579
00:34:35.199 --> 00:34:37.800
and arsenic-5 out of water.

580
00:34:37.800 --> 00:34:39.679
Turns out Atlanta is some of the cleanest water

581
00:34:39.679 --> 00:34:41.960
in the world, you know, in the country, it's amazing.

582
00:34:41.960 --> 00:34:45.000
I didn't know that until I did that exercise.

583
00:34:45.000 --> 00:34:48.360
Here's why I would never buy this company.

584
00:34:49.159 --> 00:34:51.400
And their investors, their board brought me in

585
00:34:51.400 --> 00:34:52.239
to look at the whole thing.

586
00:34:52.239 --> 00:34:55.320
The capital table was so complex, this one,

587
00:34:55.320 --> 00:34:58.160
and then, you know, it was just a mess.

588
00:34:58.160 --> 00:34:59.840
Even if I fix the capital table,

589
00:34:59.840 --> 00:35:00.880
even if we simply...

590
00:35:00.000 --> 00:35:02.160
I had all these investors and what they could do

591
00:35:02.160 --> 00:35:03.560
and not get and all that stuff.

592
00:35:03.560 --> 00:35:04.920
Even if you took away all the options

593
00:35:04.920 --> 00:35:08.040
and all the complexity and just made them simple investors,

594
00:35:08.040 --> 00:35:09.440
I still wouldn't buy their business.

595
00:35:09.440 --> 00:35:12.640
Even if those investors handed me their shares,

596
00:35:12.640 --> 00:35:14.680
I wouldn't have bought that business.

597
00:35:14.680 --> 00:35:18.280
It was so complex, that business.

598
00:35:18.280 --> 00:35:23.280
So I would pay them one times earnings, not five.

599
00:35:23.920 --> 00:35:26.160
It's too hard to crank the handle.

600
00:35:26.160 --> 00:35:28.600
But if it was two people,

601
00:35:28.600 --> 00:35:32.920
so let's say it's two people online doing this,

602
00:35:32.920 --> 00:35:36.440
no offices, just two shareholders,

603
00:35:36.440 --> 00:35:38.200
they're cranking the handle.

604
00:35:38.200 --> 00:35:41.480
And we all say, oh, YouTube guys, it's so easy.

605
00:35:41.480 --> 00:35:43.160
It's not, those guys burn out.

606
00:35:43.160 --> 00:35:45.800
That is a tough, tough business.

607
00:35:45.800 --> 00:35:48.400
But if you get to a certain momentum,

608
00:35:48.400 --> 00:35:51.640
you're gonna have a team of 10, 15 people doing it,

609
00:35:51.640 --> 00:35:54.520
but the cranking of it is fairly easy.

610
00:35:54.520 --> 00:35:56.400
But who's coming up with all this stuff

611
00:35:56.400 --> 00:35:58.240
and how long will that be there?

612
00:35:59.240 --> 00:36:01.680
Will YouTube still be the same in five years?

613
00:36:01.680 --> 00:36:03.480
No way.

614
00:36:03.480 --> 00:36:06.160
So I don't think that if it's dropping a million dollars

615
00:36:06.160 --> 00:36:08.960
today, cranking the handle is gonna be a million dollars

616
00:36:08.960 --> 00:36:10.240
in five years time.

617
00:36:10.240 --> 00:36:11.320
Might be nothing.

618
00:36:12.160 --> 00:36:15.640
So I'm not gonna give them 5X, give them 3X.

619
00:36:15.640 --> 00:36:18.240
Yeah, but it's easy, it's cranking the handle.

620
00:36:18.240 --> 00:36:22.480
But if somebody comes up with such a clever idea

621
00:36:22.480 --> 00:36:24.560
and it's growing so quickly.

622
00:36:25.480 --> 00:36:30.040
So a friend of mine opened up a restaurant group

623
00:36:30.040 --> 00:36:33.400
and he owned, he built a restaurant, sold it,

624
00:36:33.400 --> 00:36:36.960
built another, he's a CPA, smart guy.

625
00:36:37.840 --> 00:36:42.840
And what he did was he sold a business chain

626
00:36:42.960 --> 00:36:47.400
and then he took the money and he bought 150 pizza

627
00:36:47.400 --> 00:36:50.480
with a major pizza franchise.

628
00:36:50.480 --> 00:36:51.680
He bought 150 of them.

629
00:36:51.680 --> 00:36:53.000
And I thought, this is crazy.

630
00:36:53.000 --> 00:36:54.240
I mean, he didn't build them all at once,

631
00:36:54.920 --> 00:36:57.000
but he built him in groups of five and 10 very rapidly.

632
00:36:57.000 --> 00:36:59.800
Within two, three years, he got it up to 150.

633
00:36:59.800 --> 00:37:02.600
And then he decided, and so people could come to him

634
00:37:02.600 --> 00:37:05.120
and offer him, you know, three, 5X,

635
00:37:05.120 --> 00:37:08.680
because that little pizza place will just churn out cash.

636
00:37:08.680 --> 00:37:13.280
They make between 11 and 13% a year.

637
00:37:13.280 --> 00:37:14.240
That's the gross profit.

638
00:37:14.240 --> 00:37:16.680
Those little things can count, just churn them out.

639
00:37:16.680 --> 00:37:18.480
And by the way, if you have a sitting in pizza,

640
00:37:18.480 --> 00:37:19.440
then it drops way down.

641
00:37:19.440 --> 00:37:23.560
If it's just sheer delivery, it goes up to 14, 15%.

642
00:37:23.560 --> 00:37:24.400
Which is really interesting

643
00:37:24.400 --> 00:37:25.240
because you could take your money

644
00:37:25.240 --> 00:37:27.360
and give it to Warren Buffett and get 15% a year

645
00:37:27.360 --> 00:37:30.160
and do absolutely nothing, as an example.

646
00:37:31.480 --> 00:37:33.360
And well, how long can he keep that up for?

647
00:37:33.360 --> 00:37:34.880
Well, he's done it for 39 years.

648
00:37:34.880 --> 00:37:36.200
I think he's fine.

649
00:37:36.200 --> 00:37:38.040
So the issue is, you know,

650
00:37:38.040 --> 00:37:40.320
but what happens if Warren dies?

651
00:37:40.320 --> 00:37:44.680
So you, but he's got a team that is showing they can do it.

652
00:37:44.680 --> 00:37:46.840
So he comes to me and he says,

653
00:37:46.840 --> 00:37:48.480
hey, I got this new big thing.

654
00:37:48.480 --> 00:37:51.720
You need to buy the franchise for this.

655
00:37:51.760 --> 00:37:52.800
It's a primary.

656
00:37:52.800 --> 00:37:54.520
And I said, well, how much can I make?

657
00:37:54.520 --> 00:37:55.880
And he said, well, you know, you're good.

658
00:37:55.880 --> 00:37:59.160
So you probably make 15% out of it.

659
00:37:59.160 --> 00:38:01.680
And I said, well, how much does it make in a year?

660
00:38:01.680 --> 00:38:02.840
And he said, well, yeah, if you push it,

661
00:38:02.840 --> 00:38:04.600
you make a million dollars.

662
00:38:04.600 --> 00:38:07.280
So I said, I'm doing this for 150K.

663
00:38:07.280 --> 00:38:08.760
You're out of your mind.

664
00:38:08.760 --> 00:38:11.280
Why don't I give the million dollars to Warren Buffett

665
00:38:11.280 --> 00:38:15.160
and do nothing and go and sit at the beach?

666
00:38:16.480 --> 00:38:17.640
I have no headaches.

667
00:38:17.640 --> 00:38:19.400
That's a lot easier to crank the handle.

668
00:38:19.400 --> 00:38:21.280
So that's what you're competing with.

669
00:38:22.680 --> 00:38:24.400
I'm a private, I'm an investor.

670
00:38:24.400 --> 00:38:26.360
I can give the money to Warren Buffett

671
00:38:26.360 --> 00:38:27.680
or I can buy your business.

672
00:38:27.680 --> 00:38:30.080
That's what you're competing with.

673
00:38:30.080 --> 00:38:31.000
I'm not gonna put it in the bank

674
00:38:31.000 --> 00:38:33.440
because I'm gonna get what, one or 2%, that's worthless.

675
00:38:33.440 --> 00:38:36.480
Okay, so let's go back to the three ways you can,

676
00:38:36.480 --> 00:38:39.240
not Shark Tank way, three ways, crank the box.

677
00:38:39.240 --> 00:38:41.280
So you think about your business as a black box.

678
00:38:41.280 --> 00:38:43.320
Think about how you can make the cranking easier.

679
00:38:43.320 --> 00:38:44.400
What can you automate?

680
00:38:44.400 --> 00:38:45.720
What can you delete?

681
00:38:45.720 --> 00:38:48.240
What can, how can you get less of the gears in there?

682
00:38:48.240 --> 00:38:49.560
Get some of the gears out of there.

683
00:38:49.560 --> 00:38:51.200
Make that thing smooth, you know?

684
00:38:51.600 --> 00:38:52.440
Can you automate it?

685
00:38:52.440 --> 00:38:54.920
Can you put a little electric motor in there,

686
00:38:54.920 --> 00:38:57.000
let it turn the handle almost by itself?

687
00:38:57.000 --> 00:39:01.560
You know, what can you do to make it easier to crank?

688
00:39:02.720 --> 00:39:07.040
And that's what we're gonna spend

689
00:39:07.040 --> 00:39:10.440
a lot of time this year doing, talking about all that.

690
00:39:10.440 --> 00:39:11.400
Three ways to build your business.

691
00:39:11.400 --> 00:39:13.640
Number one value is what's called book value.

692
00:39:13.640 --> 00:39:14.800
I take your financials

693
00:39:14.800 --> 00:39:16.560
and I look at the assets in your business.

694
00:39:16.560 --> 00:39:19.200
This only really works particularly for real estate

695
00:39:19.200 --> 00:39:21.480
and some unique situations

696
00:39:21.480 --> 00:39:24.680
where there's big assets on the books.

697
00:39:24.680 --> 00:39:26.960
By assets I'm, you know, I'm referring to,

698
00:39:28.160 --> 00:39:30.880
you know, longer term assets like, you know,

699
00:39:30.880 --> 00:39:33.680
like real estate, like cash and so on.

700
00:39:33.680 --> 00:39:36.440
That's a horrible way to value a business

701
00:39:36.440 --> 00:39:38.240
and no one will really do that

702
00:39:38.240 --> 00:39:40.320
unless it's a really old business

703
00:39:40.320 --> 00:39:41.840
and it's in a very unique spot.

704
00:39:41.840 --> 00:39:44.160
So pretty useless to you.

705
00:39:44.160 --> 00:39:46.240
The next way is a competitive valuation

706
00:39:46.240 --> 00:39:47.200
based on your market.

707
00:39:47.200 --> 00:39:50.200
So we'll go and look up in your market segment.

708
00:39:50.200 --> 00:39:51.880
The public markets are divided up

709
00:39:51.880 --> 00:39:54.040
into very specific market types.

710
00:39:54.040 --> 00:39:56.120
We can look up where you fit in that market type

711
00:39:56.120 --> 00:39:57.080
and the size of your business,

712
00:39:57.080 --> 00:39:59.400
and we can scale and see what is the typical.

713
00:40:00.000 --> 00:40:06.240
factor. Is it 5x like we've been talking about for the black box or in your industry it's 7.5,

714
00:40:06.240 --> 00:40:11.280
14, it's pretty well documented and private equity firms know what that number should be.

715
00:40:13.120 --> 00:40:18.800
But the best way to do it is called DCF, discounted cash flow. Basically what we do is

716
00:40:18.800 --> 00:40:24.880
this, we say here's my black box today, next year, each year something new is going to be added.

717
00:40:25.840 --> 00:40:30.720
And so what happened is I'm starting now but then we're launching that second product so

718
00:40:30.720 --> 00:40:34.080
that's going to go up so we're going to grow, the box is going to get bigger, it's going to

719
00:40:34.080 --> 00:40:39.600
crank out more cash. The next year we're automating all that and we can do it with half the staff so

720
00:40:39.600 --> 00:40:44.800
the amount falling to the bottom line is going to go. So this year it's going to go a million,

721
00:40:44.800 --> 00:40:48.720
million five, then it's going to go to three because we've got this new automation thing

722
00:40:48.720 --> 00:40:53.680
we're building and when that kicks in we need half the staff to do it. Like we did at Brilliant,

723
00:40:53.680 --> 00:40:57.280
we roughly ended up with half the staff, we simplified the cranking of the handle.

724
00:40:57.920 --> 00:41:01.520
And it wasn't just getting rid of costs, you've got to think smarter than just getting rid of

725
00:41:01.520 --> 00:41:07.840
costs. What you're looking for is how easy it is. And then if I can explain now the question

726
00:41:08.480 --> 00:41:12.400
the private equity person is, what's the likelihood that you do the first thing,

727
00:41:12.960 --> 00:41:16.480
what's the likelihood you do the second thing, what's the likelihood you do the third thing,

728
00:41:16.480 --> 00:41:20.720
and then what we do is we discount that cash flow. You say in three years time it'll be three

729
00:41:20.720 --> 00:41:26.480
million, today it's a million, it's gonna be three million, then I discount that back to today's

730
00:41:26.480 --> 00:41:32.800
money based on the risk I perceive. Maybe I say well there's a 50-50 so I knock off 50% so I'll

731
00:41:32.800 --> 00:41:38.000
give you one and a half million credit for that. So it's a million a year, million and a half,

732
00:41:38.000 --> 00:41:45.600
million and a half, so you see what I'm doing I'm discounting it based on the risk. So this is how

733
00:41:46.560 --> 00:41:52.720
this is how venture capital people look at your business, they're looking at the risk

734
00:41:53.600 --> 00:42:00.880
they're gonna have to take and they're looking to how probable is it. This means

735
00:42:01.600 --> 00:42:07.600
that when you make an assumption, I'm assuming that we're going to add this next product,

736
00:42:07.600 --> 00:42:14.160
if you've got that tested, piloted, if I was selling the edge today, if I were going to go

737
00:42:14.240 --> 00:42:21.440
and sell this off today, notice I piloted it for a whole year first so that every assumption that

738
00:42:21.440 --> 00:42:25.840
I put in that projection going forward has already been tested. Where did I learn that

739
00:42:25.840 --> 00:42:33.440
from I wonder? I learned that from people and I can't tell you how many founders massively

740
00:42:33.440 --> 00:42:38.000
overestimate the value of their business or massively undervalue, they're not anywhere near.

741
00:42:38.960 --> 00:42:46.080
So this is 30 years of figuring this stuff out by the way, I think my goal was to give you the

742
00:42:46.080 --> 00:42:52.160
full value of your whole year investment and then some in the first half an hour, first hour of the

743
00:42:52.160 --> 00:42:59.120
day. So here's where we're landing with this, we're landing here, that discounted cash flow,

744
00:43:00.000 --> 00:43:05.680
most founders if I asked each of you tell me what your business is worth,

745
00:43:07.120 --> 00:43:13.200
I put serious money on the fact that none of you or very few of you would get it close,

746
00:43:13.200 --> 00:43:17.520
you're either going to underestimate it or overestimate it. Here's how you can get past

747
00:43:17.520 --> 00:43:23.680
that under over thing and that is ask yourself what am I assuming is going to drive the growth

748
00:43:23.680 --> 00:43:30.720
next year and the year after that? And how well tested is that assumption? Now that you know how

749
00:43:30.720 --> 00:43:35.840
to do thin slicing because you've been through the edge, you can go and thin slice that test

750
00:43:35.840 --> 00:43:42.480
and find out and find out what you do and don't know. Hence the joke at Brilliant that if you

751
00:43:42.480 --> 00:43:47.120
really want the team to burst out laughing say it's my intuition red hat that we're going to

752
00:43:47.120 --> 00:43:52.960
do whatever and everyone just laughs because we know you're 90 to 95 percent wrong. And why we

753
00:43:52.960 --> 00:43:57.680
have our whole teaching and a whole training on how to make things less dumb? Because almost all

754
00:43:57.680 --> 00:44:01.680
our assumptions we make on the growth of the business is almost always wrong either because

755
00:44:01.680 --> 00:44:07.040
of the market or because of the amount we think we'll sell, for what we'll sell it for and how

756
00:44:07.040 --> 00:44:12.960
much it will cost to produce. We all make mistakes in all of that and so when you're asking

757
00:44:12.960 --> 00:44:19.760
somebody to pay for so here's what the private equity people are thinking. I'm looking to buy

758
00:44:20.720 --> 00:44:23.520
realistic cash flows not your dreams.

759
00:44:27.280 --> 00:44:31.280
They're not buying your dream. It's your dream but it's not their dream. They just look at the

760
00:44:31.280 --> 00:44:36.560
black box and look at the machinery. Does that help? Okay so here's three things you can do

761
00:44:36.560 --> 00:44:41.040
that will really drive value in your business. Create a team of leaders. We've already covered

762
00:44:41.120 --> 00:44:44.960
that so the IP doesn't go home at night. The intellectual property isn't all in your head.

763
00:44:44.960 --> 00:44:53.520
Number two, focus on reoccurring revenue. The fastest way to grow revenue is sell

764
00:44:53.520 --> 00:44:59.920
more stuff to the customers you already have. If you have tried to reduce the one-time customer

765
00:45:00.000 --> 00:45:02.520
You work your tail off, get a customer and lose them.

766
00:45:03.600 --> 00:45:09.040
Don't be like the big telephone companies who spend billions of dollars on advertising

767
00:45:09.040 --> 00:45:12.400
or whatever to get you as a customer and then give you the worst possible customer

768
00:45:12.400 --> 00:45:13.520
service on the backend.

769
00:45:13.840 --> 00:45:17.960
And so you get so annoyed, you leave and you think, I wonder what the acquisition cost

770
00:45:17.960 --> 00:45:22.520
was to get my $50 a month, my $600 a year.

771
00:45:22.560 --> 00:45:25.800
Maybe they spent $6,000 or $600 or whatever it is.

772
00:45:25.960 --> 00:45:27.600
And the person on the backend didn't care.

773
00:45:28.000 --> 00:45:30.840
Literally, you say, I'll go somewhere else that are like, fine, whatever.

774
00:45:32.120 --> 00:45:34.920
So you look at where it's bleeding.

775
00:45:34.920 --> 00:45:40.680
And if you've got customers and you're selling a customer, like if you do, if

776
00:45:40.680 --> 00:45:45.960
you're in construction, right, since I'm sure Ben and Tyler will hear this

777
00:45:45.960 --> 00:45:49.920
afterwards, but if you're in construction and you're building a house and then the

778
00:45:49.920 --> 00:45:53.000
person leaves, the next time I'm going to build a house at seven, 10 or 15 years

779
00:45:53.000 --> 00:45:55.520
from now, that's, that's not reoccurring revenue.

780
00:45:55.520 --> 00:46:00.800
But maybe there's a series of other things you can add that will allow

781
00:46:00.800 --> 00:46:03.080
you to build on top of that.

782
00:46:03.560 --> 00:46:07.800
So go and sell to the same customer and try to set them up on some subscription

783
00:46:07.800 --> 00:46:10.480
or some annual payment or some mechanism.

784
00:46:10.800 --> 00:46:13.560
Don't do a cost per job business.

785
00:46:13.560 --> 00:46:18.960
That's a horrible, horrible way to value a business that doesn't do very well.

786
00:46:18.960 --> 00:46:20.880
You're going to get two or three X out of that deal.

787
00:46:21.520 --> 00:46:23.280
And then the last thing is free cashflow.

788
00:46:23.480 --> 00:46:24.400
So what about debt?

789
00:46:24.480 --> 00:46:29.480
Look, if debt is smartly used and there's a lot of free cashflow still fine.

790
00:46:31.040 --> 00:46:35.240
Building free cashflow in a business, as you all know, is the hardest thing to do.

791
00:46:35.520 --> 00:46:37.800
Businesses don't die because they don't have good products.

792
00:46:37.800 --> 00:46:39.400
They die because they run out of cash.

793
00:46:41.640 --> 00:46:45.760
So have two, three months of cash in the bank that you can run your team.

794
00:46:47.080 --> 00:46:48.760
Try to get it up to six if you can.

795
00:46:48.760 --> 00:46:51.520
And if you've got a, if you've got a cyclical business, definitely,

796
00:46:51.960 --> 00:46:53.160
you know, six months.

797
00:46:53.320 --> 00:46:55.920
So you can last half a year if you sell nothing.

798
00:46:56.480 --> 00:46:58.280
That's a huge sign.

799
00:46:58.720 --> 00:46:59.800
You say, well, that's so hard to do.

800
00:46:59.800 --> 00:47:03.680
It's not actually as hard to do as you think when you put your mind to it.

801
00:47:03.880 --> 00:47:04.200
Okay.

802
00:47:04.200 --> 00:47:06.560
So those are the three things you can do.

803
00:47:06.600 --> 00:47:11.200
Create a team of leaders, focus on reoccurring revenue, you know,

804
00:47:11.240 --> 00:47:12.600
manage free cashflow.

805
00:47:13.280 --> 00:47:16.360
So you have, here are three big things that buyers are looking for.

806
00:47:17.200 --> 00:47:18.960
And, and this is a summary and then we're done.

807
00:47:19.360 --> 00:47:21.680
So the three big things that a buyer is looking for.

808
00:47:23.880 --> 00:47:27.760
On the financial side, they're looking at, do you have multiple sources of revenue?

809
00:47:27.800 --> 00:47:30.920
They don't want to see you singularly dependent on one source of revenue.

810
00:47:31.160 --> 00:47:33.920
Two, how cyclical is your business?

811
00:47:34.120 --> 00:47:37.960
It's okay if it's cyclical, especially if you've got free cashflow cushion in there.

812
00:47:38.000 --> 00:47:38.520
That's fine.

813
00:47:38.880 --> 00:47:41.240
If you sell Christmas trees, you know, it's fine.

814
00:47:41.720 --> 00:47:46.080
Just, we know that the business runs for two months a year or whatever you do.

815
00:47:46.360 --> 00:47:48.440
But it's okay.

816
00:47:48.520 --> 00:47:52.920
As long as that, that you've structured the business around its cyclical nature.

817
00:47:52.920 --> 00:47:55.520
You don't get shocked every time the cycle comes around.

818
00:47:56.320 --> 00:47:58.600
And some of the cycles are more easy to see than others.

819
00:47:59.040 --> 00:48:02.320
You know, Christmas trees rather obvious, but some of them are much more so like

820
00:48:02.320 --> 00:48:04.560
the, you know, the housing cycles and all those.

821
00:48:04.960 --> 00:48:06.480
Three, is it recession proof?

822
00:48:06.560 --> 00:48:10.320
By that it means, do you have enough cash that you could carry?

823
00:48:10.760 --> 00:48:15.320
So one of the, one of the big things you can do there guys is to structure your,

824
00:48:15.720 --> 00:48:20.360
Rich, you mentioned like you really care about getting your team.

825
00:48:20.640 --> 00:48:21.920
Here's, here's a simple rule.

826
00:48:22.800 --> 00:48:25.960
Pull your cashflow, pull your expense down to the lowest expense.

827
00:48:25.960 --> 00:48:29.800
You can pull everybody's salary below the market.

828
00:48:29.800 --> 00:48:32.200
What the markets offer everybody, yours include everybody.

829
00:48:32.240 --> 00:48:37.400
Pull them really low, low, low, as low as the team can take it this way.

830
00:48:37.400 --> 00:48:40.720
When you hit a recession time, you don't have to fire anyone.

831
00:48:41.240 --> 00:48:42.360
It always annoys me.

832
00:48:42.360 --> 00:48:45.160
No CS to lay people off what you didn't know what you were doing.

833
00:48:45.880 --> 00:48:48.320
What did you get caught of God with, with that?

834
00:48:48.480 --> 00:48:50.440
Oh, well, you know, the market's different and you don't

835
00:48:50.440 --> 00:48:53.040
know this about markets move and change.

836
00:48:53.040 --> 00:48:53.920
You didn't know this.

837
00:48:54.440 --> 00:48:55.680
How did you not know this?

838
00:48:56.920 --> 00:49:01.480
When 9-11 happened, the reinsurer behind some of the buildings.

839
00:49:02.240 --> 00:49:06.680
For, uh, at 9-11 was, was Warren Buffett's reinsurance company.

840
00:49:07.240 --> 00:49:08.760
I think it was Munich real or whatever.

841
00:49:09.040 --> 00:49:09.520
That's it.

842
00:49:09.760 --> 00:49:16.160
And he apologized for the losses to his shareholders as an insurance company.

843
00:49:16.440 --> 00:49:20.040
They should have modeled that there would be a major catastrophe.

844
00:49:20.040 --> 00:49:22.920
What's the probability of a major catastrophe in a major

845
00:49:22.920 --> 00:49:24.400
US city in the next 10 years?

846
00:49:25.080 --> 00:49:26.600
How was that not planned for?

847
00:49:27.000 --> 00:49:27.960
You said, well, I'm a small business.

848
00:49:27.960 --> 00:49:29.600
I can't, you must think of this.

849
00:49:30.240 --> 00:49:31.040
So here's what you do.

850
00:49:31.040 --> 00:49:34.720
Lower your lowest with your team can tolerate, and then be super generous

851
00:49:34.720 --> 00:49:36.440
on bonuses when the team does well.

852
00:49:36.800 --> 00:49:39.840
That way we've done this at brilliant.

853
00:49:39.840 --> 00:49:43.120
We even moved to a four day work week to help get that thing

854
00:49:43.120 --> 00:49:44.880
to really, really, really low.

855
00:49:45.040 --> 00:49:49.160
Well, the, the performance is so high productivity wise, we could do that.

856
00:49:49.160 --> 00:49:53.880
So four day work week, we pulled it really, really way down, but man, they

857
00:49:53.880 --> 00:50:00.000
can really earn great bonuses and have so because our business can be spiky.

858
00:50:00.000 --> 00:50:02.000
It's brilliant.

859
00:50:02.000 --> 00:50:04.660
Okay, so that's revenue.

860
00:50:04.660 --> 00:50:07.120
Margin, how much margin is your business?

861
00:50:07.120 --> 00:50:09.800
Honestly, if you're not running a 40% margin on things,

862
00:50:09.800 --> 00:50:11.840
I'm not sure it's worth doing.

863
00:50:11.840 --> 00:50:14.760
60 is better, more space there, you know.

864
00:50:14.760 --> 00:50:16.520
So you want some, you know, the rule of three.

865
00:50:16.520 --> 00:50:18.600
Remember how we broke up the rule of three?

866
00:50:18.600 --> 00:50:19.960
Okay, I can't go through all that again,

867
00:50:19.960 --> 00:50:22.800
but you can go back to the training on the rule of three.

868
00:50:22.800 --> 00:50:26.780
And let's get to scalability.

869
00:50:26.780 --> 00:50:28.680
So number two is they're looking for scalability.

870
00:50:28.680 --> 00:50:31.540
One of the first things a private equity firm will ask you

871
00:50:31.540 --> 00:50:33.920
or a buyer will ask is how big is the market

872
00:50:33.920 --> 00:50:34.920
for what you have?

873
00:50:36.380 --> 00:50:38.940
And they don't want you to say things like big.

874
00:50:40.140 --> 00:50:43.520
They want you to give a number, right?

875
00:50:43.520 --> 00:50:46.340
So they say, okay, and they will sit there with a calculator.

876
00:50:46.340 --> 00:50:48.900
I can't, I've done this more times than I can count.

877
00:50:48.900 --> 00:50:51.180
They'll sit there with a calculator and go, okay,

878
00:50:51.180 --> 00:50:56.180
so for tiny homes, our total market is 50 million.

879
00:50:57.180 --> 00:51:00.120
I'm going to make this up because I don't know your market,

880
00:51:00.120 --> 00:51:03.160
but the point will come across 50 million.

881
00:51:03.160 --> 00:51:05.200
What percentage do you have now?

882
00:51:05.200 --> 00:51:07.280
Oh, 2%.

883
00:51:07.280 --> 00:51:08.520
All right, fine.

884
00:51:08.520 --> 00:51:10.080
If you've got 2% of the market,

885
00:51:10.080 --> 00:51:12.800
could you grow, could you get 10% of the market?

886
00:51:12.800 --> 00:51:13.840
That's pretty aggressive.

887
00:51:13.840 --> 00:51:15.720
What if you've got 5% of the market?

888
00:51:15.720 --> 00:51:17.240
Now as an investor, I'm thinking,

889
00:51:17.240 --> 00:51:19.880
is it realistic that Robin and his team

890
00:51:19.880 --> 00:51:21.520
will get 5% of the market?

891
00:51:21.520 --> 00:51:23.680
Probably, but if they come with their business plan

892
00:51:23.680 --> 00:51:26.080
and show me they're going to take 65% of the market,

893
00:51:26.940 --> 00:51:28.780
I'm not paying for that plan.

894
00:51:28.780 --> 00:51:31.520
While they might do it, they may actually be that good,

895
00:51:31.520 --> 00:51:33.900
the chances and the risk for me to put capital in

896
00:51:33.900 --> 00:51:36.560
that they will do that is too high.

897
00:51:36.560 --> 00:51:38.820
So they quickly look at the size of the market,

898
00:51:38.820 --> 00:51:40.300
where are you now?

899
00:51:40.300 --> 00:51:41.580
So we did this at Brilliant.

900
00:51:41.580 --> 00:51:44.920
We know that Brilliant, the market is 47 million people.

901
00:51:45.940 --> 00:51:47.900
And we own such a tiny, tiny fraction

902
00:51:47.900 --> 00:51:51.500
that to get our subscriptions up to 100,000

903
00:51:51.500 --> 00:51:54.580
from where we were at the time was about 4,000,

904
00:51:54.580 --> 00:51:56.020
seemed very realistic.

905
00:51:56.800 --> 00:51:58.400
Never got near that, but the market is so big,

906
00:51:58.400 --> 00:52:01.520
but it's not a market that pays for subscriptions.

907
00:52:01.520 --> 00:52:03.820
So we scratched our head forever

908
00:52:03.820 --> 00:52:05.480
trying to crack the code on that.

909
00:52:06.640 --> 00:52:08.780
Can you scale this business?

910
00:52:08.780 --> 00:52:11.920
It's great that you can do this in Atlanta,

911
00:52:11.920 --> 00:52:13.880
but can you take this to other markets?

912
00:52:13.880 --> 00:52:14.840
And what would that be?

913
00:52:14.840 --> 00:52:16.740
Can you franchise this idea?

914
00:52:16.740 --> 00:52:19.340
Can you, so franchising is a great way

915
00:52:19.340 --> 00:52:21.100
to scale something, right?

916
00:52:21.100 --> 00:52:22.560
If especially it's a service business,

917
00:52:22.560 --> 00:52:23.960
people always, there are all these people

918
00:52:24.500 --> 00:52:26.820
that wanna just own a salary.

919
00:52:26.820 --> 00:52:27.660
You can do that.

920
00:52:29.460 --> 00:52:31.960
What is the customer acquisition cost?

921
00:52:31.960 --> 00:52:33.140
You watch on Shark Tank.

922
00:52:33.140 --> 00:52:34.920
If a person walks onto that stage

923
00:52:34.920 --> 00:52:37.060
and knows their customer acquisition cost,

924
00:52:37.060 --> 00:52:39.120
what it costs me, all my advertising,

925
00:52:39.120 --> 00:52:41.320
some of my staff that run that, my sales team,

926
00:52:41.320 --> 00:52:44.760
all that, all in, we sell a $1,000 product

927
00:52:44.760 --> 00:52:47.940
and it costs me $150 to get it.

928
00:52:47.940 --> 00:52:50.200
That is a nice business.

929
00:52:50.200 --> 00:52:53.400
But if it costs $1,000 and it costs me $800 to get it,

930
00:52:53.400 --> 00:52:54.640
get out now.

931
00:52:54.640 --> 00:52:55.600
Stop that immediately.

932
00:52:55.600 --> 00:52:56.760
You'll hear Mr. Wonderful say,

933
00:52:56.760 --> 00:52:59.460
I forbid you to continue with this business.

934
00:53:00.400 --> 00:53:01.980
And he's actually being kind.

935
00:53:01.980 --> 00:53:03.400
He's not being obnoxious.

936
00:53:03.400 --> 00:53:06.760
He's saying you're wasting your time.

937
00:53:06.760 --> 00:53:08.400
You're wasting your shareholder's time.

938
00:53:08.400 --> 00:53:09.920
And if you're the primary shareholder,

939
00:53:09.920 --> 00:53:12.000
you're being really unkind to yourself.

940
00:53:12.000 --> 00:53:13.400
You're showing no self-respect.

941
00:53:13.400 --> 00:53:14.740
Stop this immediately.

942
00:53:14.740 --> 00:53:17.960
This is, by the way, there's about 20% of all businesses

943
00:53:17.960 --> 00:53:19.340
that should be stopped today,

944
00:53:19.340 --> 00:53:21.560
not even get to tomorrow morning.

945
00:53:21.560 --> 00:53:23.320
Stop them today.

946
00:53:24.240 --> 00:53:25.920
Don't shut it down.

947
00:53:27.160 --> 00:53:30.160
Don't be that business or convert what you're doing.

948
00:53:30.160 --> 00:53:31.260
Okay, so that's your market.

949
00:53:31.260 --> 00:53:33.320
The next thing they wanna know on the scalability side

950
00:53:33.320 --> 00:53:35.280
is customer base.

951
00:53:35.280 --> 00:53:38.360
Are you over-reliant on a single customer

952
00:53:38.360 --> 00:53:40.400
or on a very, very small group of customers?

953
00:53:40.400 --> 00:53:43.840
So you wanna diversify the risk of the customer base.

954
00:53:43.840 --> 00:53:46.560
So you're not like, well, we have the US government,

955
00:53:46.560 --> 00:53:49.880
we have the IRS contract.

956
00:53:49.880 --> 00:53:52.000
Okay, and if that goes away, do you have a business?

957
00:53:52.000 --> 00:53:53.120
No.

958
00:53:53.920 --> 00:53:55.440
Well, we've got these other little smaller customers

959
00:53:55.440 --> 00:53:57.760
that we do stuff for, but we've got the IRS.

960
00:53:57.760 --> 00:53:59.200
You think, oh, they're gonna pay big money

961
00:53:59.200 --> 00:54:00.120
because I have the IRS.

962
00:54:00.120 --> 00:54:02.840
No, they will not pay big money because you have the IRS.

963
00:54:02.840 --> 00:54:04.600
But if you had five government agencies

964
00:54:04.600 --> 00:54:06.120
or three government agencies

965
00:54:06.120 --> 00:54:08.760
and a whole bunch of mid-tier and small-tier stuff,

966
00:54:08.760 --> 00:54:11.240
for sure, then can you sell multiple products

967
00:54:11.240 --> 00:54:13.200
and services to the same customer?

968
00:54:13.200 --> 00:54:18.120
This says, this speaks to when you spent $100

969
00:54:18.120 --> 00:54:22.280
to get a customer, so you can sell them a $1,000 product,

970
00:54:22.280 --> 00:54:25.240
but then you go back and sell them another $2,000 product

971
00:54:25.240 --> 00:54:28.720
and have $10 acquisition because they were your customer,

972
00:54:28.720 --> 00:54:31.960
took the phone call or whatever, right?

973
00:54:31.960 --> 00:54:33.040
In this particular case,

974
00:54:33.040 --> 00:54:35.840
Bryn has done a really good job, right?

975
00:54:35.840 --> 00:54:38.360
We took a customer that was paying us $20 a month

976
00:54:38.360 --> 00:54:40.760
in a subscription, and as many of you know,

977
00:54:40.760 --> 00:54:44.400
we recently sent a training program that cost $6,000,

978
00:54:44.400 --> 00:54:46.520
but we built it up to that.

979
00:54:46.520 --> 00:54:48.280
We didn't go from 20 to 6,000.

980
00:54:48.280 --> 00:54:51.760
It took us time, by the way, it was tricky.

981
00:54:52.440 --> 00:54:56.640
So that idea, while 6,000 people may give you $20,

982
00:54:56.640 --> 00:55:00.400
we only needed 80 people to give us...

983
00:55:00.840 --> 00:55:02.080
$6,000.

984
00:55:02.080 --> 00:55:06.020
So the issue is, if you're gonna scale the business,

985
00:55:06.020 --> 00:55:07.280
make sure you have multiple customers.

986
00:55:07.280 --> 00:55:10.280
And then this is the last and biggie one.

987
00:55:10.280 --> 00:55:12.040
They want to see uniqueness.

988
00:55:12.040 --> 00:55:14.160
So I talked about one, the financials,

989
00:55:14.160 --> 00:55:16.160
two, scalability, and three, uniqueness.

990
00:55:16.160 --> 00:55:19.360
What's the barrier to entry to get into your business?

991
00:55:20.280 --> 00:55:24.120
Don't worry if there is no barrier of entry.

992
00:55:24.120 --> 00:55:24.960
Don't worry about that.

993
00:55:24.960 --> 00:55:26.440
Well, anybody can start this up.

994
00:55:26.440 --> 00:55:29.280
You know, I'm a YouTube channel, fine.

995
00:55:29.360 --> 00:55:32.080
But the barrier to entry doesn't have to be,

996
00:55:32.080 --> 00:55:35.640
but if you've got some sort of magic something.

997
00:55:35.640 --> 00:55:39.600
So if you have anything, a process,

998
00:55:39.600 --> 00:55:44.480
a technology that you can patent in your space,

999
00:55:44.480 --> 00:55:47.040
you've raised the barrier of entry.

1000
00:55:47.040 --> 00:55:49.680
It doesn't even matter how simple that is.

1001
00:55:49.680 --> 00:55:51.960
You'll notice on Shark Tank, they'll often ask that.

1002
00:55:51.960 --> 00:55:52.880
Do you have a patent?

1003
00:55:52.880 --> 00:55:53.800
Why?

1004
00:55:53.800 --> 00:55:55.720
Because the barrier to entry is now high.

1005
00:55:55.720 --> 00:55:57.160
It means somebody will have to invent

1006
00:55:57.160 --> 00:55:59.760
something completely different to compete with you.

1007
00:56:01.920 --> 00:56:03.400
And then of course, the other uniqueness is,

1008
00:56:03.400 --> 00:56:06.160
if you have a team of leaders that can function without you,

1009
00:56:06.160 --> 00:56:08.440
if you are truly at prime,

1010
00:56:08.440 --> 00:56:12.600
then what's gonna happen in that overall structure

1011
00:56:12.600 --> 00:56:15.480
is you're gonna show that you've released innovation

1012
00:56:15.480 --> 00:56:16.680
at every level.

1013
00:56:16.680 --> 00:56:18.920
You're innovating how you get accounts paid.

1014
00:56:18.920 --> 00:56:21.480
You're innovating, you know, your HR.

1015
00:56:21.480 --> 00:56:23.440
You're innovating how you do payroll.

1016
00:56:23.440 --> 00:56:25.160
You're innovating your capital structure.

1017
00:56:25.160 --> 00:56:27.280
You're innovating how you do your debt.

1018
00:56:27.280 --> 00:56:28.560
You're innovating everywhere.

1019
00:56:28.560 --> 00:56:30.080
You never stop innovating,

1020
00:56:30.080 --> 00:56:32.480
and you're constantly innovating all the time,

1021
00:56:32.480 --> 00:56:35.520
and you're innovating faster and faster and faster.

1022
00:56:35.520 --> 00:56:37.480
So if I've got the cycle of innovation

1023
00:56:37.480 --> 00:56:38.720
going quicker and quicker,

1024
00:56:38.720 --> 00:56:41.400
used to take us eight months to release a new product.

1025
00:56:41.400 --> 00:56:42.680
Now it's taking us three months.

1026
00:56:42.680 --> 00:56:43.600
Now we did it.

1027
00:56:43.600 --> 00:56:45.960
So last year we launched a school and a church

1028
00:56:45.960 --> 00:56:48.280
in three weeks at Brilliant.

1029
00:56:48.280 --> 00:56:53.280
Now, two years before that, no way, no way.

1030
00:56:54.120 --> 00:56:56.240
No way, no way.

1031
00:56:56.240 --> 00:56:58.800
Couldn't even vaguely even consider such a thing.

1032
00:56:58.800 --> 00:57:02.000
We wouldn't have had that cycle of innovation.

1033
00:57:02.000 --> 00:57:03.560
And by the way, they did it in their,

1034
00:57:03.560 --> 00:57:06.360
pretty much in, there was a certain east.

1035
00:57:06.360 --> 00:57:07.360
I'm not overstating.

1036
00:57:07.360 --> 00:57:09.480
I don't think, Jenny, do you think?

1037
00:57:09.480 --> 00:57:12.840
Well, dear, you were there too at the time, I think.

1038
00:57:12.840 --> 00:57:16.160
So, hey, getting that cycle of innovation.

1039
00:57:16.160 --> 00:57:19.160
So this idea of, oh, we all innovate at every level.

1040
00:57:19.160 --> 00:57:21.200
People don't think about this properly,

1041
00:57:21.200 --> 00:57:22.640
but if you're thinking about this deeply,

1042
00:57:23.040 --> 00:57:25.240
you're saying that means that when we go

1043
00:57:25.240 --> 00:57:28.000
and test a new product in the market,

1044
00:57:28.000 --> 00:57:31.360
we are going to give ourselves very short appetites,

1045
00:57:31.360 --> 00:57:33.600
hugely unrealistic, short appetites.

1046
00:57:33.600 --> 00:57:35.960
I wanna know this in 30 days, if this is gonna work.

1047
00:57:35.960 --> 00:57:37.840
I don't wanna wait six months.

1048
00:57:37.840 --> 00:57:38.840
Go and get wide data.

1049
00:57:38.840 --> 00:57:40.520
What's the fastest, thinnest slice?

1050
00:57:40.520 --> 00:57:42.640
Change this, turn this around, turn this around.

1051
00:57:42.640 --> 00:57:46.120
Learn, learn, renovate, learn, innovate, learn, innovate,

1052
00:57:46.120 --> 00:57:48.080
and get that cycle happening quickly.

1053
00:57:49.080 --> 00:57:54.080
Why did we change the edge so that people can join any month?

1054
00:57:54.160 --> 00:57:55.240
Anyone wanna say?

1055
00:57:58.320 --> 00:58:03.320
I would say so that you could actually add people

1056
00:58:03.440 --> 00:58:06.080
along the way, if you have to wait a year

1057
00:58:06.080 --> 00:58:09.440
to add more people, that doesn't work.

1058
00:58:09.440 --> 00:58:11.720
Yeah, so what happens if our sales effort fails?

1059
00:58:11.720 --> 00:58:14.600
Because the first pilot stuff was because people knew me,

1060
00:58:14.600 --> 00:58:16.640
either at 100X or Brilliant or somewhere else,

1061
00:58:16.880 --> 00:58:18.800
there was a connection, right?

1062
00:58:18.800 --> 00:58:21.640
Now the question is, can we bring in a large number

1063
00:58:21.640 --> 00:58:24.400
of people and we've got this group in New York

1064
00:58:24.400 --> 00:58:26.480
who are helping us and blah, blah, blah, blah,

1065
00:58:26.480 --> 00:58:28.080
but the innovation cycle is too slow

1066
00:58:28.080 --> 00:58:29.320
and they were very slow.

1067
00:58:30.400 --> 00:58:31.440
They think they're fast

1068
00:58:31.440 --> 00:58:33.920
because they think they're innovating quickly.

1069
00:58:33.920 --> 00:58:37.600
So, and the reason why I was so thrilled,

1070
00:58:37.600 --> 00:58:39.520
Deer came back because Deer knows how to do that

1071
00:58:39.520 --> 00:58:40.800
really, really fast.

1072
00:58:40.800 --> 00:58:42.080
And that's what we need.

1073
00:58:42.080 --> 00:58:45.840
Because if I team brilliant people, that's what you get.

1074
00:58:45.840 --> 00:58:50.800
So you wanna create those people in your organization.

1075
00:58:50.800 --> 00:58:53.880
And most people just don't think in those terms.

1076
00:58:53.880 --> 00:58:55.720
They don't have the capacity necessarily,

1077
00:58:55.720 --> 00:58:58.280
or the framework or the training or the education

1078
00:58:58.280 --> 00:59:02.040
to think about how innovation is gonna change

1079
00:59:02.040 --> 00:59:05.080
the black box dropping off piles of cash.

1080
00:59:05.080 --> 00:59:06.680
Because if I'm looking at a black box

1081
00:59:06.680 --> 00:59:09.400
that's got a super fast innovation cycle in it,

1082
00:59:10.360 --> 00:59:12.960
then I know that the chances of them growing

1083
00:59:12.960 --> 00:59:15.960
by more than 10% next year is very high.

1084
00:59:15.960 --> 00:59:17.840
Maybe even 25%.

1085
00:59:17.840 --> 00:59:18.680
I'm watching them.

1086
00:59:18.680 --> 00:59:20.360
Maybe they could even double their money.

1087
00:59:20.360 --> 00:59:22.960
Well, okay, I'll give them 50% of it.

1088
00:59:23.840 --> 00:59:27.400
Because I, and I see that the innovation cycle is improving.

1089
00:59:27.400 --> 00:59:30.640
The rate of change is improving.

1090
00:59:30.640 --> 00:59:34.640
Now you've built a massively valuable business.

1091
00:59:36.360 --> 00:59:41.360
Okay, we should end the recording for that portion there

1092
00:59:41.360 --> 00:59:43.640
and then start a new recording.