If I started a Business in 2025… - Problems to Profit

Summary

Problems to Profit Podcast: Episode Summary

Episode Title: If I Started a Business in 2025…
Host: Preston Brown
Release Date: March 27, 2025

In this insightful episode of the Problems to Profit podcast, host Preston Brown delves deep into the strategic considerations essential for launching a successful business in 2025. Rather than presenting a superficial list of business ideas, Brown emphasizes the foundational elements that aspiring entrepreneurs must evaluate to transform their problems into profits effectively. This comprehensive summary captures the key discussions, insights, and conclusions drawn throughout the episode.

1. Debunking Clickbait and Focusing on Substance

Timestamp: [00:03]

Preston Brown begins the episode by dismissing the allure of "clickbait bullshit," highlighting the importance of genuine value over sensationalism. He asserts:

"Anytime you see clickbait bullshit, remember, bait is for the fish. And you don't want to be the fish, you want to be the fisherman. That's what business is all about." ([00:03])

Instead of offering a list of business ideas, Brown redirects the conversation to the critical factors that determine the viability and sustainability of a business venture.

2. The Crucial Role of Passion

Timestamp: [02:15]

Brown underscores that passion is paramount when starting a business. He likens a business to a financial vehicle designed to enhance one’s quality of life:

"The idea of a business is to create a vehicle, something that makes it easier for you to enjoy life. It's a financial vehicle." ([02:15])

He advises entrepreneurs to introspect whether they are genuinely passionate about the problem they aim to solve and the customers they intend to serve. Passion ensures commitment through the challenging phases of building and scaling a business, likening it to a long-term relationship:

"Can you be certain that you're willing to invest the time to go all the way to build the vehicle and then drive it? Because I mean, it's a long term relationship. It's going to be like a family member in your life." ([05:45])

3. Mastering the Economics of Your Business

Timestamp: [07:30]

Understanding the economic landscape of a business is the next focal point. Brown emphasizes the necessity of grasping both the external economic conditions and the internal financial mechanics of the business:

"Do you understand the economics? And not just the economics going on in the world around you, but the economics of the business." ([07:30])

Key aspects include:

Cost Analysis: Evaluating the costs associated with acquiring products or services.
Profitability and Scaling: Ensuring the business can grow and maintain profitability.
Competition Study: Assessing the number of competitors and their operational lifestyles to gauge market margins and potential profitability.

He notes:

"Luxury margins come from luxury products. And if all your competitors are making a bunch of money, that's probably an indication that there's enough margin for you to make some mistakes in that first year or two when you're starting up." ([10:20])

4. Analyzing Market Competition and Scale

Timestamp: [12:50]

Brown advises entrepreneurs to enter established and profitable markets rather than pioneering entirely new sectors. This approach offers several advantages:

Talent Pool Availability: Established markets have a trained workforce, facilitating easier hiring and team building.
Supplier Networks: Existing supplier relationships can be leveraged to maintain competitive costs.
Market Demand Indicators: A thriving competitive landscape suggests robust demand, ensuring sustained margin opportunities.

He cautions against venturing into uncharted territories where understanding customer needs and market dynamics is uncertain:

"If you're going to be the first of a kind of business ever created in your industry, you don't have a talent pool to farm from... you don't know what the fish are going to bite on." ([15:00])

5. Developing Robust Exit Strategies

Timestamp: [18:25]

Risk management through exit strategies is another critical element Brown highlights. He draws parallels between business commitments and personal life decisions, emphasizing that both require long-term dedication:

"If I can make an entrance into the market, if I can build and scale a business, can I sell it to one of my competitors? Can I sell it to one of my employees?" ([22:10])

Key considerations for exit strategies include:

Potential Buyers: Identifying who might purchase the business, such as competitors or employees.
Asset Liquidation: Exploring options to sell parts of the business for a profit.
Valuation Metrics: Understanding how the business will be valued in the market to ensure a profitable exit.

Brown reiterates the importance of balancing upside potential against downside risks:

"What's the upside of the company? What's the downside to the company? Can I live with the downside?" ([19:50])

6. Valuation and Business Multiples

Timestamp: [25:40]

A significant portion of the episode is dedicated to understanding business valuation through multiples. Brown explains that businesses are not just revenue generators but valuable assets that contribute to personal net worth. He elaborates on:

Market Cap: The total value of a business if all its shares were sold, applicable to both public and private entities.
Wealth Generation: Businesses are pivotal in creating and sustaining wealth, comparable to the vast holdings on major stock exchanges like the New York Stock Exchange.

He uses the concept of multiples to illustrate how businesses can be scaled and valued:

"What's the market cap? If you were to sell all the shares of that business, public or private, how much is that business going to be worth?" ([27:15])

Brown provides an analogy comparing businesses to real estate investments, where strategic enhancements can significantly increase value:

"Almost treating a business like a flip home, like, I'm gonna put it together, I'm gonna fix it up, I'm gonna exit it with a large amount of cash." ([28:50])

7. Strategic Business Planning for Long-Term Success

Timestamp: [30:00]

In wrapping up, Brown emphasizes the importance of comprehensive due diligence and strategic planning to ensure long-term success. Entrepreneurs are encouraged to:

Conduct Thorough Research: Evaluate the economy, competition, suppliers, and market scalability.
Focus on Automation and Team Building: Transition from being a sole operator to building a team that can automate processes and drive the business forward.
Align Business with Personal Goals: Ensure that the business strategy aligns with personal aspirations, whether it's to generate income, build net worth, or achieve a significant exit.

"You want to put the right amount of due diligence into a business... but most importantly, are you passionate about it?" ([33:20])

Conclusion: Transforming Problems into Profits with Strategy and Passion

Preston Brown concludes the episode by reinforcing that successful entrepreneurship in 2025 hinges not on trendy business ideas but on foundational principles such as passion, economic understanding, competitive analysis, exit strategies, and valuation insights. By meticulously addressing these areas, entrepreneurs can build sustainable and profitable businesses that serve as valuable financial vehicles.

"Hopefully this adds some value to your entrepreneurship decisions in 2025. I look forward to seeing you out there. I hope you have an amazing day on purpose." ([35:00])

Key Takeaways:

Passion is Paramount: Ensure deep personal commitment to the business idea and its underlying mission.
Understand Your Economics: Grasp both internal financial mechanisms and external economic conditions.
Choose Established Markets: Leverage existing talent pools and supplier networks to mitigate initial risks.
Plan Exit Strategies Early: Balance potential rewards with manageable risks through well-defined exit options.
Focus on Valuation Multiples: Treat your business as a valuable asset to build wealth and enhance personal net worth.
Strategic Due Diligence: Conduct comprehensive research and planning to avoid repeated failures and ensure long-term success.

By adhering to these principles, entrepreneurs can effectively navigate the challenges of starting and scaling a business, ultimately transforming their problems into profitable ventures.

Transcript

A (0:03)

Welcome back to Problems to Profit. I am excited to bring you another exciting episode. This one is going to be titled if I started a business in 2025, here's the three types of businesses I'd start, which is a line of clickbait bullshit. And anytime you see clickbait bullshit, remember, bait is for the fish. And you don't want to be the fish, you want to be the fisherman. That's what business is all about. Now I'm not going to go into three types of businesses I'd start because really what matters probably most in starting a business is are you going to be passionate about it. Like the idea of a business is to create a vehicle, something that makes it easier for you to enjoy life. It's a financial vehicle. You could walk to the store or you can drive to the store. When you drive to the store, it's a more efficient process. There's a vehicle involved. Business is the financial vehicle. When you set it up, that makes your life better. So rather than giving you three types of businesses I'd start, I will give you maybe some questions to ask to figure out what type of business you should start and if it's aligned with the time for you to start it. So one, first thing, are you passionate about it when you build this vehicle? Because you don't go to a business dealership and buy a business normally. Normally you build the business. So it's kind of like if you wanted the car, you got to build it before you can drive it, right? So you're going to build the business. Is this business something you're passionate about? It's a problem you love solving, it's customer you love serving. And can you be certain that you're willing to invest the time to go all the way to build the vehicle and then drive it? Because I mean, it's a long term relationship. It's going to be like a family member in your life. So number one, passion. Number two, do you understand the economics? And not just the economics, you know, maybe going on in the world around you, but the economics of the business. What are the costs associated with acquiring the products or services? You need to be able to, you know, grow and scale and profit within this business, but you don't want to ignore the economy around you either. I like looking at, before I ever start anything, a competition study. I want to see, you know, a, how many competitors are out there, how's the lifestyle of the owners of those competitors? Like that. That'll give you a good indication of the margin and the Profitability. I mean, remember guys, luxury margins come from luxury products. And if all your competitors are making a bunch of money, that's probably an indication that there's enough margin for A you to make some mistakes in that first year or two when you're starting up, but B, that once you're done making some of the dumber mistakes or, or maybe the more immature mistakes, you have a brilliant revenue stream opportunity that's going to take you for the long haul. Okay. The other thing I like to see in the economics of the business is, is it at like I'm going to say market scale? Is this something really small scale or it's large enough scale where there are enough competitors, where you know there's a talent pool trained in the business. Like if, if you're going to be the first of a kind of business ever created in your industry, you don't have a talent pool to farm from. You can't go fishing, you can't put out that bait and catch the fish because you don't even know what the fish are going to bite on. You don't know who the fish are, you don't know where to find them, where to get them, how to train them, anything. So you're going to be pioneering a lot of processes. I like going into established, profitable areas. Like if there's an established, profitable industry where you have a large enough market where you can bring in a talent pool that after the business is just you and you're starting to build that team approach, you can hire other people to begin the process of automation. So profitability, understanding the market, understanding your competitors, knowing your suppliers, can you acquire enough different suppliers to maintain good costing, Keep the suppliers competing with one another, keep your costing low so that when you're selling to whoever your customers are that by there being many competitors, there proves there's a demand for the product that you always have a margin within. Probably the last piece that I really focus on is the exit strategies. Anytime you're going into a business, a big concern is going to be risk. Like every business is a cost benefit analysis and a risk reward analysis of is it worth it for me to commit my time, my energy, frankly my life? Cause there is no work life balance when you either start a new business or have a new baby. Like let's be real, you don't have a newborn baby and be like, hey little baby, let's, let's schedule when you're gonna take a shit and I need to change diapers. What happens in a startup business or with A brand new baby is they own your schedule. And so I wanna know that there's exit strategies. If I can make an entrance into the market, if I can build and scale a business, can I sell it to one of my competitors? Can I sell it to one of my employees? Is it something like, say, that I could piecemeal off and sell the parts of for more than what it cost me to get into? What was that statement I heard at one point at a seminar, and it was like, what's the upside? What's the downside? Can I live with the downside? And that was kind of more around investing. But I think it's relevant for business too. What's the upside of the company? What's the downside to the company? Can I live with the downside? In every business I've ever looked at, the reason I'm looking for exit strategies, and that does work for investments too, by the way, is because if I've got more than one, then I've got a security blanket around the business. And the other piece of exit strategies is it identifies that there's going to be a higher valuation on the other side. And so with that, let's jump into multiples. One of the big reasons to build a business is to have an asset, okay, an asset that's not just producing you wealth and revenue and income, but also providing higher net worth on your personal balance sheet. And the benefits of those assets is as we're aging or as our goals and priorities are changing, we can sell them. So having the knowledge of what multiple that business or industry is selling at on the market in one of the exit strategies, like whether you're, you know, going public, selling to a local competitor, whether you're doing kind of a, an M and a growth strategy, and then taking an arbitrage approach and selling however you're selling, knowing the multiples within the industry of the different businesses that make up the market that you're in is key because that's what's going to drive wealth and net worth. The single largest generators of wealth on the planet are businesses. So understanding what is your multiple is critical. And let me, let me give you an example of what a multiple is. A lot of people don't think about business. A lot of people think business is, where do I go to work? What's the job that I'm going to have? Like, job just over broke right at this business. And when you look at it that way, it becomes that it becomes your slave driver. When you look at it as an asset you own the asset, it doesn't drive you, you drive it, at least at later stages in the game. And when you're driving it, you can automate it, you can pull in talent from the market, you can turn it into a cash flowing asset that eventually has a saleable value. Right. What's the market cap? If you were to sell all the shares of that business, public or private, how much is that business going to be worth? It's the way to generate wealth, like businesses. If you go look at the, what probably largest investment, you know, arena on earth, it's probably the New York Stock Exchange. Okay. And if we go look at the New York Stock Exchange, which is arguably above 50 trillion at any one day of the week, then that's the single largest hold of wealth on the planet. Well, if we know that's where all the wealth lies, and we know that every business on the New York Stock Exchange is a business, then are you scaling this business because you want to build it up, develop it and sell it? Are you scaling this business because it's your life purpose? So not just knowing the valuation, but knowing what's your strategy of generating income and, or long term net worth and or a large exit, Almost treating a business like a flip home, like, I'm gonna put it together, I'm gonna fix it up, I'm gonna exit it with a large amount of cash, hey, maybe go take a vacation for two or three years. So rather than going in and looking for all the clickbait bullshit, if I started a new business, what would it be? I would say let's look at the idea of asking all of these different questions and trying to put all the right ingredients in to making the right decision. Because what you don't want to do is go have to start multiple businesses over and over again because you've continually failed each time. You want to put the right amount of due diligence into a business. Look at the economy around you, look at the competitors around you, look at the talent within the market around you that you can hire from to automate, look at your competitors, look at your suppliers, look at the profitability, look at the margins in the business, look at the multiples that they're scaling on, look at the different exit strategies, look at the valuations, look at all of it. But most importantly, are you passionate about it? Hopefully this adds some value to your entrepreneurship decisions in 2025. I look forward to seeing you out there. I hope you have an amazing day on purpose.