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Dan Martell
Welcome to the Growth Stacking podcast. This is Dan Martell. How do you build a hundred million dollar company in three years? I have had dozens of friends do it, some of them billion dollar companies. And when I think of the conversations I've had with each one of them about the early days, what challenges did they overcome to get to a place that create repeatability and scale, to become attractive enough to somebody to buy them for 100 million? This is what and through that process discovered some unexpected strategies that I want to share with you guys today. The first thing is that you have to solve a huge problem in a unique way. Most people build businesses and it's just an incremental improvement. So they have an agency, they do it faster, they have a software tool, they have one extra feature. But the companies that exited for 100 million, they all had this in common. They solved a problem that a lot of people had in a very unique and creative way that never been done before, that the market pulled the product into. And that's why it's called product market fit. You need to make sure that the product is so good that you get word of mouth virality, what's called vwam, viral word of mouth marketing to get people to be aware of your solution to grow really quick. Number two is they had a growth engine. When you look at a product that grew really quick that had a lot of people purchasing, what they had is a positive cash conversion cycle, meaning that they were able to not require a lot of capital initially to grow the business. If it takes you nine months to pay back the acquisition costs, after you pay for the thing you sold and the amount of money in marketing and sales, then it's going to require a ton of money to make the $100 million exit. So what a lot of them had is a cash conversion cycle was called a CAC payback period. That was under 60, ideally 30 days if you're able, even better, to sell something that people buy today, but you don't deliver it for three or four or seven days after the fact, but you collected that cash. That's how you have the self funding to grow incredibly quick. So you might just need to reconsider your pricing strategy, your payment terms, renegotiate your expenses or your vendor. So the money out of your business slows down, the money coming into your business gets faster, and then that way you've got this ability to finance your growth off of a credit card. The third thing is they built incredible teams. There's no amount of like Steve Jobs hero Complex genius that's going to overcome the ability for talented folks to own different areas of a business. When I first moved to San Francisco, I met this guy named Keith Raboy, and he's arguably one of the top operators in Silicon Valley. I remember asking this question at a party. I said, keith, why do you think that some of the best companies were created in a down economy? The Googles, the paypals of the world that we all know about. And he says it's because in a downward economy, you're not competing for talent. So what you have is you have a high concentration of IQ per square foot. And I was like, oh, that makes sense. It's like when you look at the PayPal mafia, you got Elon Musk and Peter Thiel and literally all these multi billionaires that came from the beginning of a team at one company. You got to ask yourself, well, what was in the water at that office? But the truth was, it's because the economy wasn't doing so well. They weren't getting pulled off from their competitors, they weren't vying to go do their own thing. And when you can get high caliber team members and that's what you got really good at, you got to be able to attract top talent to come in and own outcomes so that you as a CEO can run to the next problem and keep building the business behind you. The next step is you got to be able to raise money. When I look at the four master skills of entrepreneurship, things that create great leverage, they're called the four Cs. I got this from Naval Ravik. You've got content, you've got code, you have collaboration and you have capital. What you don't want to be is capital constraint. If there's opportunity, the market's pulling your product into it. But you need to hire ahead of your cash flow. That is the constraint. And you never want that to be the reason that you aren't able to grow. So the ability to raise capital on positive terms in a fast process will give you incredible leverage to grow a business to 100 million. And finally you have to build a sellable business. Now, oftentimes I meet these entrepreneurs and they have great businesses, they're profitable, they're growing. But when I look under the hood, it's a genius with a thousand servants. Like there's no team in place. Or they do this marketing strategy that let's call a little gray and nefarious. They call it a growth hack. But essentially it's breaking the law. And eventually it's going to stop or there's no systems or processes for how to actually repeat the success. They've had to scale it up. Right? And that's what makes a company attractive to a buyer. A person will buy another company, essentially an asset or an engine of producing revenue if it's predictable. So if you have no repeatability, no predictability in your growth and anybody evaluating that's going to look at the team or look at your systems or look at your software that you're using to run this thing and they can't make sense of it, they're not going to give you the multiples to get that kind of exit. So as you build a higher growth business, you want to continuously backfill, build the playbooks, build the team, create the process for repeatability and scale so that you have something that somebody would buy to generate the same profit you've been getting. And that's why you get paid on the multiples, how many multiples of profit and or top line into the future they're paying today for. That's the equation. So my question to you is, would you dedicate your life to building $100 million business in three years if you knew you only had a 20% chance or a 30% chance or maybe even a 50% chance of being successful? Because it's going to require everything from you with zero probability that it's 100% guaranteed? That is the question you have to ask yourself. But if you want to learn more strategies like the ones I just taught, then I want to invite you to subscribe to my brand new newsletter all around buying back your time and getting leverage. So click the link. Subscribe because I want to help you learn how to build a business that you don't grow to hate. I'll see you on the other side. If you like this week's episode, be sure to visit itunes, leave a review that'll help us get in front of other founders just like you. And if you're looking for more resources and video trainings, be sure to check out dan martell2lsmartel.com to subscribe. Keep up the hustle, keep stacking your growth and I'll see you next Monday's episode. Peace. Grow Peace. Bye Bye.