WEBVTT 1 00:00:00.000 --> 00:00:04.000 The reason that a lot of the wealth in the world sits with financiers is because they can say, 2 00:00:04.000 --> 00:00:09.120 hey man, just give me a billion dollars and I'll just make you 10% a year on it and they know 3 00:00:09.120 --> 00:00:14.400 how to make 15% a year and they make that extra five on a billion and they take home 50 million 4 00:00:14.400 --> 00:00:19.760 a year and they're like, works for me. The wealthiest people in the world see business as a game. 5 00:00:19.760 --> 00:00:23.440 This podcast, the game is my attempt at documenting the lessons I've learned on my way to building 6 00:00:23.440 --> 00:00:27.040 acquisition.com into a billion dollar portfolio. My hope is that you use the lessons to 7 00:00:27.040 --> 00:00:29.920 bring your business and maybe someday soon partner with us to get to a hundred million dollars 8 00:00:29.920 --> 00:00:35.200 in beyond. I hope you share and enjoy. So I was at dinner the other night with a business owner 9 00:00:35.200 --> 00:00:39.440 who's doing five million dollars a year top line, about two million dollars a year in profit and 10 00:00:39.440 --> 00:00:43.440 she was talking about how she was thinking about moving to Puerto Rico, she went there at sucked 11 00:00:43.440 --> 00:00:48.000 and now she was living in a higher tax state and she was like, I would live in California, 12 00:00:48.000 --> 00:00:53.280 but like I just don't want to pay the taxes and I was like, why not? Not to say that I think you 13 00:00:53.280 --> 00:00:57.920 should pay taxes. I mean, you should pay your taxes. Boy big. I was like, why? And she was like, 14 00:00:57.920 --> 00:01:03.440 well, I want to hit this net worth goal. And I was like, okay, how do you think that happens? 15 00:01:03.440 --> 00:01:06.800 And so she walked through, she's like, well, you know, I'm going to take the money out of the 16 00:01:06.800 --> 00:01:12.480 business, the two million dollars that I made in profit and pay my taxes. So I'll have one point 17 00:01:12.480 --> 00:01:16.880 to left and then I'll invest that in like real estate and stocks and crypto and things like that. 18 00:01:16.880 --> 00:01:22.960 And that's how I'll build my wealth. And I got this big creepy grin on my face because I was 19 00:01:22.960 --> 00:01:26.240 like, all right, we're about to have a discussion right now. And I thought you guys would find this 20 00:01:26.240 --> 00:01:30.880 valuable. And so I'm calling this how to make a billion dollars. And I want to call that because 21 00:01:30.880 --> 00:01:36.080 I didn't understand how to make a billion dollars for a very, very long time. And so if you see 22 00:01:36.080 --> 00:01:40.720 billionaires like I did, I was like, man, I want to be a billionaire someday. Most people myself 23 00:01:40.720 --> 00:01:45.680 included don't even know how to make a billion dollars. And so I want to walk you through how to 24 00:01:45.680 --> 00:01:49.760 actually make a billion dollars. And the first misunderstanding is that you don't make a billion 25 00:01:49.760 --> 00:01:56.400 dollars to become a billionaire. You own stuff that's worth a billion dollars to become a billionaire. 26 00:01:56.400 --> 00:02:01.520 And so let me walk you through how I used to think this worked, all right? So phase one high school 27 00:02:01.520 --> 00:02:08.080 Alex was like, okay, in order to be a billionaire, I have to make a billion dollars every year. 28 00:02:08.080 --> 00:02:11.920 That was in my mind what I thought being a billionaire meant. I think you make a billion dollars 29 00:02:11.920 --> 00:02:15.760 every year, which is ridiculous. But that's what I thought. And so that's maybe it's you. You're 30 00:02:15.760 --> 00:02:20.080 not ridiculous. This is okay. I thought the same thing. The second phase I was like, oh, 31 00:02:20.080 --> 00:02:24.400 silly high school Alex, that's not how you make a billion dollars. All you have to do is take home 32 00:02:24.400 --> 00:02:29.200 two billion dollars before taxes over, you know, your lifetime. And then you'd have, you know, 33 00:02:29.200 --> 00:02:34.480 half that after taxes. So two billion dollars after taxes, if saved up would be a billion dollars, 34 00:02:34.480 --> 00:02:38.240 right? Now that didn't account for anything that you'd invest in or any kind of compounding. But 35 00:02:38.240 --> 00:02:43.120 I just figured if I make two billion, even if I suck at investing, I would have a billion dollars 36 00:02:43.120 --> 00:02:48.720 left over. And so that was honestly what I thought for years, like as a small business owner, 37 00:02:48.720 --> 00:02:53.760 even. And so then enter kind of the third season, which is where I'm out right now in terms of 38 00:02:53.760 --> 00:02:59.600 how to make a billion dollars. And you don't make it, you own it. And so here's how. So I'm going to 39 00:02:59.600 --> 00:03:03.840 give a simple example and then we'll expand it out. So it makes more sense. So let's say you own 40 00:03:03.840 --> 00:03:10.000 a business that is making $10 million a year top line. All right. Now half of that is your profits. 41 00:03:10.000 --> 00:03:16.640 This is what I get to take home is the $5 million. Now, if this company is worth 10 times its 42 00:03:16.640 --> 00:03:20.480 earnings, and I'll explain why that why a company like this might be worth 10 times its earnings. 43 00:03:20.480 --> 00:03:24.240 But let's just say it's worth 10 times its earnings. It means that this business is a $50 million 44 00:03:24.240 --> 00:03:28.640 business, or maybe for you, it's 50 like that. There you go. It's a $50 million business. Okay. 45 00:03:28.640 --> 00:03:33.760 Now let's say after taxes, I got my $5 million after taxes, I take home, you know, three. I'm like, 46 00:03:33.760 --> 00:03:40.320 okay, cool. Alex has $3 million that he can go in crypto mine and and buy Airbnb's and stocks 47 00:03:40.320 --> 00:03:44.560 and real estate and all that stuff, right? So I get $3 million richer. Good for me. Next year, 48 00:03:44.560 --> 00:03:49.760 because I'm a I'm in Mosination and we focus on the main asset that we have our business and not 49 00:03:49.760 --> 00:03:53.760 all the side hustles. And I've really focused on my business and I go from $5 million a year in profit 50 00:03:53.760 --> 00:03:57.360 to $6 million a year in profit. It doesn't sound like a huge win, right? It's like, I added a million 51 00:03:57.360 --> 00:04:03.360 bucks about a mine. Cool. This is great. Well, if we have a 10x multiple, then something I own 52 00:04:03.360 --> 00:04:11.840 went from being worth 50 million to being worth 60 million because 10x on the extra one added 10 53 00:04:11.840 --> 00:04:16.000 million dollars. Now I own 100% of that thing and I just got something that appreciated by 10 54 00:04:16.000 --> 00:04:21.280 million dollars that I didn't pay tax on. Wait a second. But what I got out of the business only 55 00:04:21.280 --> 00:04:26.320 went from three to three and a half million after taxes, right? Six at 40%. You get three and a half 56 00:04:26.320 --> 00:04:33.280 to take home. And so I only made an extra $500,000 after taxes this year. No. You made an 57 00:04:33.280 --> 00:04:39.760 extra $10 million after taxes because the thing that you own appreciated by 10 million dollars. 58 00:04:39.760 --> 00:04:44.720 And that's the thing that I didn't understand for a very long time. And so now let's zoom out. 59 00:04:44.720 --> 00:04:50.960 You want to be a billionaire. Again, it's not by me side hustling my way to a billion. Like Zuckerberg 60 00:04:50.960 --> 00:04:55.920 didn't have Airbnb's. He was flipping on the sidewalks building Facebook. What did you do to become 61 00:04:55.920 --> 00:05:02.960 a billionaire? He built Facebook, all right? So if you have the opportunity to spend half of your 62 00:05:02.960 --> 00:05:08.960 time obsessing about your passive income rather than saying, huh, I wonder if I could take my 63 00:05:08.960 --> 00:05:14.640 $5 million profit business, focus all my attention on it and make it into a $6 million profit business. 64 00:05:14.640 --> 00:05:19.520 And then all of a sudden I just added $10 million to my net worth. How much would you have had to do 65 00:05:19.520 --> 00:05:24.480 with that $3 million that you took on last year in order to get 10 million after taxes 66 00:05:25.360 --> 00:05:29.040 in the appreciation that you're going to have of there? You'd have to be a remaker. You'd have to 67 00:05:29.040 --> 00:05:34.000 do it full time. Oh, wait, but you already have an asset that you have that you're working on 68 00:05:34.000 --> 00:05:39.520 full time. And so this is how a billion dollars actually is made, which is realistically owned. 69 00:05:39.520 --> 00:05:47.120 You have something that makes between $8,100 million in EBITDA or fancy word for profit. Just leave 70 00:05:47.120 --> 00:05:52.320 it at that. That you get a multiple on, all right? And usually companies of that size tend to treat 71 00:05:52.320 --> 00:05:57.120 15 times earnings like if you look at the S&P by 500 companies that that size traded 15 times. 72 00:05:57.120 --> 00:06:02.880 All right, so you'd really only need somewhere in there of like $70 million in EBITDA to be a billionaire 73 00:06:03.600 --> 00:06:08.000 because you own the company. And so let's break it down. So it means that you'd have to make a little 74 00:06:08.000 --> 00:06:14.960 bit more than $1.3 million, $1.5 million per week and take home. I was just like, that's it, 75 00:06:14.960 --> 00:06:19.680 which I know that that sounds crazy, but like you have to think in increments. Like there's probably 76 00:06:19.760 --> 00:06:24.960 a time, if you're listening to this right now, five years ago, like imagine how much you made five 77 00:06:24.960 --> 00:06:30.160 years ago as an entrepreneur. Remember that number is, how crazy small does that feel to you now? 78 00:06:30.160 --> 00:06:34.560 Right? We were like, oh my god, I could do that in two seconds because you've leveled up. And so 79 00:06:34.560 --> 00:06:38.560 as much as whatever number I just said to you might sound like a lot, five years from now, you might 80 00:06:38.560 --> 00:06:42.560 be in shooting distance, right? And so it's really just about understanding like, how do I reverse 81 00:06:42.560 --> 00:06:45.760 engineer what has to happen? And if you want to be a billionaire, it's like, okay, well, how to make 82 00:06:45.760 --> 00:06:51.840 a million dollars, $1.5 million a week in profit? Well, if I'm running a 30% margin business, 83 00:06:51.840 --> 00:06:56.480 I got to make $6 million a week. There's 52 weeks. I got to make $300 million top line. Okay, 84 00:06:56.480 --> 00:07:02.320 so $300 million top line. So then you can start actually putting tangible goals to this idea that 85 00:07:02.320 --> 00:07:06.800 used to be amorphous to you about, I want to become a billionaire. You become a billionaire by 86 00:07:06.800 --> 00:07:12.320 owning something worth a billion dollars. Hey guys, real quick, if you're new to the podcast, 87 00:07:12.400 --> 00:07:17.520 I have a book on Amazon called 100 million dollar offers that over 8,000 five star reviews and 88 00:07:17.520 --> 00:07:21.600 it has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is 89 00:07:21.600 --> 00:07:25.840 that I put over a thousand hours into writing that book and it's my biggest gift to our community. 90 00:07:25.840 --> 00:07:30.720 So it's my very shameless way of trying to get to you to like me more and ultimately make more 91 00:07:30.720 --> 00:07:35.040 dollars so that later on in your business career, I can finish the part with you. So that's my give, 92 00:07:35.040 --> 00:07:41.760 go check it out, Amazon and back to the show. If you really want to be smart about it, 93 00:07:41.760 --> 00:07:47.440 you don't shoot for a billion. Here's why. You want to shoot for 10 billion or 50 billion. 94 00:07:47.440 --> 00:07:53.520 And I know this is going to sound crazy, but I get asked every day, hey, if I want to make six 95 00:07:53.520 --> 00:07:58.880 figures, what do I do? And I gave this answer on a podcast and I think that I probably pissed off 96 00:07:58.880 --> 00:08:05.680 half the audience, but I hope that you can take something from it because the guy said, how do you 97 00:08:05.680 --> 00:08:10.560 how do you make a hundred grand a year? And my literal first thought was why it's sell something 98 00:08:10.560 --> 00:08:14.080 worth a hundred grand and then figure out what I would do with the rest of my year, right? But 99 00:08:14.080 --> 00:08:19.520 realistically, I would never imagine trying to pursue an opportunity that was capped at a 100 00:08:19.520 --> 00:08:24.400 hundred million dollars a year because it's so much easier to try and make a ten million dollar 101 00:08:24.400 --> 00:08:29.840 per year business. And then and what happens is you think in different orders of magnitude, you think 102 00:08:29.840 --> 00:08:35.840 in bigger measuring units because if you have to think about that, then your rounding error was your 103 00:08:35.920 --> 00:08:40.720 goal. And so if you if you want to become a billionaire, what happens is your reverse engineer, 104 00:08:40.720 --> 00:08:45.200 like I just did, how do you have to do three three hundred million dollars in top line revenue 105 00:08:45.200 --> 00:08:49.440 and you'll take home 70-ish million at a 15x multiple and now you're a billionaire, right? 106 00:08:50.000 --> 00:08:56.880 But if you were to think, how do I do three billion dollars a year in revenue in order to make 700 107 00:08:56.880 --> 00:09:01.520 million dollars a year, you would have to think about opportunities that one, we're not limited 108 00:09:02.240 --> 00:09:06.320 two, could serve a very big marketplace, three had very high gross margins that would allow you 109 00:09:06.320 --> 00:09:11.040 to scale and four, you'd think probably on a very, very long time horizon and then all of a sudden 110 00:09:11.600 --> 00:09:17.760 you're thinking like a billionaire. And so the reason that the goals we have matter, matter more 111 00:09:17.760 --> 00:09:22.480 because of how we measure them and the increments in which we use to build them more than what the 112 00:09:22.480 --> 00:09:26.720 actual goal itself is. And so when someone tells me they have a goal to make six figures, what happens 113 00:09:26.720 --> 00:09:30.400 is they're going to think that six figures is the cap and they're going to break it down in a tiny 114 00:09:30.480 --> 00:09:35.440 itty bitty units and they're going to basically say 100% of my effort equals $100,000 and they're 115 00:09:35.440 --> 00:09:39.520 going to measure in tiny units and then they're going to do 100% effort and they're going to be like, 116 00:09:40.080 --> 00:09:44.480 I was at 94 this year because they weren't 100 out of 100 to get that 100K. 117 00:09:45.200 --> 00:09:50.240 But if you're thinking about making $10 million, you'll think in like, okay, for me to make $10 million, 118 00:09:50.240 --> 00:09:56.720 I got to sell let's say a $10,000 thing and I got to sell 1,000 of them. Okay, that means $3,000,000 119 00:09:56.720 --> 00:10:02.720 are things today. Okay, wait, $3,000 are things today. I mean, if I close one out of three calls, 120 00:10:02.720 --> 00:10:06.800 that means I have to take nine calls a day. Okay, well, how much do I have to spend to get a call for 121 00:10:06.800 --> 00:10:11.360 this thing? All of a sudden, you start thinking in a much bigger increment and you feel like, 122 00:10:11.360 --> 00:10:15.120 I don't know what I could sell for $10,000. Well, then you got to figure out something that makes 123 00:10:15.120 --> 00:10:20.640 someone else $100,000 and you can sell something that's worth $10. And so the end of the day, 124 00:10:20.640 --> 00:10:23.680 the reason you're not making enough money is because you don't know how to provide enough value. 125 00:10:23.680 --> 00:10:27.280 If you can make somebody a million dollars, they'll pay you a hundred grand all day, right? 126 00:10:27.280 --> 00:10:31.440 And then how many of those things that you just sold for $100,000, do you need to add up to make 127 00:10:31.440 --> 00:10:36.160 your $10 million to make your $50 million? The reason that like a lot of the wealth in the world 128 00:10:36.160 --> 00:10:40.720 sits with financiers is because they know how to take someone passively and they can say, 129 00:10:40.720 --> 00:10:46.320 hey, man, just give me a billion dollars and I'll just make you 10% a year on it and they know how 130 00:10:46.320 --> 00:10:51.600 to make 15% a year and they make that extra five on a billion and they take home 50 million a year 131 00:10:51.600 --> 00:10:56.720 and they're like, works for me, right? So they know how to provide that value. And so 132 00:10:57.680 --> 00:11:03.600 if you can approach the problem that way, you'll start thinking more along the lines of the people 133 00:11:03.600 --> 00:11:08.080 that I think you're trying to emulate. And so I wanted to break this down about how to make a 134 00:11:08.080 --> 00:11:12.080 billion dollars because there were so many misconceptions around it. You don't make it, you own it. 135 00:11:12.080 --> 00:11:16.880 You get paid for what you do, you get returns on what you own, right? And the only reason that 136 00:11:16.880 --> 00:11:21.440 this even makes sense and I'll round this off for anybody who's curious about the math behind this, 137 00:11:22.080 --> 00:11:25.840 that 50 million dollar business that we were talking about before, 10 million, 5 million profit, 138 00:11:25.840 --> 00:11:30.720 10x. Why would someone pay 10x or something? You're like, I wouldn't pay 50 million dollars for 139 00:11:30.720 --> 00:11:36.160 business that's making five. Let me tell you why you would. So if that basis went from five to six 140 00:11:36.160 --> 00:11:43.120 and then went 20% again because I was a 20% growth, it went to 7.2 and then 20% again would be 8.6 141 00:11:43.200 --> 00:11:53.520 and 20% again would be 9.5, whatever it is, 10.2, you know, and keep going, right? And then 12.48 142 00:11:53.520 --> 00:11:58.640 in earnings, right? Now if you added all those things up, you'd be at 40-ish million in earnings over 143 00:11:58.640 --> 00:12:02.560 the next five years, all right? So 40 million got taken out of the business and remember we bought it 144 00:12:02.560 --> 00:12:09.520 for 50. But wait, now we still own the thing and it's making 12.5 million in profit. Wait, if we 145 00:12:09.520 --> 00:12:13.280 just apply 10x and realistically at this point, it'd probably be closer to 12x. But let's just 146 00:12:13.280 --> 00:12:18.800 still apply 10x for this. Now we have a hundred and 25 million dollar thing that we paid 54, 147 00:12:18.800 --> 00:12:26.800 that already paid us 40 back, that now is worth 125. And this is where it gets even juice here. 148 00:12:27.760 --> 00:12:33.920 To buy that 50 million dollar thing, I had to write a check for 50. I wrote a check for 15 and I took 149 00:12:33.920 --> 00:12:40.320 a loan for 35, huh? And so then at the end of this whole thing, I put my 15 million down, 150 00:12:41.040 --> 00:12:46.560 I pay back my loan for the 35, which by the way, I could pay it back just from the 40 million that 151 00:12:46.560 --> 00:12:52.800 got made. So I actually was five up on my original 15, right? It's only have 10 million dollars left 152 00:12:52.800 --> 00:13:01.600 over that I got to pay back. And now I get 100% of that 125 million that got made minus my original 153 00:13:01.600 --> 00:13:08.560 10 because I covered five of it from the cash flow. Oh, I just made 120 million dollars off of 154 00:13:08.560 --> 00:13:13.680 a 15 million dollar original investment. That's why people do it. So even at that kind of valuation, 155 00:13:14.240 --> 00:13:18.960 that's why it still makes sense for people to buy at those levels. And the thing is that the smart 156 00:13:18.960 --> 00:13:22.480 money, if you want to sell to institutional investors, they think that way. And so you have to think 157 00:13:22.480 --> 00:13:26.560 that way about the assets that you own and the assets that you're building so that that is like 158 00:13:26.560 --> 00:13:32.960 ultimately how you can make huge leaps in in wealth, right? And so anyways, I had a lot of 159 00:13:32.960 --> 00:13:37.520 misconceptions about how a billion dollars was made because it's owned and you become the person 160 00:13:37.520 --> 00:13:41.200 who owns the thing and setting the goals in such a way that you're not even just trying to hit a 161 00:13:41.200 --> 00:13:44.320 billion, you're trying to hit 10 billion or trying to hit 50 billion because then you think it 162 00:13:44.320 --> 00:13:48.640 increments that will more than likely not take 100% of your effort to hit 100% of your goal. 163 00:13:49.280 --> 00:13:54.560 But 100% of your effort far surpasses your goal and you hit it 20% of the way up. So 164 00:13:54.560 --> 00:14:04.000 most of the nation love you all. See you next bit.