WEBVTT 1 00:00:00.000 --> 00:00:04.400 and how dramatically will impact how much money you make and ultimately the value of the company 2 00:00:04.400 --> 00:00:09.840 that you ultimately built. Welcome to the game where we talk about how to get more customers, 3 00:00:09.840 --> 00:00:13.360 how to make more customers, how to keep them longer, and the many failures and lessons we have 4 00:00:13.360 --> 00:00:19.520 learned along the way. I hope you enjoy and subscribe. Welcome to Mosivation. In this video, 5 00:00:19.520 --> 00:00:23.520 I'm going to be sharing with you three most important lines that you need to draw in your business 6 00:00:23.520 --> 00:00:29.440 that you probably are not. And I want to show you some different combinations of these lines 7 00:00:29.440 --> 00:00:33.840 and how dramatically will impact how much money you make and ultimately the value of the company 8 00:00:33.840 --> 00:00:39.760 that you ultimately built. So if you don't know my name, my name is Alex Ramozia and acquisition.com. 9 00:00:39.760 --> 00:00:45.200 We do about $85 million a year. This is a bonus sponsored episode, so if I'm less chipper than normal, 10 00:00:46.080 --> 00:00:51.920 that is why we think our sponsors as always. And so these are the three lines that I think everyone 11 00:00:51.920 --> 00:00:58.480 needs to understand. All right, so line number one right here. And I'm going to make sure that you 12 00:00:58.480 --> 00:01:03.600 guess. So if you can, guess right now, which of these lines are going to represent? You have price, 13 00:01:04.320 --> 00:01:10.800 you have value, and you have cost of goods. All right. So every line has every business has these 14 00:01:10.800 --> 00:01:15.600 three lines within everything that they sell. You have how much you sell it for, you have how much 15 00:01:15.600 --> 00:01:20.800 value the person gets, and you have what it costs you. And what I want to show you is a mental 16 00:01:20.800 --> 00:01:24.880 framework and the interplay between these things and how dramatically it can shift your business. 17 00:01:25.440 --> 00:01:31.840 So this is this price or value. This actually, I mean, I would do 18 00:01:35.120 --> 00:01:44.400 this is the value line. This is what they are getting. This is the price line. This is how 19 00:01:44.400 --> 00:01:55.760 much you charge. This is the cost of goods line, which is how much it costs you to fulfill on 20 00:01:55.760 --> 00:02:04.640 this value, right? Right? Right. Okay. So here's where it gets kind of cool. If we move our price up, 21 00:02:05.920 --> 00:02:11.920 see how little value we have here? This means that we have a low customer surplus. 22 00:02:12.720 --> 00:02:20.000 Customer surplus is the excess between what they pay and what they get. The higher the surplus, 23 00:02:20.000 --> 00:02:24.880 the greater the distance between these two things here, the more value they will perceive that they 24 00:02:24.880 --> 00:02:32.640 have gotten from your services. The bigger this discrepancy is, the more viral your business will 25 00:02:32.640 --> 00:02:38.960 be. Imagine there was a day years and years ago where you could have access to everything in 26 00:02:38.960 --> 00:02:44.320 the entire blockbuster store on demand from the comfort of your home and you could do it for less 27 00:02:44.320 --> 00:02:51.440 than it costs to do a new release and to run a new release. Wouldn't that be amazing? Well, 28 00:02:51.440 --> 00:02:56.560 they did create that and that was called Netflix. And so what they did was they priced it so low, 29 00:02:57.280 --> 00:03:02.160 but their cost of goods was still low or because the cost of the incremental cost of adding a single 30 00:03:02.160 --> 00:03:08.960 customer is basically nothing. Right? And so their gross margins here, very important, 31 00:03:10.000 --> 00:03:17.200 is still very high because for them, they can still lower these things even more. And so what I'm 32 00:03:17.200 --> 00:03:21.760 going to tell you at the end of this video is the trick to how you actually can build a fortune 33 00:03:21.760 --> 00:03:26.480 simply understanding the interplay between these three lines. And if I have one takeaway for 34 00:03:26.480 --> 00:03:31.760 everybody who's watching this is that if you can think about your business just using these 35 00:03:31.760 --> 00:03:40.000 three lines, then you will be able to build a fortune. All right? So if we have here our cost of goods 36 00:03:40.000 --> 00:03:49.440 at the bottom and we raise this all the way to here and we have a, you know, a ton of customer 37 00:03:49.440 --> 00:03:54.160 surplus, what kind of business is this? This is going to be a business that probably doesn't need 38 00:03:54.160 --> 00:04:00.800 to market very much. This is going to be a business that is probably operationally difficult, 39 00:04:00.800 --> 00:04:07.600 probably a service-based business and probably runs on very thin margins. Right? Right. Many 40 00:04:07.600 --> 00:04:12.960 businesses run like this. These are a lot of old-school businesses that grow consistently every year 41 00:04:12.960 --> 00:04:18.880 by, you know, 10%, 15% per year. And they don't have a ton of money to reinvest in resources. 42 00:04:18.880 --> 00:04:23.920 They're very operationally efficient in order to run a business like this. That's businesses 43 00:04:23.920 --> 00:04:30.160 scenario one. Let's see if you can guess what type of business this would be. So this, 44 00:04:33.280 --> 00:04:37.040 Aimosonation, quick break just to let you know that we've been starting to post on LinkedIn 45 00:04:37.040 --> 00:04:40.720 and want to connect with you. All right? So send me a connection request and note letting me know 46 00:04:40.720 --> 00:04:44.320 that you listen to the show and I will accept it. There's anyone you think that we should be 47 00:04:44.320 --> 00:04:49.280 connected with tag them in one of my or lateless posts and I will give you all the love in the world. 48 00:04:49.280 --> 00:04:50.480 All right. So let's get back to the show. 49 00:04:58.880 --> 00:05:04.880 He's most of your generic mom and pop businesses. All right. Decent margin. Let's say this is the 50 00:05:04.880 --> 00:05:12.800 baseline here. Sorry. There's our baseline. Decent margins here. Decent margins. Decent value. 51 00:05:12.880 --> 00:05:18.160 Just kind of another run of the mill business. Nothing underwhelming or overwhelming about 52 00:05:18.160 --> 00:05:22.960 this business. And this is what most bond businesses operate like. So let me tell you what type of 53 00:05:22.960 --> 00:05:30.960 business I would like to try and create. My goal is always to find a way to bride something that's 54 00:05:30.960 --> 00:05:36.960 excessively valuable. That cost me almost nothing to make. Unique expensive sticky year for those 55 00:05:36.960 --> 00:05:40.720 you know guys who know that channel. It's one of that video. It's one of favorites. 56 00:05:41.520 --> 00:05:46.240 I want something that costs them was nothing. Provide tremendous value. And 57 00:05:47.840 --> 00:05:48.880 creates a big 58 00:05:52.480 --> 00:05:59.680 customer surplus. And here's what's crazy. The bigger you do this, discrepancy, 59 00:06:00.400 --> 00:06:09.280 the more viral your business will become. And for me, as I feel like I've aged in entrepreneurial 60 00:06:09.280 --> 00:06:15.760 doggy years, the more I strive for this than anything else. Because if you conquer this piece, 61 00:06:15.760 --> 00:06:20.880 you conquer the customer surplus in terms of how much value they are getting for what they are 62 00:06:20.880 --> 00:06:27.360 paying, then you will have an infinitely scalable business because you will have a quadratic way 63 00:06:27.360 --> 00:06:32.400 of expanding which is through word of mouth, which should always be, which is the antithesis 64 00:06:32.400 --> 00:06:35.840 of what everyone in the market in world will tell you. But the goal should always be to have a 65 00:06:35.840 --> 00:06:39.840 business that grows on word of mouth. The problem is most people don't have enough word of mouth 66 00:06:39.840 --> 00:06:45.360 because this surplus is not big enough. If you have the surplus big enough and you go from good 67 00:06:45.360 --> 00:06:50.000 to great and great to so good that people cannot help but tell their friends about you, 68 00:06:50.000 --> 00:06:55.600 remark a bull or remark worthy. That is how good it is. Then you will have more customers that 69 00:06:55.600 --> 00:07:00.240 you know what to do with and your cost of acquisition will be zero. And your business will grow 70 00:07:00.240 --> 00:07:07.120 quadratically, not linearly. That is the difference between making money and building a fortune. 71 00:07:07.120 --> 00:07:10.720 And I thought of this visual with the three lines and I just thought it was really telling and so 72 00:07:10.720 --> 00:07:16.720 I thought I would keep this short in the spirit of Rona to show you this. But if you can think 73 00:07:16.720 --> 00:07:22.080 through how you're providing value and rather than and really focus because the things that you can 74 00:07:22.080 --> 00:07:26.320 control, you can control all three of these variables. But when I'm trying to diagnose a problem 75 00:07:26.320 --> 00:07:30.720 that I want to solve as an entrepreneur, I think how can I provide the most value? Step one. 76 00:07:32.320 --> 00:07:39.440 Step two, how can I lower my cost of good sold to a crazy degree? And then once I know how I can 77 00:07:39.440 --> 00:07:44.640 lower my cost of good sold to a crazy degree, I'd rather have something that cost me a penny that I 78 00:07:44.640 --> 00:07:51.680 can sell for ten cents that has the value of ten dollars. And if you have that kind of value 79 00:07:51.680 --> 00:07:58.800 that you're able to deliver, you will make a literal F-ton of money. And so I think this is a 80 00:07:58.800 --> 00:08:03.040 useful framework. You can apply your own business. You can probably apply your competitors' business 81 00:08:03.040 --> 00:08:06.240 using this simple framework. And I thought I would give it to you because it's one of the tools 82 00:08:06.240 --> 00:08:10.560 that I use when I'm thinking through how valuable an enterprise could potentially be and how I can 83 00:08:10.560 --> 00:08:17.840 move these lines around to create value, create margin, and ultimately take home the most money 84 00:08:17.840 --> 00:08:23.920 and out the most people. So just like everything that we do, hopefully the price that you paid was 85 00:08:23.920 --> 00:08:27.520 the time, the value that you got was hopefully a framework that you can use to apply to your 86 00:08:27.520 --> 00:08:32.800 business. And the cost of good sold for me is the time that it takes me to do this and the many 87 00:08:32.800 --> 00:08:37.200 failures and lessons I've learned and suffer the hard costs of failure to make these little 88 00:08:37.840 --> 00:08:42.720 frameworks for you. So anyways, mousy nation. I love you guys. The reason I make this 89 00:08:42.720 --> 00:08:45.680 stuff is because a lot of people are broken. I don't want you to be one of them. As always, 90 00:08:45.680 --> 00:08:48.880 I have nothing to sell you. Keep being awesome. If you enjoyed this hit subscribe. If you didn't 91 00:08:48.880 --> 00:08:54.960 love me, do make what you guys did next video. Bye!