How To Craft An 8-Figure Exit

Guys, before we jump into today's episode, if you haven't gone through the 10 part free training that we did about building a seven figure business, you can get it for free over@capitalism.com start.

This is the best place for those.

Of you who are thinking about starting a new business or you haven't crossed the seven figure mark yet. This is going to show you our strategy for building seven figure brands. And that's free. It's over at capitalism.com start.

Hey, have you noticed how great the world is recently? You guys, have you guys noticed this? I mean think about six months ago, how uncertain we were, how freaked out we were, how we didn't know what was happening in the world, how we didn't know who was, we had no idea what was going to happen. And like all the political shakeup and now everything's just fine. You notice stock markets are at record highs. People are wanting to buy and sell again. Everybody's like, are we still wearing these face coverings? God bless America.

Such a great world now. And guess what? Most of us are still at home. We got so little to complain about. Coronavirus numbers are plummeting. I mean, just plummeting. If you don't look at the charts, if you want to have a great day and you want to just look at the 7 day moving average of the number of cases of coronavirus in the United States and you're like, oh, oh, we're almost out of it, ladies and germs. Of course, if you watch the news a little bit different.

But if you look at data, oh man, we're almost through it, ladies and gents. So there is a, there's something to be said about this from a business perspective because many people were sitting on the sidelines for the last six months and we've had all of this movement go into the online space. We've had all this movement, all this new investment moving into the marketplace. We've had all this stimulus money move into the marketplace. So what do we do about that? So if you like the rest of the world are starting to come out of this and you're saying, I don't think I want to go back to work, or you're saying, I think it's time for me to double down on the business that's moving or the business that I've started, well then here's how we do that. Because if you start the business with an exit in mind, you will not only position yourself to have the exit, but you will also just build a better company. You all just, you also just build a better business because the business that sells for the most money is the business that you don't want to sell, is the business that is performing well, is the business that you're not tense about. So the as you build that foundation for a business that you can sell, you will hit better numbers along the way, whether you decide to keep it or decide to sell it. Now a big thing that I realized when I was selling my company was that valuation and profit are different. Valuation and sales are different. For example, if you'd like, open up a new browser tab and look at Zoom stock today. Zoom stock.

Going nuts. Absolutely nuts. Now, their profits came out and their profits suggested that they were gonna just absolutely destroy earnings. Like meaning they were, they had a great quarter, but the valuation of the company went up a very disproportionate amount to the amount of earnings increase. So Zoom is Now trading at 2000 times earnings. That means that if you've got a million dollar company, that's a two billion dollar valuation, that's absurd to most people anyway, not to Zoom. Now what's the reason for that? The reason for that is because earnings and profit are different than valuation. And when you are building a company for an exit, you're building for valuation, you're not building for profits. This is the big braingasm that most solo entrepreneurs are missing and that keeps them held back because they're optimizing for profit. Why? Because to them, profit equals lifestyle, profit equals success. To most small entrepreneurs, the success of a business is not determined by how much you can sell. The business for is determined by how much you can put into your pocket month over month over month. That's amazing. That's awesome. But that's a cash flow business. That's a business that can never grow outside of the founder. That's a business that is going to have a hard time being positioned for a sale later on. Now we know lots of people in the info marketing space, in the Amazon space, in, in the online business space who will make amazing profits or have incredible revenues, but they can never step away from the business. They can never sell the business, they can never exit. They can't even walk away. Kind of a classic example of this is Tony Robbins. Tony Robbins has done extremely well as a personality and as a personal brand. But it will be very difficult to continue on that legacy when he retires or passes on. That's going to be a very difficult transition for and very big shoes, quite literally to fill when he has built the whole company around himself. So what Tony has done is actually partly my model as well, which is you build the audience and you build the cash flow structure around that part of the business. And then you use that exposure, that cash flow and that influence to take equity positions in other businesses that he then advises and helps grow. And those are the businesses that can be sold for millions or billions of dollars. That's why Tony has a net worth of hundreds of millions of dollars. It's not because he makes so much cash, although he might. It's because of the value of the positions that he holds in the other companies. So that's the first major distinction that solo entrepreneurs would benefit from knowing, which is that valuation is different than profit. And sometimes there's a trade off between those two things. Sometimes you have to eat less profit in order to invest into higher valuations. That means taking some of that profit and putting into things like team and infrastructure or traffic or, or areas of growth that will help accelerate new areas of the business.

So that's the first piece. And on the other side, when this is a bit of a mind warp, but sometimes if you have given the perception of maximizing profit, then the valuation of the company can go down. Why is that the case? Reason for that is because when you have maximized profit means you have kind of flatline in your profit. It sends the signal that that might be all the meat that exists on the bone. And so if that's the case, then another person who's coming in to buy the business doesn't see the same value add potential that was there before and they might be willing to pay less money. This isn't always the case, but the important thing is that a group of systems from the buyer and a group of systems from the seller come together to create more value and more profit. In other words, when you are selling the business, you have to have something that when plugged into another business, increases the value of both. An example of this, Primal Kitchen. Primal Kitchen was started by blogger Mark Sisson five years ago in within three to, I think it was three years, he sold to Heinz for $200 million. This is a blogger, a blogger sells a business for $200 million. Now when Heinz comes in, what are they buying? They're buying the customer base, the awareness, they're buying the audience, they're buying the existing profit line. Yes, but the least important of that was profit. Get that? The least important part was the profit of the business. When Heinz comes in and buys a company, they're buying top line revenue they're buying exposure and brand awareness and they're buying the audience. Why? Because Heinz can roll out product after product after product. They can bring in their systems to drive down costs. They can bring in additional advertising to boost revenue. That is how real business is done. That's how business, how the big boys play business. Whereas most solo entrepreneurs are just looking at profit. So what do you do about this? Inside of our trainings we break this into three categories. We have audience, sales and product. Now, when I'm drawing this out, is my whiteboard in here? No, when I draw this out, I draw this in three circles like a Venn diagram. And we look at where they intersect when we look at product. You can develop the best product in the world and be broke if you don't have sales channels. Now you can have great sales channels and crappy products and go out of business because you're just a marketer and you're selling stuff, but you don't have anything that is adding value to people's lives. So you have no, you have no depth to the business. And you could have sales and product but be vulnerable to competition if you are not building an audience. And you could also be an audience and be broke because you're just famous and nobody buys from you. So the real magic is when you combine a great product with good sales channels and a good audience. And when you have all three of those that are good enough, you're in business and you have the potential for an eight figure exit. So an eight figure exit is determined by those three categories coming together to build a brand. And that's you have a great product, you have an audience of customers who want your stuff, and you're on good sales channels. And you can think about this in minimal viable terms. You can think about this as you need to be on a platform like Amazon. You need to have those three to five products that serve the same person and you need to have a customer list that you're following up with. That's enough to get the ball rolling. Those three pieces, repeat customers, good product or product line, and you've got clear sales channels on a place that is easy to sell and easy to buy. Now one of the common concerns that entrepreneurs bring up when I talk about this is they're looking at, okay, how do I pay myself? While also building something that has the potential for an eight figure exit. And this is where collaborative capitalism comes into play. So let me tell you a quick story. Yesterday I had about an hour ish long conversation with one of our Recent graduates from the tribe. And this person runs a pretty sizable manufacturing company. He's been helping some of our tribe members with some of their product design and product optimization. He's also working with us at Capitalism Brands to help us get the formula really dialed in and nailed. While we were talking about this brand that has a $2 billion valuation, like a public valuation of $2 billion and they've done $2 million in sales, what in the world? How does a brand that has $2 million in sales not profit? Half of you on this call have $2 million in sales. Doesn't mean they've made anything in profit. Why do they have a $2 billion valuation? Well, the reason was 100% pure awareness. There was a survey done that 1% of customers had enough awareness about this brand. And 1% awareness is enough of an adoption for a big acquirer to come in and say, we can take this thing. You have done the hard work of getting 1% of people to know who you are and where you're going will come in with the infrastructure to take it to 80% and that would be a multi billion dollar business. So in order to get 1% awareness, what do you need? You need things like awareness, you need things like advertising, and you need things like capital. And that's the magic piece. So when you're building something to sell and you're building with the intent of making the biggest pie possible, then the focus is not what do I take off the table, it's how do I create as big an exit, as big a pie as possible. And sometimes that means you go raise capital. It means that you are okay managing debt. It means that you use other resources that make that pie as big as possible. Instead of looking at how do I drain the bank account so that I can, I can protect my freedom. Remember, freedom is not how much money you have, it is doing what you want to do. So this always comes back to building the business that you want to build and then building the systems to keep you in this spot that you want to be on a day to day basis. And sometimes that means being willing to go out and sell 20% of the company at a lower than you want valuation so that you can make the investments in the people, the advertising and, and the vision for the business that you want to build. So when you come together with those people that can provide funding or provide infrastructure, then you're able to build a much bigger pie. It's that idea of two plus two equals five. It's very hard to build A business that you can sell, just operating as a solopreneur. It's very difficult to build a really big pie when you are committed to controlling as much of the pie as possible. It's really difficult to have a big exit if you're unwilling to create partnerships or to build the infrastructure that's needed for you to walk away. Think about that for a second. Most of us, most solo entrepreneurs, are so focused on profit that they can't walk away from the business. That's not a business that you can sell. So the thing that needs to be in mind is are you putting enough investment into the business for you to be able to walk away? And if so, then you have a business that you can sell. And where do you put that money you put into building great products into good sales channels and building the audience so that you're building as big a pie as possible, and you are in the position to sell that for. For eight figures. Now, what I like to do to make this thing happen fast as possible.

Is you carve out a certain amount of the business to raise your seed capital. And sometimes that's like 20%. Then I like to carve out a small amount of the business that's 10 to 20% for partnerships and audiences. That's board members, advisors, but most importantly, it's people who have audiences. So if I create a partnership with an audience that has 100,000 people and that helps me get to 100 sales a day much faster, then I have basically cut out a year's time of grind and it cost me 20% of the business. But now I have a very predictable way to get sales for any product at high profit margins. I'll make that trade all day long. One of the best assets that you have in your business is the equity and the control of that pie that you're building. And guess what? Jeff Bezos only owns 19% of Amazon. Mark Zuckerberg only owns like 18% of Facebook, and I think Elon Musk owns 20% of Tesla. They're all doing just fine. So when your focus is on building the biggest pie as possible, you now have the ability to go make the strategic investments that you need in order to get audience partnerships, get investors to manage cash flow, to bring on that great employee. And that requires you to have a very clear vision for the business that you are building. Like rule number one of understanding how wealth and the world works. Everything is expanding. You are expanding. The government is expanding, the economy is expanding, the population is expanding, Net worths are expanding. Things are expanding and it's impossible for them not to expand because we are all wired for growth and expansion. It's just the nature of the world. Things will continue to expand. We'll have increases in freedom, increases in liberty, increases in wealth. It will always continue to expand. If you don't believe me, think about when you were a kid. When you were a kid, do you remember what your parents said was a lot of money? When you were a kid, do you remember how much money you wanted to make when you were a kid? How many options of cereal boxes were there? When you were a kid, how many options of places to eat were there? Now compare that to now what is it now? What is a lot of money now? What are your desires now? How many cereal boxes are there to purchase now? How many options of us to allocate our attention? Are there? Is a world getting busier with more places to put our attention or less? Is the stock market higher or bigger? Is the government spending more or less? Now, if that's not a clear enough example, let's go back to Jesus time when Jesus was walking on the earth, how many options were there? What was a lot of money?

So you can go back to any point in history and look at from then to now and see that everything expands. So if you want to understand wealth, then you have to understand that wealth is created by the expansion. And so the thing that you need to have to be in the game is ownership of part of what's going on. I remember I was living in my apartment in downtown Austin, and I was looking across the city, this is about two and a half years ago, and just thinking about how much expansion was happening in this city and how I wanted to just own a piece of all this expansion. To me, it was a similar feeling that I imagined some of the pioneers of the country had. Like, there's all this expansion happening in the country and I want to own some of it. There's a gold rush happening. And So I bought two homes, one of which went up by approximately $100,000 in two years time. Was I a genius? No, there's just expansion and I owned a piece of it. I recently bought a home outside of Austin proper. And the reason I did that is because A, there's not a whole lot of desire right now to live in the cities. And two, all the expansion is happening outside of main cities right now. There's a pouring into the suburbs. And so then it was announced like four weeks after I bought the place that Joe Rogan and Elon Musk were moving to that general area, what do you think is going to happen to those property values? They're going to go way up and they already are going way up. So this is.

I am. I don't consider myself a real estate investor, although I sometimes invest in real estate syndications. The point being that wealth is always going to expand. The universe is always going to expand. The world is always going to expand. And the first rule to money is you have to have ownership of what is expanding. And the fastest way to do that when you are first starting out and you got no money, is to cast a vision for a business that you can then go recruit the assets to expand. So if you watch this video or you're watching a clip of this and you're sitting here going, this all sounds great for people with money, I'm here to tell you the best way to get in the game is to decide what you own is to create something that you own because that's going to expand the most. Especially when you're operating with the mindset of I can bring in other connections and relationships that can help me grow this piece of.

There are two kinds of people in this world. There are members and non members. If you are enjoying this stuff, you have got to join us inside the 1%. 1% members get access to our courses on building businesses and investing the profits. They get access to experts who are bringing in lessons on a regular basis.

Some of the best in the world.

And they're joining regular calls with myself or members of my team to keep the community growing. The 1% is a community of entrepreneurs who are actively building businesses and investing the profits. And every month you get a community newsletter to see what's going on in your community and what the opportunities are to create the change that you want to see in your world. Join us at capitalism.

Com, the number one that's capitalism.

Com1.