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My Favourite Type of Business

Name: My Favourite Type of Business
Uploaded: 2024-10-11T14:00:07+00:00
Duration: 58 s
Channel: Shanli Liu, CPA, CTP
Description: In this short monologue, Shanli Liu explains that the most attractive businesses are those that compound revenue over time. She identifies two…

11 Oct 2024 · 1 min

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In this short monologue, Shanli Liu explains that the most attractive businesses are those that compound revenue over time. She identifies two fundamental ways to achieve compounding: (1) offering products or services that customers repeatedly purchase, creating a continuous stream of sales (e.g., Coca‑Cola); and (2) building a sales network where each participant continuously generates revenue for the company, often by recruiting additional sellers (e.g., a real‑estate brokerage where agents sell homes month after month and bring in new agents). Both approaches create a self‑reinforcing loop of growing revenue as the customer base or sales force expands.

Chapters

The best businesses to start are ones that compound, and there's only two ways to build a compounding business. Number one is you build stuff that people never stop buying all the way through. They buy again, they buy again, they buy again. The other way is to add on people who never stop selling for you. And so that means that even if they sell people only once, they themselves consistently sell month after month after month. And so if you have, for example, a real estate brokerage, the realtors you have really are the customers of the business because each of them represents a certain amount of revenue that they will collect for you. They're going to sell 2 houses a month every single month, and you can count on that versus something like Coca-Cola where you'd have somebody who buys this month, buys the next month, and buys the next month. But in both situations, these realtors get more realtors and then the next month they sell more houses and that's how this compounds. And then for this one, you continue to get more customers and then they never stop buying.