How to Build a $1,000,000 Business in 2020


So it’s fairly straightforward to launch
a business and get it to say ten thousand dollars a month, or thousand
dollars a day, thirty thousand dollars a month… but let’s talk about growing to
that million dollar level – how do you actually get this business from that
upstart level which there’s a blueprint pretty straightforward how do you grow
it how do you hit a million and just in case this video reaches a new audience
I’m mainly talking in the framework of a physical products business selling
online say launching on Amazon but I think these principles will apply even
much broader than that and I first just want to define what a million dollar
business is because there’s a couple different ways of looking at it
obviously there’s the income you could be making every month is one way of
looking at business and another way is looking at the evaluation of the asset
you are creating if you were to say sell your business for one wad of cash
so you might define a 1 million dollar business as a business that does a
million dollars in revenue per year and that might actually be worth about a
million dollars because obviously there’s profit margins but let’s say
that million dollar in revenue business operates at a 33 percent profit margin
so it’s profiting three hundred thirty three thousand dollars per year and
let’s say that business is able to sell at a multiple of three X that means 3 X
or annual earnings is the value of the business so that business would be doing
a million dollars in sales and worth a million dollars but what I want to get
into in this video is that there’s two ways to grow one is to increase your
profitability and the other way is to increase the multiple that you would be
able to sell at and both are ways of increasing your valuation so to make
multiple simple typically different types of businesses or businesses with
different levels of certainty are going to sell for different multiples and this
goes all the way up into the crazy tech companies that sell for obscene
multiples because they have something very very unique but say in the
e-commerce space your multiple is typically going to be say two to four X
and it could definitely be lower than that for a really not great business and
it could definitely be much much much higher than that for a phenomenal
business and those multi in this space are typically based on
profit not revenue so let’s say you have a business that’s profiting $200,000 a
year and based on what you’re currently doing and we’ll get into growing this
let’s say your valuation would be out of 2 X multiple so your $200,000 per year
profit business is only worth $400,000 if you want to sell it so at that
multiple to get up to a million dollar business your 200,000 would have to go
to 500,000 and then 2 X 2 1 million or what if your revenue went up to 300,000
and your multiple went up to 3 X will now you’re at 900,000 or let’s say
hypothetically you go up to $250,000 in profit but your multiple goes all the
way to 4 X and now you’re at that million dollar business so what I want
to make clear is that there’s two different levers to be playing with
there’s your annual profitability and there’s your multiple and both these are
a factor in the overall valuation of your business and each one should be
worked on and thought about in terms of growing so now you have the premise the
meat of this video is what are the things we can do to increase that
valuation and grow from that starting base which you guys know how to get to
relatively straightforwardly and grow that to a business that’s worth
a million dollars so starting off with the clear-cut path that I’ve talked
about on this channel a million times this is to add more products and this is
obviously working on the revenue and profitability side and then the rest
we’ll be talking about the stuff that you’ve probably never really heard about
in this context on the growing your multiple side so let’s say you’ve got
two three hundred dollars a day in revenue or a thousand dollars a day in
revenue or even two thousand dollars a day in revenue the most clear way to get
from there to three thousand dollars a day which all uses the benchmark for a
million dollar business as I explained the most clear way is to add more
products like if you know how to get to five hundred dollars a day and you did
that on one product do the same thing and now you’re at a thousand dollars a
day do the same thing and now you’re at fifteen hundred dollars a day so I still
think the most clear-cut way to grow an e-commerce business is to rinse and
repeat and do the same thing that you just proved that you know how to do and
do it again and again again and again and I’ll link up a video
here that I made about what I mean when I talk about growing a product line and
growing a brand of related products and this is also going to be crucial when it
comes to increasing your valuation so having that cohesive brand is going to
be the foundation of all of the points that were about to talk about when it
comes to growing your valuation because if you’re just selling random product
and then ditching it and then random product you’re not going to have the
foundational layers to be doing any of the things that we’re talking about from
here on forward so hopefully you’re already sold on the concept of starting
your own brand selling related products and you’re not just looking for these
short-term you know up-and-down opportunities that have no real
sustainability and again if you want more on that topic there’s a ton already
on this channel but the first way of growing your valuation and this is
directly related to more products is introducing ways of getting your
customer value up so that customer can you get them to buy more products from
you at one time different products that you’re offering
can you get them to buy products repeatedly a month later six months
later it is there something they need to replenish is there another accessory
that they want to add to this product so repeat orders are something that
massively increases valuation because if you think about valuation as how
safeguarded your business is to a potential buyer or investor those are
things that are going to increase the value are things that make it more of a
more of a moat around the business more of a castle that you built and say half
your orders every day we’re from customers who had ordered from you in
the past now you have a business that is pretty much indestructible and that’s a
high bar to go for of course but the closer you get that number up the higher
your valuation is going to go in conjunction with that because it’s so
much more protectable and so as you’re launching new products and building out
your brand if you’re baking in some level of increasing that order that cart
value getting them to buy more products or getting more products that the same
customers can buy or getting recurring products that the same customer buy the
same thing over and over again those things all have a massive impact in your
multiple when you go to sell so as I lay out these points they’re kind of going
to fit into three buckets and what I just finished was the first bucket which
is kind of that classic growing your brand
with some of that stuff sprinkled in as far as getting the order value up and
their recurring up that’s going to position you for a higher multiple but
those all fit into this sort of traditional launch a product on Amazon
and scale it and make more money and spoiler alert the more you get these
three buckets filled up the more your valuation is overall going to go up so
if you have two out of three of them instead of one out of three of them your
valuation is going to be much much much better than if you’d have just one out
of three say just selling on Amazon and if you have all three then it’s going to
synergize and be a monster business that would potentially be a four or five six
X I mean some go for 10 X depending on if it’s a strategic buyer so the second
bucket is basically the DTC model which is the direct to consumer model and this
is a business space in general that’s being disrupted much larger than just
Amazon brands themselves I mean look at say the products that you’re probably
seeing a lot of ads for classic examples of DTC would be all these new mattress
companies that are constantly advertising on podcasts and stuff like
that or say Warby Parker with their glasses any product that is kind of just
done in the 20/20 way and going straight to the consumer it’s that model of we
cut out the middleman we made the best product and we’re just selling it
directly to the consumer and the key reason why these businesses are so
valuable and how you can plug it in to your Amazon business is that these
businesses have their customer data for example 30 years ago a brand a brand
that was worth hundreds of millions of dollars or a billion dollars that was
only selling on the store shelves they might not even know any of their own
customers because they don’t have that data so the value is in the data because
the data is what allows you to remarket to those customers so more products to
them tying it to that first point this is what allows you to grow that
protectable thing over the next decade so bucket two is how many sales are you
getting on your own channels say on your own Shopify store which you’re driving
from social media even word-of-mouth paid ads on Facebook YouTube Instagram
whatever and this is probably the hardest of the three to crack and it is
not easy but the world-class players figure this out and this has a massive
impact in the protectability and the valuation of your business if you’re
getting a large amount of sales on your own channels and through your own email
lists so not only the sales aspect but how much data do you have do you have
these big Facebook groups or Instagram followings
or email lists where you’re collecting your customers and potential customers
and creating a real branded community in your space that has massive value so as
far as the multiple buckets let’s say you had just Amazon and just your own
Shopify store and let’s say you even got it to a point where instead of being a
hundred percent Amazon and zero percent anything else you were now 75 percent
Amazon 25 percent Shopify even that difference allows your business to be so
much more stable to a potential buyer so that alone might bring you from that low
to range into the mid threes which even if you were selling no more product and
you were profiting no more $200,000 in revenue just went from 400 thousand
dollars to probably six or seven hundred thousand dollars and even if you’re not
utilizing all this stuff just collecting the data and having these this
information to be utilized later has value to potential buyers who could
strategically throw their special sauce onto your business and do all these
things and that’s why I talk so much about Amazon and being focused on Amazon
but laying the foundation for these other pieces at the same time and this
third channel is almost never talked about in our space and I am personally
very very intrigued by this one because I think it’s arguably a lot easier than
number two of figuring out all that direct-to-consumer digital marketing on
your own and this channel could be much more hands-off and potentially just as
big if not your biggest channel in the future so what I’m talking about is
taking your brand of product and wholesaling it to retailers those store
shelves and yes I mentioned in the last point you don’t have the customer data
there and that is a downside but if you’re doing this is a third bucket in
addition to the other two or even just in addition to Amazon this has a massive
impact on your business in addition to adding a lot to your bottom line so this
is really going to grow both sides so is the Shopify one’s going to potential
grow your own if you are really getting more sales there but this is going to
add an entirely new channel to your business in one reservation I think a
lot of people have with this is like oh aren’t I getting such a lower margin
here compared with selling on Amazon and not to make this a super long video just
about breaking out profit margins maybe that’s for another day but I honestly
think this can be equally as profitable and you can just be selling hundreds or
thousands of units at a time and while on Amazon you might be selling at a full
retail price of $30 the product that you sourced for seven you’re still paying
half of that to Amazon for all these different ads and fulfillment whereas if
you’re selling your seven dollar product direct to a wholesaler for $15 to sell
it for $30 well now you’re basically profiting the same amount and another
huge benefit of this one is once you land a contract it’s potentially very
recurring and that add adds into valuation as well because now you kind
of have a recurring revenue element of your business
not in the traditional sort of customer on a subscription way but if this store
is ordering three thousand dollars of product every single month from you for
the past a year that’s going to look incredible
in the valuation of your business and again this one’s not talked a lot about
but I want to get into it more on this channel so leave a comment specifically
if this one is interesting to you because I’m planning on having a friend
who is a killer at this on the channel a few times over the next coming months so
let me know what questions you might have about this and so overall the more
you have these different channels filling up and you have your customer
data you have these recurring wholesalers you have your Amazon stuff
you have your Shopify you have your social media the more of these different
buckets and channels you can fill the more that multiple is going to increase
at the same time your revenue is increasing so obviously focusing on
increasing your revenue and profit is important but spend some time on that
other piece like I talked about here and you’re increasing your overall valuation
by a factor of how much you’re increasing your profit and if you’re not
already launched and at that thousand dollars a day or so then there’s a link
in the description to an hour-long free training I definitely suggest starting
there it is very very helpful and will totally get you going there are also a
bunch of other resources linked down there in the description so be sure to
check that out too and smash the like button feed
YouTube’s algorithm subscribe and hit the bell if you have not already leave
comments again I’m especially curious what you think about the brand –
wholesale model I would love to hear your thoughts and feel free to follow me
on Instagram as well at Matt Lowe Gerstein hope you enjoyed the video let
me know you thought and see you soon I think that’s just Amazon

5 Comments

Add a Comment

Your email address will not be published. Required fields are marked *