How to Make Money Like The Top 0.001%

Have you ever wondered how the top 0.001% make f*ck you money? It's not from a salary, it's not from investing, and it's definitely not from real estate. It's from being a business owner. I know this because I went from broke at 24 to selling my first company for millions at 28. Since then, I've built and sold multiple software companies and now own a portfolio on track to be worth a billion dollars in the next three years. Most people think getting rich is about making a lot of money. When in reality, it's about owning a business that's worth a lot of money and knowing how to increase the enterprise value, which just means how much somebody's willing to pay to buy your business. And today, I'll show you exactly how to do it step by step. Welcome to the Martel Method. I went from rehab at 17 to building a $100 million empire and being a Wall Street Journal bestselling author. In this podcast, I'll show you exactly how to build a life and business you don't grow to hate. My bestselling book, Buy Back Your Time, is out now. Grab a copy at buybackyourtime.com or at any of your preferred online retailers. Step number one, make your revenue predictable. Kind of simple, but buyers will pay top dollar when they can count on your income, meaning that your revenue becomes predictable, durable. That's the language. When they look at the trailing 12 and trailing 24 months of your business and it just keeps going sideways or ideally up, a buyer is going to pay more for that kind of business because they can predict in the future, it'll keep doing the same thing. Just think about your phone bill. It's why telecom companies are worth so much money because you pay the same every month. And look, when I share this, some people are like, well, I don't have reoccurring revenue, but check it out. My brother's a home builder. He started selling lawn care and snow removal as a contract to the people that bought home from him. My buddy, Nick owns a sign company. He started selling maintenance contracts. I sell software. Guess what? Subscription revenue is a beautiful thing, but every business has the opportunity to build a reoccurring predictable revenue. You just got to be creative. Aschat GPT, it's right there. This is what the money people call durable revenue. Durable revenue is great, but what makes businesses thrive is making profit on that revenue. So step number two, make more money on the stuff you sell. The money people will call this gross margin. It's the money you keep after you've paid for the cost of the service or the product. My kids sell lemonade and they will take your credit card and swipe it on their square device and they will charge you two bucks for that glass. They only paid 25 cents for all the stuff that goes into it from the cup to the lemon to the freaking ice cubes and stuff. So that means that they make $1.75 of gross margin. See the best companies focus on increasing their gross margin. Everything is around a conversation to do that because the more you get on gross margin, the more profit you have left over. So here's how you can increase your gross margin. Number one, decrease your costs. For example, if you look at AI and automation, many service businesses could automate a lot of their back office costs, their people to deliver the service to make it even better from a gross margin point of view. If you buy things that are part of what you sell, you can go find a different supplier, maybe negotiate higher volume for a lower cost. All that hits the bottom line from a gross margin point of view. Number two is you increase your price. This is literally the go-to move. If somebody bought your business tomorrow, the first thing they would change is your prices. But you can pretty much increase your prices until you notice your sales conversion drop a little bit. And I get it, if you raise your prices, less people will buy. But people will buy if you market properly. If you build the brand properly, if you deliver a quality product or service, trust me, the problem is not that people won't buy, is that you haven't built enough demand to overcome putting your prices up. And this one is going to sting and could be quite scary. Big piece of advice is that drop the unprofitable clients. Again, if somebody bought your business tomorrow, they would probably fire the lower 10% of your clients that aren't profitable, the ones you gave early deals to, the people that complain all the time, the ones that are outside your target market today, but you kept them around, but they're not really making you money, but you feel bad for firing them, they got to go. The easiest way to fire them is just put your prices up to a point where they don't like it. And then they just self select. To me, this is why it's so important to increase your gross margin is first off, you make more money. So you have more money to grow. And second, people that buy your business are going to be more excited because you have more profit. You're more attractive to other buyers, which creates more demand to buy your business, which means the price goes up. Everybody looks at like revenue as how cool businesses, how much money they make. But to me, revenue is just vanity. Profit is sanity keeps the lights on, but EBITDA is value earnings before interest tax depreciation and amortization. It's a fancy word that buyers will look at because the bigger your EBITDA, the more they're willing to pay you on multiples. But what a lot of people don't know about making your business more valuable is that profits die if you have customers leaving through the back door. So what do you do? Step number three, reduce your client churn. Essentially, keep the clients you got. If you have a bucket and there's massive holes in the bucket and your customers are water being poured at the top of the bucket, the water flowing out is your customers churning. That means the bucket will never fill up if the bucket's not full. There's no value. Nobody's going to buy you because it's an empty bucket. Why businesses don't understand this is because they can't see it. They don't track. I've got 100 clients this month, 100 clients next month. They don't go, oh, we lost one, we lost two, we lost three. Over time, that number could be massive. Most businesses are losing 100% of their customers every 10 months. They just don't know it. And the truth is high churn, 10, 15% a month kills a company's worth. Nobody's going to buy a business if you don't have predictability in the customers buying and keep showing up. Imagine I had a grocery store for the first few years. I had a lot of people buy and my revenues are good, but nobody paid attention that the population around the grocery store wasn't coming back because they came in and they didn't have a certain product where they bought something and it wasn't great. And eventually I burned through the whole population and then I go to sell my business, but I'm slowly dwindling down my revenue because I don't have anybody else to sell groceries to because the word on the street is I don't get to in my grocery store. I literally have that happening at a grocery store in my local market. And guess what? Less product on the shelf, staff turnover, zero surprise if that thing goes up for sale in the next six months. And when it does, it's not going to sell for a lot. It'll be a fire sale on the real estate. The more customers you keep, the more profits will stack because each customer's gross margin stacked up over time creates more profit at the bottom. Think about going to the beginning of time in your business and every customer you got kept buying from you. You never lost them. So all the people on the bottom of this line are the ones you lost. All the ones on the top are the ones you have. Imagine if all the ones you lost ended up on top of the ones you have, that's how much bigger your business would be. So here's how we actually reduce your churn. First, we got to track monthly reoccurring revenue. Essentially we need to look at the trend closely so we know where the leaking is happening. This will make sure you catch churn. Most people just don't even measure it. So measuring that monthly reoccurring from the existing customers will show you that. Essentially you check the amount of customers that bought from you this month and did those customers buy from you again the next month and the next month and the next month. If you know this, then you can measure what's called your growth ceiling. Essentially a point into the future. When you give me four numbers, I will tell you the growth ceiling into the future when you will stop growing based on your current numbers, your current churn. If that sounds like Chinese to you, I'll make it simple. Click the link in the description below to download my growth ceiling calculator. I'll ask you those four questions, those four numbers and it will predict exactly when you will hit your growth ceiling and what to focus on to fix it. So now that you know whose churn in, the way to fix it is very simple. You have to get your customers to value as fast as possible. I call this time to first value, TTFV. Ideally within seven days, but honestly, I call them quick wins. I want to do it in the first interaction. If you join my gym, I want to get you a plan and some wins as fast as possible. If you sell social media stuff, give them a cheat sheet that they can use tomorrow shooting their reels. Even if you do long form YouTube, it got them a result. It got them value. And last but not least, we need to implement a cancellation capture flow. Every customer that leaves is leaving with information, feedback to make your business better. If they leave without you capturing that information, you're missing the opportunity to learn. Speed of growth to make your business valuable is speed of learn. If you get that information from the customer when they leave, then you can implement the fix to get the current customers to stay longer, which is going to make your business more valuable. So remember, first off, we got to track so we see the trend. Second, we got to make sure that we get them to value fast. And third is we have to make sure if they leave, we know why, so we can make the product or service better. Remember how we talked about durable revenue? This specifically lowering your churn, making the revenue more predictable, getting customers results faster will make your business easier to grow, which makes it more valuable. A sticky customer base makes the business safer to buy. Okay, so now that the bucket isn't leaking, let's make sure we make more money from those existing customers. Before we get back to the episode, if you actually want to know what my real life looks like and see the people and the businesses and the companies I buy and my family and just like how I make it all work, go follow me on Instagram, Dan Martell to Elza Martell on Instagram. It's where I show the behind the scenes, the real deal, real time. I'd love to see you there. Have an amazing day. Step number four, increase the amount of money your customers pay you over time. The money people in the industry, they call this lifetime value of a customer. Essentially, if somebody buys from me once and they keep buying from me over a period of time, I'm going to look on average what a customer spends with me. That becomes the lifetime value of a customer. If over time, somebody pays me $100 in the state for three years, then I make on average $3,600 by that customer, that's the lifetime value. The reason we want to know this is because a buyer that wants to value your business is going to look how much you spend to acquire a new customer. If that number is low, what you spend to get the customer and what you make is high, then that is a very good business to buy. So there's two parts to it. It's how much they spend and how long they stick around and keep spending. If I sell stuff to people that have babies, they might only buy from me for two or three years. That's fine. They might also spend $15,000 or $20,000 in that period. That's the lifetime value. Have you ever wondered why Netflix is worth $521 billion? It's because they have subscriptions and over time, their customers actually spend more money. It's crazy. You might have started with Netflix and it was $9 and maybe you got somebody else's password so you paid $0. What happened is Netflix over time figured out, "Hey, I could charge more." There's a little bit of pricing power and if we stop people sharing their accounts with everybody, their cousins and their dogs, then I can get those people to pay and that's why Netflix has grown their subscription base and the lifetime value of a single account. That's why they're worth so much money. So here's how you can increase lifetime value of a customer. First, add other things that they buy or give them a reason to upgrade. We got to think about usage-based pricing. If you think about it, if you use software, you might have an account for you but if you want to add a team member, that's a per seat pricing. If it's other devices like Netflix, those are called screens so they might let you have seven screens. If you want to go to eight, you got to pay a little extra. Essentially, you might be giving too much away to your existing customers and you have to create reasons for them to want to upgrade. So just look at what everybody's using on average and just create some parameters around their usage so they have upgrade pass so you can make more money from the customers because they're using your service more. See, if they're getting more value, they should be paying more for it. Most businesses are being too generous and that way they're not capturing more share of wallet is what it's called. Then the second thing is we want to monetize additional services. Think about if you have a gym. Maybe you ask yourself, what does a customer do before they come into the gym or what do they do after they leave my gym? Well, before, they probably get dressed. Do I sell any clothes? Is there any type of product that I could sell in the gym that would get them to buy from me so they don't go to somebody else? Maybe after they go to the gym, they decide they want to go have a smoothie. Maybe I should have a smoothie bar. When I think about it, I ask myself, what does my customer do three minutes before and three minutes after they use my product or service? Those are opportunities for me to monetize additional services. Last, look at ways to create expansion triggers in your customer journey, meaning that there's something they do that tells you there's an opportunity for you to sell them more. If somebody's coming to your gym six to seven times a week, maybe they want to work with a fitness coach. Maybe they would like to have a nutritionist. You think about like Dropbox, the file storage software. When you get to 80% of your storage usage, they'll email you saying, "Hey, you're at 80%. Did you want to upgrade for a discount to get triple the storage?" Those are expansion triggers. Paying attention to how your customers are using your product or service and introducing those prompts will make you a lot of money, which creates more value for your business. A company that grows the amount of money they make from their existing customer base over a year, over time, without adding any new customers, becomes incredibly valuable to a buyer. If I have 100 customers that buy from me this month and they spend $10 with me, well, that's $1,000. If those same 100 customers the next month, I lost like 10, but the 90 that stayed spent more because I found ways to serve them better and charge more for additional services and they make me $1,300 that next month, then I've increased the lifetime value of my customers by 30% in that month. That is a very hard thing to do, but if you can figure it out, we'll make your business very valuable to a buyer. The reason this makes your company more valuable is because it turns your business into an annuity. Think about it. Over time, even if you don't add any more customers, if they can become more valuable to the business because you figure out how to create these upsells and sell additional services as a natural process for your customers, the buyer will feel better because they're not going to be pressured to have to add new people if you're not able to make more money with the ones you have. They know they'll be making more money over time by just having ownership of your business. It's like a life insurance policy, it's like having a 401k, it's like owning stock in the S&P 500. Over time, that has made money. It grows on its own. Creating a business that can do that, very valuable. With that in mind, the next step is crucial if you want to grow your company's worth. Before we get back to this episode, if you prefer to watch your content, then go find me on YouTube. I have this episode on YouTube. I'm Dan Martell on YouTube. Just subscribe to the channel, turn on the notification bell because then you'll get notified in real time. It'll tell YouTube to tell you. We've got a new episode, so you'll never miss anything. Now let's get back to the episode. Step number five, don't put all your eggs in one basket. This is what the money people call concentration risks. For example, if you rely on one big customer for 60% of your revenue, that's concentration risk. If you rely on one or two partners to generate all the marketing and sales for your business, incredibly dangerous. These are things that buyers do not want to see. I remember when I started going in business, I had a partner that wanted to give me more business and I told my dad and he said, "Whoa, don't do that." I said, "Why?" He goes, "They're already 40% of your business." If you give them more, then they may get up to 60%, 70% of your business. What happens the day you don't do what they ask you to do and they take their time paying your invoices. All of a sudden, you grew to meet their demand and then you can't cover your expenses because they stopped paying your invoices. Guess what they're going to do? They're going to buy your business from the bank. That's the risk you run when you have one customer generate too much of your revenue or one marketing channel be the primary one. A lot of businesses only have one marketing channel, Facebook. They don't realize if Facebook shuts down their ad account, their business goes to zero. They don't realize that if this key person that everybody loves, that everybody works with, if that person left your business, you wouldn't have a business, concentration risk. Concentration risk isn't just about how you get your money. It's about where your leads come from. It's about how you deliver that service. It's about where you even get the supplies to deliver the product to your customers. If you only have one supplier and they know that, that's going to be a risky proposition for a buyer. Here's what you need to do to de-risk or lower that concentration risk. First thing is you got to keep your top clients under 15% of your revenue. Ideally, your top three customers shouldn't be more than 30% of your total revenue. The reason why is that I've never seen a scenario where one customer leaving, maybe you won't make profit the next month or the second month, but eventually you'll replace them and you'll get back into normal business. It doesn't create a scenario that makes you unprofitable and not be able to cover your expenses. In my world, I don't want any one marketing channel to be more than 40% of my lead generation. I have a business and at one point, Instagram was 85% of our lead generation. I went to the CEO and I said, we've got six months to bring that down below 40%. He did. He went, he activated other channels. He tracked it. He made it a reward for the team if they could accomplish it. That way, if something happened to my Instagram, which it did because somebody reported it as fraud because that's what happens when you build a large channel and it gets locked out for the three, four, five days that we're trying to fix it with Instagram, we didn't skip a beat in the business because we weren't reliant only on that channel. The reason why this is important is because diversification makes your business safer to run. It takes that single point of failure away and that's what buyers are looking for, safety in your operations. Now that we're in a safer position, let's clean up the way you run your business. Step number six, write down how everything works. Some people call these standard operating procedures, SOPs, other people come checklist or systems. I like the analogy of playbooks because it's a sports analogy. So we call ours playbooks. Essentially, I want a playbook for every department in my company that explains exactly how we think about, how we measure, how we operate, how we review the operations, the plays of that department. If you don't have them written down, then a buyer won't trust that they're going to be able to take the business from you and operate it because there's nothing documented. It's actually why most entrepreneurs are stuck to their business and they can't get free or they haven't built a business that's worth anything to anybody else is because they didn't take the time to just write it down. You have to make it easy for somebody to come in cold, go through your playbooks, understand exactly how you make your secret sauce. That way they can keep making your secret sauce, which means the revenue will keep showing up. McDonald's can open a store in Japan and have a 14-year-old kid make a Big Mac that tastes exactly the same as the one I bought in New York City. How crazy is that? Why? They have a playbook for how the Big Mac is made, where the product is sourced, how the bun is toasted, how the beef and the whole thing comes together. Any person, anywhere in the world, same result. And that's why they're worth billions of dollars. So here's a simple way for how you can build your playbooks. First, I call it the camcorder method. I want to record myself doing the task, meaning I get to do the work. Let's say it's accounts receivable or you know, scheduling a sales call. But while I'm doing it, I'm recording myself and talking out loud what I'm doing, how I'm doing it. The cool part is then I can use a tool like trainual.com, which is a free tool. You can upload that video and it will create using AI the playbook from the thing that I just said. It's wild to watch it happen because most people are like, I got to go away for the weekend and document everything I do in my business. And I'm saying, nope, you can actually just run your business, record yourself, and a tool will create the playbook for you. Then we have to store that document into some kind of company wiki. If you use trainual, guess what? That's what the platform does. But you can use anything. You use Google Docs, you can use Notion, but you got to put it in an organized fashion. Why does this increase the worth of your business? Because a well-documented business is easier to scale and grow and sell. Once you do that, now you can move to the most important step of the process. Before we get back to the episode, if you want to jumpstart your week with my top stories and tactics, be sure to subscribe to the Martel Method newsletter. It's where you'll elevate your mindset, fitness, and business in less than five minutes a week. Find it at martelmethod.com. Which is number seven, build a leadership team. A leadership team is one of my favorite things to build, because it's a team that runs the company without you making every decision. I know this is scary. They're like, what do you mean? What's my job as the CEO if I'm not making all decisions? Well, let me tell you, one is vision, two is money, and third is people. Your job's to pick these folks. And the better you do at picking the leadership team, the more valuable the company gets because a buyer's going to interview them and see, do you have great people? If they interview your leadership team and they find a bunch of ding-dongs, you're not going to get bought for a lot of money because they know they're going to have to replace them as soon as they take over. But on the other hand, if you do this right, what I'm about to teach you, you will have a business that you may not even want to sell because it's so easy to run. One of the first things you have to do is empower your team to run the show. Steve Jobs used to say, it's easy to hire somebody and tell them what to do. It's hard to hire somebody and have them tell you what to do. When I hire somebody to take over a department or a company, I give them the keys. I give them the ownership. I give them the responsibility. I'm no longer involved. If the emails come in, I'm sending them to you. I'm going to empower you to make the decisions. You want it to be like a sports team where every person plays a position. They know the position. They know the plays they got to play. They know the responsibilities. They know what's required of them. They collaborate with the other people and everybody expects to win. This is where you realize you can't possibly play all the spots yourself and you have to have team members that come on to help you win. So here's how you actually build a leadership team. First, we got to start by hiring somebody to help run operations. At the end of the day, you're probably best doing marketing and sales. Having somebody start to manage the operations and really lead that, own it, finance, recruiting, technology, all the internal stuff, that's key. Once you've got that, then you look at marketing and sales as leadership positions, but you want to stay on them until you build a machine that they can run. Then you have somebody generating the leads and then closing those leads because somebody else is running the sales team. That starts to get you free and build a leadership team that makes the business predictable. Next, you want to create a dashboard, a simple, clear way to track their results every day, every week, every month. The mistake people make is they track the results for those leaders. That's not leadership. The right way is have them self-report, update that dashboard on a meeting, report to their peers how they're doing, to the numbers, to the targets. That is leadership. You sit back and you coach incorrect, but you're not running or driving things. Remember about the ownership? Having somebody else that runs a show makes your business more valuable. Then you need to provide a decision framework for those leaders to operate with them. So for example, in my business, I have a $50 rule, 50 to fix it for anybody to solve a problem they run into as long as they tell their leader that they made that change. I also have 500 for managers, 5,000 for directors, and 50,000 for C-level leaders in my companies where they can fix anything without approval as long as they let me know that they did that. I do that because it pushes the decision to fix problems down to the people that have the most information to actually solve it and it doesn't make me the bottleneck of all decisions. And then last, but definitely not least, on a weekly basis, you have to hold a leadership meeting. That way you can align everybody to the vision of the business, to the goals for the quarter, and help them work with them to solve the problems, but only once they've brought to you the problem and their solution and ideas. All of this is wildly important because you produce strong leaders that reduce the risk to a buyer and even freeze up your time to focus on growth. The reason why this is so valuable is buyers value companies with proven leaders already in place. I just gave you a masterclass in creating real wealth, how the 0.001% of the people actually make their money by owning a business that's valuable to somebody else. It can feel like a lot. I get it, but I'm going to encourage you to consider this. Follow the steps, look at what areas in your business are missing, and just choose for the next 90 days to fix one of those. If you do that every 90 days, over time, maybe in a year, you'll build a business that's incredibly valuable, not only to you, generating massive profits, but most importantly valuable to somebody else. See your active income, how much you make every month is money. That's cool. What's creating the most value though is what's called enterprise value, and it's the value of the asset called your business to somebody who's willing to buy it. That'll make you rich. And remember, if you want to access to my grow ceiling calculator, just click the link below and I'll send it over to you. Thanks for listening to Martell Method. If you like this episode, could you do me a huge favor and go leave a review? This helps us get the podcast more ears and helps more people get unstuck, reclaim their freedom and build their empire.