Copy This Strategy, It’ll Blow Up Your Business

What if I told you that your business could be worth two, three, even 10 times more without adding a single customer? I've sold three companies, invested in dozens more, and I've seen the same revenue numbers get completely different price tags. And the truth is the difference always comes down to one metric most founders ignore. By the end of this video, you'll have the step-by-step formula to wildly increase the value of your business and set yourself up to sell for way more when the time comes. Most founders think that the way to grow their business is just getting more customers through the door. But let me tell you, that's just simply not true. The real multiplier is how much you grow from the ones you already have. Let's start with the question a lot of you might be asking yourself. Why does this even matter? Getting new customers is getting more and more expensive. And when somebody comes to buy your business, they don't care how many total customers you have. They care about how many stay and how much they spend over what period of time. Here's the facts. It's five to seven times easier to sell to an existing customer than to a new lead. People are willing to buy more of what they've already bought. Trying to get somebody to buy from you for the first time, that's hard. Think about it. Company A, obsessed with new customer acquisition. They're like the ultimate salespeople marketing and they're just like, I'm the best marketer ever. And they're burning cash on ads. The problem is they get high turn. Versus company B, focus on getting the customers, delivering value. Company A struggles to raise money despite growth. Company B gets acquired at a premium. Why? Predictable revenue. Why is predictable revenue important to buyers? Because when they buy your business, they're gonna pay you money and they expect to make a return on that money. So the probability of seeing a return is what matters most. When I'm buying a business, I always look at the amount of risk I'm willing to take. If the business is small and they don't have predictable revenue and they're not growing, there's a lot of risk in me buying that business. If the business is bigger and the customers are happy and they buy more and more, I have less risk that something bad is gonna happen. That is why people pay more for companies that have predictable revenue. And I know some of you guys are thinking, but Dan, I just wanna grow my business. Why do I have to care about exit valuations? Having a business that is valuable to somebody else is a great business to run. You may never wanna sell, that's great. A company that could sell is a great company to operate. See, your best customer is the one already paying you. So always try to find ways to serve them better so that they pay you more. Now, before we move on to the next section, if you wanna know the rough valuation of your business, just click the first link in the description below to get access to my valuation calculator. Essentially, you can input all your business metrics and get a rough estimate of how much your business is worth to an investor. But what actually creates that predictability that buyers are willing to pay 10 times more for? You might wanna grab a pen for this. It's called lifetime value. Here's the best way to think about it. I have a customer. How much does the average customer pay me over time? Is it $100 once? Is it $10,000 over 18 months? Here's the official definition. It's how much money a business makes from a single customer during the entire time they stay as a customer. So for example, if a customer buys $100 product every month for 12 months, lifetime value equals 1200 bucks. If another buys once for 200 bucks, lifetime value equals $200. The more each customer is worth over time, the more valuable and predictable your business becomes. Now, this is a big concept. It's called expansion revenue. Expansion revenue is the holy grail. Grow what you've got before chasing what you don't. And we'll get into this in a second. Now, to really understand LTV, we need to know how to calculate it. It's a simple formula. LTV equals the average order value, how much the person pays, times the purchase frequency monthly, maybe weekly, maybe yearly, I don't know, multiplied by the customer lifespan. How long do they stick around or do they cancel after six months? Maybe they stick around for six years, maybe 10 years. I know some businesses, they've never lost a customer. This is completely different for every business. I mean, if you have a plumbing company, that's gonna have a different customer profile in regards to lifetime value than potentially an AI software product, that's my world, that pays every month. But they might only stay for 18 months or 24 months. So for example, if you have a media agency and right now customers are buying up front, maybe 25 grand for a project, that's cool. But maybe customers buy on average 1.2 times in their lifespan. So it's not just 25 grand, it's 25 grand multiplied times 1.2. So a customer's worth a little bit longer. See, that's what I'm looking for. It's like every customer buys once, but maybe some customers buy two or three times. That's the average purchase frequency over that customer lifespan. To really bring this home, bad situation. $100 average spend, purchase one time, once a year. That's $100 lifetime value of a customer, which some people have and they don't even know and they think it's like, oh my God, we're doing so great. No, you're not. Example number two, this is great. Average customer spends $100, but they buy every month. So that's 12 purchases per year. But on average, they stick around for three years. That's a lifetime value of $3,600. That's a 36X difference in value without adding a single customer. Those are wildly two different businesses, but what's actually considered good? Is it good that a customer's worth 25 grand? Or what if they should be worth 100,000? You don't know, right? Cause you might be pumped, 25 grand, that's awesome. That's profit. I can live with that. But what if your potential is four times more? That's what we need to figure out. So just so you understand, I've been involved in buying over probably 35 companies in just the last five years alone. I've exited several companies myself. I've invested and helped those companies exit. So I wanna give you a ratio that'll help you understand what great lifetime value is. The truth is though, is it does vary depending on industry. So instead of asking, is my LTV good or bad? Compare it against customer acquisition costs. Essentially, how much does it cost you to acquire a new customer? Because once I understand my lifetime value and my CAC ratio, then I create a new formula that puts it all into perspective. The reason you wanna calculate the cost to acquire a customer over the LTV is because when you are doing marketing, you want to be efficient and you wanna be able to grow. So you want that ratio to be as good as it possibly can. So if you spend a lot of money to get a customer that's not worth a lot, business isn't a great business. If you spend a little bit of money to get a customer that's worth a lot, that's a winner winner chicken dinner. Here's a rule of thumb. I'm gonna just assume on average, you have 70 to 80% margin, meaning that it costs you $20 in cost to get $100 customer. With that in mind, let's talk about some ratios. If your ratio is less than three to one, meaning that if a customer's worth $300, you're spending $100 to get them, then you're probably in trouble. You're spending way too much to get a customer compared to what they're worth. If your ratio is between a range of three to one to five to one, then you're healthy. You're essentially making good returns on every customer. If ratio is more than five to one, you're getting into the world-class territory. That's when buyers and investors will pay premium on the multiples for your business because that means that they can grow your business easily and it's generating more profit. See, strong lifetime value is the backbone of all valuations. If your customers stick around and they spend more, that's where the magic happens. So the obvious question, how do I actually increase my lifetime value? There's only three ways that you can increase the value of a customer. The first one is you gotta keep the customer for longer. What I always do when I sit down with a founder is I'm looking at how long customers stick around and I have to increase that. I have to improve it because you've done all this work to get the customer and then they leave. To fix that, it's kind of simple. Look at why they left. I had a friend that had this software and he had all these signups, all these people became customers, but then he had 10% every month leaving. If you're losing 10% of your customers every month, that means every 10 months, you lose 100% of your customer base. He didn't get the customer to what I like to call core value. They were promised something on your homepage, they bought from you and you didn't get them that value as fast as humanly possible. So you have to nail the onboarding. Design it, okay? Think about like the effort that Disney goes through for new customer experience. Man, that whole thing is dialed in from the phone call to the app, to the park experience, to the music they play in the parking lot. Not only is it designed to get you in the right headspace, but then all of the signage, all of the details, the railings, they're all custom for the situation you're in, the park you're in, it's all themed. They nail that experience. That essentially gets you time to first value you've experienced Disney as soon as you walk out of your car. And then you have to look at stickiness, right? How easy is it for somebody to leave? If you don't make it sticky, then some person that's better at marketing, selling a bigger dream, will get them to switch. So I always ask myself like, what integrations into their life, into their habits can I create that makes me top of mind, have them think about me and make it a little harder for them to swap. It could be the data I've collected when they became a new customer. I call this the octopus method where I've got my tentacles and they're sticky pow and pow. Not from a place of like trying to make it hard cause I suck and I want them to stick around, but just don't make it too easy for somebody to go click, click swap. And then finally be proactive in your customer success. Meaning that if you know somebody is not using your product, they haven't been to your gym in a while, they haven't logged into the software you sold them, have somebody reach out. To me, this is a no brainer. In this world of technology, it's actually quite simple to set up sensors where you can monitor the customer's usage or consumption of what you have and have a report pulled every day to tell you in the last 30 days of your total customers, which ones are red, yellow, green, or purple. Purple are your super fans, okay? Those ones you want to like acknowledge and reward, but the people that are red and yellow, that's where you wanna be proactive in reaching out to them to make sure that they understand, they're not upset with you. I taught this to one of my coaching clients and he had an HR software. His biggest reasons for customers churning was the person that worked there took a new job. And I said, hey, why don't you set up a monitor of your customers on their LinkedIn account? When you notice somebody updates to a new position, you have your team reach out to their old team and other people on the team to figure out who the new person that took over and then reach out to the person that went to the new company and see if they won't wanna buy your software at the new company. So that's how we keep customers longer, also known as retention. Number two is get them to buy more often, essentially the frequency. When I think about it, it's like somebody's bought from me, but maybe they're using more of what I sold. So I wanna create like usage-based pricing. So for example, if they come to the gym, I might say, okay, you're allowed to come to the gym five times a week for that membership. But if they're coming more, then they pay more for the more times they come. If I have storage on Dropbox, I'll pay more the more storage I put there. Or the other thing is to think about what are other ways to increase the spend per purchase? In the software world, we have this thing called implementation fees, which is essentially a way to charge to help the customer onboard. For example, I built a company called Flowtown that was a social marketing platform. And then I was asking, what do customers do before they come in and use the software? Well, they go and they buy templates from other people to use to get ready to use my software. Why don't I sell those templates inside my software so they don't have to leave? That way I can increase my share of wallet. There is so many opportunities in your business to look to sell higher price things. I like to think about it like a garden is that I could want to have this like luscious garden and I keep planting seeds and planting seeds and planting seeds. But if I don't pay attention to current plants and seeing if they're getting all the nutrients they need or check the soil quality or even make sure where I'm planting the seeds is actually gonna grow, then I could do a lot of work that doesn't get me this lush garden. So now that you know all the moving parts, here's where it all comes together and 10X is the value of your business. You have to take action. Now that you know like all the different things you could do to increase the value of a customer, I want you to pick one. What is the thing that you're gonna focus on because you could do it all but it would just become overwhelming. Is it how much they're paying? Is it how often they pay? Which one has the highest potential return for the least amount of effort? That's what you wanna look at. Pick that one for the next quarter and execute. And remember, if you want access to my valuation calculator, just click the first link in the description below, plug in your metrics and see how much your business could be worth. This is business. If you have a business, you probably wanna make the most amount of profit for least amount of effort. Trust me, customers being worth more in your business makes more profit, means you have more resources to invest in buying back freedom. But more importantly, most people look at their life through the lens of cashflow. How much money do they make every month? Because they think, okay, that's what I can afford to pay for my life. I'm more interested in increasing the potential for your net worth. See, the moment you start treating your business this way, then the business becomes valuable. And if you look at your personal net worth sheet, which the banks ask you to submit every time you wanna borrow money, having that number go up because the business is worth more, because you've done these things to make a customer worth more is probably the biggest opportunity for you to create massive wealth in your life. Now, if you wanna learn how to get ahead of 99% of the people that are already using AI, but you wanna be better, click here and I'll see you on the other side.