Latest / Forge Fire Protocol Podcast / You Built a Job, Not a Business | $10M Exit Math Explained

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You Built a Job, Not a Business | $10M Exit Math Explained · Forge Fire Protocol Podcast

• 0:02
  Imagine breaking free from the grind and building a business that lights you up, ignites with purpose, and delivers the ultimate reward.
• 0:12
  Forge Fire Protocol gives ambitious entrepreneurs the proven five-step system to choose the right business, launch it successfully, scale it strategically, and exit on your terms.
• 0:26
  Turning vision into lasting wealth, forged in fire, built for legacy.
• 0:35
  All right, welcome back to the Forge Fire Protocol Podcast.
• 0:39
  I'm Don LaPlume.
• 0:40
  We've got Michael Sullivan here, Stephen Moynihan, your three hosts, and we're going to get into a challenge.
• 0:49
  People have asked us, you know, hey, well, you talk about a $10 million exit.
• 0:53
  How do you define that?
• 0:55
  Right.
• 0:55
  So we're going to get into that.
• 0:57
  And Mike, I'm going to ask you this question.
• 1:01
  Why should they care?
• 1:02
  It's simple.
• 1:03
  It's simple.
• 1:05
  What are we all going after?
• 1:06
  Okay, so you might hear the $10 million challenge and hear $10 million say, I don't need $10 million.
• 1:11
  Or you might think of $10 million and say, only $10 million?
• 1:14
  Okay, that could be two people in the same family living in the same household.
• 1:18
  But what are we all after?
• 1:20
  Okay, let's think about it seriously.
• 1:22
  We're all looking for that financial freedom.
• 1:26
  We're all looking to find something that we can't.
• 1:30
  care about, that's going to help a lot of people.
• 1:33
  We want to provide that impact.
• 1:35
  We want to provide that value.
• 1:37
  We want to be able to live the life that we want.
• 1:40
  Okay, we want to be able to experience things, not just read about them, not just watch them on TV.
• 1:45
  We want to be able to make sure our kids, our family are taken care of.
• 1:50
  We want to make sure our parents, grandparents, whoever, when they're in, again, I've gone through this personally, when you can't financially provide for people in your life who are in significant medical need.
• 2:07
  I was on a call the other day, the guy was talking about, he spent $30,000 to $40,000 a month during his mother's last few months.
• 2:17
  But she got to go out and pass away the way that the whole family ideally wanted.
• 2:21
  And he's like, it's the best money I ever spent.
• 2:24
  Because she went out on her terms with the whole family around her.
• 2:28
  And we didn't have to do what my family had to do.
• 2:31
  And again, as I've said before, thank God for my sister and brother-in-law who really covered a lot of that.
• 2:35
  And it's not fair to them that they had to do that.
• 2:38
  Because the rest of us couldn't support that.
• 2:40
  And a couple of us had passed away.
• 2:42
  But the bottom line is, that's what we're after.
• 2:47
  We're after providing something better than we have today.
• 2:52
  $10 million, a $10 million exit can provide that.
• 2:56
  That can be the kickoff of the foundation that can set you up no matter what your age is right now.
• 3:01
  Okay, that can be your, whether you want to call it a nest egg, or that can be your investment that's going to support you over the remaining years that you have.
• 3:08
  I mean, I'm 50 years old.
• 3:11
  All right, I'm very...
• 3:13
  I'm extremely grateful that I had 50 years.
• 3:15
  My parents had me at 45.
• 3:16
  I'm extremely grateful that I got 45 years with them.
• 3:19
  I never expected to get that much.
• 3:22
  So let me ask you, Mike, cause I mean, you were going there and I want to bring in Steven here too, but does it have to be 10 million?
• 3:29
  You sort of started there and then you went a little deeper.
• 3:31
  Does it have to be 10 million?
• 3:33
  It doesn't, but I want people to understand it isn't just an arbitrary number that we picked.
• 3:37
  We didn't just say 10 million sounds good.
• 3:40
  Let's just do 10 million.
• 3:43
  What we see in a lot of people, once you achieve that level of success, there are things that people want and people want for that foundation and for their securities.
• 3:52
  You want to be able to set up your future, but most people don't just set it and say, okay, I'm good.
• 3:57
  Most people who are building want to do this and still want to be inspired every day.
• 4:02
  They still want to be part of something.
• 4:04
  That 10 million gives you the ability to establish that foundation and retire or establish that foundation and retire.
• 4:11
  start building something else or start helping others do what you just did.
• 4:15
  That number doesn't have to be 10.
• 4:16
  It could be 5 million.
• 4:17
  It could be 1 million.
• 4:18
  It depends on who you are.
• 4:19
  But the reason why we chose 10 is because that is a fantastic foundation to scale.
• 4:26
  I talk about it from technology all the time.
• 4:28
  If you don't build the proper foundation in your business,
• 4:33
  You cannot scale, you cannot grow or even contract because the building doesn't have the strong enough foundation to handle those fluctuations or to handle that scale.
• 4:41
  That's what we're doing.
• 4:42
  We're establishing that fortuitous foundation that can serve you for the rest of your life.
• 4:48
  That's why that number is so important.
• 4:51
  And it really is.
• 4:51
  And Stephen, let me ask you, because I know you have thoughts on this too.
• 4:56
  We talked about the $10 million exit.
• 4:57
  Where is your mind when we talk about that before we really get into what it means?
• 5:02
  It was a thing.
• 5:02
  Mike just kept mentioning the word 1010.
• 5:05
  And it struck a chord with me.
• 5:06
  As, you know, people heard on earlier podcasts, and it's 38 years ago.
• 5:12
  Now I was diagnosed with leukemia.
• 5:14
  And I had a bone marrow transplant before my sister was a match.
• 5:18
  And after that, I had my mind, I wanted 10 years.
• 5:25
  Give me 10 years.
• 5:26
  Yes.
• 5:27
  So I had to have a 10 year plan.
• 5:29
  What was I gonna do?
• 5:30
  What was I gonna accomplish?
• 5:31
  And it was hard to keep, stay on track, to stay, okay, now I got nine years.
• 5:37
  Now I've got eight years.
• 5:38
  Now I've got seven.
• 5:40
  And then I hit 10 and 11 went by and it changed.
• 5:47
  And so here we are now.
• 5:51
  And with the Forge Fire Protocol, one of the things is this sense of urgency.
• 5:56
  And it's doing it now.
• 5:57
  And you'll get that theme all throughout.
• 6:00
  Things are done quick and fast.
• 6:03
  And when Don first came up and had the book and said, I wrote a book and I read it, Mike read it.
• 6:08
  And we both said, there's something big here.
• 6:10
  And we got it.
• 6:11
  And then we use that to create the whole ecosystem and other projects that have come out of it.
• 6:18
  And we did that at that fast pace.
• 6:21
  And it's really the revolutionary time that we're in.
• 6:24
  And that is AI and what it's done and exponentially what it allows
• 6:29
  The three of us each now do in a matter of minutes or hours versus what took days and months or a year.
• 6:39
  That's where we are right now.
• 6:40
  And that's where we can get to.
• 6:42
  And we've seen that 10 million is a doable number in three to five years.
• 6:47
  It's not a far-fetched thing anymore.
• 6:49
  Now with today's technology and in the forge,
• 6:53
  We have all the tools that show you how to use AI.
• 6:57
  You don't have to be a prop specialist if you know something about AI.
• 7:00
  If you don't know anything, you can use the basicness that's in here.
• 7:04
  Well, you'll grab it, you'll get it.
• 7:07
  And then we've each had where, you know, we've had that, you know, inside each of the three of us has been a spark in the past.
• 7:17
  But we sometimes have lacked that vision to take control of it, to create that real and lasting freedom that we each, the three of us individually, have strived for ourselves, for our families.
• 7:30
  And we've experienced, we can stay, you know, trapped in trading our time for a paycheck, you know, and
• 7:40
  building a high stress job, you know, really that drains us.
• 7:44
  Instead of something that inspires us where we can see ourselves moving forward.
• 7:48
  We found through the protocol is we get that we've created an operating system to validate our ideas, do it fast, launch, lean, scale, and automate that business.
• 7:59
  And the value from engineering it from day one to a 10 million dollar buyout in three to five years,
• 8:08
  That's the key.
• 8:10
  And hopefully you get that idea today from what we go through and what we explain.
• 8:15
  And that having that goal in mind from the very beginning shapes and formulates your actions on what you do to get you there faster.
• 8:26
  Well, well said.
• 8:27
  So let's get into this.
• 8:29
  I mean, we sort of covered why the 10 million and why it matters because it's life-changing.
• 8:34
  I've got a friend of mine.
• 8:36
  It's funny.
• 8:36
  We met because she was actually my neighbor.
• 8:38
  Didn't know her before she moved in and my kids get to know her kids and stuff.
• 8:43
  But I remember she would launch a business and sell it.
• 8:49
  But she would do the financing of that business.
• 8:51
  Right.
• 8:52
  And so if it failed or something wasn't going right, she'd take it back over.
• 8:57
  Or the person stopped making payments on it.
• 8:59
  She'd take it back over, rebuild it back up and sell it again.
• 9:03
  And I don't know how many times she did that.
• 9:04
  She did that with coffee shops and all sorts of different things.
• 9:07
  But her core was real estate.
• 9:11
  And that's how she started.
• 9:12
  She says, look, if I just buy a house and I start to work on it and build it up, you know, repair it.
• 9:17
  So she got something at a low price, repair it.
• 9:21
  And then it builds equity.
• 9:25
  Now I can sell it.
• 9:25
  Now I've got a nest egg to start the next piece.
• 9:28
  It's always building on top of those steps, right?
• 9:32
  And that's sort of a smaller version of exactly what you were talking about, Mike, this is a $10 million, um, cornerstone.
• 9:40
  Let's call it that builds, that sets the stage for a hugely strong foundation in, in one fell soup.
• 9:48
  Right.
• 9:49
  It, it does, but you know what else it does too?
• 9:51
  And just, again, I always go back to every single time I'm having a conversation with someone is number two things.
• 9:57
  I want them to understand.
• 9:58
  Number one, um,
• 10:01
  I want you to understand that I know why you care.
• 10:04
  I want to make sure you get, why should you care?
• 10:08
  I mean, I could be more crass about it.
• 10:10
  I won't be right now, but that's, I've used a much more crass response to that.
• 10:14
  It's, and I'm just being honest.
• 10:16
  I'm from Boston.
• 10:17
  So we are who we are.
• 10:18
  Okay.
• 10:18
  So it's like, I'm listening to someone talk and they're just going on and on.
• 10:21
  And I'm like, yeah, what, what, why do I care?
• 10:25
  I'm not saying that, but if you're trying to say something, make sure I understand why do I care?
• 10:29
  Right.
• 10:30
  Number two, what people don't say, and we've talked about it a lot, and this is what's so special about this is one of the reasons I started working with you, Don, quite frankly, is yes, I liked the business we were in.
• 10:44
  But I liked what you had done.
• 10:46
  And I liked what you were doing.
• 10:48
  And I liked the way you approached it, which was a completely different approach than the way I was doing things.
• 10:54
  Some of it was the same where we were aligned from a vision perspective in goals.
• 10:59
  But the process was different.
• 11:01
  Well, my process wasn't working at the level I wanted it to be working at.
• 11:05
  Yours was working better than mine.
• 11:07
  So I wanted that law of proximity.
• 11:10
  I wanted to be closer and understand what is he doing differently than me?
• 11:13
  How is it working?
• 11:14
  How can I help serve him?
• 11:16
  What can I do that can provide value to him so I can...
• 11:19
  see how we can do something.
• 11:22
  Okay.
• 11:22
  It was, and that's what I think people don't understand as much as we're building towards this $10 million exit.
• 11:28
  We're validating the idea.
• 11:29
  We're following these proven steps, but we're also building community.
• 11:34
  And you're not just building community with people who are going to just sit around the fire, hold hands and sing songs.
• 11:40
  You will get that support because you're with like-minded people, but you're also going to get that support.
• 11:47
  direct conversation saying, oh, where you're heading is dangerous.
• 11:50
  Don't do that.
• 11:52
  Just saying, I've been there.
• 11:54
  Share with me why you're doing that.
• 11:56
  And that is so essential when building that business because that $10 million exit could take 10, 15 years.
• 12:02
  We didn't do that.
• 12:02
  We compressed it to three to five.
• 12:05
  That's right.
• 12:06
  And that's intentional.
• 12:08
  And that doesn't happen without that community and without that mentorship and without that proximity to like-minded builders.
• 12:13
  Yeah.
• 12:15
  And people have to expect that, by the way.
• 12:17
  Yeah.
• 12:17
  Because the community is going to be very straight with you.
• 12:20
  Sometimes it's going to be brutally honest with you.
• 12:22
  And it's never a personal thing.
• 12:25
  Understand that.
• 12:26
  If you're getting into business, you can't get into business from an emotional standpoint.
• 12:32
  You've got to be in there on a mission to do something.
• 12:34
  Now, you could have emotions behind why you're doing it, but not with how you run it.
• 12:39
  All right.
• 12:40
  And when you're learning and you're taking...
• 12:44
  direction, you're taking suggestions from people that care about your success, right, that have done it already, then don't take it personal.
• 12:55
  Take it as, okay, this is something I wasn't seeing, right?
• 12:58
  Look at it from a different perspective, right?
• 13:00
  Don't let the emotion take you over.
• 13:03
  Let the, okay, what do I need to learn from this?
• 13:07
  Yeah.
• 13:08
  Everything is about learning.
• 13:09
  David O' You don't have to figure it out by yourself.
• 13:12
  You don't have to do it alone in the dark.
• 13:14
  David O' Right.
• 13:15
  David O' You really got a tribe of passionate, driven entrepreneurs that you can tap into.
• 13:21
  And the cutting edge AI tools that we have available.
• 13:25
  And the proven playbooks that are in the forge, along with the daily accountability.
• 13:30
  And that's really a key, that daily accountability.
• 13:33
  And Mike and I experienced that here with Don.
• 13:38
  Because when we initially started to plan for the protocol, he had him...
• 13:46
  he used what he believed and what he wrote about in the book.
• 13:49
  And we had an aggressive schedule.
• 13:51
  And when you first looked at it, you said, yeah, okay.
• 13:54
  But then as we accomplished the tasks each day, and there were some things that could get put out a little bit longer, because we had to rely on, you know, different things beyond our control that happened first.
• 14:05
  You know, it's like some system we're using was gonna take three days before it would be up and going.
• 14:11
  and things like that could happen.
• 14:12
  But we adhere to the schedule and the system allows you to keep, allows you to not forget where you are.
• 14:20
  Yeah.
• 14:21
  So let's get into what a $10 million exit is because that's what we've been talking about.
• 14:25
  We talked about the why, we talked about why it matters to you and why it should be a number that you're really looking at.
• 14:32
  And even if you do change it, 10 million is a phenomenal number as a cornerstone for the rest of your life.
• 14:39
  that's the kind of exit you want so when you think about a 10 million i'm just going to go through a simple definition for you and i'm going to break this out right because if you've never really understood how businesses are valued and evaluated and how they get sold for massive amounts of money or not so much right that's what we're going to break down today and we'll go through a whole bunch of different examples and stuff but look a 10 million dollar company
• 15:05
  This is simple.
• 15:06
  A $10 million company is one whose verified earnings or recurring revenue.
• 15:11
  And we talk a lot about MRRs, which is monthly recurring revenue, and ARR, which is annual recurring revenue, but whose verifiable or verified earnings or recurring revenue multiplied by a multiple the market pays for that type of transferable risk.
• 15:30
  And when those two multiply and it equals 10 million or more, you've got a $10 million valuation.
• 15:35
  If you don't and you want it, let's say you're at 3 million or 5 million and you want to get to that 10, well, how do you raise it?
• 15:42
  You raise it by changing the multiple that is gonna be used by the buyer when they buy, and we'll talk about how you do that, or increasing and or increasing the MRR and ARR.
• 16:01
  That's what it comes down to, and making sure you've got that retention.
• 16:05
  And the real key is that you, the founder, have to be optional.
• 16:10
  All right.
• 16:10
  Because if you're the key, if you are the linchpin, if you are the one that this business relies on, then you're selling yourself.
• 16:19
  You're not really selling a company.
• 16:22
  All right.
• 16:22
  The idea is inside of you.
• 16:23
  It's with you.
• 16:24
  And they have to buy you.
• 16:27
  I just want you to sort of, I'm being stark when I say that because we really can't sell ourselves in that way.
• 16:32
  Maybe we can, I don't know.
• 16:33
  But that's what it comes down to.
• 16:34
  That's what a buyer has to look at.
• 16:36
  It's like, if I'm going to be buying this business and it relies on you, I have to have you as part of the business.
• 16:42
  Is that freedom, Don?
• 16:44
  That is not freedom.
• 16:45
  That's called slavery.
• 16:47
  That's called a leech.
• 16:49
  That's probably a nicer term.
• 16:53
  No, because I like the analogy.
• 16:55
  If you think about it, okay, so you have this business that you have that you can sell, whatever.
• 16:59
  Yeah, you can get the paycheck.
• 17:01
  Yes, it initially requires you.
• 17:02
  You want to stay on.
• 17:04
  You want to stay in control.
• 17:05
  By the way, you're not going to stay in control.
• 17:07
  As much as you think you are, you're not.
• 17:10
  I mean, have you ever heard, not to go off on a brief tangent, but I have to here.
• 17:13
  If you ever listen to the story of Proctor Gallagher, when Bob Proctor brought in Sandy Gallagher, who had been doing billion-dollar bank mergers, he first said, oh, you mean how many millions?
• 17:25
  She's like, not millions, billions.
• 17:27
  Because she understood money.
• 17:29
  When she did this, she's like, that can happen and you can be the chairman, but I'm the CEO.
• 17:35
  That's my condition.
• 17:35
  I'm the CEO.
• 17:37
  And she wanted to change the way certain things would be doing and exponentially increase things financially.
• 17:41
  Okay.
• 17:42
  But think about that as an owner.
• 17:43
  Are you prepared to not be the CEO?
• 17:47
  Yeah, what you have there is really the elimination of founder dependency and via the systems and AI and securing that mid- to high-tier valuation and the multiples demands replacing the owner really as the primary operator to documented SOPs, the autonomous workflows,
• 18:07
  and that delegated delivery so the business easily passes the two-week CEO vacation test.
• 18:14
  And we have that in the protocol.
• 18:17
  It's a key part of it.
• 18:19
  And you'll find that in there.
• 18:21
  So that's a key, that CEO vacation test.
• 18:25
  Yeah.
• 18:26
  And if you think about it, like that lease that we were just referring to, it's just going to get tighter.
• 18:31
  If you've ever walked a bigger dog,
• 18:34
  or I'd have ever been taught how to properly have a dog walk by your side that has a tendency to pull.
• 18:39
  I actually had gone to a dog trainer for my father-in-law, I had a shepherd years ago.
• 18:44
  And when we first did the training, I was taught to never let the dog lead me, to always make sure the dog walked by my side.
• 18:51
  And if it started to lead, to shorten the leash.
• 18:53
  So I'd shorten my hand on the grip down on the leash to make sure I held it.
• 18:56
  I just continued to walk, but I made sure it walked by my side and it never led me.
• 19:01
  That's how I vision most entrepreneurs in their business.
• 19:07
  The bigger it gets, the more they grow.
• 19:09
  If they don't have the proper systems that Stephen just referred to in place, that leash just gets tighter and tighter and tighter until you learn to let go, until you learn to build those systems.
• 19:19
  So that's why it's so essential that we start doing that with the exit value design from the get-go.
• 19:24
  We start building that in.
• 19:26
  You can't have freedom when the leash is that tight.
• 19:29
  Every single crisis or supposed crisis, you get called.
• 19:33
  You're in the Caribbean, tough.
• 19:35
  You're getting called because they need you.
• 19:37
  Yeah.
• 19:37
  Because the system doesn't know how to run without you.
• 19:40
  And that's a problem.
• 19:41
  That is not financial freedom.
• 19:43
  That is not emotional freedom.
• 19:45
  It's actually probably more stress than you had when you were just starting out.
• 19:48
  At least you had the excitement of starting out of what can become.
• 19:51
  Now, you just have a very short leash.
• 19:55
  You just had to chime in on there on that leash.
• 19:58
  So at one point I had a commercial lending company and I had 10 employees working for me, originators.
• 20:11
  And I would ski every weekend.
• 20:15
  And then every other weekend I had my son and daughter with me.
• 20:18
  The youngest one wasn't born yet.
• 20:20
  And we'd be up in Vermont, lived in Connecticut, and we'd be at Kilmington.
• 20:25
  And on the weekends I didn't have them, I'd go up on Thursday night and Friday ski with a couple of friends of mine that were up there that were kind of like on the same schedule.
• 20:33
  And Friday could not go by without me getting several phone calls during the day because things just didn't operate without me.
• 20:44
  You know, for small things.
• 20:47
  And you had zero freedom, you know, with that.
• 20:51
  And it's just perfect case, perfect example.
• 20:54
  And it's whether even just to be at home, you know, maybe on a Saturday morning, and all of a sudden your business has a problem.
• 21:03
  And you have to stop what you had planned for that morning and start working.
• 21:10
  I used to think that was job security, by the way.
• 21:12
  I'm not going to lie.
• 21:13
  In the early 2000s, I used to think if you're that important, the company can't get rid of you.
• 21:17
  Now think about that from a scarcity mindset.
• 21:19
  They can't get rid of you.
• 21:20
  By the way, yes, they can.
• 21:23
  They just have to pay a little bit more to get it fixed.
• 21:25
  But I had my wife, because I was getting called nonstop, every weekend, every Saturday, Sunday, consistently, month over month over month.
• 21:34
  And my CIO called the house and said, hey, can I speak with Mike?
• 21:37
  And she goes, no.
• 21:40
  And he's like, no, no, no, he works for me.
• 21:41
  And she's like, yeah, no, he's not here.
• 21:43
  And hung up the phone.
• 21:44
  And he called back and he's like, I need you to get a hold of him.
• 21:46
  She's like, he's not around.
• 21:48
  And hung up the phone.
• 21:50
  And she's like, she's like, she just got, she's like, I'm sorry.
• 21:54
  There comes a point in time.
• 21:55
  Someone has to say enough is enough.
• 21:56
  She's like, build something better.
• 21:57
  What you're doing isn't working.
• 22:01
  Right.
• 22:01
  And she's 100% right.
• 22:03
  What he was doing, that system was broken.
• 22:06
  It relied on one person.
• 22:09
  That's a failure.
• 22:11
  Yeah, it is.
• 22:12
  And it's stressful.
• 22:13
  And I'll tell you, part of the reason I wrote this into the protocol and said, we're going for the $10 million exit and how to go about it.
• 22:23
  In order to do it, in fact, three to five years, you have to eliminate yourself as a cog of the wheel.
• 22:29
  You have to take yourself out of it.
• 22:31
  And what caused me to do that was for years, I launched my first business when I was 18 years old.
• 22:37
  Right.
• 22:37
  It was it was a it was a an S Corp back then.
• 22:42
  But I've launched a lot of businesses over the years and there was not one of them where I had any peace afterwards or during.
• 22:50
  Right.
• 22:50
  Some were successful, some were not so successful.
• 22:52
  Didn't matter.
• 22:53
  I still had headache and call after call after call.
• 22:56
  I still own one company right now that is a thorn in my side.
• 23:01
  Most of the time now, it's good in other ways, but
• 23:06
  Everything I'm building these days, all the new stuff that I've been building, it follows this formula.
• 23:14
  And I seldom get any kind of calls from those things.
• 23:18
  That's power, that's freedom.
• 23:21
  All right, so that's what we're gonna go into.
• 23:23
  So hey, look, we wanna cover this content.
• 23:26
  So let's get into some terms because there's some terms that people need to understand.
• 23:30
  Yeah, that's exactly where I was going right now.
• 23:32
  Cause I was saying, you were talking about the base for those multiples.
• 23:35
  Well, what do you mean by the base?
• 23:36
  And what are the different bases that we have?
• 23:38
  And what is EBITDA?
• 23:39
  What is SDE?
• 23:40
  So, I mean, let's just briefly go over it.
• 23:42
  All right.
• 23:43
  And I'm just going to cover on a high level.
• 23:44
  Please elaborate further if it's needed.
• 23:47
  But EBITDA, okay.
• 23:48
  Earnings before interest, taxes, depreciation, and amortization.
• 23:53
  So why is that important?
• 23:56
  Because it's a number of the cash profit before the capital structure and the accounting of non-cash items.
• 24:03
  All right, so a lot of businesses I've known, very successful ones and ones that were growing, EBITDA was a very important number for them because they wanted to know what was that net number.
• 24:12
  Also, and we'll get into it more, but SDE is seller's discretionary earnings, which is basically EBITDA plus owner compensation and personal ad backs that a new owner would not need.
• 24:24
  Okay, this is very common in owner operated businesses under five to $8 million value.
• 24:30
  cannot mix the SDE and EBITDA multiples, but they're both can be used as basis.
• 24:36
  Right.
• 24:36
  And either one, depending on the size of the business and the professionalism of the business, how it's structured, that's going to determine whether we're going to base it on EBITDA, whether we're going to base it on SDE, again, discretionary earnings.
• 24:48
  Yep.
• 24:49
  But that's what it comes down to.
• 24:50
  And when we're looking at those earnings, right, what are those earnings?
• 24:58
  And this is a key piece.
• 24:59
  That's the ARR, the annually, the monthly.
• 25:03
  Basically, you're taking your monthly recurring revenue every single month and looking at it from an annual perspective.
• 25:08
  So your annual recurring revenue.
• 25:10
  How much money do you have coming in every single year?
• 25:15
  And by the way, is it growing or is it going down?
• 25:19
  All right.
• 25:20
  If it's growing continuously every single year, now your business is going to have a much higher value.
• 25:30
  not just because of the numbers that are growing, but it's a growth business.
• 25:34
  If you get something that's dying, it's going backwards, they're not going to pay you, a buyer of that business is not going to pay you a premium for that situation.
• 25:44
  They're going to be looking for a seal in that situation because they know they have to turn that business around.
• 25:53
  Right?
• 25:53
  So that's huge.
• 25:54
  That's really important.
• 25:55
  So when we're looking at,
• 25:58
  multiples and we're looking at valuation of a company, it's two things.
• 26:02
  It's two core things.
• 26:04
  And we've got some other ancillary stuff, which is key.
• 26:06
  But the core things are, what is that revenue?
• 26:11
  What is that annual recurring revenue?
• 26:14
  All right, so whether you're using the SDE, you're using EBITDA, you're gonna look at that.
• 26:19
  That's the base, all right?
• 26:21
  The money that's coming in is the base.
• 26:24
  And then you have a multiple of that or multiply at times a set amount.
• 26:29
  All right.
• 26:29
  Based off the type of business that you have.
• 26:32
  And that's what we want to get into multiples because it's easy to figure out what a what a what a base is, because you're looking at how much revenue is coming in, how much revenue is consistently coming in and growing.
• 26:44
  Yep.
• 26:44
  Right.
• 26:45
  And let me ask you that question.
• 26:46
  So.
• 26:48
  Obviously, it depends on the industry.
• 26:49
  So we're not going to say this industry has this, this has this multiple, this industry has that multiple, or this type of business gets this.
• 26:55
  Let's just talk high level.
• 26:57
  What are the MRR and ARR?
• 26:59
  What do those numbers look like for a $10 million valuation?
• 27:03
  Well, it matters on the type of business.
• 27:06
  It really does.
• 27:07
  Because we can't take the type of business out.
• 27:09
  So I'll give you an example.
• 27:11
  If you've got a retail store,
• 27:14
  a small retail shop at a mall or, you know, in a plaza or on a main street.
• 27:19
  All right.
• 27:20
  You're going to look at when you're valuing, you take that base income, whatever that income is.
• 27:27
  All right.
• 27:28
  Let's, let's say we're looking at SDE.
• 27:31
  Okay.
• 27:31
  Cause a lot of times those are smaller businesses.
• 27:33
  We're looking at SDE and you want to multiply that in the case of a small retail business, you're looking at Forex at best.
• 27:43
  All right, 4X multiple.
• 27:45
  So if you're earning a million dollars a year for your SDE, you multiply that times four, you get a $4 million valuation, right?
• 27:54
  You don't have to do $10 million.
• 27:57
  I mean, you don't have, in order to have a $10 million value, but you'd have to have $2.5 million in order to have that $10 million value, which is, by the way, about $208,000 a month in that example.
• 28:08
  But...
• 28:12
  If you've got a business that is a SaaS business, software as a service, something like that, where once it's built, it runs on systems.
• 28:23
  It's just built.
• 28:24
  The owner of the company, the founder, you, if that's you, doesn't have to put very much into it at all.
• 28:30
  All right.
• 28:30
  You basically replaced yourself.
• 28:32
  Now you're looking at a 10 or 12 times multiple.
• 28:37
  And that's providing that the business is growing and growing rapidly.
• 28:41
  If it's growing really rapidly, that's where you might get to that 12 times revenue.
• 28:45
  Otherwise, you're going to be, let's say, 10 times multiple, a 10x multiple.
• 28:49
  But a 10x multiple, that means you could be doing $83,000 a month in business and still have a $10 million valuation.
• 28:58
  $83,000 is easier to get to than $208,000.
• 29:01
  Can we agree?
• 29:02
  Yeah.
• 29:03
  at least initially.
• 29:03
  I mean, over time, you're going to be like, you should be able to get to both, but, but that's, that's the same.
• 29:09
  If you're looking at a business, that multiple matters and it mattered and the type of business matters.
• 29:17
  So did I answer that?
• 29:19
  You did.
• 29:20
  And I just want to like explain the importance.
• 29:22
  I mean, yes, the industry matters, but you also need to know.
• 29:24
  Okay.
• 29:25
  So what you need to understand is number one, what are the multiples and why they matter?
• 29:28
  And I, I think it's important to see them.
• 29:30
  All right, so you see that 4X, and we go into this in a protocol when you're inside, but say with the 4X, you need about 250 million, about 208 MRR to get there.
• 29:39
  Like you just said those numbers, and at 10X, you only need about 83,000 MRR, monthly recurring revenue.
• 29:46
  But when you understand your industry, that's part of that exit value design.
• 29:51
  When you understand your industry and what is the
• 29:55
  required base number for that multiple let's say what is your sde number for let's say an hvac plumbing electrical business well that's let's say two and a half to three and a half roughly compared as you were saying to a sas company as like a software company or a techno an it msp like i was in but a low end and
• 30:12
  using SDE as the base, that might only be like two to three and a half.
• 30:15
  Lower mid-market using EBITDA, that could be like four to six.
• 30:19
  But again, if that company is also rapidly growing, like you said, and quite frankly, there is no maintenance mode.
• 30:24
  If you're in maintenance mode, you're dying.
• 30:27
  All right, so you're really growing or dying.
• 30:29
  Yes, and you have that.
• 30:32
  It's important that you have that contracted, verifiable, reoccurring revenue base.
• 30:36
  Yeah.
• 30:37
  And that achieving that 10 million enterprise value requires engineering, as Don said, either a million, 2.5 million, and high retention annual reoccurring revenue, terms we just went over.
• 30:51
  And when you say, well, what does that mean?
• 30:54
  And you've got 83,000 to 208,000 monthly recurring revenue.
• 31:00
  And then based on the type of industry you're in in a business, you can multiply that four to 10 times that multiple.
• 31:07
  And to give you that, you know, 1.25 roughly to 2.5, that EBITDA, as Mike mentioned.
• 31:16
  And when you get those multiples through clean, audible, you know, billing rather than one-time project spikes, that's really the key that is reinforced throughout the whole protocol, you know, that reoccurring revenue.
• 31:35
  Yeah, and one thing too is that we just spoke about is the industry type, right?
• 31:38
  So we talked about that SaaS business, the software business.
• 31:42
  We've told you guys already,
• 31:44
  One of the benefits of being inside here in that community and that proximity is you identify the problem and we're able to build out a SaaS solution.
• 31:53
  Now, pure SaaS companies, that multiple has gone.
• 31:55
  I've seen it go as high as 24.5%, 25%.
• 31:57
  I'm not saying that's the norm, but that number can't go that high.
• 32:02
  Don was referencing 12% earlier.
• 32:04
  So just think about that.
• 32:06
  If there's an issue out there that you know there's an issue in your industry or in another industry that you see,
• 32:14
  We have the ability to quickly build out tools.
• 32:18
  I was going to listen to a major podcast, very wide known, one of the top podcasts out there.
• 32:24
  In an interview he had the other day with one of his guests, he was building out an application, an ATS, an application tracking system for hiring and maintaining staff, et cetera.
• 32:36
  Typically to build this out would have cost him about one and a half to 1.8 million and taken about two to three years, at least 18 months.
• 32:45
  He was able to do it in a week.
• 32:48
  Right.
• 32:49
  For 20 bucks.
• 32:52
  I mean, I think about it.
• 32:56
  You think about it.
• 32:57
  We've experienced it here.
• 32:58
  The three of us have experienced that right here.
• 33:01
  But what is that?
• 33:02
  That's a SaaS business, right?
• 33:04
  Yeah.
• 33:05
  That's a SaaS business.
• 33:07
  That's what we're talking about.
• 33:10
  That's exactly what we're talking about.
• 33:11
  And, you know, depending on the type of business you want to launch, I mean, think about the ideas that you have.
• 33:16
  All right.
• 33:21
  You're going to take that type of business, whatever it is.
• 33:26
  And a lot of people think, well, all right, if I'm going to sell this, let's say I built this, I need to sell it.
• 33:31
  Right.
• 33:31
  They're thinking retail or they're thinking, you know, I'm going to build out whatever systems.
• 33:37
  depending on how you structure your business, you could completely change what multiples are going to apply in that three to five years.
• 33:48
  Right.
• 33:48
  So you want to think about it.
• 33:49
  So let's, let's talk about, and I broke this up in bands, right?
• 33:53
  And let's, let's go through these bands for a second, because it's really important that people understand this piece, because this is what's going to determine that, that change.
• 34:03
  And if you're at a certain point, let's talk about that small retail business, right?
• 34:07
  You're at a certain point and you want to go up in multiples instead of a two X, you want to have a, you know, a five X or six X or, or whatever.
• 34:15
  How do you get there?
• 34:17
  Right.
• 34:17
  So, so an example of a two X business and what we call a low band of business, this is two X to three and a half X on your SDE, your seller discretionary income.
• 34:29
  Okay.
• 34:29
  That's, that's what we're talking about in this case.
• 34:32
  That's an owner operated service company.
• 34:35
  So you're operating it, it's providing service.
• 34:40
  You could be doing, you could be a coach, right?
• 34:43
  Think about being a coach.
• 34:44
  Like in Forge Fire, we have our own coaching platform.
• 34:47
  Do we wanna be known as a, so this is, let's actually break up Forge Fire in this example, because I think this is a great place to start, right?
• 34:55
  We could have Forge Fire just as a coaching platform and that's it.
• 35:01
  And that coaching platform,
• 35:03
  is designed to utilize the talents of Stephen, Mike, myself in coaching.
• 35:10
  Right.
• 35:10
  If we were to do that, and by the way, that's not what we're doing.
• 35:13
  That's not what we did.
• 35:14
  Okay.
• 35:14
  I just wanted to start there.
• 35:15
  But if we were to do that, could we, yes.
• 35:18
  Could we be profitable?
• 35:19
  Yes.
• 35:20
  Could we help a lot of businesses?
• 35:23
  Yes.
• 35:25
  However, what are we doing?
• 35:27
  We're tying ourselves to the business.
• 35:31
  Right.
• 35:31
  We're we're we're tightening that leash around our necks.
• 35:34
  I'm sorry, but that's that's that that's a horrible vision, but it's exactly what happens.
• 35:40
  Right.
• 35:41
  And that's not knocking.
• 35:42
  By the way, I respect coaches out there.
• 35:44
  I'm not knocking coaches and I'm not taught.
• 35:45
  I mean, if that's what you are, that's what you want to do.
• 35:49
  That's your business.
• 35:51
  That's beautiful because you're able to help a lot of people.
• 35:55
  Okay.
• 35:55
  Well, we're, we're only looking at this, not from what is necessarily good or bad, but we're looking at this from a dollar perspective, from a multiple perspective.
• 36:03
  Okay.
• 36:04
  So, um, you know, coaching would require a lot of our time.
• 36:07
  Can we agree with that guys?
• 36:09
  Yes.
• 36:10
  Yep.
• 36:10
  All right.
• 36:11
  Uh, and we talked about all sorts of different stuff as we're developing this and, and Mike, you specifically were like, yeah, I don't, I don't want to take all of my time up for coaching.
• 36:20
  Right.
• 36:21
  Right.
• 36:21
  I'm paraphrasing because I don't remember your exact words, but I certainly agreed with you, right?
• 36:26
  I don't want, I don't have any interest in that.
• 36:28
  I love coaching, but I don't, not from that perspective, right?
• 36:33
  So how do we change that?
• 36:35
  That's that sort of that low band, that two to three X, two to three and a half X multiple, right?
• 36:43
  The next band, and I'll go up this with Forge Fire, but the next band is when you're about three and a half to five
• 36:50
  X of your seller discretionary or your, you know, four to six of your EBITDA, right?
• 36:58
  But that's when you've got productized services.
• 37:00
  You've got retainers.
• 37:02
  Think of, you know, maybe attorneys, right?
• 37:05
  Specialized B2B services, recurring maintenance, staffed operations.
• 37:10
  And you've got some processes there, right?
• 37:14
  That's okay.
• 37:15
  That's a little bit better.
• 37:16
  But what did that sound like?
• 37:19
  It's still a leash.
• 37:20
  It's productized services with retainers.
• 37:23
  If somebody's going to pay a retainer, what are they expecting?
• 37:27
  They're expecting you're going to be there to provide a service.
• 37:32
  Whenever they call.
• 37:33
  Whenever.
• 37:34
  Exactly.
• 37:35
  When you feel that, the pull, the yank.
• 37:38
  Yeah.
• 37:38
  Here's a very quick visual.
• 37:40
  Imagine the business as the dog walker and the CEO on the leash.
• 37:45
  Not the other way around, by the way.
• 37:47
  And when you're tighter, you're stuck.
• 37:51
  Like it's that leash is really short.
• 37:53
  Even it might be looped up, but they're holding it really short to the collar and you're side by side, like leg to leg.
• 37:59
  Yeah.
• 37:59
  All right.
• 38:00
  And then you'll also see other people walk dogs who can let the dog out on a full leash and the dog will not walk past them.
• 38:06
  And then there are those whose dogs are trained that are completely off leash and it doesn't matter what happens around them.
• 38:13
  They could be, uh,
• 38:14
  chicken running to the road or there could be this and the dog just going to keep on because it's focused.
• 38:18
  And it knows that we're off leash, whatever, but we're working together.
• 38:22
  And that's where we want to be.
• 38:24
  And that's the visual.
• 38:25
  And what we're talking about here, I have experienced this firsthand so many times.
• 38:29
  I've worked with CEOs who became, who started off exactly.
• 38:33
  They started off low band.
• 38:34
  They built something and they started moving up into mid.
• 38:38
  All right.
• 38:38
  And then they started to get into upper, which I know we'll touch in a second.
• 38:41
  But as they joined communities, almost every one of them joined Vistage, which is like a CEO peer group.
• 38:49
  OK, that's out there.
• 38:49
  Cost a decent amount for entry, but they all started doing and focusing on MRR with the project revenue, with the one time revenue.
• 38:57
  They all started changing it to an MRR based business.
• 39:01
  Why?
• 39:01
  Because they understood the power of the valuation based on consistent and predictable MRR and taking that multiple from a 3 to a 8, 10, 12x business.
• 39:14
  So that's consistently being done with all these companies.
• 39:16
  And I've seen it multiple times in every... By the way, the two main companies that came to mind when I think about that, revenue went near hockey stick curve once they started focusing on the MRR and their valuations.
• 39:32
  It's so important.
• 39:34
  If you're not understanding and there's a grasping guess, you need to pause and go back and play it again.
• 39:38
  This is absolutely critical.
• 39:40
  And this is part of that exit value design.
• 39:42
  You really need to be aware of this to get to that.
• 39:45
  Why spend five years building something that you could have done in three if you just structured it right?
• 39:51
  Why?
• 39:54
  Yeah.
• 39:54
  So, and a hundred percent on that page and please re-listen to that piece because it is, it is key.
• 40:01
  I want to bring Forge Fire back into this for a second because we could have been at that coach.
• 40:05
  And I want to, I do want to say, it doesn't matter what type of business you've got.
• 40:10
  I'm not saying those business ideas are bad.
• 40:11
  What we're going over is how to create a $10 million exit in three to five years, starting from scratch, right?
• 40:21
  Not starting from a $5 million business.
• 40:23
  If you're already there, awesome.
• 40:25
  Make it 100, all right?
• 40:28
  Don't do five.
• 40:29
  Don't do 10 in that case.
• 40:31
  One very quick thing on that.
• 40:32
  If you already have a five, though, and let's say this is one of the benefits here, okay?
• 40:37
  If they're at a five and they're on a low-band solution and a low-band methodology, let's just help.
• 40:43
  And this is part of how the system works.
• 40:45
  This is what you guys don't understand is I don't think we've done a good enough job explaining this.
• 40:49
  So that's why people don't understand this.
• 40:51
  You come in with a business already there
• 40:54
  You're breaking up a bit, Mike.
• 40:55
  Oh, I was going to say, if you come in already there, let's just focus on how do we change that band to increase that multiple.
• 41:01
  So your valuation can increase very shortly.
• 41:05
  And that's where, go ahead, Steve, because I'm going to go in.
• 41:07
  I'm going to bring Fort Spire back in just a second.
• 41:10
  Sure.
• 41:10
  That institutional transferability and due diligence and the readiness for that.
• 41:17
  That's what you're going to get that you probably don't have if you've just linked it and done it yourself.
• 41:22
  And by creating that, you're going to exponentially increase the value of the sale of your business, of its value.
• 41:31
  A hundred percent.
• 41:32
  That's exactly what's going to happen.
• 41:34
  You know, with Forgefire, we designed it this way.
• 41:37
  All right.
• 41:38
  We designed it.
• 41:38
  So we said, OK, how do we offer the coaching?
• 41:41
  How do we offer the tools?
• 41:42
  How do we offer the guidance without us putting in all the time to do that?
• 41:47
  How do we eliminate us from that equation?
• 41:52
  Right.
• 41:52
  So what do we do?
• 41:53
  We started building systems, started building an app where all of the tools are there with the video content is there, where it literally guides you step by step by step.
• 42:04
  So we just sort of disappeared, which that's not our plan.
• 42:08
  But if we just sort of disappear for a minute, right, you can still run your business and, and get the coaching and our community,
• 42:17
  our masterminds, all the stuff we built into this that by the way, does not require us.
• 42:22
  All right, it doesn't require Don LaPlume or Mike Sullivan or Steven Moynihan.
• 42:27
  It doesn't require the three of us to do this, right?
• 42:30
  These are all systems that are in place.
• 42:33
  So it changes us from a low band, let's say two to three X multiple all the way up to a high band, right?
• 42:45
  Upper band in some cases.
• 42:46
  So let's talk about upper band because I want to go there and then high band.
• 42:50
  But what we're talking about is we took an idea that could have been built as a 2X and we changed it and we built it.
• 43:01
  We're building it, I should say, because we're not there just yet.
• 43:04
  We're building it as a 10X multiple business.
• 43:09
  And you can take any business, and this goes to Mike's point.
• 43:12
  Any business that you have that you've already launched, if you're already in business, and look at, okay, where am I?
• 43:19
  What type of business do I have?
• 43:21
  Am I at a 2X?
• 43:22
  Am I at a 3X?
• 43:23
  A 5X?
• 43:23
  10X?
• 43:24
  Where am I?
• 43:25
  You say, how do I move that multiple up?
• 43:30
  Even if you don't want to sell.
• 43:33
  Let's say you're young.
• 43:35
  You love your business.
• 43:36
  You don't want to sell in three to five years.
• 43:38
  You want to keep it for 10, 20, 30, 50 years.
• 43:40
  You want to pass it down to your kids.
• 43:43
  And your grandkids, that's awesome.
• 43:45
  Okay, hopefully they want it.
• 43:47
  All right.
• 43:49
  But whether they do or not, all right, it's an asset of the families, right?
• 43:56
  So if you want to keep it, that's fine.
• 43:58
  The idea is though, the more you take yourself out of the equation, the more you get to spend the money earned with the people you care about.
• 44:11
  That's bottom line.
• 44:13
  That freedom without the interruptions is worth building systems.
• 44:21
  It's worth building a higher multiple company because you actually get to enjoy life.
• 44:28
  We were not here just to create a company.
• 44:32
  There's a lot more in life than that.
• 44:34
  So when you think about multiples and you think about your business, you say, all right, well, look,
• 44:38
  I'm not living the life I want to live right now.
• 44:41
  I'm building this business and it's going well, but I want to change some things.
• 44:46
  Great.
• 44:46
  Let's look at how we can take from whatever band you're in, low, mid, upper, high band.
• 44:52
  But wherever you are, more than likely you're not in a high band because if you were, you wouldn't be as concerned with time.
• 44:57
  All right.
• 44:58
  But let's look how we take that business from wherever it is.
• 45:03
  to the lifestyle that you want and a growing profitable business that you could sell should you choose.
• 45:11
  That's what it's about.
• 45:12
  And I know we're into it in time here, but a couple of things I'd like to check quickly, just briefly discuss.
• 45:16
  So like, what are some of those factors that you would use to move a company up a bit?
• 45:22
  Like I know MRR is important, but elaborate on what else we can do.
• 45:25
  Yeah, MRR is really important because it's, and I'll get into the other stuff, but it's really, really important because it's a consistent income.
• 45:35
  All right, when you've got a consistent monthly income, that by the way is growing, all right, going back to my earlier point, it has to be growing because if it's going down, then you're dying, that doesn't work.
• 45:44
  You can't stay still in business.
• 45:46
  Just like if you're in a river, a raging river, you can't stay in one place.
• 45:52
  All right, you're either gonna go with the current
• 45:54
  or you can try and fight against the current.
• 45:56
  But if you want to stand still, no, you're just going with the current.
• 45:59
  You don't have a choice then.
• 46:00
  It's going to take you.
• 46:01
  Business will take you.
• 46:03
  Life will take you.
• 46:04
  All right?
• 46:05
  So you have to be growing that MRR.
• 46:07
  So that's number one.
• 46:08
  And you want that at 70%, right, Don?
• 46:12
  No, no.
• 46:12
  So you could have MRR at 70%, but define what you say.
• 46:18
  When you say that, I want MRR by 70%.
• 46:19
  I'm talking about systems.
• 46:21
  I want systems at 70 plus percent.
• 46:23
  Yeah, I want systems too, but I was thinking in terms of the revenue coming into the company, I want the MRR providing 70% of that revenue at that number.
• 46:31
  More than 70% of the income I have coming in.
• 46:34
  So if I have one- I want it higher.
• 46:36
  Yeah, I do too.
• 46:37
  But my base is I don't ever want it to drop below 70.
• 46:41
  We always want to keep it higher than that.
• 46:43
  But if it drops below now, we have an issue.
• 46:44
  We got to address that and get it right back above because that has to be 70 plus minimum.
• 46:49
  Yeah, at bare minimum because you really-
• 46:52
  And it depends on how you get your income structured.
• 46:54
  What is it?
• 46:56
  You know, I'm working with a company right now and they've got two different aspects of their business.
• 47:01
  And the MR, one part has nothing to do with MRR, but it's going to generate revenue.
• 47:06
  The other part is pure MRR.
• 47:08
  And, but that is the vast majority.
• 47:11
  It's like 90%.
• 47:13
  And that's where they need to be.
• 47:14
  All right.
• 47:15
  In that particular business case, I'm not going to get into that business now, but it's all about the MRR.
• 47:20
  All right.
• 47:21
  So that MRR is key, but the other thing is systems, right?
• 47:25
  How do you go up a band?
• 47:27
  How do you go from low to mid to upper?
• 47:30
  It's putting in systems where you start to replace yourself, all right?
• 47:35
  Where you start to multiply your teams.
• 47:38
  You need fewer employees.
• 47:40
  And it's not about laying people off, by the way, when I say that.
• 47:43
  No, if you've already got a staff, look,
• 47:45
  multiply their efforts in sales, in production, in productivity, whatever it is, multiply them 10x plus, utilizing AI, utilizing tools and systems.
• 47:56
  And now you're going to be able to scale much faster.
• 47:59
  You're going to be able to grow much faster.
• 48:01
  And it's not going to rely on you.
• 48:04
  But AI and systems have to run at minimum 70% of your business.
• 48:08
  That 70 is a hard number.
• 48:12
  And then another thing that matters is
• 48:15
  founder elimination, complete founder elimination, because you cannot be the reason the business exists.
• 48:24
  You can be the reason the business was founded.
• 48:26
  You can't be the reason the business exists and continues.
• 48:31
  Yeah, you're the visionary.
• 48:32
  Right.
• 48:33
  Yeah, it's your idea.
• 48:34
  It's your vision.
• 48:35
  It's your launch.
• 48:37
  All right.
• 48:38
  And you've got to build it.
• 48:39
  But you cannot, it can't just rely on you.
• 48:44
  Right, and the other two things too that you just touched on that, again, I've personally gone through and we're doing here at Fort Fire Protocol as well is in addition to that target on that recurring revenue or the bare minimum, and then we know where we need to be above that, the standards, I mean, the systems and the standard operating procedures, but documenting that.
• 49:01
  And that's easy and quick to do with AI, but having that documented process is essential for that valuation.
• 49:08
  As well as the three years.
• 49:08
  Like the three to five years, isn't it again, wasn't an arbitrary number of like, doesn't three to five years sound great?
• 49:12
  We'll pick that.
• 49:14
  Well, now you've got three years of clean, growing financials and numbers that go along with your standard processes and procedures that are all documented on top of your recurring revenue above 70%.
• 49:25
  That's a great start to any conversation.
• 49:27
  David Blytheon- There's a real blueprint within the ForgeFire protocol that ensures the elimination of the founder dependency via the systems in the AI so that you can replace yourself as that primary operator through those documented SOPs that Mike just mentioned, the autonomous workflows and the delegated delivery so the business
• 49:53
  easily passes, once again, come back to that CEO vacation test.
• 49:58
  I mean, if you have a business right now, do the test.
• 50:02
  See if you can take two weeks off.
• 50:06
  You might have to not go that far away.
• 50:09
  Yep.
• 50:10
  You're right.
• 50:11
  So that was good.
• 50:14
  I want to give you an example of how fast this can happen, by the way, and how fast it can go away.
• 50:20
  All right.
• 50:21
  So I launched a company.
• 50:23
  I was one of three owners and it took off.
• 50:29
  First six months, it really didn't go anywhere.
• 50:32
  It was, you know, we're building some different things and working through some different things.
• 50:36
  But then we launched a key product and we went from next to no revenue to over $4 million in revenue in that first year.
• 50:45
  Right.
• 50:45
  And consistent.
• 50:47
  I mean, daily we could look and I talked about this company before.
• 50:50
  We could literally look at the at our at our bank account every single day or at our merchant processing is what we were looking at.
• 50:59
  Right.
• 50:59
  Because we say, OK, great.
• 51:00
  Today is a thirty thousand dollar day.
• 51:02
  And every single month you go to that next month and this month it was thirty thousand.
• 51:05
  The next month, you know, thirty three thousand thirty five thousand forty thousand.
• 51:09
  Right.
• 51:10
  And we could do that every single day of the week.
• 51:12
  It was crazy.
• 51:14
  It moved fast.
• 51:15
  That all happened in the first year, over $4 million.
• 51:20
  Right?
• 51:20
  That company was a SaaS company.
• 51:24
  All right.
• 51:25
  That company, now we didn't replace the owners.
• 51:28
  We didn't have all the systems in place.
• 51:29
  We just grew so fast, but we were, so we were not at a, let's say a high band or even, um, uh, we, we were between mid, probably I would, I would have given us a mid band at the time.
• 51:43
  And so you're talking four to six X on EBITDA, right?
• 51:48
  And, or even if I did the SDE, right?
• 51:51
  Three and a half to five X, but let's just go EBITDA.
• 51:54
  Cause we're, we're growing so fast.
• 51:55
  We're, we're, and we were professionalizing things.
• 51:57
  We just, we're not there yet.
• 51:58
  The point is we went from zero to over $4 million in that first year.
• 52:08
  And that's in revenue.
• 52:10
  And it was growing rapidly.
• 52:12
  So if you think about that, $4 million, if we were only at a Forex multiple, that was a $16 million company.
• 52:19
  We did in one year.
• 52:21
  One year.
• 52:22
  Okay.
• 52:23
  Now, that next year, we were on track for over $16 million.
• 52:28
  All right.
• 52:31
  Now, that was according to our CFO.
• 52:33
  Everything was now we had other issues that popped up that second year.
• 52:37
  This is why this matters, right?
• 52:39
  We hadn't put in all the SOPs.
• 52:41
  We're starting to write out the SOPs.
• 52:42
  We're trying to professionalize everything and systematize everything.
• 52:46
  But we had a couple of weak links.
• 52:49
  And these are things that you're going to want to learn.
• 52:52
  One weak link was in our suppliers.
• 52:55
  Our suppliers that were providing certain things for us did an absolutely horrible job in some cases.
• 53:02
  We had to replace them.
• 53:04
  So there's turmoil there.
• 53:05
  We're still growing, right?
• 53:07
  We relied on a technology that we built off of.
• 53:12
  And that technology was from a very large tech company that we didn't know at the time, but they wanted to compete with us.
• 53:18
  All right, they should have just bought us.
• 53:19
  I'm just saying they should have just bought us.
• 53:21
  But hey, they had a brain cramp.
• 53:23
  Either way, they ended up tweaking things to try and shut us down.
• 53:28
  So we had to fight through that.
• 53:29
  So we had things that held us back.
• 53:31
  We still were growing.
• 53:33
  rapidly.
• 53:34
  So our valuation, if you had to do a valuation for us, from a revenue standpoint, it was great.
• 53:42
  All right.
• 53:42
  And it was moving fast.
• 53:45
  On the other side, though, if you're a business owner or a business buyer, you had a lot of money, you just want to buy the company, you'd say, okay, well, great.
• 53:54
  This is good.
• 53:54
  They've got revenue.
• 53:55
  Their revenue is growing rapidly.
• 53:57
  They've got an idea that's really catching on.
• 53:58
  It's good.
• 54:00
  And it's SaaS.
• 54:01
  So I can certainly give them a good multiple there.
• 54:03
  but their supply side is having issues, right?
• 54:09
  It's not where it needs to be.
• 54:13
  And by the way, we started bringing that in-house, right?
• 54:16
  We started bringing everything in-house so we can control it and build it up.
• 54:21
  Had we successfully done that all the way through, that would have put us in great shape long-term, okay?
• 54:28
  But what I'm saying in all of this is this,
• 54:32
  You want to start from day one.
• 54:34
  This is the key that I learned from that.
• 54:36
  There's a whole bunch of keys that I could talk about for hours on this one.
• 54:39
  But a key that I learned is that you need to start with the plan from day one, looking at and implementing systems.
• 54:48
  And what you said a minute ago, Mike, SOPs, day one, and you have to have the controls where you know what's going to happen.
• 54:56
  But once you've got that, now you can free yourself up.
• 55:01
  You can replace yourself.
• 55:02
  The system runs, all right?
• 55:05
  We were not the cogs, but the real problem was we didn't have all the systems in place.
• 55:13
  Right.
• 55:14
  I mean, you had, and that's how, again, the reason why this was built in the order of it.
• 55:18
  All right?
• 55:18
  So you have the validated idea.
• 55:19
  You know you have something marketable that'll sell that the market wants.
• 55:22
  First and foremost, check.
• 55:24
  We've talked before.
• 55:25
  We've kind of just briefed over it and said, okay, but now we know we have that $10 million exit goal valuation in three to five years.
• 55:33
  And our goal is to help 10,000 companies do that.
• 55:35
  Do you guys understand now how much easier it is to comprehend those numbers when you realize the multiples?
• 55:41
  And if you're building the system right, or you're tweaking the existing system to focus on the important numbers that matter to the valuation, how building an, let's call it an $85,000 to $100,000 company, can be a $10 million valuation.
• 55:55
  That's right.
• 55:55
  And monthly recurring revenue.
• 55:58
  Those numbers are not massive.
• 56:00
  You just need to be intelligent about the structure.
• 56:03
  And that's what's being brought to the table.
• 56:05
  And that's the stuff that I never understood.
• 56:07
  I heard EBITDA.
• 56:08
  I knew we were focusing on MRR and we had to build out systems, but I didn't holistically understand how to look at it and build based on that.
• 56:16
  I just understood that those numbers were important for us to get there because it increases the multiple, but I never internalized it initially.
• 56:21
  And I only, by the way, I only got that information by earning my seat at the table where those conversations were being had.
• 56:29
  Because that does not get spread around the company.
• 56:31
  Where if the owner covers it, people, it's at a quarterly or annual meeting where 50% of the people are enjoying eating a chicken wing or sipping on a beer while listening to what's going on.
• 56:39
  And they're hearing it, but they're not laser focused.
• 56:42
  I'm the crazy.
• 56:43
  I'm the guy that was always laser focused on that stuff that's being talked about because I wanted to learn how to be better.
• 56:48
  But I looked around the room and 95% of them are like, they're not even paying attention.
• 56:53
  Yeah.
• 56:54
  Yeah.
• 56:55
  Don and Mike are getting to our time on here for this podcast.
• 57:00
  But Don, you just mentioned you knocked heads with another company that was your company was knocking heads with.
• 57:07
  And I'm pretty sure that company is still around.
• 57:09
  And I don't know if you can mention who they are or not.
• 57:13
  I don't know if I can or not.
• 57:14
  I mean, look, you know how you have, I'll say it this way.
• 57:19
  All right.
• 57:20
  I won't mention their name.
• 57:21
  But you know how you have aluminum foil and people will call it Reynolds wrap.
• 57:25
  because Reynolds started it, or Saran Wrap for that clear stuff.
• 57:30
  Right.
• 57:30
  Right.
• 57:31
  It's synonymous with Xerox for a copier, even though Minolta and all these other companies make it.
• 57:37
  Well, think of who might be synonymous with search engines.
• 57:42
  Yeah.
• 57:42
  Right.
• 57:43
  And you'll probably have the right company.
• 57:44
  Just saying.
• 57:45
  Exactly.
• 57:46
  Yeah.
• 57:47
  So that's what I battled with.
• 57:48
  And we battled four times when we beat them.
• 57:53
  Four times we beat them.
• 57:55
  Well, technological, you beat them.
• 57:57
  Right.
• 57:58
  But the fifth time, well, it didn't go our way.
• 58:02
  I'll leave it at that.
• 58:03
  And I don't knock them.
• 58:04
  I mean, look, they were in business to be in business doing their thing.
• 58:07
  So they're still knocking people.
• 58:09
  So they are.
• 58:12
  But that's what you're going to get with the protocol, the Forgefire protocol, because you're going to learn the things like Mike was just talking about that you would get if you were in that room and you were not eating the chicken.
• 58:23
  You were paying strict attention, right?
• 58:25
  You're going to get the lessons that we learned, right?
• 58:28
  Stephen, you learned lessons launching a bank.
• 58:31
  You learned a ton of lessons and all the other stuff that you've done over the course of your life.
• 58:35
  Mike, same thing.
• 58:36
  All of us have some great hair.
• 58:37
  We got a little bit of salt and pepper up there, right?
• 58:40
  We've learned different things.
• 58:41
  Yeah.
• 58:42
  Do we know it all?
• 58:43
  Not by a long shot, all right?
• 58:45
  But that's okay because we surround ourselves with people who know more than us.
• 58:50
  That's what we're always trying to do.
• 58:52
  But at the same time, in the Forgefire protocol ecosystem, you get access to our knowledge.
• 58:58
  You get access to the community's knowledge, which is huge.
• 59:05
  You get access to masterminds, which you cannot replace the power of the mastermind.
• 59:12
  Right.
• 59:13
  There's so much.
• 59:14
  So, so if you're thinking about building a business and you're thinking, okay, great, well, I, I, I love this idea of a $10 million exit, but I didn't, I didn't know until today that I only have to do, you know, a hundred, $200,000, uh, a month in revenue and I could have a $10 million evaluation.
• 59:30
  I didn't realize it was that.
• 59:32
  Right now, now you're understanding that it could be that way and it could be fun to build, not just exciting at first, but fun because of the freedom fun because of the funds.
• 59:42
  that it drives for you.
• 59:45
  It can be a great time, but you know what?
• 59:48
  There's things you need to know, and if you don't know what to look for, like I didn't know what to look for in that particular company, oh my golly, the stuff.
• 59:55
  I could, it's just crazy stuff I learned.
• 59:58
  That was great though.
• 59:59
  The best education I could have ever gotten.
• 1:00:02
  Yeah, and the only thing I'm gonna end on real quick is,
• 1:00:05
  I've seen a lot of these companies go through this transition, like I was alluding to before.
• 1:00:09
  And what changed is from a sales perspective too, rather than having to go to find 20 to 30 accounts and projects for the next month, which by the way, will always fluctuate if that's your model.
• 1:00:19
  It will never be consistent if you're going out and hunting that.
• 1:00:21
  If it does, then you have found a system for MRR and we should talk.
• 1:00:26
  But bottom line is,
• 1:00:29
  Rather than having to do that, we changed having to hunt and find 20, 30 projects a month to keep those numbers up to saying we can efficiently add two clients a month.
• 1:00:41
  Think about the difference there.
• 1:00:42
  Yeah.
• 1:00:43
  We had to focus on two recurring revenue clients a month that we were onboarding.
• 1:00:47
  And that was sustaining that 75% plus recurring revenue.
• 1:00:54
  by just finding two clients a month.
• 1:00:55
  And we also stop looking for the small customer.
• 1:00:58
  Who are the larger customers?
• 1:00:59
  And we'll get into that in a whole nother podcast.
• 1:01:00
  But who's that target market?
• 1:01:02
  And that's what you get part of that validation test.
• 1:01:03
  Who's the right market for you to go after that's willing to pay the right amount of money so you can focus on those two clients that are going to pull in a revenue that you used to have to hunt for 20?
• 1:01:14
  And it's all recurring revenue.
• 1:01:15
  It's all feeding into that same system and driving towards that same goal.
• 1:01:19
  It is absolutely essential that you comprehend this.
• 1:01:22
  That's all I want to leave with is just think about the simplicity and the freedom that's built into that.
• 1:01:26
  If it's just structured right from the start, we're going to go into that.
• 1:01:32
  Um, in our next podcast, by the way, uh, it's so funny.
• 1:01:36
  You just described a training I just did for a group of about what, how many people were on that one, Steven?
• 1:01:42
  38, 55, 55, 35.
• 1:01:44
  And that, that doubled from the previous week.
• 1:01:47
  Yeah.
• 1:01:48
  And, and,
• 1:01:49
  But I don't want to go into that now because we're at the end of the podcast.
• 1:01:52
  But I'll tell you, stay tuned for the next episode because we're going to tell you how I was teaching people how to make a million dollars a year in income.
• 1:02:00
  Just as independents, just independent contractors.
• 1:02:03
  Right.
• 1:02:05
  All right.
• 1:02:06
  Now it would take care of my family as well.
• 1:02:07
  It's a great business, but that's beside the point.
• 1:02:09
  So, hey, we're glad you're here today.
• 1:02:12
  You know, look, if you haven't caught up with all of the other podcasts building up to this one, go ahead and binge from the beginning.
• 1:02:18
  All right.
• 1:02:19
  But follow us, like us, share us.
• 1:02:22
  And we've got some great stuff coming.
• 1:02:24
  So we'll see you in the next episode.
• 1:02:28
  That's it for this episode of the Forge Fire Protocol podcast.
• 1:02:32
  Take at least one step from today's episode while the fire is still hot.
• 1:02:37
  Don't let the insight cool.
• 1:02:39
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• 1:02:43
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• 1:02:56
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• 1:03:04
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