Recurring Revenue Is the Key to Business Growth and Stability

0:00Auto ship or auto renewal and this applies to anything. So anything that you're selling right now that you can sell more than once, put on auto ship. And you see lots and lots of businesses offering this because they are aware that if they can get somebody to pay more than one time for the same product or service, then they will not have a customer acquisition cost the second time or any time after that because the customer has already an existing customer.

0:37All right. We are almost to the end. I know we've been talking about this for a bit, but this is so important because this is all about figuring out how, what are the types of companies we're going to buy? And so you'll never run out of ideas. If you do the exercises that we're going through here, you'll have an almost infinite number of categories of businesses to buy, but you'll also have, once you go through and look at each of the categories, a multiple of that, because under each category, you'll find 10, 50, 100, 500 companies that fit that particular category. So this exercise is really, really important.

1:14And that's why we spend a lot of time on it. Also, this document, this tool, this acquisition wheel is one of the most robust tools that I have created in all of this program, because it gets used over and over and over. You'll use it once a quarter or once a year as you revisit the kinds of companies and categories you can buy, as you revisit the companies under each category of company, because there's always new companies that are coming about. And so I just find it to be continually delightfully surprising how many new things show up, even in the list of categories, because so much is happening in terms of innovation at any given time.

1:58So that said, We are to our final category here. We are in category seven. We've gone all the way around the acquisition wheel. And now we're finally talking about MRR for capital. So if you recall, this section talks about when you want resources to come that are going to increase the value of your company and increase the customer experience, this is called capital. And so one of the easiest ways to appeal to those who have capital, particularly if it's money, capital in the form of money, is to have some sort of ability to reduce the risk that they perceive when they're either investing in your company, that's investment of cash or capital, or they're loaning capital to a company.

2:47So if you're going out trying to get loans or credit or things like that. So when you are doing that, if you can say, well, the risk in my company is lower because I am guaranteed to have a continuing revenue stream because the products or services that I sell, people either consume or need continuous access to on a continual basis. Therefore, I don't have to make new sales every month to have money coming in. Every single month, I'm going to have a certain amount of recurring revenue that continues to come in as these customers use the products or services that I've got. So when we're talking about recurring revenue, it generally comes in two different forms.

3:30It can come in monthly or it can come in annually. And sometimes it could come in weekly too, but most common it's MRR for monthly recurring revenue. People who are paying monthly for a lot of the categories of things we're going to talk about in a second or annual recurring revenue, meaning that it's an annual contract. They pay once a year. So the longer that you've got recurring revenue coming in, the more valuable your company will be. So one of the things that we look to acquire when we're thinking about how do we increase the value of our company? How do we make it more attractive to investors?

4:02How do we give it a higher value for us in the event that we might want to sell? How can we get access to greater lines of credit and loans? It's to reduce the risk to all those people that we would be dealing with by having recurring revenue. So let's talk about some of the types. One of my favorites is auto ship or auto renewal. And this applies to anything. So anything that you're selling right now that you can sell more than once, put on auto ship. And you see lots and lots of businesses offering this because they are aware that if they can get somebody to pay more than one time for the same product or service, then they will not have a customer acquisition cost the second time or any time after that because the customer has already an existing customer.

4:53So let me give you an example. If you're selling a product that you sell for$30 and you have a manufacturing cost of$10 and it costs you$10 in ads or whatever else to get a customer, that means that you'll make a profit of$10. So you've got a$30 price minus$10 that it costs to create that product, the cost of goods sold. That's going to leave you$30 minus$10 is$20 a profit. Now you got$20 of profit, but it costs you$10 to get somebody to buy it, to get a customer. That's your customer acquisition cost. So that$20 profit, now you have to take$10 customer acquisition cost after off of it. Now that gives you a$10 profit.

5:36Great. If next month they buy it again, and let's say that it has the same cost. So they're paying$30, the same price, and it has the same cost, which was$10. That's$30 minus the$10 cost is a$20 profit. but now we don't have the$10 acquisition cost, then your profit now is$20 instead of 10. It's literally 100 % more, double what it was the first month because the customer acquisition cost is going away. Okay, if they then buy the third month, it's$20. The fourth month's at$20 and so on. If you have a subscription product or a continual auto ship product, then eliminating that customer acquisition cost can be the difference between being profitable and not profitable.

6:24If you can get them just to buy that second month, you've liquidated the customer acquisition costs. The profits literally doubled in the example that I gave you. And that's not uncommon at all. So I'll give you a kind of off the wall example of auto ship. And that is for dog food, right? So for dog food, I have a friend of mine, Lori Taylor, that owned a company. I don't know if I think she may have sold it now called True Dog. And, um, it, she was not able to make money at that business. And when she added auto ship, she did this True Dog, uh, love dog, love club, I think it was called. And, um, she gave free shipping, but, um, required you to go on auto ship.

7:08And that made all the difference for her. It changed the whole business because the reorders of people, because it was so expensive to acquire a customer that the reorders then were able to make it profitable for her. Another example is a friend of mine, Randy, that owned a company selling salmon patties. He was selling salmon patties for people that want omega-3. And then he realized that he could also sell that those people didn't want to eat salmon patties every day and every night, so he would also sell supplements. And he was selling, uh, Omega oil supplements and salmon patties. And he wisely started selling the, uh, the supplements on auto ship so that you could get them every month.

7:54Um, but he never thought to do it with the patties themselves, but he had reorders very, very regularly from his customers. And so he realized when we talked about his business and said, you know, you could do auto ship on the patties too, that he's just like, I can't believe I've been leaving about 50 % more, a hundred percent more profits, uh, that I could be getting if I had just thought to do that, because just having them order that one extra month on auto ship, uh, makes all the difference in profitability. So, uh, auto ship can apply to salmon patties. It's been applied to cars by Porsche and Cadillac.

8:31It's been applied to phones by Apple. It's been applied to, shoes by Nike. It's been applied to everything that you can think of. Autoship is a wonderful thing. So if you don't have an Autoship product right now, acquiring a company that has one or acquiring a product or service that does Autoship can make a huge difference. Memberships apply as well. So any kind of subscription that you might have, a membership site, membership to a club, membership like American Express, where you get a card and an ability to do something with that card membership like Costco has, uh, memberships can be very, very valuable.

9:13Software as a service, acquiring software is huge. As long as you can acquire it at the right price, if you can acquire it, no money out of pocket, using some of the strategy we talk about, those companies will always be providing a continuing access for a continuing fee to their customers. And because SaaS companies are in very, very much favor right now in the investment banking world, they're valued typically at a multiple of their revenue, their recurring revenue, not a multiple of their profit. So that's a really amazing opportunity. Also, rebuy consumables. So anything that you could acquire that people consume, whether it might be water or toothpaste to me is a great example because that's something that if you get a consumer on your toothpaste, they're going to stay there for a very, very long time unless you screw it up totally.

10:09And toothpaste is something that most people who brush their teeth every single day and hopefully twice a day are using. And so it's constantly going away. It constantly needs to be replaced. and that is a wonderful consumable to own. So maybe you own a dental practice or maybe you own a teeth whitening company or something like that. Whatever replaceable consumable thing that you could acquire to also offer your customers can have a dramatic increase on your profitability and your ability to attract capital. Repeating services. Any service that you know that a customer might use again and again that you could acquire and add to your business is going to increase the value of your business pretty dramatically.

10:52So this could be very, very simple. Like if you're a landscaping company right now and you acquire a lawn mowing service, let's say that you do landscape design, that's generally a one-time thing. And maybe you're doing it for, for hospitals and commercial buildings and things like that. Well, once it's done, that landscape design exists. And so maybe they'll come back once in a while to tweak it, but they kind of get it at that point. Now, the thing that you know, though, is that they're going to have to take care of it. So you could add a lawn mowing service. You could add a tree trimming service.

11:29You could add a flower updating and planting service. And all of those would be things that they would pay for on a monthly basis because you got to maintain the stuff once it's done. So that could dramatically increase the profitability and the value of your business. Also making it easier for you to get capital when you need it. And then also subscriptions. So subscriptions, anything people could subscribe to, whether it's a paid newsletter, like the one I've got here, or it is a service like Netflix or Apple TV, or it's an internet service provider or it's a software as a service or it's a magazine or books or an online membership site.

12:10Any of those things are going to be great because they're monthly recurring revenue or annual recurring revenue. And if you can acquire something that has that feature, it will dramatically increase the value of your business.

12:35Ever wondered how some people build real wealth through acquisitions while others just sit on the sidelines? Well, I'm here to tell you it's not about luck. It's about having the right system, the right deals, and the right guidance. And that's exactly what we give you in the Epic Deal Fast Track. If you've been thinking about buying a business, but you keep getting stuck, whether it's finding the right deal, structuring the financing, or negotiating with sellers, You are not alone. Too many people waste months, even years, just thinking about acquiring a business while the real opportunities pass them by.

13:09The Epic Deal Fast Track is not another course. It's actually an implementation program and it's designed to get you from the idea to the acquisition in just 16 weeks or less. We work with you one-on-one to help you find, fund, and close your first or next deal. And once you do, we're going to plug you into our elite Epic Board community so that you can keep scaling through acquisitions. We install three powerful systems in your business. The first is the deal flow engine. So you always have high quality off market deals coming to you. Number two, we give you our offer and funding system so that you can structure offers that get accepted and fund them creatively many times with no money out of your own pocket.

13:52And number three, our closing and integration system so that you don't just buy a business, you actually successfully run and scale it once you have acquired it. Plus, you'll have direct one-on-one support from an Epic Deal Advisor every step of the way. And that's people that have actually come up through the system and done these deals themselves. That's the only way to become an Epic Deal Advisor. And if you're serious about acquiring a business this year, don't just sit on the sidelines. Just text I'm in to 334-458-9034 and we'll get you in. So text I'm in to 334-458-9034. We'll get you in.

14:29No fluff, no wasted time, just real deal making from people that are actually out there doing deals right now. I'll see you there.