12 Months To $1 Million - Turning $600 into $16 Million with Ryan Moran

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like I Digress. Today, we'll be breaking down 12 months to$1 million, turning$600 into$16 million. To drop these value bombs, I brought to Ryan Moran and the EO Fire Studios. Ryan is the founder of Capitalism.com, where he has helped over 100 entrepreneurs make their first$1 million online. He is best known for turning a$600 investment into a$15 million exit. and his podcasts and videos have been downloaded over 10 million times.

0:40He lives in Austin, Texas, where he loves to debate politics and religion, neither of which we'll be doing today, Fire Nation. And we'll be talking about how realistic is it to build a million dollar business in 12 months. We'll talk about Amazon. Is it super saturated? About selling your business and so much more. And the big thing for sponsoring today's episode goes to Ryan and our sponsors. The Next Wave, your chief AI officer, hosted by Matt Wolf and Nathan Lanz, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Matt and Nathan are leading AI creators in your guiding light in the AI and technology frontier.

1:17AI technology is transforming the way we do business and the media landscape is fragmented. The Next Wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to The Next Wave wherever you get your podcasts. Are you looking to start or grow a successful business? attend the world's highest rated and most reviewed business growth workshop taught personally by Clay Clark and football great Tim Tebow at thrivetimeshow.com slash EO fire. Again, request life changing tickets today at thrivetimeshow.com slash EO fire. Ryan, say what's up to fire nation and share something that you believe about becoming successful that most people disagree with.

2:02Hey, everyone. Thanks for having me, John. The thing that is most controversial that I believe is that money does not equal freedom. Most people start the entrepreneurial journey thinking that if they have more money, they will have more freedom. I think that's a trap. I think that if you are always on the hamster wheel of needing more and more money to have more and more freedom, then you'll end up being a slave to your business. Instead, I think that money gives us choices, but it doesn't give us freedom. This is why so many entrepreneurs work 18-hour days until they're dead, basically, and why so many people are unhappy and entrepreneurs have a higher proportion of depression and anxiety and disappointment when they get to the level that they think is going to make them happy.

2:45So money and freedom are independent of one another, and we work on them independently of one another. So money does not equal freedom. And that's why when you meet that person and it doesn't happen often, but you're like, man, it seems like they have it figured out because they're doing what they're doing. They seem happy. They're taking trips. They seem like they're relaxed. They're not like grinding it out all the time. And you kind of say, what is your secret? Sometimes they step back and they go, you know what? I spend less money than I make. And sometimes it can be that easy. Sometimes there's more to it than that.

3:18But Fire Nation, wow. Let me tell you, that's a good start. And we're talking about 12 months to$1 million. We're talking about turning$600 into$16 million. Now, listen, this title may cause some doubt in Suspicion Fire Nation. So I'm going to let Ryan dive in. I mean, seriously, Ryan, how realistic is it for someone to build a million dollar business in just 12 months? For most people, it's not realistic because they give up at month three or six. If you have a long enough time horizon, and as an entrepreneur, your time horizon is at least a year, then it's completely possible. And we can break down what the math looks like and what the process actually looks like.

3:59If you think about it in terms of investing, if all you did was invest$500 a month into the S &P 500 index funds, over 30 years, you'd have a million dollars. That's as simple as it could possibly be, yet almost no one does it. They would rather have the short-term increase in lifestyle or leisure time than invest something like$500 into an index fund that will compound into a million dollars over 30 years. Now, no one wants to wait 30 years. Of course, that's why you want to be an entrepreneur in the first place. You want the result a lot faster. But in our entrepreneurial world, when we're on TikTok and we're seeing short-term results thrown in our face all of the time, it's easy to get enamored with the short-term results of things.

4:49But in my model and in most entrepreneurial businesses, things compound just like the stock market compounds, just like everything else compounds over a long enough period of time. And I think 12 months is an appropriate time for things to compound to becoming a million-dollar business. So for about three to six months under my model, it feels like nothing's happening sometimes. And this is where most people give up because they hit that hump in which it feels like all their efforts are for naught. But if they allow things to continue to compound over 12 months, a million dollar business is completely realistic.

5:27Now, what exactly is a million dollar business in what we're talking about here today? Is that projected revenue, gross, actually net dollars that have come in over 12 months that are in your bank account? What does that mean? Great question. So I specialize in e-commerce brands. That's selling physical stuff. That is the stuff you buy on Amazon. That's the stuff you buy on Shopify. It's the stuff you see in your house everywhere. I think that is the simplest way to build a million-dollar business because the math works as just four products at 25 sales a day at a$30 price point. becomes a million dollar business.

6:08So if you have four products doing 25 sales a day, that's 100 sales a day. At a$30 price point, that's$3 ,000 a day or about 90-ish thousand dollars a month. And that's about$1.1 million a year. The path to getting there is creating systems and processes that will allow one product to get to 25 sales a day. That's where the real work comes in. When you have that process for getting one product to 25 sales a day, we can now release product number two and things move a lot faster. I kind of use this analogy of building a highway. It takes a tremendous amount of time and resources to build a highway that gets one car on the road.

6:54But once you have it built, you can put the second car on almost automatically. And now you could put 100 cars, 1 ,000 cars on there. So that first three to six months is about building the highway that allows us to get one product to 25 sales a day. And then when we have that in place, we can release additional products until we have four at 25 sales a day at a$30 price point. And then we have a million dollar business. So that's my model. That is what I invest in. I invest in e-commerce brands. That's how I turned a business from a$600 investment into a$16 million exit. This is what I help clients with.

7:31And this is what I've seen be the most predictable path to building a million-dollar business that can result in a multi-million-dollar exit over a period of three to five years. Now, what is your range of actual profits on those$30 sales? In a typical e-commerce brand, you're looking at 35 % to 55 % profit margins at the end of the day. I recommend when people are considering going in this direction that their first product has at least a 50 to 60 % gross profit margin, at least. Then there's going to be things like Amazon fees if that's where you're taking your sales. You're going to have some advertising expense.

8:13And that leaves us with 35 to 55 % profit margins. Now, a way to stack the deck in that direction is to, from the beginning, launch a premium brand. One of the mistakes that people make when they're going in this direction is they try to be the cheapest product. They're looking at Amazon as their competition. They're trying to be just a little bit cheaper than one of their top competitors. I think that's the wrong approach. This is why Amazon and e-commerce has been taken through the ringer the last couple of years because you had so many cheap brands that didn't have enough margin to be able to do this well.

8:52So out of the gate, if we're coming out with a premium brand with the idea that we're going to be one of the higher priced products in the space, then we can stick that 50 to 60 % gross profit margin, which gives us enough room to be able to run the rest of the playbook. So a lot of people are saying that Amazon is not just saturated, but super saturated. Is this true? Yes, it is super saturated if you're running the old playbook. The old playbook of how most people and even I launched my first physical product brands was to put a product on Amazon and then rank for keywords so that you got free exposure and then use Amazon ads to be able to get some additional exposure.

9:40And you would work your way into having enough of a conversion rate, work your way into having enough exposure to where the organic and free traffic would pay for the expenses of getting it there. That still works to some extent, but it's also very saturated. This is why I think that model is out of date. I mean, I ran that model 10 years ago. I think you know, things change over a decade. The play to be able to make Amazon your partner, the way to break into any space is to generate the demand for the product first. Now, this is true if you're selling insurance, if you're selling high-ticket coaching, if you're selling physical products.

10:27You generate demand first. And one of the setbacks that a lot of e-commerce entrepreneurs had was they were spoiled at the free traffic that was available on Amazon for many years because the demand was more than the supply. It was kind of like TikTok two years ago where you could make any content and be seen by thousands of people. Now you have more supply, you have more people making content, so you don't get as much virality and free traffic. The way that we flip the game back into our favor is that we build a small audience first. What does that mean? It means if you've got 100 to 300 people on a launch list, if you have a few hundred people who have raised their hand saying, I want to buy this product before they go shopping for other competitors, before they go price hunting, that gives you the ability to launch your product and send that traffic over to Amazon or Shopify or TikTok shop.

11:31And that restacks the deck in your favor. One of the reasons for that is because Amazon has changed its algorithm to now reward outside traffic. So if you have as little as a hundred to a few hundred people on a launch list and you send that traffic over to Amazon, Amazon now becomes your partner and they will advertise you for free in the form of free rankings, in the form of showing you in other people's listing. And now we get the traffic that we control from having a list, from having a little bit of a following, even if it's only a few hundred people. And we're getting the free traffic that is coming over from the platform where we're taking sales.

12:10Again, Amazon or Kickstarter or wherever you decide to take your sales. And when you do that combo, it is very realistic to run that play and get a product to 25 sales a day without doing a ton of advertising, without putting up a bunch of capital. In fact, a lot of the people that I work with will pre-launch their product, take 10 to$25 ,000 in deposits pre-sales, and then use that money to go order the first round of inventory so that they can now fund the growth of their business. So if you're playing by the old playbook, It is totally saturated. You can still win. It just takes way more capital and time to be able to win that way.

12:55The workaround is to build a small audience, which can be as little as a hundred or a few hundred people, then launch the product, use that customer list as your base for reviews, video testimonials, feedback, and that becomes the content that you use to post and continue building the list. If you do that for about 30 to 60, maybe 90 days, you have enough of a following to be able to get the first product to 25 sales a day. And then we repeat the process over three additional products. Well, Fire Nation, I know that you know Ryan's been dropping value bombs, and we have many more coming up as soon as we get back from thanking our sponsors.

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16:52That's V-A-N-T-A dot com slash fire for$1 ,000 off. Now, I would say one of an entrepreneur's biggest dreams and goals is to one day sell their business. And you've actually had multiple exits, even just since you were last on the show. So let's kind of go into detail about the process of actually selling a company. I'm sure that you have lessons that you learned in your career that you wish you could go back and tell your younger self. This is where my biggest ones come up. Because first of all, I was a scrappy entrepreneur who was dreaming of a million dollar business. And I was an entrepreneur for, I think, 12 years before I got into selling physical stuff.

17:42what I would consider real businesses. I was doing affiliate marketing and search engine optimization and blogging and all this stuff that we still talk about today to make money on the internet. But when I started taking that skill set and applying it to building real brands, it was like bringing a flamethrower to a knife fight. So my first million dollar business happened in a period of 12 months. That's now a process and hundreds of entrepreneurs use that process to build million-dollar businesses. But what I didn't factor in was that I was also building enterprise value. Enterprise value meaning the amount of money that someone would be willing to pay me to acquire my business.

18:25That doesn't usually get talked about when we're talking about affiliate marketing or podcasting or making YouTube videos. It just doesn't factor into the conversation for most beginning entrepreneurs. They're thinking about cash flow rather than building enterprise value. Cash flow is super important, obviously. But had I known that the real money was made in building a business that I could sell, I would have operated my business differently. And one of the ways that this showed up was when I sold one of my businesses in 2017, I sold it to a private equity group out of Dallas for $16 million.

19:07I had no idea that I had the leverage in that conversation. I had no idea as a 29-year-old man that I could show up to a meeting with somebody who wanted to buy a business and I could have my own set of demands. I viewed it more as these people are big, experienced business owners. They're the ones writing the check. They're going to set the terms. And had I known that I could show up to that meeting and say, I want this for my company. It's just like selling anything else. The person who is doing the selling gets to set the terms. And I wish I could go back to that 29 year old young man and tell him what he was sitting on.

19:48So I wish that I had known at the beginning of my journey that I was building enterprise value and that other people are counting on entrepreneurs like me to build a company that they can buy one day. The entire business model of private equity groups, of aggregators, is to look for good businesses to buy so that they can make it part of their portfolio. I didn't know that when I started. I was just optimizing for cash flow. And when you can think instead about, I'm not just building something that's going to make me half a million dollars or a million dollars a year. I'm building something that someone else is going to write a check for$5 million,$10 million.

20:35That's when you can really start to be aggressive and optimistic and play long term. And then you can set the terms when you show up for that meeting. And there are always people who want to buy businesses. You've probably seen the people who buy businesses making content in podcasts and YouTube videos, they are counting on people like us to build the quality companies that they want to write a big check for. And it's just one of those lessons that I wish I had known. And now I know and will preach it from the hilltop because there are entrepreneurs who settle for millions of dollars less than they should when they go to sell their companies.

21:14Well, so what are those KPIs that we should be focusing on if we're following that methodology that most people are instead focusing on the wrong one? So what are the ones they should be focusing on for those big potential checks? Great question. So the lazy one is your profit per year and your growth rate. Those are the lazy ones that everyone thinks all of the decisions are made around. And they are, they matter. Your profit matters, your EBITDA matters. The growth rate matters. But there are other factors too. One of those factors that most people don't factor in is simply the target customer.

21:58For example, when Dollar Shave Club sold in 2019 for a billion dollars, Gillette bought them not because of their EBITDA. They bought it for the customer list. They bought a customer list for a billion dollars. Why? Because Dollar Shave Club was going after a different segment of the market than Gillette had been going after. Dollar Shave Club had been building up a list of customers that was younger, more internet savvy, more modern. And Gillette didn't have access to those customers. They were more of a legacy brand. So they bought that company because of the target market, because of the target customer.

22:40And this is one of the ways into building a business that people don't factor in. If you are all in on a target customer, first of all, you'll have an easier time getting in front of them because you'll speak directly to that person's needs and wants. So you break through the noise of advertising. Number two, you can charge higher prices and have higher profit margins because that person is choosing you because you're the brand for them. And third, you're increasing the amount of money that someone will pay for your company because you're the brand for a specific target market and someone else who is selling maybe the exact same products as you or in the same industry as you will buy you to access that customer list.

23:26So who you target, how you talk to them, and how you position yourself in front of those customers is one of the ways to increase the amount of money that you will sell a company for that has nothing to do with profit or growth rate. Again, those things matter, but they pale in comparison to the enterprise value that you build by targeting a very specific customer. Another thing to factor in is your audience. So most e-commerce brands do a terrible job at building audience and building loyal relationships with their customers. So if you have a podcast alongside your e-commerce brand, first of all, you'll get more exposure and you'll get more sales and you'll have more loyal customers, but you also build a moat.

24:15You also have more of a defensible position that gives someone else more confidence when they go to buy your business. If you have a responsive email list, if you have YouTube videos, if you have relationships with influencers who have reach in your space, these are all things that add into the credibility of your business and the potential growth of your business. and they add to the enterprise value that someone else is willing to pay. So these are the things that a lot of people overlook. They're looking just at EBITDA, profit, and growth rate, but it's the things that drive that long-term brand position that ultimately will determine your highest enterprise value.

24:57Ryan, you've been dropping value bombs. I'm really hoping that you shifted the mindsets of some people that are starting or currently building their business, looking for exits down the road on what actually really matters when it comes to this. Now, what I really want you to do is take a step back and say, hey, what's the one value bomb I want to leave Fire Nation with? The one thing they're going to walk away with knowledge-wise. Then give us a call to action about how we can connect with you. And then we'll say goodbye. My biggest value bomb would be that entrepreneurship starts as a selfish journey.

25:32Most of us get into this because we want a better life or we want a better life for our family or because we want freedom. But the faster that you can shift into thinking about it being for other people, even if you do that in a selfish way, you will make more money and you will build a business that someone else wants to acquire. Here's what I mean. Instead of thinking about what product I'm going to sell, if you start the conversation with, who is the customer that I most want to serve, you will get more customers. When you think about the person who eventually wants to buy your business and you think about the type of business that they want to buy, you will build a better company.

26:17When you think about, instead of thinking about how I make more sales, but I think about what type of product or what type of marketing campaigns would an influencer want to support, you will get more free exposure and free traffic and more connections. So the faster you can flip the conversation from what I get out of that to what will other people get out of what I'm creating, you will get more customers, you will grow faster, and you will build a more valuable company. In terms of calls to action, I'm an investor now. I invest in e-commerce brands. I freely teach the e-commerce model of building a million-dollar business, and I invest in the deal flow that comes from my audience.

27:01So I invest my own capital and I advise the companies that follow my model, build a million dollar business, and then I guide them to a multimillion dollar exit. My fund is called the Capitalism Fund. And if you meet that criteria, you can look up capitalism.com slash fund. But for most people, the most affordable way that I could serve them if they're wanting to build a business in this model is to grab my book, which is called 12 Months to 1 Million. Or if you just want the cliff notes, you can go to capitalism.com slash playbook. And that's a summary of my process of how I think about building million dollar businesses and preparing them for exit.

27:38I believe in this model. I invest in this model. I think it is the most predictable path for the average entrepreneur to build both a profitable business and to have an exit that completely changes their life. It did that for me. It's done that for hundreds of my clients. and it's something that I believe in and invest in with my own time and energy. Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with RM and JLD today, so keep up that heat. For links to everything we talked about, visit eofire.com, type Ryan in the search bar and the show notes page will pop right up.