From: alexhormozi
Achieving an enterprise value of 100 billion, then creating “the next Google” would be necessary [00:00:18], but for $100 million, almost any business can reach this valuation [00:00:22].
Case Study: House Cleaning Business
Using a house cleaning business as an example, one can derive the necessary sales metrics to achieve a target valuation [00:00:27].
Industry Averages
For a house cleaning service, typical industry statistics can be used for projections:
- Average Customer Retention: Customers generally stay for about two years [00:00:31].
- Average Monthly Payment: An average customer pays around $400 per month [00:00:35].
- Net Margins: The industry average for net margins is approximately 20% [00:00:37].
Path to a $100 Million Valuation
To build a house cleaning business worth $100 million, the following revenue and profit calculations can be made:
- Required Profit: To reach a 12 million and 20 million in profit is suggested [00:00:50].
- Total Revenue: With a 20% net margin, 100 million in annual revenue [00:00:52].
- Monthly Revenue: This translates to roughly $8.3 million in revenue per month [00:00:56].
- Weekly Revenue: Approximately $2 million in revenue per week [00:00:57].
- Daily Sales Velocity: To achieve these numbers, the business would need to generate about $300,000 in sales per day [00:01:03].
Business Model Derivation
The process of deriving a business model typically involves:
- Determining the daily sales volume required [00:01:15].
- Calculating the customer lifetime value (LTV) [00:01:08].
- Projecting the total revenue this will create [00:01:17].
- Understanding the profit margins [00:01:19].
- Applying the multiple on that margin to determine the business’s overall value [00:01:21].