7 Ways To Measure Business Value | Ep 702

The Game with Alex Hormozi

Alex Hormozi

Entrepreneurship, Education, Business, How To

4.9 • 4.4K Ratings

🗓️ 24 April 2024

⏱️ 19 minutes

🔗️ Recording | iTunes | RSS

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Summary

“You can bet on yourself, but there are so many more stories of guys who bet everything on themselves at the casino and walked away empty handed.” Today, Alex (@AlexHormozi) shares the key aspects of business valuation, debunking common misconceptions and highlighting seven critical metrics: contract value, lifetime revenue, business valuation, yearly revenue, profit or EBITDA, net free cash flow, and personal net worth. At the end, he ranks which of the metrics are best to use and why you should not be looking at the others to determine the value of a business.

Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.

Timestamps:

(0:56) - 1st Metric: Contract value

(2:35) - 2nd Metric: Lifetime revenue

(4:58) - 3rd Metric: Business valuation

(7:10) - 4th Metric: Yearly revenue

(8:14) - 5th Metric: Yearly profit

(10:11) - 6th Metric: Net free cash flow

(11:07) - 7th Metric: Net worth

(13:32) - Ranking each business valuation metric

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(This episode is a re-run. Original airdate was on July 1, 2021)

Transcript

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0:00.0	A lot of times businesses fail. There are tons of risks. That's why
0:03.7	business is one of the riskiest things to get into. Most businesses do not
0:06.7	succeed. That's just those are just the stats, right? And 99 times out of 100
0:11.5	business never actually sells.
0:12.8	The wealthiest people in the world see business as a game.
0:18.0	This podcast the game is my attempt at documenting the lessons I've learned on my way to building
0:21.4	acquisition.com into a billion dollar portfolio. My hope is that you use the lessons I've learned on my way to building acquisition. Com into a billion dollar portfolio.
0:24.0	My hope is that you use the lessons to grow your business
0:25.7	and maybe someday soon, partner with us to get to $100 million and beyond.
0:28.6	I hope you share and enjoy. I'm going to show you seven ways to measure business value and how you're probably
0:39.7	being deceived by most people you see on the internet simply because you're not
0:43.5	understanding the words and terms they are using. All right so by the end of
0:46.9	you'll understand who's BS who's legit who's real who's fake and if they
0:50.3	haven't given you enough information to make the decision,
0:53.0	exactly what questions to ask.
0:55.0	So let's dive in.
0:56.4	So the first of the seven types of ways
0:58.7	that people will measure value is that they will extrapolate
1:01.3	a single month of contract value into eternity or at least over a year.
1:05.0	And so for example what that looks like is someone, you know, selling a yearly contract at an event,
1:11.0	they sell a hundred people at that event, let's say, for $30,000 a year, right?
1:16.0	And they say, we're doing $3 million a month.
	...

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