I recently spoke at a large event in Las Vegas. After the event I met a young man named Matt Clark. Matt has built two multi-million dollar companies from scratch and he is not even thirty yet. I was so impressed with his success at such a young age I wanted to sit down and talk with him. I was not financially free until my 40’s and that was with the teachings of rich dad. Had business changed at all from my day as a start-up?
Matt attended one of the top entrepreneur colleges. When I was young there was no such thing. The university taught Matt about customer service, brand-building, operations, finance, accounting, marketing, etc. But Matt said that’s not really where he learned the most. The best education he received was by actually going out there and just doing it. Matt’s best teacher was experience. That hasn’t changed since my day. Nothing teaches better than going out there and just doing it.
I asked Matt what advise he would give to an entrepreneur just starting out. He said that after building and starting two multi-million dollar companies and talking with lots of very successful entrepreneurs along the way, there are three fundamentals that, if any entrepreneur implements into his or her business, will increase the likelihood of creating a fun, profitable business immeasurably:
- High Margins
- Recurring Revenue
For a successful business, not one in which you’re scraping by, you should shoot for a 500% or more markup on the products or services you sell. Matt struggled for many, many months operating a business with only 30-40% profit margin. It wasn’t until he started selling his own brand of private-labeled products with a 600% margin, that he really began to experience the level of profitability a small business needs to survive.
Matt’s second fundamental is recurring revenue. This is one of those business mindsets that become more and more powerful with time. Recurring revenue can be a subscription model business or a business that that sells an add-on product. Matt uses the example of the Keurig coffee brewer and the little K-cups you HAVE to buy each and every time you want to use the machine.
If you implement a recurring revenue component right now into your business, you’re only going to get those same people re-billing next month – nice, but that’s not the big payoff. But, if you keep it up, continually adding more and more recurring customers each and every month, 6 months, 1 year, 2 years down the road, you’ll have more than your company is making now on AUTO-PAY.
Matt is right. The recurring model does not make you an overnight success but if you keep at it, it can be very profitable. I’ve found the key to recurring revenue is quality. You are only as good as your last customer experience. Rich Dad just started our Insiders subscription model. I know that if I do not deliver quality lessons and insights ever week the Insiders members will stop paying. My team’s job and my job is to keep delivering quality.
Lastly, measurement is a MUST for any business of any size. For any business, online or offline, if you’re spending money on advertising, your business will never experience the gigantic leaps in growth a profitable advertising campaign can produce if you are not measuring.
What Matt calls measuring I call feedback. Feedback comes through results, through listening to customers and through the numbers you get when you measure. Being in business is not a hobby where you do what makes you feel good. You need to get the numbers, know how to read the numbers and adjust based on what the numbers are telling you.
I asked Matt about the importance of your businesses’ mission. He looked at me with a smirk and said, “that’s a given.” I knew I liked this kid.