My Worst Investment Ever Podcast

BIO: Jessica Yarbrough has quickly developed a reputation of being one of the best business strategists and marketing and sales consultants for entrepreneurs who want to sell high-value products and services.STORY: Jessica met a very persistent guy who offered to take over her sales and marketing. Jessica was at a point where she could do with the help, so she didn’t research the guy and his business. Unbeknownst to her, the guy was selling his services to Jessica’s customers instead of getting her new ones.LEARNING: Do thorough research before working with a service provider. Don’t outsource your sales unless you’re a high-volume business. “I don’t recommend outsourcing your sales unless you have a volume-based business.”Jessica Yarbrough Guest profileJessica Yarbrough has quickly developed a reputation of being one of the best business strategists and marketing and sales consultants for entrepreneurs who want to sell high-value products and services. Her background is in international business, and she has built multiple companies.Jessica is a genius at showing entrepreneurs how to build an expert platform, rapidly raise their value, build their credibility online, and attract high-paying clients. She is passionate about teaching and inspiring entrepreneurs and helping them grow their influence and make the income and impact they desire.Download her case study that shows how she took a business coach from stagnant at a quartermillion dollars to seven figures during a pandemic year.Worst investment everJessica had just reignited her business after getting back from travels. She was having some success selling high-end services when a guy reached out to her with the offer to take over most of the business functions that most entrepreneurs struggle with. This included sales, marketing, customer service, etc.Even though she had her doubts, it all sounded great, especially since Jessica wanted more time away from the business to pursue other interests, including full-time travel. Jessica invested significantly into the offer.One day she got a call from her friend who had had a rather bad experience with the guy’s company. The friend had contacted the company because she wanted to enroll in Jessica’s program but instead was told she’s not a good fit. Instead, they tried selling to her the very same program they’d sold Jessica. The company was stealing Jessica’s customers instead of getting her more, yet she had paid them to bring in customers.Lessons learnedResearch, research, research.Only work with people with a proven track record who will bring you results.Use your discernment to evaluate your service providers.Check their paper trail online, get a sense of their values and integrity, look at their content, and get their website.Look at their results, know the values and the integrity of that person.Andrew’s takeawaysNot doing thorough background research is the biggest mistake that entrepreneurs make.Before you invest in anything, find dissatisfied customers and learn from them.Actionable adviceDon’t outsource your sales; own it. Do your own sales unless you have a volume-based business.No. 1 goal for the next 12 monthsJessica’s number one goal for the next 12 months is to do more traveling again and continue to help her clients scale their businesses.Parting words “Follow your dreams and keep executing. Even if life knocks you down, get back up and go again.”Jessica Yarbrough [spp-transcript] Connect with Jessica YarbroughLinkedInYouTubeWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Robert Leonard is the VP of Growth & Innovation at The Investor’s Podcast Network, Podcast Host of ‘Real Estate 101’ and ‘Millennial Investing,’ ex-W2 Accounting and Finance professional, as well as a stock and real estate investor.STORY: When Robert first got into the financial markets, his research into companies he invested in was purely quantitative. He never paid attention to details such as the actual business itself, its prospects, or where the industry was going. His focus was purely on the numbers. This led him to make a couple of bad investments.LEARNING: There is more value or at least equal value in the qualitative factors than there is in the financials. Stop just focusing on intrinsic value and start looking at the whole picture. “There is arguably more value or at least equal value in the qualitative factors of a business than there is in the financials.”Robert Leonard Guest profileRobert Leonard is the VP of Growth & Innovation at The Investor’s Podcast Network, Podcast Host of ‘Real Estate 101’ and ‘Millennial Investing,’ ex-W2 Accounting and Finance professional, as well as a stock and real estate investor. He earned an MBA in Accounting and Finance, a BSBA in Finance and Economics, and is a Certified Management Accountant (CMA).Worst investment everWhen Robert first got into the financial markets, his understanding was that value investing was simply following a discounted cash flow (DCF) model. So, for the most part, he just relied on the DCF model and made many investments based on quantitative factors.Robert never looked at the actual business itself, its prospects, or where the industry was going. His research was purely quantitative. After making a couple of bad investments, Robert found out that investing is not just about the numbers. It’s not always just about the valuation; although that is important and should be considered, it’s also about the qualitative aspects of the business.Lessons learnedThere is more value or at least equal value in the qualitative factors of a business than there is in the financials.There’s so much value in the qualitative data so pay attention to it.Andrew’s takeawaysIt’s one thing to pick a stock, and it’s another one to build a good portfolio.You can add value by being steady in your emotions and not let them get the best of you even when the market is going crazy.Stop just focusing on intrinsic value and start looking at the whole picture.Actionable adviceCompletely understand the business you want to invest in and make sure it’s within your circle of competency. If you can, use their products or services first. It’s worth a little bit of money that you’re going to put into seeing how the business works, seeing what their products and services are and their quality.No. 1 goal for the next 12 monthsRobert’s number one goal for the next 12 months is to scale his new stock investing software platform to help investors. [spp-transcript] Connect with Robert LeonardLinkedInTwitterFacebookInstagramAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Patrick Zulueta is a country pioneer for launching and managing technology brands. He’s helped Cashalo, PayMaya (Mai a), and BPI achieve millions of downloads and users, as well as triple-digit revenue growth in the first two years handling each of these brands.STORY: Patrick’s worst investment was failing to invest in himself earlier in his career and only started doing so in his 30s.LEARNING: Failure is an integral part of success, and the earlier you fail, the better. Start testing your ideas as early as possible. “Open yourself to failures and be willing to accept the risks.”Patrick Zulueta Guest profilePatrick Zulueta is a country pioneer for launching and managing technology brands. He’s helped Cashalo, PayMaya (Mai a), and BPI achieve millions of downloads and users, as well as triple-digit revenue growth in the first two years handling each of these brands.Since then, he has become a Co-founder and Director for Growth at apper.ph, a tech company that helps businesses adopt new technology and innovation. Their clientele includes some of the country’s top digital companies.He has over 13 years of experience in marketing strategy, branding, business development, and marketing communications. And Patrick’s mission is to continually empower the underserved via digital transformation.Worst investment everPatrick’s worst investment was not investing in himself early on in his career. Many tech co-founders in Southeast Asia, Silicon Valley, and the greater regions of Europe typically experience success even in the 20s. But Patrick received his success in his early 30s. This is because he didn’t invest in the right mentorship, the right skill set, or trying out a tech startup earlier. He started doing these things when he was already 30.Lessons learnedThe only way to learn is by trying it out, failing, and then getting back to it.It’s only when you put yourself out there will you learn and start to succeed.Be willing to accept that failures are essential before success comes, and the earlier you fail, the better.Andrew’s takeawaysYou’ve got to start testing your hypotheses and ideas as early as possible.Actionable adviceTake one idea, whether it’s a good one or a bad one, as long as you strongly believe in it and it’s something that you’re passionate about, go for it.No. 1 goal for the next 12 monthsPatrick’s number one goal for the next 12 months is to continue helping shape the Philippine tech and cloud industry.Parting words “Listen to other people’s learnings and failures in investing so you don’t make the same mistakes. You’ll learn and fail forward sooner.”Patrick Zulueta [spp-transcript] Connect with Patrick ZuluetaLinkedInFacebookWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Jonathan Yabut is the proud Filipino winner of the hit Asian reality TV show, The Apprentice Asia. Today, he is Asia’s leading motivational speaker on topics involving leadership, talent development of Gen Y workers, and office productivity.STORY: Jonathan won $100,000 as the winner of The Apprentice. He took a large chunk of the money and left it sitting in the bank. He regrets never investing the money because it never made much from the bank.LEARNING: Your money won’t grow if you put it in the bank. Ask questions to understand how an investment works. “Never hesitate to ask questions about your finances and investments.”Jonathan Yabut Guest profileJonathan Yabut is the proud Filipino winner of the hit Asian reality TV show, The Apprentice Asia. For winning the show, he served for one year as Chief of Staff of AirAsia, reporting directly to Malaysian business mogul Tony Fernandes based in Kuala Lumpur. Today, he is Asia’s leading motivational speaker on topics involving leadership, talent development of Gen Y workers, and office productivity.Worst investment everAs the winner of The Apprentice Asia, Jonathan got $100,000. That was quite a huge prize money for a 27-year-old. So apart from spending on things every millennial wants, such as shoes, travel, gadgets, he left a big chunk of it sitting in the bank.Jonathan’s biggest regret now is that he never invested in investments such as stocks, bonds, money market, etc., way earlier. Had he invested that money as soon as he got it, it could have probably led to something more significant.Lessons learnedExpand your network and be around people who can nudge and advise you on where to invest your money and yield better returns.Never be ashamed of asking as many questions as you can, especially if you are entering or enrolling in a long-term investment.Andrew’s takeawaysTake advantage of the many investment options available now.If you put your money in the bank, you expose yourself to the shortfall risk because it doesn’t grow as it should.Actionable adviceNever be embarrassed if you don’t know much about your finances and how it’s going to be utilized. You need to ask as many questions as possible until you have a reasonably good understanding.No. 1 goal for the next 12 monthsJonathan’s number one goal for the next 12 months is to diversify his assets further. [spp-transcript] Connect with Jonathan YabutLinkedInTwitterFacebookInstagramBlogAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Dennis Yu is the CEO of BlitzMetrics, a digital marketing company that partners with schools to train young adults.STORY: Dennis had a very good idea for a program, and once he launched it, he got more customers than he anticipated. Unfortunately, he was not able to execute the program well, and so it failed.LEARNING: Just because you’re good in one business doesn’t mean you will automatically be good in another. Have a system in place to help you execute your ideas. “Never overestimate the level of preparation you need to anticipate when executing an idea.”Dennis Yu Guest profileDennis Yu is the CEO of BlitzMetrics, a digital marketing company that partners with schools to train young adults. He’s a former Yahoo search engine engineer who optimizes ads and analytics across search and social that he’s turned into training to create good jobs for aspiring digital marketers.Worst investment everDennis started a digital marketing agency and launched it at a conference. He got so many people who paid about $2,000 to come into the program. Dennis hired a CEO and a couple of VAs to run the program.As luck would have it, the program attracted so many customers. Unfortunately, the program got destroyed by having too many customers. The team Dennis hired wasn’t able to execute the program, and eventually, he had to shut the thing down. Dennis had put in $100,000 into the program, and shutting it down was painful.Lessons learnedJust because you’ve been successful in another kind of business doesn’t mean you’re going to be successful in a different or even a similar one.Hope for the best, but prepare for the worst.Have a tight process and people who know how to operate in that process.Andrew’s takeawaysAs you start your business, be sure to manage your risks.Ideas are one thing; execution is another. Have systems in place that will help you to execute your ideas.Actionable adviceStart small, but still dream big.No. 1 goal for the next 12 monthsDennis’s number one goal for the next 12 months is to launch 10 agencies. He has already launched three of them, and they’re going in the right direction.Parting words “By sharing your failures, people respect you more, and they’re more likely to hire you.”Dennis Yu [spp-transcript] Connect with Dennis YuLinkedInTwitterFacebookBlogWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Jeff Heggie is an entrepreneur and success coach with a passion for helping others achieve their biggest dreams.STORY: Jeff started a manufacturing business with a former client, and everything was going great until the 2008 financial crisis hit. While it would have been a better idea to close down the business then, Jeff put everything he had, including his house, into the business to try and salvage it. Unfortunately, it never recovered, and they had to finally close it after COVID-19 hit.LEARNING: Sometimes, it’s better to accept failure instead of getting sucked into the sunk cost fallacy. “A fixed mindset focuses on specific outcomes, whereas the growth mindset focuses on the process and doing things right.”Jeff Heggie Guest profileJeff Heggie is an entrepreneur and success coach with a passion for helping others achieve their biggest dreams. As a coach, Jeff starts with a focus on mindset. Taking his client or their business to the next level always begins with the right mindset.Jeff enjoys using his extensive experience in the banking industry, over twenty years as an entrepreneur, plus his training and experience as a coach to help his clients break through the mental and physical barriers that hold them backWorst investment everJeff left the banking industry when he saw an opportunity with one of his clients, who turned into an incredible mentor and a great business partner. Together they started a manufacturing company that though it was capital intensive, and did pretty well.Then the 2008 financial crisis hit, and their world got turned upside down. They came to a point between 2008 and early 2010 where everything they tried to do failed. They should have closed the company, but as the CEO, sitting in a staff meeting with all the team heads, Jeff decided failure was not an option. And so, they invested more to try to save the company.Jeff took everything he had and even mortgaged his house and put it back into this company. His rationale was that they had already sunk as deep as they could go, now they had to fight their way back and rebuild.When the COVID-19 pandemic hit, the company could barely survive, so they closed down in January 2021. Jeff knew the company was done long before that. But he was too afraid to let it happen. He was too scared to face the reality of what his losses were going to be and to face his shareholders and tell them he had lost everything.Lessons learnedFailure is always an option when trying to achieve success.Sometimes you must accept you’ve failed and try to move on instead of trying to keep pushing a failing business.Andrew’s takeawaysAny business can fail. That’s a risk every business owner and shareholder has to accept.If you’re contemplating closing your business, first ask yourself: if knowing what you know now about this business would you start it today? If the answer is no, then you better start closing down. If the answer is yes, then you better start thinking differently and bring your energy to keep going.Get rid of the sunk cost fallacy.Actionable adviceFailure is an option. But when things get tough, make the right business decisions and don’t act on your emotions.No. 1 goal for the next 12 monthsJeff’s number one goal for the next 12 months is to get 350 clients and 1,000 athletes to take his High Achievers Mindset Secrets course.Parting words “To be great, you’ve got to be able to take the risk. Put yourself out there and know that failure is an option. So keep going because you’re gonna get there.”Jeff Heggie [spp-transcript] Connect with Jeff HeggieLinkedInTwitterFacebookYouTubePodcastWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Karen Briscoe is the creator of the transformative “5 Minute Success” concept. Her first book Real Estate Success in 5 Minutes a Day: Secrets of a Top Agent Revealed, offers a combination of information and inspiration delivered through memorable stories.STORY: Karen took over Huckaby Briscoe Conroy Group (HBC) when Sue Huckaby passed in 2008. The luxury business had high overheads, and Karen was having a tough time running it, but a past client came to her rescue.LEARNING: Invest in yourself because you are your greatest asset. Take your challenges and turn them into confidence. “Changing you starts with changing the way you look at things because whatever got you here is probably not going to get you there.”Karen Briscoe Guest profileKaren Briscoe is the creator of the transformative “5 Minute Success” concept. Her first book Real Estate Success in 5 Minutes a Day: Secrets of a Top Agent Revealed, offers a combination of information and inspiration delivered through memorable stories. Karen is the host of the “5 Minute Success” podcast, ranked #1 on Overcast, most recommended in the business category.Karen is the principal owner of the Huckaby Briscoe Conroy Group (HBC) with Keller Williams. The HBC Group has been recognized by the Wall Street Journal as one of the 250 Top Realtor® teams in the United States.Worst investment everIn the early 2000s, Karen went into residential real estate, where she did well and became successful very rapidly. Karen’s success came to the attention of one of the top agents in her market area, who happened to also be number 10 in the entire nation. Sue Huckabee asked Karen to join her and become a partner in her company, which she did in 2006. The business was doing great then.In 2008, the financial crisis hit the US, and real estate took a turn for the worst. In the same year, Karen’s partner died, and she took over the business.Running the business was tough for Karen because it was a luxury business with high overheads. She often felt like she had made the worst investment ever. But just as Karen was about to give up, a past client came to her and expressed interest in getting into real estate. Her client’s energy and drive renewed Karen’s spirit, and together they revived the company.Lessons learnedInvesting in yourself is worth it.Your knowledge and ability to create value and help people are your greatest asset.Andrew’s takeawaysConfidence is built by overcoming a record of challenges.Take your tough experiences and turn them into your confidence.You can change yourself.Actionable adviceTake action. What you put energy into is what you’re going to receive back. If you want to attract something new or anything good in your life, you need to take action towards it.No. 1 goal for the next 12 monthsKaren’s number one goal for the next 12 months is to launch four books. She is also focusing on expanding her coaching business.Parting words “If I can do it, you can too.”Karen Briscoe [spp-transcript] Connect with Karen BriscoeLinkedInTwitterWebsitePodcastBookAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever PodcastFurther reading mentionedGary Sutton, (2001) The Six-Month Fix: Adventures in Rescuing Failing Companies

BIO: Marina Krivonossova is a Russian-American currently based in the Netherlands, pursuing a master’s degree in political science.STORY: Marina was looking for accommodation in the Netherlands when she met a fellow Californian lady on Facebook. They decided to move in together. Marina made the mistake of leaving her in charge of the lease. One day, she came home to find the lady had canceled the lease and didn’t want to live with her anymore. Marina was left homeless and a few thousand dollars poorer.LEARNING: Never trust anyone with your money unless you have a legal contract in place. “Don’t trust anyone else with your money unless there’s a legal contract.”Marina Krivonossova Guest profileMarina Krivonossova is a Russian-American currently based in the Netherlands. She moved there to pursue a master’s degree in political science after completing her bachelor’s degree at the University of California, Irvine. Though her most recent work has been in marketing and writing, Marina’s ultimate goal is to work for the government in anti-human trafficking policy development and implementation. In her free time, Marina is a fan of traveling, hiking, and baking.Worst investment everMarina was craving for something new, and so she decided to study in the Netherlands. She found a program that she liked and started looking for a place to stay but couldn’t find any through the websites she was using. She decided to turn to Facebook, where she found a lady who lived near her in California. The lady also wanted to do that exact same program, at the exact same time, at the exact same location. They got in touch and decided to meet up. They got along fine, and they decided to be roommates.The lady had an Airbnb account, so they found a long-term rental and moved in together. The two ladies lived in harmony, but there was just something off about the lady. However, Marina didn’t think much about it, and she wasn’t home most of the time anyway.Marina spent most of her free time traveling in and out of Netherlands. For her birthday, Marina went to visit a friend in London, and on getting back, her roommate informed her that she didn’t want to live with her anymore and had canceled their Airbnb lease. The lady refused to refund her the money she had paid for the lease.As if that was not enough, they had booked a trip together to Portugal, Spain, and Morocco, and now they couldn’t go. Everything had been prebooked and was nonrefundable.Marina was homeless and also lost thousands of dollars on a trip that she never got to take. Her biggest regret was trusting a stranger too fast and allowing her to have access to her money.Lessons learnedDon’t trust anyone else with your money unless there’s a legal contract.Make sure everything you book is refundable, or at least partially refundable.Make sure you’re always in charge of your situation, and nobody else is influencing it.Andrew’s takeawaysNever lose control of your money or let another person get access to it.When moving to a new location, use your friends as a reference or starting point.Actionable adviceDo thorough research before moving to a new country. Don’t be so trusting and never let anyone take control of your money.No. 1 goal for the next 12 monthsMarina’s number one goal for the next 12 months is to finish a book she’s been working on. [spp-transcript] Connect with Marina KrivonossovaLinkedInFacebookBlogAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

How to Value a StartupToday I want to talk to you about how to value a startup.This story started when Dan, a podcast listener, replied to my recent weekly email with this question, “How do you value a startup, especially if there is no revenue?”How do you value a startup?To answer this question, I decided to dust off a business plan that I wrote for a client soon after the 2000 dot-com boom and bust. For those of you who were not around then, the dot-com boom saw the US Nasdaq Composite peak in early 2000, up 400% from 1995. At that time, the New York Stock Exchange Composite index was trading at a Shiller cyclically adjusted PE (CAPE) ratio of 45x (by the way, as of this writing on July 16th, 2021; we are currently at 37x a CAPE). But after the Dot Com crash by 2002, the Nasdaq Composite had fallen by 80% from its peak.You will learn how to value a startupAfter this story, you will see that you can value an idea, activity, or revenue for early-stage companies. Ideas have value if their market size is massive and there is a reasonably high probability of success. Activity has value, particularly activity related to customers. This value derives from the fact that eventually, those users can be converted into paying customers. And that’s when revenue starts rolling in. A company may lose money for years but still have massive revenue growth.You can value an early-stage startup with no revenueA good example of this is Amazon which ramped up revenue but produced losses for many years. And now we all know there was value to those revenues. So, Dan, you can value an early-stage startup with no revenue based on its idea, activity, or revenue.Let’s get into the story.I was hired to write a business plan to help my client raise capitalThis client came to me in 2004 as we were just recovering from the dot com bust. He asked me to help his team write a business plan and value their company to raise capital from angel investors and eventually from venture capital funds. He even had big dreams of someday listing his startup on the stock market.I pulled together all the information they had and started to work on forecasting revenue and building the financial model that would lead us to the value of the business. What follows are excerpts from the report I wrote for him.Our product is globalWe believe that our product is global, so our market is the world. Therefore, the first driver of value for our business is the size and growth of the global population. As of 2004, the world’s population is 6.5 billion, and we expect it will grow at about 1.2% per year for the next 10 years and then slow to 1.1% for the remainder. That means that by year 30 of our projections, the global population will be about 8.6 billion, which is our starting point for forecasting and valuing our business.Our product is free softwareOur product is a software application that runs on a desktop computer and allows users to communicate better. We are still in the testing and development phase, and as a result, have encouraged our customers to download our software for free. Since we have also started experimenting with monetizing our software, we have generated a tiny bit of revenue. We are optimists and expect explosive growth and are raising the funding we will need to finance that growth.Only internet-connected people can use our softwareOne challenge we face is that, because we will be using the power of the internet, only those people who are on the internet can use our software. Currently, 87% of the world’s population is not on the internet, but we think that this will change over the decades to come.Addressable market of 800 million people now, and we expect 6 billion in 30 yearsTo calculate our addressable market for our software, we multiply the percent of the population (currently 6.5 billion) times the percentage of people on the internet, which we estimate at about 13%. Therefore, we consider about 800 million people as our total addressable market today.We have talked with many thought leaders who confirm that the internet is the trend of the future. They estimate that 17 years from now, there will be 5 billion global internet users, up from the current 800 million. We also expect 30 years from now; there will be 6.3 billion people on the internet, more than two-thirds of humanity. In other words, three decades from now, our total addressable market will have expanded by 8 times. This is massive. This is exciting. And now is your opportunity to get in.We expect to capture at least 50% of all internet usersWe estimate that by year five, we will capture 10% of all internet users, and by year ten, 49%. No company can expand forever, so we forecast that this will peak at about 60% of all internet users sixteen years from now and then slowly fall to 50% due to competition. However, we do not forecast that our share of internet users will ever fall below 50%.One million customers already use our softwareNow that you understand the market potential let’s talk about customers. We consider customers to be those who download and use our software. Some will only use the limited, free option, while others will use the paid feature. But to simplify, we will combine these into one measure, which we call monthly users. These are customers who use our software at least once a month.Currently, we have one million monthly users. And you could say that they are almost all free users as they are paying us next to nothing. Our revenue this year (2004) was only US$400,000, or about 40 cents of revenue per user per year. We know it is tiny, but our objective is to get as many users on as possible to start to build something we call called the “Network Effect.”The “Network Effect” could drive massive valueThe “Network Effect” was first described in Bell Telephone’s 1908 annual report, written by Theodore Vail. It was later expanded on by Robert Metcalfe, which is why it has more commonly been called Metcalfe’s law. Metcalfe’s company, 3Com, sold Ethernet cards which allowed computers to connect to the internet and communicate. He argued that the value of the network was proportional to the square of the number of users.This Network Effect implies that as more people use our software, it will make the experience more valuable for all users, making our company more valuable too. Our goal is to expand our network of users in the first five years rather than focusing on revenue or profit. So over the first five years, we expect only to generate about US$2 per user per year. After that point, we think we can begin exploding our revenue.We aim to surpass the 1 billion user mark within 10 yearsAbove we explained that our business’s primary internal driver is the number of users, not the revenue. So let’s consider our forecast for monthly users. We have applied Metcalfe’s law and added some of our judgment based upon our first year of experience to make the following forecast.We think we can increase our current one million users to six million by the end of year two, and then double that to 12 million by year three. By year four, we expect the network effects to kick in, and we will have increased users by five times over the prior years to 58 million.From there, we think we can more than double users in year five to 145 million. In our forecasts, we expect more than double that in year six to 360 million users and a doubling in year seven to 600 million users.The doubling will slow and happen only at year ten, at which time we expect to have broken the one billion user mark. Doubling will be hard from there, but we think by year 16, we will be at 2.5 billion users, and by year 30, we expect to have 6.4 billion users.The US$5m dream value of our businessOne year ago, our business was just a dream, but the dream of our small team was big. At the beginning of 2004, two of our founding team members put in the initial funds to cover operating costs.But a few months ago (Mid 2004), we managed to convince one angel investor to put in seed money of US$500,000 as a convertible note for a 10% stake putting the value of our business at US$5,000,000 (US$500,000 divided by 10%). That gave us the funding needed to get to work! We were excited to have someone appreciate the dream value of our business.The US$100m activity value of our businessNow, as we approach the end of 2004, our focus is on the decades ahead, not today’s profit or even revenue. Therefore we value our business based upon customer activity. Our customer downloads and software usage is extremely strong. So we believe our core focus should continue to be to gain as many users as possible to let the Network Effect work in our favor.If we can continue to get funding to finance our growth, we think that the activity value of our customer downloads and usage could be as high as US$100,000,000 by mid-2005. From there, the sky is the limit (if we can keep growing our customer base.)The US$500m revenue value of our businessEventually, we expect to start monetizing our customer experience, and it is at that time, we feel we can create massive value. By the end of our third year, we think we could generate US$4 per year from each of our customers, which would generate us US$48 million of revenue.We see many years of massive growth ahead and therefore based on just the revenue potential of our business we think we could be worth as much as US$500 million by the end of 2006. We arrive at this by multiplying revenue time a multiple of 10x. We derive this multiple based on our above forecast of massive future growth of users. Would you be interested in investing in this massive growth?Our ask: US$10,000,000 for a 10% stakeCurrently, we are looking for an investor or group of investors to put US$10 million into our business for a 10% stake. This would value our business at US$100 million. If you are interested, just let us know. Then, after we sign a non-disclosure agreement, we will share with you all the internal analyses we have done to support our conclusions in this report.Well, that’s the end of part one of this storyFrom this story, you can see that you can value an idea, activity, or revenue for early-stage companies. Ideas have value if the market size is massive and there is a reasonably high probability of success. Activity has value, particularly activity related to customers. This value derives from the fact that eventually, those users can be converted into paying customers. And that’s when revenue starts rolling in.Well, that’s a wrap. To Dan and all other listeners out there, this is my answer about how you could value a startup, especially if there is no revenue. Let me know if you have any questions (I now realize need to write part two of this story soon.) Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Doug Gordon is an international speaker, radio presenter, and CEO of D&S Performance Optimisation. He spent 21 years in the investment industry selling hedge funds and mutual funds B2B to global banks, institutional fund managers, and stockbrokers.STORY: In the past, Doug would follow other people’s dreams and would often be motivated by money. This got him stressed, depressed, and anxious. Eventually, he decided to follow his true purpose, and now his focus is on living his dream while helping people find their true calling.LEARNING: The more grateful you are, the more you open yourself to receiving more. Bring purpose to everything you do. “Visualize what you want in life, and be grateful for everything you have because you open yourself up to receive more.”Doug Gordon Guest profileDoug Gordon is an international speaker, a radio presenter, and CEO of D&S Performance Optimisation. He spent 21 years in the investment industry selling hedge funds and mutual funds B2B to global banks, institutional fund managers, and stockbrokers. He held positions of head of sales and marketing and sales director at two of the top fund managers in Europe. In 2012 he had a near-death experience which was the same year he did an industry record of over $1.75bn in sales in one year.Worst investment everDoug’s worst investment ever was following other people’s dreams and money rather than following his heart and what was truly meant for him. He found himself doing what other people said he should be doing instead of following his true mission in life. This made Doug stressed, depressed, and anxious because his gut told him he was meant to take a different path, but he kept ignoring it. Eventually, Doug listened to himself and got on track. Now he is doing what he loves most and has aligned what he loves doing and helping people. Doug focuses on adding value to people rather than focusing on how much money he will make out of it. He believes he’s found his true purpose, and he is living it.Lessons learnedMany people hold onto past influences from parents, teachers, preachers, etc. You need to move past this to live your true purpose.The people that come into our lives mirror back the areas that we serve. Suppose you can utilize that reflection of what you see in them as a way of self-improving yourself and understanding that they’re coming into your life to help you grow, evolve, learn, and then eventually, hopefully, teach someone else as well. In that case, it will make life so much easier.Focus on what you want rather than what you don’t want. This will give you the energy to focus and go in that direction.Andrew’s takeawaysYou don’t need money to be happy. Family, friends, and healthy life can bring happiness.No matter what you are doing, bring purpose to it.Actionable adviceGleam your light every day. Have gratitude for everything you have because you open yourself up to receive more. Learn something new every day because when you’re learning, you’re growing. Exercise to honor your body every day and have that awareness of where you are and what you’re looking to achieve. Then meditate to visualize your goals and visualize the steps, procedures, and processes in place to achieve those goals.No. 1 goal for the next 12 monthsDoug’s number one goal for the next 12 months is to get his TV show up and running and bring on some inspirational people that can add as much value to people. He also wants to continue adding as much value to his clients as possible and to make them align with their true selves to complete their true mission in life.Parting words “Go out and enjoy your life. Remember to focus on what you want, rather than what you don’t want.”Doug Gordon [spp-transcript] Connect with Doug GordonLinkedInTwitterWebsiteAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast