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http://personalmba.com/billionaire-formula/
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A million dollars isnt cool. You know whats cool? A billion dollars. The Social Network by Aaron Sorkin Lets assume you want to become a billionaire. Lets also assume that you choose to ignore the evidence that having a billion dollars wont make you happier or more satisfied with your life. Becoming a billionaire is your only goal. How would you go about doing it?
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http://personalmba.com/billionaire-formula/
Okay, youre now the founder of a growing company. How much money does the business need to bring in to make you a billionaire? Heres the basic formula for becoming a billionaire: (Typical Customer Lifetime Revenue Typical Lifetime Cost of Customer Acquistion Typical Lifetime Cost of Customer Value Delivery Amortized Overhead per Customer) * # Of Customers Served * ( 1 % Average Corporate Tax Rate) * % Ownership of the Business Typical Customer Lifetime Value is the amount of revenue you collect from every customer over the entire lifetime of their association with your business. Typical Lifetime Cost of Customer Acquistion is the amount you spend (on average) to bring in a new customer. Typical Lifetime Cost of Customer Value Delivery is the amount you spend (on average) to deliver the value you create to a paying customer. Amortized Overhead per Customer is the amount you spend on salaried employees, office space, utilities, insurance, etc. divided by the number of customers you serve. # Of Customers Served is self-explanatory. % Ownership of the Business is the number of shares of the business you own divided by the total number of shares that exist. This ownership percentage entitles you to that percent of the companys profits, but the mechanism by which you collect those profits in practice may vary. Astute readers will notice that (Revenue Costs Overhead Tax) is the definition of Net Profit. That means we can simplify the formula to this: Typical Lifetime Net Profit Per Customer * # Of Customers Served * % Ownership of the Business
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http://personalmba.com/billionaire-formula/
if it had a high Typical Lifetime Net Profit Per Customer or as if it were already serving millions of happy customers, an owner of that company may have a net worth of over a billion dollars at least on paper. The actual numbers may not matter so much if investors believe the company has promise in the not-so-distant future. If the market begins valuing the company differently, however, that personal net worth line can change overnight. A good example of this phemomenon is Mark Zuckerburg, who owns 28.2% of Facebook. When the company went public, investors valued the company as if Typical Lifetime Net Profit Per Customer was very high, and millions of advertisers were happy customers. (Remember, Facebook users are not Facebooks customers theyre Facebooks product. ) When Facebook went public, Zuckerburg was suddenly worth $19.1 billion dollars. 41 days after going public, however, prices for shares of Facebook plunged, and Zuckerburg was suddenly $7.2 billion dollars poorer. All that happened was a shift in the expectations of the market.
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http://personalmba.com/billionaire-formula/
Josh Kaufman is the bestselling author of The Personal MBA: Master the Art of Business. Josh specializes in teaching professionals in all industries and disciplines how to master practical business knowledge and skills. About Josh Kaufman...
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