13 Ways to DESTROY Your Competition (Legally)

the first way to legally destroy your competition by the way I'll explain there's 13 is Network effects so you can have different types of network effects the first type is a customer base so that's having a large very established user base that by the nature of it being large attracts even more people to the network so if it's just you that's not a network if it's you and two other people all of a sudden people are like I want to join that group but when you have that fourth really good person now a fifth wants

to come in and as every additional person gets added that Network becomes more valuable and so if you're like how does this actually work in the real world I'll give you two very different examples so one is you can think of Facebook right social platforms so a platform isn't valuable until lots of people are on it but once lots of people are on it well no one wants to join the small platform because there's no one's on it but if everyone's on this one then they can instantly connect with more people now in a very

different version of that in the hardware world is telecommunications companies you look at Verizon you look at AT&T as they were racing to create their monopolies which they more or less have and I'll explain what that word means in a second they were offering all these benefits for people joining in in families and free texting between people who are on the same network as them so that they could encourage more people to be on those networks and then there were advantages of being inside of it now a customer base is the first type of network

effect a different type of network effect is a product ecosystem so think of something like apple right they have all these unique plugs and all these unique softwares and operating systems that only work on Apple products and once you buy one Apple product or two Apple products all of a sudden you don't want to mix and match PC and Android and all this stuff into your world of technology and so they create a closed loop system where everything works with itself and if your product is good enough that you can get people iPhones then you

can get millions and millions of users to then just buy all these other core products that they have less Affinity less Affinity towards and then force them to use all of your products because of One champion product that everyone has and so sometimes if you're thinking about this for your own business it's like okay one is there a way that I can structure what I have so if more people enter my network from a customer base it adds value to every other business every other customer so the opposite of this is a traditional service business

usually if you're one-onone with a client you provide value as soon as you're one on two then it provides less value and so most businesses are structured to deterior rate as more customers come in versus things like a buyer group so if you have 20 dentists who get together and say hey we're going to all buy together because we're going to get cheaper prices then as more dentists come into that Association you get more and more buying power and then you become a greater and greater Monopoly and have more leverage over your potential vendors right

and so you can think about incorporating these elements into your business to make the business more competitive and harder for anybody else to disrupt you and this competitive Advantage is so valuable that tech companies these massive behemoths are willing to lose billions of dollars to establish this network because they know that once they've mapped an ecosystem then they can profit in all sorts of ways the second way to destroy your competition is exclusive control over a resource or technology so let me give you example of resource so possessing exclusive rights to essential resources or materials

that are crucial for production for some Goods right so like the deers Group which is a big diamond group historically has controlled a huge portion of the diamond market and by doing that they made able control supply and demand and since they own most of the mines and the distribution they can basically set the prices because supply and demand exists and so believe it or not there's more diamonds there are dishwashers in the United States but they're valued more because they control Supply to keep the prices high and this is a huge advantage to them

imagine if all those diamonds got released and they were what they really are which is not nearly as rare as sapphires emeralds and rubies are but how amazing would it be to have this big stockpile of stuff that you got for almost nothing that you can sell for exorbitant amounts of money that's a competitive Advantage so you've got the natural world where you've got like diamonds or there's resources right but in the technological World you've got data and proprietary Tech so that would be patents or a huge amount of data that other people don't have

access to and cannot replicate legally which creates a huge bear to entry so I'll give you an example that's really easy to understand so Google search will literally never be beaten at the keyboard inserted search I want to be clear because there's other things that can happen later right but search itself Google will always have more data because they started first and so if somebody starts today and can collect lots and lots of search data Google still has 20 years of experience and data on all of these users across the world and they can use

all those algorithm refinements that they have that no one else has to continually make better models which is why even though open Ai and chat GPT have become a huge source of search in the world Google's still very much a threat even though they're quote behind on AI in that race they're still ahead on the data and if SL when Google makes its bigger play into AI they already have everywhere you've ever searched on Google Maps every email you've ever sent they have the stuff that you buy on the Android store and everything you search

on your phone they have all of that data and so they're going to be able to personalize their AI better because I will make one bet which is it's the best AI that will win not necessarily the first one because as soon as you use a better one you'll immediately switch so I don't think that they're in some crazy rush I think what they want is better and in fact Google dominated search for so long that it became so apparent that they were something that the government calls a monopoly and so the government has tried

for many years to try and break apart Google's Monopoly for search and Google is very good at defending itself with all the lawyers in the world and they've pretty much been able to just keep that Monopoly in place and so these competitive traits that I'm talking about for businesses you don't need to have all 13 that I'm going to talk about I want you to go through it and be like is there one of these that I can more directly weave in to the fabric of my business so that I develop a stronger and stronger

competitive position over time rather than an eroding one so speaking of the government the third way to crush your competition is government regulations and Licensing so there's two types that matter most right now one is government grants the other is licensing requirements so government grants have usually exclusive rights from the government to operate in some sort of particular market so that's like utilities or public transportation and so things like Amtrak so Amtrak operates as a government granted Monopoly in the United States for rail service so they have exclusive rights to operate certain routes that literally

no one's else is allowed to operate so talk about being able to like set your own prices now there's things that come with that but talk about like going out of business it's like well literally no one else is allowed to do business and as long as people want the transport method they're going to stay in business so this second is strict licensing requirements so basically you can operate so Amtrak has this type of service between states or you could do one service in a specific area or territory and so like utilities like Con Edison

which is in New York has a strict mandate from the government to operate that area and so they have so anybody who wants to get in there has super high barriers to entry and just to give you context how viable this is Conan Edison's Revenue last year was about 16 billion so that's more than a billion a month and since we're in the great city of Los Vegas I think one of the big obvious ones is once you go through the regulatory process of getting a casino license it's basically a license to print money because

they say that people can literally just hand you money with a low chance of winning the same thing for lotteries because they're so lucrative because you guarantee the odds that you win and the only thing you have to do is Market the lottery and when people have a chance to win for money for no work guess what people do it and so the government has to grant that and they have big taxes on those corporations because they know that they're going to make money and so I'll tell you a fun hormos family story uh but

one of my relatives in Iran owned the national lottery and so he did very well until obviously the revolution overthrew it and then everything was confiscated for his family and many others like mine um but he owned the lottery and so he was allowed to come up with all sorts of promotions as long as he wrote a check to the government and so these things have occurred across different countries across borders and so sometimes Simply Having the knowledge of navigating the government regulations to get a grant or permission to do business in a certain way

gives you a competitive Advantage even something on a smaller scale as simple in some of the hard States as getting a liquor license right if you have a liquor license you're able to sell liquor at huge margins right and so it becomes a huge profit Center in the business and so that's a small example but they all fundamentally are around the same effect now you might be like well how am I going to use the government stuff well some massive companies like Oracle they've been able to get that and I'll talk about their just way

of destroying competition a second but the fourth way you can destroy one that anyone can use is economies of scale and so there's two different ways that you can attack this one is cost advantages and so basically you achieve a lower cost basis per unit sold through larger scale production and so that allows you to undercut prices and deter smaller competitors so it means other people who are smaller can't buy the volum that you can and so as a result can't price as low as you can and so this is a price based strategy as

in you can still make a profit at a lower price than all of your competition and so this is a low cost leader strategy which typically is paired with economies of scale where you don't want to get into and this I want to make this a clear cautionary tale is that if you're getting into one of these markets there's no Advantage this is Dan Kennedy quote there's no advantage to be being the second cheapest player in the marketplace the cool thing with this strategy is that it gets better with time and so that's what you'll

notice as a common theme which each of these points is that as you have a a greater Network or as you have a more robust ecosystem of products or you have larger economies of scale most businesses like I said degrade with scale they get worse and harder with scale whereas if you have one of these strategic advantages woven into the fabric of your business as you get bigger and the business becomes more complex you have another Force that's driving your competitors away so you have something that's very strong and working in your favor as you

scale which is one of the key traits of becoming a very large business is having one of these thoughts into your DNA wov day one so for example my software company Allen we started scheduling appointments 100 appointments a day a th000 appointments a day we got up to four or 5,000 appointments a day and we still continue to do that in that company and so as we acquire more data and we send more messages we get economies of scale on literally messaging itself and so if somebody else wants to come in and we're sending millions

of messages a day they're going to have to pay more per message than we do and so with that we know that we actually have increasing margins as we have more messages that go out in addition to the data that we have that no one else has and so that is a compounding advantage that makes it harder to compete if someone starts two years later than us and again any one of these competitive modes will be enough to build you a massive multi-billion dollar company and so you don't need more than one of these you

just need to do one right all the way the fifth way to destroy competition is vertical integration now this is one of the sweethearts of private Equity because it's something that usually Capital can come in to do and this is something that we've done in multi of our portfolio companies which I'll talk about in a second so there's two kind of common ones that people have one is control over Supply and the other is distribution networks so control over Supply means that you own everything that is required from kind of click to close and so

in the deers example I gave earlier they own the mines all the way to owning the front store right or Tesla right when Elon is building the cars he wants to get as close to the supply chain of like where do I get steel from all the way to the actual retailers which are just Tesla retailers that sell online to the customer so he vertically integrated the entire chain end to end and he was able to capture margin at every step and by doing that you can have a more profitable business and or sell products

that are better than other people at lower prices because you can eat into your own margin and then put everyone else out of business and so there are multiple advantages to controlling your supply one is that you can control quality all the way through and everyone is aligned with the end user and the ultimate business at large the other piece is that you control disruption because if you have vendors that you rely on for key components of your products if those just those vendors go out of business then it threatens your business and so by

controlling all of these things like controls kind of the opposite of risk in a lot of businesses if you control those elements then they are things that you can manipulate and adjust more proactively than being reliant on third parties so you not only capture the profit and have higher quality you also decrease the risk of the business so let me give you a 1.0 example of how this would work so by being a self-publisher which I am instead of hiring a publisher to publish my books I take over a second portion of the business and

so rather than relying on public Publishers to print and distribute the stuff that I have I print and distribute the books that I sell because I have the relationship with the customer you guys and I'm the one who wrote the book I didn't ghost write it out and I now can make sure that the the size of the book which is a little bit unique which I did on purpose because I want it to be like a kids book and very approachable those are all things that somebody else might not be willing to do now

if I wanted to keep eating up the supply chain I would then go to buying the warehouses that do it rather than just simply using the warehouses that do the distribution and if I want to take another one I would buy the printing presses and if I would to take another chunk up the ladder it would be I would buy paper mills right and so you can keep vertically integrating until it's I own forests that I take to my paper mills to make paper and then they go to my warehouses where I distribute the books

that go to my retail which is me fundamentally as the storefront that actually get the customers to purchase and so that would be a completely vertically integrated product line and if you think about there if you think about your products in that way then you think wow think about all the margin that's included in a book right so it goes from literally water and sunlight which is what it takes to to grow trees and time all the way to a quote influencer who has lots of Impressions and free media that can drive sales so you're

you're basically selling free media with sunshine and water and that's where you have and everything in between is where all the middlemen take a slice and if you can eat all of that up you have all the control the sixth way to destroy your competition and my personal favorite is a strong brand identity and customer loyalty and the reason I like this one so much is that some of the other ones I mentioned sometimes they require a huge amount of time or a lot of complexity like government regulations um and some of them are just

require a ton of capital right which if you're starting a business or you have a small business it might be harder to develop over time but this one is one that you can make with skill which is why I love it so much which with Brand Power you can build powerful associations and then your brand becomes synonymous with the product itself so for example Google is synonymous with search engines Kleenex for tissues Band-Aids for I don't even know what the actual name for Band-Aids is because it's so synonymous like tissue based I who even knows

right and so the advantage when you have a strong brand like Nike is that you can simply take your logo put it on a commoditized product and get higher conversion rates lower cost you car customers at premium prices and so you get massive improvements to the business because fundamentally if you can price above your competition and increase the demand for what you have what a competitive advantage and the thing is is that you can simply build it with time and skill which is why I love it and anyone can build a brand if they know

how to keep their promises and make associations clearly and deliberately over a long period of time with what their customers value and then strongly disassociate with the things and the people that their customers don't value until over time people just estab associate that value intrinsically with the brand itself and so me personally I've tried very hard to teach lots of business stuff to business owners because I believe that private Enterprise is the only way that we can save the world and so I want as many entrepreneurs getting as big a business as they possibly can

to help the most customers and do it the right way so they can build businesses that last so that capitalism has a chance if you're a business owner and want to figure out which of these strategies is right for your business come out to a workshop we just started Ed running these at our headquarters here in Vegas at acquisition. comom and so if that's you you can go to acquisition. comom click scale and if you qualify maybe we'll see you here way to destroy your competitors number seven is strategic pricing and so you can think

about this from a price discrimination perspective and from a predatory pricing perspective and I'm using the literal terms don't read into it so predatory pricing is basically temporarily low prices where your profits can Outlast selling at a loss so that no one else can enter the marketplace and the most classic example of this was Microsoft is any person who wanted to add a new feature to the micros to compete with Microsoft Suite they would immediately copy that put it into their bundle not raise the price and then that person fundamentally everybody who already had Microsoft

just kept paying Microsoft and got that feature for free this is very very common in software where everyone's in a features War where they try and copy everyone else's stuff and give it away for the same price or free so for example a simple version of that is Instagram copied Snapchat stories made it Instagram stories and basically stalled uh Snapchat's growth as soon as they were able to do that right and so that's a version of it which is predatory pricing the other is price discrimination which is founded on selling different prices to different people

so this is maximizing profit so someone walks in the door and you say hey how much money you got and they say a lot you say okay well these pairs of shoes are $200 and somebody else walks in the door and they say you say how much money you got they're like less than that guy and you're like all right well these shoes are $100 you sell the same product at two different prices to different people based on their spending power and so one of the classic examples of this is Airlines so they collect tons

and tons of data on other users and so by the way if you have credit card points with an airline they know all you're spending by the way and by the way most Airlines make the majority of their money on the credit card systems and just use all of the airline stuff as the coolest benefits program to get people to use their cards if you didn't know that um fun fact they get 3% of all of what you spend on your credit card that's their income and so if you barely ever use your you know

Southwest points but you spend $20,000 a year on your credit card they make $600 a year on you no matter what and so if you and somebody else are looking at the same flight with the same seat you might get displayed two very different prices based on what they know your spending power is and your need is and if you have that kind of competitive data compared to your competition then you can make more profit than they can and so regressing this down to a small business the way I think about this is being very

clear on the one or two customer segments or avatars that you really serve and being able to segment those people so that you can sell to the right wallet right now so discriminatory pricing is literally selling the same thing at two different prices for different people I don't personally like this and so the way that I feel ethically okay about it is I like to tweak my offer just a little bit so that when I have the rich person I can add one thing like a free cocktail with their thing and charge a lot more

for it but I can still ethically say these two things were different so if they ever do meet on the plane and say how much did you pay for your ticket how much did you pay for your ticket I can at least if they came to the owner be like hey why did I pay 200 this guy paid 160 and we bought in the same hour be like well you got a cocktail now the person might be like well if I had known I'd be like well they still were different right and so that at

least gives me a little bit of you know stress fee sleep I'll put it that way and so having a couple tiny things that you can change about your offer this especially works well with Services allows you to price more aggressively to someone's spending power or need while ethically being able to sleep at night without saying that you sold the same thing for two different prices and as a fun bonus for this one is that pricing compared to all of the other things that I've talked about so far is one of the easiest levers to

build and manipulate compared to government regulation or massive economies of scale like you can do this one much faster and you can do it on a smaller scale so number eight is exclusive contracts with three different parties so you can either have exclusive contracts that control Supply so no one else can get Supply so if I am Hershey's and I have a contract with the farmers group in Africa that gets the cocoa nibs that are required for chocolate then I make it very difficult for anybody else to get into the chocolate business unless they resell

from me which means I'm still going to make a profit on their business the second way you can think about that is customers so government contracts is a classic example where if you get a contract like Lockheed Martin does for making fighter jets or whatever they make for the government for defense then the government is known to be able to to uh keep that contract and they're only going to have one for a specific need at a time and so once you lock that contract in no one else can really compete for that core service

for years and then imagine 5 years later well you've already done this for 5 years is someone going to spin up a company that didn't make all that money in that meantime doesn't have all the relationships and then get the next contract probably not that's why companies like Oracle locky Martin are gazillion dollar companies because they basically just siphon off taxpayer dollars and have locked those contracts in the third is contracts over distribution and so you've got the supply side you've got the customer side and then you've got reaching the customers which is basically the

middle between the two and so if I have an exclusive contract to sell video games and the only retail distribution is game stunk right then I can unless there's other marketplaces for distribution I can have a huge Monopoly over everybody who walks into those stores and so having exclusive contracts with distribution are ways of locking down markets well I mean I'll tell you an obvious one one of the classic examples of having massive distribution as a monopoly is Coca-Cola and Pepsi and so they're the primary two players in the drink game and the reason is

as soon as they can buy a company that gets some sort of market share because they actually have a good product they can immediately drop it into their distribution base of every single restaurant every single 7-Eleven every single Walmart every single Walgreens every single retail store they already have the existing relationship they already have the distribution and so by having that locked in they don't even have to really innovate just wait for the market to say oh this is a winner they overpay the founder so that they get Fu money but they pay that guy

500 million bucks and they immediately take that thing and make it worth 5 billion and if somewhere to try and compete with Coca-Cola they'd have to have a hundred years of sales and outbound teams establishing all of these connections and the thing is is that especially because Coca-Cola is in the physical world like there's not a huge like you have to get the product to physical human beings so having a physical distribution Network gives them a huge competitive advantage and this is just through contracts they have these relationships they have these agreements and they're just

already in place and to the flip side the people who are sign on the other end of these distribution agreements if you don't carry Coca-Cola and Pepsi people be like what kind of Mickey Mouse thing you got going on here because they own the vast majority of the beverages that most people consume and so when you're thinking about building your business having these agreements where you can get access to distribution increases the value of the company and secures Revenue because you get to rely on all the marketing each of these individual retailers do to get

customers in to buy your product and fundamentally this is a B2B or B2B Toc strategy and if you don't what that means it's business to business or business to business to Consumer and so if you want to lock in one of these things and you're a smaller business you have to make it worth it for the distributor and so if they're picking between you and someone else then you can say hey I will help you I will sell you my product at a lower cost than other people or I'll add in a whole retail kit

that'll move more product for you or I'll come out to your site and train your staff for free you have to add other perks and incentives that more established players probably aren't willing to do or don't need to do so that you can get a foot in to the door so number nine huge Capital requirements meaning it takes a ton of money to just get into the business and so that automatically knocks out 99.9% of business owners who aren't going to be able to raise a billion dollars on their first go now Elon for example

was able to do this with SpaceX because he's Elon and by the way casually shot up hundreds of satellites into space so that he could create star right and have Global coverage for internet and there's other obvious examples of this you got Exxon Mobile who has a huge Capital to go find search and then drill oil or like underwater oil drilling like these crazy things that cost gazillions of dollars that you're not like hey you know I'm thinking about opening a dry cleaning store or an underwater oil rig right like it's it's it's a huge

amount of capital or even simply as simple to understand as developing a new drug like a pharmaceutical it takes takes a ton of time a ton of money a ton of Regulation so there's multiple big things and a ton of money because you have to run the whole thing for years at a loss not being able to make a penny and then the day that it gets legalized then you print money for like 30 years but it takes time and money and Regulation and knowledge of regulation in order to even get to that point and

many failed drugs that don't work which a lot of people don't talk about and so if you don't have a huge stockpile of cash you either got to raise it or you got to not play which means once you do win it's harder for people to enter because even if you do figure out the you know hair loss fixing drug you're going to have a huge years and years of profits and advantage over somebody else who's going to what be the second player in that market years later right and I I'll say like and let's

scale this down to small business so it's easier to start a social media agency because it just requires skill than starting a manufacturing PL or starting a business where you have to buy Capital Equipment so a equipment in order to make the business work and so basically the amount of capital that's required in order to start the business becomes a competitive advantage in of itself and so if you have the ability to raise capital or even saving lots of money for yourself you can automatically pick vehicles to start a business in that have fewer people

competing against you so you automatically shrink the pool number 10 is IP intellectual property now this is one that I think is wildly understood but you've got kind of two basic camps here so you got padon copyright trademarks which is basically like I own this information and no one else can use it so simple example of that is this book like someone else can't copy the contents of this book and then republish it and just put their name on it it's illegal and it's good that it's illegal because then people wouldn't spend the time to

write a book if they knew that the moment it does well some a hundred other people can publish the same book right and same thing with like a cartoon character like Mickey Mouse which by the way is expiring kind of soon so that's kind of frightening for Disney uh but they you can own these patents for 70 or 100 years or whatever it is and so you basically have an entire lifetime and sometimes two lifetimes they're able to create wealth with this one thing that obviously lots of people like if it's good and after that

point it becomes common it means everybody can use it and so we might some find some very interesting Mickey Mouse apparel and cartoons that start appearing after Disney's Big ownership over that IP expires now the other version of this is Trade Secrets and this one's really tough because it's really hard to enforce it's really hard to keep secret cuz you have employees who learn Trade Secrets and then they can leave and then just becomes competitive practice and so the thing is is like the classic one is Coca-Cola secret recipe for their drinks and this is

actually really common in flavoring because there's really unique recipes for like Red Bull and Monster and I think monster famously didn't own its own recipe from the person that was actually doing the manufacturing and had to pay like $500 million to just buy the rights to its own recipe from the people who made it in the beginning some crazy amount of money somebody can fact check me all right and so the thing is is that but if you're like man someone's using my offer someone's using my ad someone copied my content that's not considered intellectual

property believe it or not and so there's very strict guidelines which I won't get into about it but if you do have a copyright right if you do have a trademark which is like you can't use acquisition. comom right you can't pretend it's your business and the key word I think for knowing whether it's right or wrong is pretending like it's yours right like you can't pretend that you wrote this book you can't pretend that you in acquisition. comom you can't pretend to represent something that you're not which is what this protects and so this

gives you the business owner the opportunity to spend more resources more time building things of value because you know they're going to be protected and if I ever wanted to sell the rights to my book I would be able to sell it for probably close to $100 million based on the revenue that this book brings in and it just continues to make money and these types of businesses set themselves up for things called royalties and so Oreo for example and Nabisco set up lots of different royalties with like supplement sellers who want to say this

is Oreo flavored or ice cream dealers you you want to have Oreo real Oreo flavoring so if you want to use the Oreo recipe and the Oreo logo on your products they say sure you can use it you just have to give us 8% of Revenue of whatever you do and so there's also a really strong strategy of saying hey I'm going to just lean into this I'm going to go get 10 different big Brands to license me their brands I'm going to pay them the royalty but I'm going to piggyback on 20 years of

branding and marketing that they spent gazillions of dollars on so you can start small businesses uh a mutual acquaintance of mine started his suppling company just taking all these premium Brands like Swedish Fish and Sour Patch Kids and making them into supplement lines that people immediately recognize so he got the benefit from that brand recognition and already a flavor that people loved and knew even though he was a small business number 11 is Acquisitions and mergers and you're like how do you destroy your competition through acquisition mergers well you kind of don't you kind of

just assimilate your competition and so this one is a a darling of the private Equity world and basically the world that I live in as an investor which is hey we've got three companies that are all competing for the same Market well what if we just buy them all and put them under one well now we control the entire Marketplace and so the government seeks to break these things up once they get really really big but the problem is it gets really hard when it company's really big because they know how to defend themselves and

so Facebook for example meta has acquired number of companies like Instagram and WhatsApp to consolidate position they added messenger in and so they have all these things and they've been prevented at this point from buying any more because they don't want one company owning all of the digital media and I think rightfully so but that is a way that you can develop a monopoly and so when you're thinking about Acquisitions and mergers you're really just thinking about market segments or like I was saying earlier so this one basically umbrella is on top of any of

the others so you can do private Equity so you can do Acquisitions for example and acquire all of the things in the supply chain so you basically use outside Capital to acquire the entire supply chain and vertically integrate or you acquire all of your competitors and you achieve economies of scale or you acquire the distribution and the exclusive contracts and then you create a closed loop and so you basically use capital and taking existing resources and assets and so I had a company yesterday was talking to me about this and they were like hey I'm

having this problem because this company was doing about $60 million a year it's a roofing business he was like I buy all my leads from this online lead source and they're the biggest lead Source in the US and I'm their biggest buyer I was like okay cool so what's the problem he's like well I'm having trouble scaling Beyond them I was like okay well there's two ways you can do it you can either buy it or you build it and my recommendation to him was hey go find five small agencies that sell to roofers exclusively

and sell payer lead and rather than buy the leads buy the company because he had the capital to do it and so if he buys one two or three of the businesses he can then own another chunk of the supply chain so he owns all of the media assets that create the leads and he owns the roofing company that can create the roofs and then what would the next thing he would buy he'd probably buy the financing company that finances the roofs and he'd make points on that and so the more you eat up of

this which you can do through Acquisitions and mergers the more of a competitive Advantage you have the more valuable the company and so what's interesting is that small businesses get small and stay small through competition but big businesses think about consolidation and so you you could see five business owners who are all neck and neck in a local market but the funny thing is is that one guy sells private equity and then private Equity buys the other five and just owns them all and it just seems like the silly squabble and so if you can

work together to create a much bigger Enterprise the sum of the whole is greater than the individual parts and this is very true when it comes to equity value in a business and so if you seek to create a more valuable Enterprise don't think from the competitive lens think like how do I eat up things that would cause risk to my business and so that's looking at distribution looking at customer bases looking at looking at media assets looking at all the different components so you can say hey is there a way that we can work

together rather than compete so that we can just become a much bigger thing and then own a stronger position in the market which then gives us some of these Downstream things we have economies of scale we have a stronger brand all of these competitive modes that you then position yourself to destroy competition and so me personally and this is something that's be way too long to learn about business is I'd rather own 20% of a billion dollar company than 100% of a million dollar company and one of the classic examples you probably have heard of

because you've probably seen their big green trash bins is Waste Management which you may not know this but the owner of the founder of Waste Management didn't even like start a business he just bought Waste Management routes and he kept buying them over and over and over again and so what he saw was a very fragmented Market of mom and popop shops that he saw wait if I added all of these routes together I would have huge economies of scale and then I would own the entire network of waste which is more or less what

he did and and so he grew the entire company through Acquisitions until he became a multi-billionaire and had a big public company which we now know as waste management and so and so if you're a small business owner you can just think about that exact strategy that Waste Management did which is if you are let's say a pool cleaner or you own lawn care company then you can look at all the other lawn carees in your local Marketplace and say okay well what if I owned all of these and you just focus on your local

city and if you own them you're going to have huge advantages it's going be harder for people to come in and compete against you you have the relationships you have economies of scale you have more efficient routes because you have your houses are closer together and this happens with lots of Home maintenance type of businesses and the thing is is that right now this is a huge private Equity interest so there's tons of m&a activity that's happening here because they're seeing the same thing that's right there which is wow these guys are all really fragmented

instead of competing if we consolidate it we make a much more valuable thing so number 12 is one of my favorite personally and so one of my big sayings is find what everyone wants make it better and give it away for free and step four monetize another way so it's having an innovative business model and so a lot of people talk about this in disrupting marketplaces so you take stuff that other people are currently selling at a profit and you just give it away for free and so Google for example with Google Docs Google Sheets

Google slides to try and disrupt Microsoft or eat up some of its market share they offered essentially the same software for free and added some features that made it even easier for people to work together if they were already on Google so fundamentally many of these models exist on freemium Concepts which is I give something for free that you continue to use and I put all of my effort on ascending people from free to paid and so it's actually a marketing strategy and so your cost to acquire a customer is the cost to deliver a

customer divided by your conversion rate so if it cost me a penny to service a free customer and I convert one out of a 100 free customers into paid customers then my cost to a Car customer is a dollar and so you would actually take all of what would normally be a marketing budget and you put it into delivering the free thing and make sure that that free thing is so good that the word of mouth marketing on its own because it's free then generates more demand that you then just take the cost basis of

delivering the free thing and that becomes your marketing spend and this is really common in disruptive businesses because that is their competitive advantage that's what makes them difficult to compete with because other people in their Marketplace that's their Core Business and then you're just giving it away for free because you found out another way to monetize so Spotify for example did a great job with this where they made free music for everybody because they licensed they made all these agreements and so you can listen to whatever songs you want on demand as long as you're

willing to Jesus as long as you're willing to listen to ads and if you don't want to listen to the ads you can pay them Tada and they do a REV share with musicians we can get into whether it's ethical how much they pay them or not but that's not the point of this video the point is that they had an Innovative model that disrupted that industry but you're like okay these are some massive things but is there something that I can do on a smaller scale well the answer is yes you just have to

do the math and so for example I had a concept that I that we tested out at a gym it didn't work but I can still explain it to you is that I had a meals company called Prestige meals and I also had a sub company Prestige labs and I knew gyms and so in one of our test kitchens I said Hey what if we told people that if they were on our meals they could get the gym membership for free and so we marketed free gym forever because the whole shtick was if you eat

the right Foods when you're not here the results you're going to get in here are going to be massively Amplified now the difficulty that we had and I think if I worked at it a little bit longer I then was like this is a little bit of distraction because I was getting way too into like trying to innovate this business model but fundamentally that's how it worked it's just okay well I have a capital cost for the gym but once I incur that the additional users isn't that much to take on in terms of price

and I'm willing to give this thing away for free that other people charge for as long as they buy this other Revenue stream that has more profit or more income and so that's how I think about pairing different Services together where you just take the a very cheap service that a lot of people want even if you go from $20 to zero it's still free and free gets 10 times the interest of not free and so that then allows you to generate the demand for your much more valuable service that you can sell at a

higher LTV I'll give you another version of this if I that I would test out so if I had a large facility right I might say you have to you can come to my facility and you can use it for free you have to do these rules and I can kick you out so that would control some of the Riff Raff for example but by doing that I would use my gym as my free lead magnet to get people in the door and then what would I do when they're in the door well they got

to sit down with us to do an onboarding consultation which we would sell personal training at and so it's like I can give the whole gym membership away for free if you just buy Personal Training knowing that only one out of five people are going to buy it and that's fine because I didn't pay for the customers and I'm making all my profit here so as long as my profit and my personal training covers the cost of maintaining the facility and I can still at a profit then I have a good and very innovative business

model number 13 is control over distribution channels now you might be like this is really similar to contracts with distribution and it is kind of except it's way more valuable because contracts at some point they can break them like all of the vendors overnight could say you know what Coca-Cola we don't want you now is that likely no but if you have absolute control and ownership over distribution you also can profit from everyone else's business too and so Amazon for example owns a distribution Monopoly right they have access to everybody in the United States they're

the most widely adopted product which is Amazon Prime in the United States in total and that's how they can get you things in two hours right which is crazy and they had the warehouse Network built out first and they were putting so much strain on the US Postal Service and ups that they were like well we're just going to start Amazon's delivery and now Amazon's deliveries you see the Amazon trucks everywhere where they just have their own people that and their own vans that do all the deliveries for them and so Amazon because they have

access to everyone's front doorstep if you want to sell a product on Amazon you pay Amazon 2/3 or half of the revenue which is absurd but it's also why Amazon's revenue is like a gajillion dollars a year how do you chunk this down so you're not Amazon you're like how do I make this work for me so I would say on a smaller scale you have local distribution so you can create distribution centers in a local area and you just slowly expand outwards because in that City in that tiny area you're the best now the

other version of this is that you get really good Distribution on a specific Market segment so if I have every single CEO in America and I know them all first name basis then if I want to sell private jets I probably will have a good job doing it and so just think about it as means of communicating or means of delivering messages or products to customers that you have complete control over now I don't own those CEOs but somebody might own those relationships right and so the idea is as much of that as that you

can have complete control creates a competitive mode now I want to zoom out we talked about 13 different things here the chunked up version of this is the actual word monopoly and it comes from the Greek mono meaning one and pce meaning to sell meaning only one person can sell and so there are 13 ways that I just outlined where only one competitor can sell and that could be because they control the supply they control the demand they control the media that talks to those people they control the technology that prevents other people from getting

into it it just costs a ton of money to get into the business they have some sort of Grant or license that says that only they can do it so there's all these different ways but fundamentally it's finding a way that no one else can enter and as much as monopolies are quote frowned upon in the government they don't do very much to break them up and this is how Bill Gates and John D Rockefeller created life-changing wealth but you can create life-changing wealth and not necessarily become a billionaire you just create a small network

of a very small niche that you own and by doing that you can take steps and weave one of these 13 strategies into the DNA of your company to make it more competitive and ultimately make more money and I told you number six my favorite was brand and how to build a brand and I actually made an entire keynote that doesn't require any money and only skill to understand and deploy in your business so go check it out