Alex Hormozi

But it is shaped this way because once you get a product more fit, you can go to the sky because it is the most scalable of all four business models once you have it.

Again, that's the hard part.

So what's the great part about it?

Infinite scale, incredibly high gross margins once you have it.

If done well, if done well,

Very sticky revenue.

The vast majority of people who build software don't have sticky revenue.

But if done well, can be incredibly sticky because it gets integrated into someone's workflow.

And you can have huge enterprise value long term.

So why do software companies have such high valuations?

One person can exit it because somebody else can own the product and the customer can have the exact same experience.

So there's almost no risk at point of sale if all the other metrics of the business are there.

Number one.

Number two, the components that drive valuation are outside of that core component of software is going to be gross margin and growth rate.

So how much gross margin do we have and how quickly are we growing?

Now, the third element of this growth rate, which almost always happens at scale, it gets factored in, is going to be revenue retention.

So, of course, you can go from zero to $10 million very quickly because you can just sell a lot of people something, and you'll have high growth rate, not gross margins.

But if the customers are leaving, we have no stickiness.

And this is where many people who come from this world, in the information education world, or services world, or even e-commerce world, they say, oh, this shouldn't be hard.

I can have an infinite backend.