The MARKETING Expert's Guide to Making More Money | Neil Patel 💵 109

When I used to invest in companies, I would look at things like, first off, is it a big TAM? TAM stands for Total Adjustable Market. It doesn't matter how good you are at execution, if you go after a really tiny market, if you capture 100% of it, you're only going to make so much money.
So you want to go after big markets where people are spending hundreds of billions a year. If someone captures 1% of it, you're generating a billion in revenue a year.
That's a lot of money. Larry Ellison calls from Oracle.
He wants to buy NP np digital he's going to offer you a billion dollars yeah would you sell it no i love what i'm doing ladies and gentlemen welcome to a very special edition of the money mondays we are here inside of the rv motorhome parked right outside of tai lopez's house because there's an event going on inside so we pulled up the rv right into his driveway and i've been doing back to back to back to back podcasts with local friends luckily neil patel happens to live nearby in beverly hills and so i was super excited to get him over here because he's a very very busy character he's built some amazing companies over his career from kissmetrics to Crazy Egg and everything in between, been acquiring companies left and right. And so we're going to ask him three core topics, how to make money, how to invest money, and how to give it away to charity.
Without further ado, Mr. Neil Patel, give us a quick two-minute bio so we can get straight to the money.
My name is Neil Patel. I am the co-founder of NP Digital.
We're a global ad agency, have a few software companies, and we spend our time just helping companies grow, drive more traffic, lead sales, and pretty much it. The fastest intro in Money Monday's history in 109 episodes.
On like two minutes, I already dragged it out. I got like two seconds, but all right.
Okay, walk us through what is NP Digital. When you say a global ad agency, what does that mean? Yeah.
So we are in, I think, 20-ish countries, 19 or 20, something like that, or 21. We have people all around the world.
And let's say if you're a company like L'Oreal, which we work with, or Adobe, or pick a name, you know, where they say we need to do marketing to sell more cosmetic products or software or enterprise security, whatever it may be. We market to companies and people within all the countries that they're targeting.
So why do Fortune 500 companies that have zillions and zillions of dollars, why don't they work in-house? Why do they hire ad agencies or why do they hire firms like yours? They typically have people in-house and then they hire companies that specialize in certain things that they can help their internal team just get faster results and better results. So when a company is first getting going, they're doing their first million, five million, 10 million, they're really getting their bearings about them.
When do you think it's time to start to consider to hire an agency? You can hire one at any stage. I don't necessarily know if everyone needs one, but like for example, if you're at a million, $2 million, there could be a contractor that you know that will charge you $2,500 a month and can do really well and just drive a ton of Facebook ads and drive you more revenue.
And that's great. If you hire someone full-time internally, it may cost you a hundred grand a year.
Why not pay the person 2,500 bucks a month, which ends up being $30,000 a year, which is way cheaper than hiring that full-time person for a hundred grand a year. So someone's fresh out of college and they're making a decision.
They want to go get a job working for NP Digital, or they're going to go start their company, start their business, be an entrepreneur. How does someone make a decision for themselves? Should I get a job? Should I become an entrepreneur? Should I sit home and do nothing? Should I travel the world? What would you say to someone that's first trying to figure out their life? Do whatever you're passionate about.
If you already know you love something like cooking or making necklaces or hats go do that if you're like one day i want to start a business in this space instead of just going off and starting a business i highly recommend working for someone for a little bit ideally a growth fast growing growth stage startup not an early uh startup but a growth stage one so you can learn from a lot of their mistakes and also build up your Rolodex

and gain connections from working there for a little bit

and then go venture off on your own

because you'll avoid making a lot of the common mistakes.

So that's on the making money.

So let's talk about the investing side.

Someone, they went out there, they got their career,

they started making six figures a year,

their value in their house went up a couple hundred grand

and boom, they got some capital. Now they got a couple hundred grand to work with.
How do you start to think about when is the first time I should be investing my money, whether it's into my brain or into investments? If you have a few hundred grand, I would recommend investing in yourself. You're going to be the best investment hands down, whether it's leveling up your skill set, your knowledge, your Rolodex, your connections, whatever connections whatever it may be invest in yourself if you want to park money somewhere else stock market startups or whatever it may be i would actually start off with the companies that you use on a daily basis that you're super passionate about so for example if you know all you and your friends are addicted to buying on amazon instead of going to walmart then just buy a little bit of Amazon stock.
Sure. It's a really simple model.
But if you're the only friend that's really into something, let's say like this energy drink, and you're the only one really consuming it and no one else is, you may want to be careful putting your money in that. But if it's an established company that you know, everyone uses and loves and they're continually growing, park some of your there not a lot if you have a hundred grand you can park three four percent five percent max

into something fun fact since you just mentioned it you know what the number one performing stock

in human history is uh i think it's monster energy monster energy drink yeah that's right

you just it's real life when you see something like monster energy drink when you go to a store

and you see red bull monster and rockstar you've seen those same brands for over two decades yeah

Thank you. You just, it's real life.
When you see something like Monster Energy Drink, when you go to a store and you see Red Bull, Monster, and Rockstar, you've seen those same brands for over two decades. Yeah.
It's just math and time compounds. They're in hundreds of thousands of stores in America, millions of stores around the world.
Math and time compounds. Okay.
So on the investing side, you must get bombarded over the years because you're one of the most famous, your top five most famous on social media from the business category.

You get hit up nonstop left and right.

How do you decide if you're going to invest into a company when you get pitched by someone online or in real life?

I haven't invested in a company in ages.

I stopped because it was too much work and I don't have the time.

But what I started doing was just investing in funds and then let them pick and choose I started dealing with all the k1s for tax time but um when I used to invest in companies I would look at things like first off is it a big tam tam stands for total addressable market it doesn't matter how good you are at execution if you go after a really tiny market if you capture 100% of it you're only going to make so much money so you want to go after big markets where people are spending hundreds of billions a year if you capture 100% of it, you're only going to make so much money. So you want to go after big markets where people are spending hundreds of billions a year.
If someone captures 1% of it, you're generating a billion in revenue a year. That's a lot of money.
You got a business that can sell for a crap ton of cash for that. So first is a big team.
Second is a team. The team needs to complement each other and they need to have ideally experience within that category.
And the third thing I look for is traction. If someone can't build something or create something and get it out there without money, they're not going to usually do well with money because most businesses, unless you're trying to create like an open AI where you need tons of data centers and computing power, you can just get something out there and figure out ways to get the money.
For example, don't eat out as much for a few months and use some of that money to start your idea up if someone's not willing to go above and beyond to just get something out there and get traction they're not going to do well with someone else's money they're more likely to just burn it so you've also been buying companies yeah how do you decide there because obviously you can you have the pick of the litter, right? You could spend 2 million, 5 million, 10 million, 50 million, 20 million, whatever the amount is you're buying these companies for. How do you decide on the acquisition side when you can pick from any company in the category? So let's say there's 700 companies in the category.
Are you picking the top 10, top 20, top 30, top 50? Like how are you making these decisions in your mind? Yeah. So first off, you got to hit up companies and a lot of them don't want to sell sure the ones you want to buy a lot of them will not want to sell and the way we look at it is it's math and in private equity they have the saying one plus one equals three so how can you combine what someone else has and what you have and make more money than the combined entities so a great example of this is we're in, call it, 20 countries.
If we get a lot of customer demand for, let's say, the Middle East, which we're not big in yet, and we find an agency that we like in the Middle East, if you're listening, we are actually looking for agency in the Middle East. We would be like, all right, if they're at, call it, $10 million in revenue to math simple.
And let's assume we're at 90 million to keep the math simple because 90 plus 10 equals 100. Our goal would be to go from 100 to 110 with the acquisition.
And I'm making up numbers that are just random numbers. But let's say we have a lot of customers and they want Middle East marketing, but we don't offer that.
What we would do is we would say, hey, we're going to take all our customers and sell them now on the Middle East region, and that company offers it, so we predict we can make extra 4, 5, 6, 7, 8, 10 million in extra revenue. We then also look at their customers and say, huh, if we can generate 5 million in revenue from sending sending our customers to the Middle East and take their customers and we look to see if there's demand for their customers to want marketing in America or other parts of Europe or Latin America or Asia.
And we're like, okay, if we can estimate we can bring $5 million there, you combine both, you're generating more revenue. Then we start looking and saying, oh, you have a CFO.
We don't need a CFO. We already have one.
one oh you have a head of hr we don't need a head hr we already have one so you start figuring out cost synergies and savings too so you're adding more revenue you're becoming more efficient saving money on the cost end that's how we decide what to buy the other type of company we look to buy is not necessarily regional based it is is, let's call it industry specific. So let's say we only offered SEO and we offer more than that.
But for this example, let's just go with that. And let's go back with, let's hypothetically say we make 90 million a year.
And let's say someone else offers paid advertising services and we don't. And let's say they also generate 10 million million a year in revenue if we know we can take all our customers paying us 90 million a year for one product and say hey what's the demand for paid and let's say it's 30 more million bucks we close that business we get another 30 million we're now at 130 we take their customers that are paying 10 million maybe we get 5 million in revenue from selling them seo now we're at 135 million and that's the model with m&a that we really optimize for so your acquisition is almost free because you're kind of choosing your own adventure right you're building yeah but sadly you start to pay money for it up front sadly yes but if you use bank debt a bank usually can lend you if you have no investors two and a half to three and a half times profit assuming you're at scale scale being call it 20 ish million dollars minimum a year in profit and if you're buying a company for call it six seven times eight times profit and you can double triple and cut cut the cost down well maybe at the end of the, that six times turns into three times because of the growth and the cost savings.

The bank will float at all.

So in that example, like a $10 million business,

let's say they're netting around $2 million, right?

Yeah.

What's the ballpark?

Obviously, there's a wide scale depending on the industry.

What's a ballpark you would pay for that company?

$2 million, assuming they're growing at a good pace.

Gross $10 million, netted $2 million. And if they're growing on an annual basis and they have low churn,

they're probably going to get 12 million bucks for that business. And so in that example,

and you brought in around $30 million in new business, but you paid 12 million, right?

Correct. I like this model.
This is fun. Okay.
But the 30 million in revenue may only equate out to

call it 6 million in profit. Sure.
So it takes a couple years. Correct.
So it takes some time. It takes a year to two years, usually two years, to really integrate and ramp up.
But at the end of the day, you're at $6 million. You bought it for $12 million.
All right. You only paid two times.
Right. You just got to figure out how to float the money, whether it's you're using your own cash up front or bank.
You just got to make sure you have the cash up front or you're getting investors to help you out. So let's say that company out there in the Middle East, they're the agency.
They just heard you. They're like, wow, Neil Patel might buy us.
That's interesting. NP Digital could buy us.
And they're doing $10 million in revenue. How does someone as a founder make that emotional decision along their journey when they get from $2 million to $5 million to $10 million to $20 million? How do they know? How do you know when it's time to sell or it's a good time to sell? Whenever you're happy and content.
So people are like, oh, I can go from $100 to $200 or $20 to $30 or $40. Well, if someone's offering you enough money where you don't ever have to work again and you're happy and you genuinely want to retire or do something else, go and sell and move on.
If you're getting enjoyment from continually growing the business and you don't care for the money, don't sell. If you want to ideally plan the perfect exit, the perfect exit is selling right at the top, which is too hard to plan.
But when you're growing really fast and you know it's going to slow down, that's ideally when you want to do a transaction um it's very hard to time that but my rule of thumb with people is if you love what you're doing you don't care for money don't sell if it's enough money and you just want the cash you never have to worry again so all right pop quiz larry ellison calls from oracle he wants to buy np digital he's going to offer you a billion dollars. Would you sell it? No.
I love what I'm doing. And don't get me wrong, I would love a billion dollars in my pocket, but I wouldn't take it.
All right, so let's talk about it on the charity side of the world. Why do you think it's important for some corporations to involve charity for their employees, their morale, and their culture? I think it's just a good thing to give back.
it's like why do you think it's important for some corporations to involve charity for their employees, their morale and their culture? I think it's just a good thing to give back. It's like, why do you do a toy drive each year? I don't think you do a toy drive because you need to do a toy drive.
I think you just genuinely enjoy it. And if people are part of something that is a bigger cause, I think it creates an amazing culture.
It brings people together and it truly gives enjoyment like you look at the smiles on the faces that you're creating by giving them something whether it's toys or money or helping them out from the fires um it's a nice feeling to help others you go buy something that you may think is cool like a fancy car you'll have enjoyment for a week or a month but after that it goes away you become numb to it yeah and then you're just like i need another car okay when's this ever

ending it never ends yeah so you quietly do a lot of charity stuff how do you decide what charities

you donate to i'm married so the wife picks so i don't really um some charities i get text message

like i think you texted me i don't know when a few months ago you're like i need money for

Thank you. So I don't really.
Some charities, I get text message. Like I think you texted me, I don't know when, a few months ago.
You're like, I need money for something, toys. Was it toys? It was Toy Drive, yeah.
It was Toy Drive and you just sent me a link and I just donated because you sent me a link. I didn't really read it.
I just said, cool, Dan's doing a Toy Drive. It's not like you're making money by giving away toys.
Definitely not. All right, sounds good.
It's christmas someone needs toys click a button but um usually we look at the efficiencies of these campaigns so when you donate to charities a lot of the large ones have a lot of staff where the yeah and a lot of the money goes towards that versus actually the causes and there's nothing wrong with that because you do need staff to run these charities i don't have bill gates money so i want my money this is just my own selfish desire to go to the people who are in need not the people who are running the organizations even though they do need compensation but let the bill gates figure that kind of stuff out um so a lot of what we pick is children's education uh children's health, anything related to poverty with children. But we mainly focus on kids.
And your toy drive was a good fit because it fit within children needing toys. Yes, they did.
We did over 200,000 toys in December. Wow.
11 cities. It was three weeks of my life every year now.
It's just dedicated to that. i see like a video or image on instagram it was one or the other no joke i actually think you fill up like arena or something like yeah sofi stadium oh the nba arena the miami heat arena we did both yeah it was like crazy i was like is this an arena yeah miami heat arena yes we had 1 000 kids there come onto the court so they's cool they got a full experience see that's a good feeling it was wild and why do you do that every year honestly why do you do that I just didn't have much toys when I was a kid like I still remember the one or two toys that I got it was like a spider-man that you stick your thumb inside of like a little rubber doll like I can remember I can remember the few toys that I had and so when the toy drive became a thing there was eight of us wrapping toys the first year.
And then there was 30 of us, and then there was 60 of us, and now it just became such a big thing. How many people even helped wrap toys? Well, at first it was only eight of us.
Now there's hundreds. Yeah.
Yeah. And now I'm just, I can't stop.
Now I'm just in it. I'm so far in it.
Like, the 10-year anniversary was the first time we did a bunch of other cities. Before, we just did two cities a year Salt Lake and then we did 10 cities for the 10 year anniversary and we're like okay we're not doing that again and then last year was 11 year 11 and we just we did 11 cities yeah and now hopefully I don't do 12 cities next year but I'm probably gonna do 12 cities next year and it's just when you go there and see it in real life and there's a thousand kids in an NBA arena, they're going to remember that for many years.

In some way, I remember that one little toy from when I was a kid.

Imagine being on the NBA court.

That's cool.

It's just stuck in my head.

But see, that's the point.

A lot of people do charity because of some personal feeling and it's great.

And I think a lot of people pick a charity from their heart.

My wife picks them from the heart. I pick them more logically.

Right.

Execution of it.

Looking at dollars wise.

And I'm not saying her way is better or my way is better.

You need both because charity does need to involve the heart.

And it needs some logic as well because you need to make sure that you're not getting ripped off.

So on the recruiting side, as you build NP Digital, you've got offices around the planet. You said 19 or 20 countries.
How do you recruit people to come work for your company? At this point, the leaders in the country and the recruiting staff is in charge for it. But when we started off, what we did was we would go on LinkedIn, look for all the people that worked for multiple competitors, got promoted many times.
Because everyone says when you interview them, oh, I'm amazing. Look what I did.
You don't really know if they did that. But if they worked at a company, ideally a competitor, they got promoted multiple times, it means a company usually found them valuable.
Now, if they did that two of your competitors and got promoted multiple times, it's usually not dumb luck. It's usually they're good at what they are doing or claiming.
So hiring those people and paying them more is a great way to get great talent. And we would message them on LinkedIn like, hey, Mike, love what you did in your career.
I'm actually looking for someone like you for my company. If you know of anyone, let me know.
It's indirect. It's not as forceful when you're reaching out to them.
It's casual. And most of the time, they're like, hey, I'm actually interested.
And we found that to be very successful. And then when you get good people, they don't like working with shitty people.
So then they just keep bringing more and more good people. All right.
You've heard a couple of episodes, so you know my final question. And I've never gotten the same answer before.
MP Digital becomes worth billions and billions.

It might already be, but it becomes billions and billions of dollars.

And many, many years from now, it's finally time.

You've exited the company.

You've got all these billions of dollars.

And you've got these beautiful children.

What percentage of the billions of dollars goes to the Neil Patel children?

So I was actually asked this question earlier today, a little bit different. And I want my kids to do whatever makes them happy.
I do business and it genuinely makes me happy. I did an irrevocable trust ages ago and I probably shouldn't have given them as much, but I didn't know as much back then and I didn't know the shares would have been worth as much as well.
And they don know about it so when they get older we'll see but the way i look at it is if my kids do whatever makes them happy i'm happy and if they want to live in new york they're like cool figure out life on your own if they want to live in beverly hills next door to me i will buy them the home and i'll make sure they have food and basic necessities covered but if they want to live on their own they got to figure it out now granted they have an irrevocable trust but they're young kids they're three and five so they don't know um and yeah i would just want to make sure that their basic necessities are covered um we have a committee that looks over the trust and the kids will always have their basic necessities covered even if they want to be in new york like i don't ever want them on the street but if they're just like i want to buy a car and i want a toyota camry no problem i want a ferrari or mercedes figure it out on your own oh i want to go to italy figure it out on your own so i'm happy to provide basic necessities because they can focus on what they love i'm not okay providing more than basic necessities and i think the basic necessity that i'm talking about is even more than what most people would consider like you want to buy food no problem i'll pay for organic food you want to buy alcohol from whole foods figure it out on your own right but i just want to make sure they're okay and healthy um something's happening to planet earth and you need a crap load of money to live on mars no problem i'll give you the money right so situations like that no worries you have a health scare medical bills won't be covered by insurance i'll gladly pay for it but i don't want to give them the luxuries that they don't need that they should earn just like everyone else so you create more content than pretty much any other person in the business world where can people find you you on social media? Why do you care so much about the content? Neil Patel is my social handles. And I care because if you just give a lot of information away, it helps others.
I didn't know this when I originally started doing it, but it comes back in full. And you gain customers and revenue from it, brand recognition.
The brand recognition may be important to to you i mainly care about the revenue um and also i create a lot of content because it's just fun yeah you meet cool people doing things like this i was walking into ty's house earlier some lady got me and she's like oh miss ceo come on in and i was watching sugar ray leonard and he kind of hit someone in the rib cage softly, but it hurt them. It was entertaining for me.
I was like, oh, this is cool. They should have never stayed up.
I would have never let a 68-year-old professional boxer hit me anyway. He looks great, Sugar Ray.
Yeah, he's in better shape than I am. Victor Ortiz in there.
There's another professional boxing champion in there too, just sitting there watching. It's a lot of action going on inside of Ty's house right now.
All right. So check him out on social media.
It's all Neil Patel across all major social media platforms. You'll especially like his content on LinkedIn and YouTube.
He does some long form content there. A lot of that same content will also be on Instagram in short form versions, but it is very useful for yourself.
And it can also be useful for friends, family, coworkers, et cetera. The whole concept of the Money Mondays is to have real life discussions with your friends, family, and followers.
We all grew up thinking it's rude to talk about money. I think it's ridiculous.
We have to talk about accounting, taxes, loans, banking, payroll. What do I do if someone borrows money from me? How do I, like, there's just so many things that happen in real life.
Yeah. We don't talk about salaries.
We think it's rude to talk about salary. How are you supposed to know what to ask for if you don't talk about it we have to be able to have these discussions

and so that's why you guys have been so supportive for the money mondays we've stayed in the top 10

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really help us if you can leave a review check out nil patel check us out on themoneymondays.com

and we'll see you guys next monday