@jimcramer is there a recipe book coming soon? All these years of gardening, bet there is a great sauce recipe amongst other things.
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Austin Velarde
63 posts
Hundreds of millions of dollars of small business transactions have been struck using the @smblawgroup Letter of Intent (LOI) template.
Interested in receiving a free copy?
Simply reply here, and I'll send you a direct message with the download link.
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@LuxuryWatchGuy1 What is the avg annual price increase/appreciation of a Rolex?
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Bored on a flight if you got any timepiece questions nows the time 👇
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@wesbury Parody account. Love your articles each Monday though.
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Kicking off a big weekend in Philly with a couple bottle signings in Doylestown and Ardmore! Excited to show PA what @FosforoMezcal is all about
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@SMB_Attorney any chance you can tweet about the economics of being an attorney. Cost of law school, payback period, ROI, running a practice vs working for big law, etc?
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An entire MBA fits on one page.
But you better know the math cold.
Like & comment if you want the excel.
6 topics:
*1) Unit economics*
This builds from product-level unit economics to company financials.
Quantity per unit, growth in units.
Price per unit, growth in pricing.
Cost per unit, marketing spend per unit.
Get you return on ad spend (ROAS), customer acquisition cost (CAC), LTV/CAC, gross margins, unit contribution margins, and more.
This model sets up two diverging products:
A higher gross margin (GM), higher marking cost, low pricing power, low growth product.
Against a lower GM, better pricing power, better growing, lower unit market cost product.
To show how the dynamics of the two play out over time.
*2) Accounting*
Unit drivers flow into revenue, variable COGS, and variable SG&A.
Then to EBITDA, EBIT, EBT, Net income & EPS.
Simple cash flow statements & balance sheets reconcile D&A to inflation-adjusted replacement CapEx, debt levels, & GAAP PP&E.
You have to be fluent in accounting to look at public companies.
Not because accounting itself matters.
But because accounting can obscure what matters.
And your task it to translate GAAP into meaningful business logic.
*3) Operating ratios*
Unit drivers output financials, financials output overall business ratios.
Revenue growth, EBITDA growth, EBITDA margins.
Contribution margins (= change in profit over change in revenue).
Net debt-to-EBITDA, net debt % of EV.
*4) Valuation*
You can drive valuation on multiples or a DCF.
Which are equivalent:
The discount rate minus the growth rate determines the 'terminal multiple.'
Using a P/E instead of a DCF simply uses next year as the terminal value.
This model drives value from the DCF, and maps that to the multiples to show how they connect.
*5) Corporate finance & DCFs*
DCF math attached using the CAPM.
The summary is a beta from historical returns, add the cost of debt.
To get the WACC - the theoretically correct discount rate.
DCFs are extremely assumption laden - you can get out almost whatever you want.
But realistically.
Your banker (or analyst) will make the math work out to a 7-13% discount rate.
Depending on the risks, industry, markets - and what they want to achieve.
*6) Sensitivities & the hard part*
The last section sensitizes the equity value and multiples to unit and price growth.
Bringing unit drivers full circle to valuation outcomes.
Ultimately, the hard part isn't the math.
You have to be fluent in the math, its nuances and its limitations.
If not, you will lose out to those who are.
But once you are, you also have to shift focus.
To the hard part.
Which is always in filling in the numbers.
If you're investing, that means thoughtful views on unit drivers; on how, when, and why they shift.
And if you're building, it means making the numbers on the page happen.
That's all for now.
Like & comment if you want the excel.
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$NET
CloudFlare
✅ Q4 Non-GAAP EPS of $0.06 beats by $0.01.
✅ Revenue of $274.7M (+41.9% Y/Y) beats by $0.63M.
✅ Achieved record operating cash flow and record free cash flow for the fourth quarter
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@FIREDUpWealth Are you saving enough for desired income in retirement? Or how do you plan to get there without investing?
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If you had to pick one asset to buy and hold for the entirety of 2023, what would it be?
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@FIREDUpWealth Have you ever thought of doing portfolio case studies? People send over their portfolio and you analyze it.
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2022 was the first year since 2017 I failed a goal. In fact, I failed 5 of my 30 priority goals. For example, YouTube goal of 30k subs. I fell just short, but still failed. The market sentiment of course impacted my goals, but no excuses. I need to do more…and I will. 🤘🏻
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@KingJames The world is on notice about the Buckeyes offense.
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@FIREDUpWealth They make it sound like AMZN, AAPL, GOOGL & MSFT are in imminently closing in on bankruptcy. Total clown show those carnies.
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CNBC sentiment on tech right now should make you bullish long term. It’s comical.
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@FIREDUpWealth can you do a breakdown on “how long can they go” stocks you like AMZN,GOOGL,NET. Although they are way down, at some point they are just too cheap. AMZN might be struggling but it’s not going out of business.
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Facebook started its death spiral 2-3 years ago. Ask anyone under the age of 25.
This Meta pivot, which will take 3-5 years+, is its only chance.
Bought some more today.
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