The Game with Alex Hormozi Here's Our Criteria for Investing in Companies | Ep 406
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Jul 7, 2022 Discover the three essential criteria for evaluating investment opportunities in companies. The focus is on potential units sold, profit margins, and the competitive landscape. Learn why an 80% gross margin is crucial for service-based businesses. Alex also critiques the effectiveness of Total Addressable Market as a gauge for company size. This episode offers valuable insights into the decision-making process that can help shape successful investments.
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Assessing Business Opportunities
- Consider the potential number of units sold, the potential profit per unit, and the competitive landscape.
- These three factors help assess the overall opportunity of a business.
Ideal Business Characteristics
- High-value, low-cost products/services with favorable competitive dynamics are ideal.
- Crypto mining hardware with high returns and low competition exemplifies this.
Gross Margin Targets
- Aim for 80% or higher gross margins in service businesses.
- Profit drives business growth and allows for scaling.