GM! It's Tuesday, February 28th - Today, we're covering how the highest-paid banker on wall street earned $1.27B last year and the formula that lets bootstrapped companies beat out their well-funded competition.
How Bootstrapped Companies Can Win
Patrick Cambell bootstrapped his software business to a $200m acquisition. He was able to win even though his competition was cheaper and had more funding.
He was able to win because he understood that people pay for outcomes. Here's a framework you can use to charge more and scale faster.
The Value Continuum
By talking to his customers, Patrick discovered that they were willing to pay more if his company ProfitWell could save them more time and automatically drive their desired outcome.
Patrick decided to map it out for his business...
First, they ingested data. Then, using diagrams and dashboards, they could turn that data into analytics. Once they had analytics, customers could use them to discover insights, which ultimately would drive new outcomes - in this case, drive more subscription revenue.
Patrick decided to give away data and analytics for free, because customers valued them the least, and only started charging customers when they received insights or outcomes.
For example, Patrick's customers would often lose money to failed credit card payments. Patrick built a process to automatically email customers and nurture them to update their credit cards.
This focus on outcomes enabled Patrick to understand what customers were really willing to pay for. Because he was giving so much value away for free, the industry flocked to him.
1) Map Your Outcomes: Speak to your customers, or potential customers, and deeply understand their desired outcomes. The closer your business can get to automatically driving those outcomes as fast as possible, the better.
2) Give Away Low-Value For Free: Most people are hesitant to give away value for free, but if your business allows for it, it can be a great way to create a lot of demand quickly. Especially if your competition charges for it.
3) Charge More For Outcomes: With an explicit focus on driving outcomes quickly, you can optimize your business to achieve them more efficiently and with higher quality by building systems and automating processes.
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The Highest Paid Banker On Wall Street Made $1.27B Last Year
You should know:
Steve Schwartzman, CEO at investment manager Blackstone made $1.27B last year, bringing his total net worth to ~$30B.
- Schwarzman owns 20% of Blackstone shares and received $1B in dividends and $253M in compensation, mostly through incentive fees and a cut of his fund profits known as carried interest.
- His 4,700 employees made collectively $3.5B, or nearly $1 million per employee. Meaning he earns almost 1000x more than his average employee.
- The firm, which generates revenue from performance and a percentage of assets under management is managing close to $1 trillion in client funds.