I've never built a business that passed this test.

Five commandments. I broke (at least) three of them… repeatedly.

If you're an old geezer like me, you might remember a company called MoviePass.

For everybody else — here's the deal they offered:

$9.95 a month. One movie a day. In an actual theater. As many as you wanted.

Which is roughly the price of… one movie ticket.

Yeah. It was exactly as good as it sounds.

But that was the problem.

By 2018 MoviePass was paying $2.41 to deliver every $1.00 it collected.

Their revenue that quarter was $74 million.
And cost of goods delivered? $178 million.

And here's the part that still makes my eye twitch — they had three million customers!

Three million people, all happily paying… and every single one of them was making the problem worse.

Everybody laughed when it went down. "How did nobody catch that?"

The test that would have caught it in about ninety seconds has been sitting in a book on my shelf for years…

… and I failed it too.

Four out of four times.

(I intend to pass this time. More on that in a minute.)

Let me back up.

MJ DeMarco wrote The Millionaire Fastlane.

He's coached me over the years, and I owe the man more than I've ever told him.

His framework is called CENTS.

Five business commandments.

Break one and your business has a ceiling.

Break three and you've built yourself a very expensive job with a very nice title.

Control · Entry · Need · Time · Scalability

I've built four businesses: a karate school, professional services business, marketing agency, and a consulting practice.

Not one of them passed all five of these rules.

And I'm not going to sit here and lecture you about commandments I've done well…

I'm going to show you five companies that got obliterated for breaking them… and five that didn't…

… and then I'll tell you exactly which ones I broke, and what it cost me.

CONTROL: Do you own the ground you're standing on?

Your platform. Your customers. Your pricing.

If somebody else can change the rules on a Tuesday and end your business by Friday… you don't have control. You have a lease.

Who doesn't have Control?
Zynga

Do you remember FarmVille?

In one quarter of 2011, 93% of Zynga's revenue came through Facebook.

At least that's what their own SEC filing said.

Then Facebook did what sleazy landlords do.

They re-weighted their algorithm so the news feed would favor new games over existing ones.

And in November 2012 they ended Zynga's special partnership… dropping them to the same terms as every other developer on the platform.

That's it. That's the whole thing. Nobody got sued or anything. No drama.

Facebook just… changed its mind.

Revenue fell 32% in a year. Daily users fell 52%. And on one day in June 2013, 520 people lost their jobs (18% of the company).

Zynga didn't lose its platform.

It lost its special deal… and became ordinary.

Side note: there’s a LOT of people who have built their entire business infrastructure on one platform… Facebook. Instagram. LinkedIn. TikTok.

It’s not IF things will change, it’s WHEN.

Who does have control?
Netflix

September 2011. Starz walks away from renewal negotiations and takes about 8% of Netflix's US viewing with them.

Reed Hastings had said publicly he'd consider paying $300 million a year to keep that content (roughly ten times the original fee).

I mean, think about that. A supplier that could demand 10x the price… and still walk away from the table.

So Netflix stopped renting.

The same shareholder letter that talks about losing Starz also announces their plan to start making their own shows.

Netflix's market cap has gone from $3.6 billion to about $334 billion. 92x.

What’s Control mean for you?

You don't need a billion-dollar platform to fail this one.

If most of your leads come from one ad account… one referral partner… one algorithm… one big client…

You're Zynga. You just haven't had your “Tuesday” yet.

ENTRY: Can any idiot with a laptop do what you do?

If the door is wide open, everyone walks through it.

And then your profits get pounded straight into the ground.

Who doesn't have Entry?
Casper

Bed in a box. Great idea.

(I actually bought their competitor’s offer “Nektar”… it was like the same damn thing for $600 less… the exact moral of this story)

Such a great idea that by 2019 there were roughly 175 bed-in-a-box companies.

Casper's story:

$1.1 billion private valuation → $535 million on its first day as a public company → taken private for about $286 million → and last year it got sold to a foam supplier.

Never turned a profit. Not one year.

Now here's the part everyone gets wrong, and I want you to actually hear this:

Casper's margins didn't collapse. They actually went UP (say whaaaat?)

44% to 51%.

The margin was fine. The margin was never the problem.

The problem is that when 175 companies sell the same rectangle, nobody can find a customer for free.

You have to buy every single one.

About 72 cents of every gross-profit dollar Casper made went straight back out the door to acquire the next customer.

Casper had a 51% gross margin. It just wasn't theirs.

It belonged to Facebook ads and Google ads.

And before you say "well, they should have differentiated" — well, Purple did.

They had an actual patent and an actual differentiated product!

… but Purple lost $97.9 million in 2024. More than Casper ever lost in a single year.

That category ate them both.

Who does have Entry?
ASML

Never heard of them? Don’t worry. Only super-nerdy day-trading guys, and AI dorks like me, have.

But I guess that's usually where the money is, amiright?

ASML makes the machines that print the circuitry onto computer chips — every advanced chip on earth, the one in your phone, the one in your car, the ones behind every AI slop you've seen this year, were all printed by their machines.

They have 100% of the EUV lithography market.

Not 80. Not 95.

All of it.

And it's not because nobody tried. Canon quit trying in 2009. Nikon quit in 2011.

Two of the best precision optics companies on the planet looked at what it would cost to get in… and just kinda walked away.

It took 27 years between the first funding and a machine you could actually sell.

Result?

$38.8 billion in backlog.

About $242 million per machine. Customers get in line years early because there is nowhere else to go.

And here's my favorite comparison in this whole newsletter:

Casper's gross margin: 51.1%
ASML's gross margin: 52.8%

Basically the same company, as far as the top line is concerned.

Buuuutt…

Casper's net margin: −18%
ASML's net margin: +29%

Nearly identical gross margins and a 47-point swing in what they get to keep.

The entire difference is what it costs to get somebody to buy… and ASML's customers are begging for their products (me included).

Here’s what Entry means for you

"Anyone can do what I do, I'm just better at it" is not a moat.

That's a sentence I said out loud, about myself, for about fifteen years.

NEED: Does the market actually want this… or do YOU want it?

When I bring this one up… people tend to cry. We’re all creatives at heart. We want to build cool shit and sell it.

But there’s only 2 ways to build a business… make something (you think is) cool… and convince people to buy it.

OR

Find a group of people, ask them what they want to buy… and give it to them.

The latter is significantly easier. Like 100x easier… maybe a million times easier!

Who doesn't have Need?
Quibi

You've probably never heard of Quibi. Six months isn't long enough to make an impression.

It was yet another streaming service — short episodes, ten minutes or less with big Hollywood names… and it only played on your phone.

The name was short for "quick bites."

They raised $1.75 billion(!)

They launched on April 6, 2020.

And were dead by October 21, 2020.

Six whole months.

They wanted 7 million subscribers in year one. They got about 500,000.

In May, five weeks after their launch, the CEO, Katzenberg, said — and I promise I'm quoting this correctly —

"I attribute everything that has gone wrong to coronavirus. Everything."

Five months later, he sent out another public letter that said:

"The idea itself wasn't strong enough to justify a standalone streaming service."

They built the thing they wanted to build. Nobody asked for it!

And then there's “Juicero”

$120 million bucks.
For a $699 juice press.

They sent one to a group of Bloomberg reporters. And they did the single most devastating thing a journalist has ever done to a startup:

They squeezed the bag of fruit with their own hands.

Hands: 7.5 ounces in 90 seconds.
The $699 machine: 8 ounces in two minutes.

Hands won.

The company was dead 17 months later.

So who does have Need?
Dollar Shave Club

Here's what I love about this one — the proof isn't Dollar Shave Club's numbers.

It's Gillette's.

A hundred-year-old company sitting on 70% market share cut its prices by up to 20%.

Nobody does that for a fad. Nobody. That is probably the single most expensive, most humiliating move a market leader can make, and they made it… because the pain was real and somebody finally solved it.

Gillette went from 70% market share down to 54%.

Dollar Shave Club made a $4,500 video, took 12,000 orders in 48 hours, and eventually sold for a billion dollars.

What does need mean for you?

You’ve gotta stop asking "is this a good idea?"

Ask “what do these people want?”

“What can’t they get that they need?”

Ask "which company is already bleeding customers and are they even trying to stop it?"

I wrote about this a couple weeks back — go find a group of people, ask them what they want, give it to them.

I did it the other way for two decades… don’t make my same mistakes.

TIME: Does the money stop when you do?

This is the one that has kept me chained to my desk.

Who doesn't have time?
(I mean, besides me…)
Groupon!

Groupon is a gift to anybody teaching this, because they actually disclosed their salesperson headcount every quarter in their SEC filings.

(Almost nobody does that)

Groupon had 5,735 salespeople.

Every deal you ever saw on that site got there because one of those people picked up a phone and talked a restaurant owner into it.

One conversation. One deal.

So how do you get more deals next month?

There's exactly one answer. Hire more people to have more conversations.

It’s kinda like a barbershop.

A barber can cut so many heads in a day, and then the day is over.

Want to double the shop?

Rent another chair and hire another barber.

Now, of course, there's nothing wrong with a barbershop — but the money can never grow faster than you can hire and pay for hands.

Groupon built its “barbershop” with 11,000 chairs.

Then it started shrinking.

Over the next ten years, they let about 10,000 people go… and the money walked out the door with them.

Almost perfectly.

They lost 82% of their people… and they lost 85% of their revenue.

The people weren't running the machine.

The people were the machine!

Who does have Time?
VeriSign

VeriSign runs the .com registry.

Every .com domain name on earth pays them a fee, every year (you, me, everyone)

932 employees. $1.56 billion in revenue. 169 million domain names.

That's $1.67 million of revenue per employee — six times Groupon's best year ever.

Nobody there has to make a phone call for that money to arrive. It arrives on Sundays. It arrives at 3am. It arrived while you were reading this sentence.

(Actually, I just had 2 domains renew today!)

Or if you want the flashy version — when Facebook bought WhatsApp, their lead investor pointed out that WhatsApp had 32 engineers supporting 450 million users.

That’s FOURTEEN MILLION users per engineer. Freaking wild.

Groupon: 4,551 customers per employee.

Now, what’s Time mean for you?

If you got hit by a bus tomorrow, how long does the money keep coming?

If the answer is "about a week"… you don't own a business.

You have a very well-paid job.

(And yes, I'm well aware I wrote almost exactly that sentence two weeks ago about myself. It stung then too.)

Last one…

SCALABILITY: When you get bigger… does it get better, or does it get worse?

Who doesn't have it? MoviePass

Yup. We’re back where we started.

Here's the part I didn't tell you at the top.

Every time you used your MoviePass card, MoviePass went out and bought you a real movie ticket. At full price. Around fifteen bucks.

And you were paying $9.95 a month.

Not per movie. Per month.

So if you saw two movies, they lost twenty dollars on you. If you saw ten, they lost a hundred and forty.

Their best customers were their most expensive customers.

Now. When they dropped the price to $9.95, they went from 20,000 subscribers to three million in eleven months.

That's 150x. Every growth chart in that building looked like a rocketship.

Every single one of those people, though, was a bill.

By 2018 they were spending $2.41 for every $1.00 they took in.

The faster they grew, the faster they died!

But who does have Scalability, though?
Shopify

Shopify built one piece of software that lets anybody run an online store.

Then they sold it a few million times.

Here's the whole idea: when store number two million signs up tomorrow, Shopify doesn't have to build anything.

Nobody buys a ticket.

The thing already exists.

It was built once, years ago, and it just… keeps getting sold.

Watch what that does to a business.

In 2023, Shopify lost $1.4 billion running the company…

Two years later they made $1.5 billion.

Revenue nearly doubled. And they did it with fewer people — about 11,600 employees down to 7,600.

Bigger made it better.

What’s Scale mean for you?

Take your next 100 customers. Does serving them cost more per head than the last 100… or less?

If it costs more, you don't have a growth problem. You have a math problem — and more marketing just gets you there faster.

So how did I do with all of this?

Stuck with me for this long?

I’ll evaluate my businesses. Especially those latest consulting gigs I’ve done.

Control?

I’d say… “passed”

Every single business I ever built, I owned outright.

You could argue the karate school was a franchise but we just screamed at each other every day and I ended up nodding, smiling, and then doing what I wanted anyways…

Maybe we chalk that up to me being a 21-year-old-hot-headed-know-it-all-asshole.

Maybe I have some apologies to make? …or maybe not.

My name, my customers, my pricing. Never once built on rented ground.

I'll take the win… (it's probably the only one I've got).

Entry

Fail.

"Marketing consultant."

You know how many of those there are? I competed on being better, which works right up until you get tired… and boy am I tired.

Need

Mostly passed.

I've always sold things people were already desperate for. Or at least positioned it in a way that gave them what they wanted.

(Ya gotta give me that one)

Time

Failed catastrophically.

I was always the product.

Every dollar required my hands on a keyboard, on a stage, on a call, performing — the whole dancing monkey thing.

Scalability

Failed.

Nothing systemized.

No two clients alike.

Every new client was a brand new build, from scratch, by me.

So that’s three out of five, broken. MJ would be pointing and laughing at me if he ever read this.

On paper I was making more money than I'd ever made in my life… and I was checking my bank account before I bought lunch.

That's not a marketing problem. That’s not a sales problem. I'm a marketer. I’m a sales guy. I could always get more clients.

It’s a model problem.

I’ve finally admitted that I can’t out-hustle a broken model. I tried for two decades.

Now here's your homework, and it takes about four minutes:

Run your own business through all five.

Be honest. Nobody's watching.

Control. Who could end you on a Tuesday?
(Think Google slap)

Entry. Could a smart 24-year-old with AI copy you in a weekend?

Need. Are they already looking for this, or are you convincing them?

Time. You’re on a beach in Mexico. How long does the money last?

Scalability. Does customer 500 cost more to serve than customer 5? Can you handle 10 customers as easily as 100?

Hit reply and tell me your score.

Seriously — I’m reading every one.

And if you want, I'll tell you which one I’d fix first.

Scale & Success is the first business I've ever built that's trying to pass all five at once.

I have no idea if I'll pull it off.

I guess that's sort of the whole point of watching.

See you next week,
Steve

P.S. Everything I'll share is free. The only thing I ask: if one of these updates ever helps you, send it to one person who needs to hear "it's possible" today. That's how we grow this.