For those of you with children under 15 living in your home, you are probably familiar with MrBeast. For the rest of you, 24-year-old Jimmy Donaldson (“MrBeast”) is considered by many to be the most successful YouTuber in history, with 130 million subscribers as of January 2023. Forbes estimates that Donaldson made $54 million from his various YouTube channels in 2021 alone, and he has parlayed that success into cookies (Feastables), hamburgers (MrBeast Burger), and philanthropy (Team Trees, which has received donations from the likes of Jack Dorsey, Susan Wojcicki and Elon Musk). Late last year, he turned down a valuation of $1 billion for his YouTube channels and related businesses, and entrepreneur Gary Vaynerchuk publicly supported Donaldson’s decision to walk away, stating, “I don’t think $10 billion is enough” for the entire MrBeast empire.
Those of us in the 40-and-over crowd are left scratching our heads and wondering, “How on earth do you build a $10 billion business from posting free videos on YouTube?” Beyond his obsessive attention to detail on how the YouTube platform works (“What lighting produces the most clicks?” “What type of thumbnail pictures produce the most clicks?” “How many cameras and camera cutaways produce the most clicks?”), MrBeast does something that few business owners can bring themselves to do: he reinvests every single dollar he makes back into his content. If, for example, he receives a $100,000 sponsorship, he’ll create a “How I gave away $100,000 to an unsuspecting fan” video, which details an entertaining way that money passes from his pocket into the pocket of a fan, for no other goal than to garner the most clicks. Business Insider recently pegged his monthly spend at $8 million to produce content and promote his various businesses. On multiple podcasts, Donaldson has admitted to living a very humble lifestyle, not needing much cash flow from the business to support his “comfortable” living.
The decision to reinvest in the business vs. strip money from the enterprise to support the owners’ lifestyle can be a tricky one: one mindset is to maximize the terminal value of the business (hoping for a hefty multiple on the firm’s retained profits), the other is to maximize cash flow and distributions to the owners. Neither is wrong, but it will wreak havoc on the business if some owners are looking to maximize retained profits and others want to strip the cash flow. We have this discussion often with breakaway advisors who are looking to set up their first company with co-workers they have worked alongside for many years as W2 employees. “We’ve known each other forever,” they’ll tell us. “We’ll be great business partners!” When we ask their respective opinions on “terminal value” vs. “cash flow,” often we get differing answers from the soon-to-be business partners. It’s akin to one spouse saying, “I want 6 kids!” and the other saying, “What? I don’t want any!” the night before the wedding. Unless that is sorted out quickly, it is going to make for a rough partnership.
There are countless business coaches who advise their clients to “Start with the end in mind,” but few business owners (especially RIA owners who tend to define their strategic vision as nothing more than, “We want more…”) actually take the time to define the vision of the firm. For MrBeast and his partners, they have chosen to focus on nothing but the number of clicks per video, and all their energy and attention goes toward that narrow goal. You can see the level of success they’ve achieved, even without a focus on business growth. On the other hand, businesses with multiple definitions of “growth” pull themselves in different directions, getting stuck and achieving little or none of their goals.
On the Joe Rogan podcast, MrBeast stated, “What do I need money for? Living your life chasing a nicer and nicer car, or a bigger and bigger box to live in is kind of a dumb way to go about life…” For MrBeast and his partners, “growth” is defined in clicks, and they have maximized their business for that (and have achieved enormous success!); another business may define “growth” as cash flow and should maximize all activities that lead to cash distributions for the business. Many RIA owners may disagree with MrBeast’s philosophy about money, but there is still an important business lesson to learn: your definition of success must be defined and agreed upon before you set out on a business journey.
Matt Sonnen is founder and CEO of PFI Advisors, as well as the creator of the digital consulting platform, The COO Society, which educates RIA owners and operations professionals how to build more impactful and profitable enterprises. He is also the host of the popular COO Roundtable podcast. Follow him on Twitter at @mattsonnen_pfi