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8 Essentials for Building a Billion Dollar Company What makes "unicorns" so alluring is the people behind them.

By R.L. Adams Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

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Imagine this scenario for a moment. You're six-hundred thousand dollars in debt. Your credit line is tapped out. Creditors are hounding you for payments. You're late paying back everything. To top it all off, the bank seizes your house and sells it off as a short sale. Just to add insult to injury, your spouse divorces you.

Okay, so maybe this situation isn't so unique. But, what's unique is the ability to turn it around and quite literally build a billion-dollar business. That's the story of Howard Panes. And it's one of the most inspiring modern-day tales of rags-to-riches that possibly could exist.

I've gotten to know Panes after a string of interviews. I've spoken to him at length about his past ordeals. What he did was little short of miraculous. Panes, for all intents and purposes, is the godfather of the disposable electronic cigarette. Yes, many of you know it well. His company, Logic, is a proverbial behemoth in the marketplace.

After a buyout by Japan Tobacco, Panes was left liquid. Extremely liquid. But, the amount of money he hauled in was less important than what he learned along the way. My question? How do you build a billion dollar company? What are the necessary ingredients? And, how do you go about doing it when your back is quite literally against the wall?

Easy? Nope. Not at all. It takes focus. Pure unadulterated focus. Is it well worth it? Definitely. But, most people have witnessed the meteoric rise in other so-called unicorns. They've seen how they've gone from a company with little to no value, to the hottest thing since sliced bread. The question then becomes, how do you do it?

I asked Panes this very question. How do you build a billion-dollar company? That's the real question, isn't it? That's the question that entrepreneurs are asking themselves around the world. Some think they need to be well-funded. Others think they need the best employees. To others, it's something else. So what does it really take at the end of the day?

At the expense of sounding rhetorical, I really wanted to find out how this was done from people who had actually achieved it. Rather than pose the question to the world, I went to a person who had achieved this very feat.

Related: Meet the Man Who Sold 4 Companies for Over a Billion Dollars

The Path to Billion-Dollar Business

Okay. So you want to build a billion-dollar business, right? Well, who doesn't? But, how many people can pull it off? Not many. That's for sure. But, what makes these so-called unicorns so incredibly alluring isn't the actual company itself. It's the people behind them.

While many of us have heard of companies that have quickly reached astronomical valuations, others haven't heard of the slew of other companies that don't achieve household-name status. There are plenty. So what does it take to reach the path to a billion?

Panes says that before you figure out the "how" you have to figure out the "why"? Why do you even want to build a billion dollar company? If it's only for the money, you're wasting your time. Any goal worth achieving has to have a strong enough reason why. And money can't be the driving force.

Sounds strange right? You want to build a billion dollar business but you can't really have money as the driving force. It just doesn't work. Panes says that there has to be something else that's deeper, that's driving you. There needs to be a burning cause. Something that you hold near and dear to your heart.

That's first and foremost. Before anything else. Find that one thing. For Panes, it was to secure the future of his children. That's what kept him up at night. For you, it might be to help your family or to donate to a worthy cause or something else for that matter. As long as it's a deep enough reason. Something that you'll quite literally do anything for.

Once you come up with your "why", you have to navigate the sea of perilous waters to build your business. It's not easy. While others try to do large raises of capital, Panes never secured funding. In fact, all he did was borrow $10,000 from his dad to get started. He joined up with a partner, and off they went to the races.

But, when asked, point blank, what it actually took to get there, Panes identified eight very specific ingredients.

1. Real value in your offer

The first ingredient for building a billion dollar business is that there needs to be real value in your offer. Whatever product or service or information you're peddling, it needs to help others. Without that, you're wasting your time. For Panes, it was a product that removed all the harmful effects of cigarettes while still delivering nicotine. Liquid nicotine, to be more precise.

He did it better than anyone else in the marketplace. He air-shipped instead of sea-shipped his product, making the nicotine fresher on delivery. He added longer-lasting batteries than his competitors. And so on and so forth. He focused on delivering real value, not on trying to cut corners or skimp.

Related: He Went From Dead Broke to Millionaire Because He Just Wouldn't Stop Trying

2. Proper distribution channel

The second ingredient is to tap into a proper distribution channel. Without the right distribution, you can't get the saturation you need to create a billion dollar empire. Uber did this by launching an app in the the largest app marketplace. Others have done it by tapping other big distribution networks.

The right distribution network will give you the scale you need. Without it, you'll be left struggling. Especially if you don't have the proper budget to run ads and you're entirely bootstrapping your company. Unless you're highly skilled at online marketing and know specifically how to push your product out there, you need to tap into an already-established network to reach the most amount of people quickly and effectively.

3. Build a solid team

There's no "i" in team. That much is certain. But, Panes tells me that one of the most crucial components of building a billion dollar business it to focus on the quality of your team. Teamwork makes the dream work. It's those on-the-ground customer-facing employees who will resonate with your company's core mission. They can either propel you forward or hold you back.

How you treat your team will reflect on how they treat your customers. So treat them right. Take care of them. Give them perks where you can. Don't be stingy if you're looking to seriously scale your business. It simply doesn't work if you have unhappy employees.

Related: 11 Ways Successful People Deal With People They Don't Like

4. Swim in a blue ocean

I first heard this concept from Russell Brunson. You want to swim in a blue ocean. Not in a red ocean. Red oceans are filled with competitors that are vying for the consumer's attention. Blue oceans are wide open. When Uber first hit the app store, it was a blue ocean. Now, it's a red ocean. It's hard for companies to compete in a red ocean.

Sometimes, it's impossible to swim in a blue ocean. You're targeting first adopters. But, if you can identify blue oceans and adapt, you can grow your business quickly. Billion dollar companies like Panes' Logic, were early to market. They gained popularity quickly because there was little in the way of competition.

5. Optimize your conversions

You can't scale without a converting offer. It doesn't matter if that's a physical product or a digital service or app-based business. You need to be in the black. Sometimes it isn't possible early on, but it is crucial. Calculate your costs and your income carefully and optimize your conversion in order to scale.

Today, this is simple to track with Facebook ads or using Google's ad network. You can use re-targeting pixels and a slew of interests and other metrics. Ensure your cost-per acquisition (CPA) is as low as possible while still ensuring you're getting quality leads.

Related: 11 Habits of Truly Happy People

6. Build an effective sales funnel

Whether you're in the ecommerce business or you're selling information products, you need an effective sales funnel. Sales funnels are highly crafted automated selling machines. They help you scale quickly. You can bring your products or services or digital information to market quickly and effectively.

If you study anything about sales online, you'll know that most transactions don't occur on first interaction. They take time. They occur slowly as you build up a relationship with the subscriber. With the right sales funnel, you can do the work once and allow it to repeatedly sell on autopilot for you.

7. Watch your expenses like a hawk

You have to be careful of your bottom line. It's really easy to spend and much harder to watch those expenses like a hawk. Panes was critical of every last cent that he spent in his business and would always work to get a deal. He says that if you don't watch even the smallest expenses, you could eventually end up being taken for a ride.

It's hard to focus on the small stuff at times. But, it's crucial. If your money is being spent frivolously, there's simply no way that you'll be able to scale quickly enough to build a billion-dollar company.

Related: Habits of the World's Wealthiest People (Infographic)

8. Focus on acquisitions to speed up growth

Acquisitions are key. That's one way smaller companies can quickly grow. They gobble up competitors in other markets. In order to do that, you need the proper funding. That much is clear. But, it's a strategy that small and big companies use to reach market saturation quickly.

Identify competitors that you could potentially acquire while you scale your business out. They don't have to be massive companies. But, if you play your cards right, they could help you become a behemoth and quickly build out your dreams of having a billion dollar business.

R.L. Adams

Entrepreneur, software engineer, author, blogger and founder of

Robert Adams is a writer, blogger, serial entrepreneur, software engineer and best-selling author of dozens of technology, SEO, online marketing and self-development books, audiobooks and courses.

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