00;00;05;19 - 00;00;25;29

Unknown

You're listening to the Profit First for Real Estate Investors podcast. This show is all about helping real estate investors and entrepreneurs bring clarity and structure to the financial side of their business. In these sole episodes, we focus on practical financial strategies that real estate investors and business owners can actually implement, whether it's profit, cash flow forecasting or mindset.

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Unknown

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. If you don't pay yourself a real salary, you don't own a business. You own a job. So many people that I talk to, they do not have anything that they're taking from their business. It's astounding to me. Or they're not taking what they really need from the business.

00;00;48;26 - 00;01;05;16

Unknown

And sometimes it's like, hey, well, I'm just getting up and running or I'm just getting started. Sometimes it's people that have been in an entrepreneur for years and years are a business owner, and they're just like, I don't know, I don't know how to pay myself. I don't know how to do that. I've read Rich and Poor Dad, and I've read all these books that tell me how to pay my.

00;01;05;20 - 00;01;26;16

Unknown

Or would that I should be paying myself, but I don't know how to. I don't know those steps and I read a book years ago that changed my life. And now we implement an entire system around this to make sure you are paying yourself first. Is the book Profits First? Because I was in a business where we were doing lots of deals, lots of transactions.

00;01;26;23 - 00;01;48;08

Unknown

We were doing millions of dollars per year, but we were spending more than we were making. And something had to change. And then I started working with business owners, not just as an employee, but then as a business owner, and saw other business owners where they were doing a 10th, maybe even a, you know, a fraction of what we were doing when I was in that company ten years ago.

00;01;48;11 - 00;02;10;02

Unknown

And then they still weren't paying themselves, and they didn't have the money to be able to pay themselves. They didn't have a good system. They may have had the money, but they didn't know how to pay themselves or where they could pay themselves from, or how to even understand that psychologically. Like it's okay to pay yourself and you're not a bad business owner if you pay yourself and that type of thing.

00;02;10;03 - 00;02;29;02

Unknown

So that's where when I read that book Profit First, it really opened my eyes because it took the concepts like rich dad, poor dad where it says, pay yourself first. The richest man in Babylon, a portion of all you have is yours to keep that other book out there. The Seven Habits of Highly Effective People, Stephen Covey, where it's like one of the habits is first things first.

00;02;29;05 - 00;02;50;20

Unknown

Well, in a business it's crazy, right? A for profit business needs to be profitable. And how many business owners put a profit last in their business and usually end up putting themselves last? And when it comes to their pay and when it comes to the business and all of that, where there's books out there like Simon Sinek, I think wrote a book called A Leader's Eat Last, which is great.

00;02;50;20 - 00;03;08;20

Unknown

It's about servant leadership. It's how you have the emotional paycheck for the team and how you show up for that team. But when it comes to paying yourself as a business owner, you should not be paid last. You should be paid first. You know why? Just because if someone was doing your job in that seat, they would be paid.

00;03;08;20 - 00;03;27;07

Unknown

You would expect to pay them and they would expect to do to be paid. I want you to treat yourself like an employee of the business because you are. You're the best employee. You're the one giving up the time, the energy, the money, everything to be able to invest all you are into this business. I want you to get rewarded for that.

00;03;27;13 - 00;03;45;17

Unknown

So what does it really mean to pay yourself? That means that from every deal that you do, all the sales that you have in your business, that you actually have a salary that you draw, or that you take something from the business on a consistent basis, I get it. If you're just starting out, you might not be able to take much.

00;03;45;21 - 00;04;03;09

Unknown

You might not be doing lots of deals, you might might be doing lots of sales. But I want you to start somewhere. Profit first gives a good system that doesn't just tell you to. You should pay yourself. It tells you how to pay yourself. How do you do that? You set up some bank accounts. So what does that mean?

00;04;03;11 - 00;04;26;15

Unknown

Dave Ramsey's made it super popular in the personal finance space, where you set up the envelopes in your personal life, and then you pay your, you know, like you get paid, and then you give all the money into envelopes like rent, utilities, mortgage. It could be groceries and gas and all that stuff. Then every dollar has a name in your business.

00;04;26;15 - 00;04;42;26

Unknown

I want you to set up business checking accounts and name every dollar, because the principle that I want to teach you is that it's way more important as a business owner, to know where every dollar is going. And one of those accounts you'll get and guess what? It's literally called owner's pay. So I'm going to focus on that.

00;04;42;29 - 00;05;05;19

Unknown

I might go over the different accounts in a different video. But even if you are out there and you just listen to this and instead of setting up all these bank accounts, if you just listen to this video and you set up one account, you call it the owner's compensation account, and you actually start from every sale that you make a portion of that sale goes into the owner's comp account.

00;05;05;26 - 00;05;24;29

Unknown

You'll start the habit of a wealthy business owner. That's a good money habit. Lots of people are waiting for money events. They're waiting for one day in the future for a big sale to happen, and all their financial troubles are taken care of. Or they have such consistent deal flow and sales that they don't have to worry about the money.

00;05;25;01 - 00;05;45;05

Unknown

But if you have consistent deal flow, if you have the big deal that happens, but you don't have a system for your cash, you will always find yourself back in the same place, which is you make money but you feel broke. I want you to have that one bank account that is dedicated to you, the owner. Call it owner's compensation.

00;05;45;05 - 00;06;07;19

Unknown

Call it an owner's copper owner's pay account. That way, from every deal that you do, every sale that you make, a portion of it goes into that account and you say, how much should I put David? What I'm going to tell you, it depends on what you can do. If you're already into your business and you let's say you're making 500,000 plus in revenue, but you've never paid yourself before, or you paid yourself just a pittance, like hardly anything.

00;06;07;25 - 00;06;36;16

Unknown

Then I would set up that account and I would do what you can do. Can you do 1%? Can you do 5%, 10% into that account to pay yourself? Start with a percentage that you can do consistently in the business from every sale that you make. Now let's just say you're under 500,000. You're a newer business owner. How much would you pay yourself if you're a newer business owner and you say, well, maybe you have a W-2 still, maybe you still work a job, but you're in this other business part time as a side hustle and you want to get to full time.

00;06;36;23 - 00;06;53;21

Unknown

You say, well, I don't really have to pay myself because I have a job and it's providing all my needs. I would argue that just because you have a job does not mean that one day you won't want your business to overtake the money that you're making in your job. Currently. So if you want that to happen, you have to start with good habits.

00;06;53;21 - 00;07;09;28

Unknown

Start with that owner's comp account, set it up. A portion of all that you make needs to go into that account. So see a portion of all you have is yours to keep. Here's the practical steps. You set it up. You set up that owner's comp account. And from everything you do, you put inside there. And if it is 1%, that's fine.

00;07;10;00 - 00;07;29;04

Unknown

I want you to get into the habit. Now let's just say you're a newer business owner and you want to be able to break away from your W-2. I would put as much as humanly possible inside that owner's comp account. Can you do 20, 30, 40, 50, maybe 60, 70% of what you make into the owner's comp bucket?

00;07;29;07 - 00;07;45;13

Unknown

Because if you're aggressively trying to leave your W-2, I want you to have several months worth, if not six months or 12 months before you take that leap of faith. Unless you're just going out there and you say, I love the risk, I'm going to go out there, I'm going. I would still have at least three months of reserves in the owner's comp account.

00;07;45;16 - 00;08;00;08

Unknown

But a general rule of thumb for me that I would want for you is that it? Can you have 6 to 12 months in that owner's comp account? So that way if you jump ship from your W-2, then you say, at least I could pay myself for half a year to a year from what I've made in the business.

00;08;00;08 - 00;08;18;01

Unknown

And it's in that owner's comp account. And even if it doesn't get off the ground, maybe I hit a fluke and I had several good deals up front, but then I don't get anything for a while. That way you could still pay yourself consistently until you get to consistent deal flow or consistent sales. But this is why so many people don't pay themselves because they don't have a system.

00;08;18;04 - 00;08;36;26

Unknown

They don't have a system to pay themselves. They just heard those words before, like pay yourself first or make sure that you have a, you know, something to be able to pay yourself. Well, here's the system here. I'm giving you the bottom line. I'm giving you the the very practical thing you could do right from this, right from this conversation we're having right now from this recording.

00;08;36;28 - 00;08;54;19

Unknown

Go out, set up one account, call it owner's comp. A portion of everything you make goes into that account. If you wanted to quit your W-2, try to save 6 or 12 months in there. If you're already out of your W-2 and your full time like, put as much as you can in the owner's comp. But while you're still growing the business, but start to pay yourself consistently.

00;08;54;21 - 00;09;13;02

Unknown

If you're always struggling with, well, I don't want to take money out because I want to reinvest in everything. If you're not getting what you want from the business, I promise living off of less on the business side. But paying yourself will also free up mental capacity to make better decisions for yourself and for the business. Just try it out.

00;09;13;04 - 00;09;30;08

Unknown

If you don't believe me, why don't you see if the proof is in the pudding? I will say I've spoken on this a lot. This is one of my two topics of conversation that comes up a lot, because I talk with a lot of people that have not paid themselves or paid themselves consistently. So there was a guy at an event that I spoke to a couple of years ago.

00;09;30;10 - 00;09;47;07

Unknown

He did that. He went out and set up one account, and then he saw me add another event. A year later, he came up to me and said, I set up one account and I started putting money away from every sale that I did. He's like, I've never had business reserves before, let alone pay myself what I need.

00;09;47;07 - 00;10;04;03

Unknown

He's like, I have six months of reserves for my entire business. Inside of that account. He's like, it just took a little bit of pushing and you setting up, you know, you tell me to set up one account. He's like, I could do one account. That was very simple, and I could do just a portion of everything that I make goes into that account.

00;10;04;05 - 00;10;24;28

Unknown

I'm not telling you anything. That's rocket science. I'm just telling you these are disciplines. These are principles. These are habits that will serve you as a business owner and at the end of the day, give you what you really want, which is a business that's getting you to financial freedom, getting you to pay yourself, getting you to actually sleep at night and say, hey, I can actually pay myself from the business.

00;10;25;00 - 00;10;43;13

Unknown

Thanks for spending time with me today. If this episode gave you clarity or a new perspective, be sure to like, subscribe, and comment below if you're ready to apply. What we talked about today with real guidance and accountability, visit profit Recom to schedule a free discovery, call with us to create your path to financial clarity and freedom.