00;00;05;21 - 00;00;26;01

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.

00;00;26;02 - 00;00;47;11

Unknown

The goal is simple to help you run your business with more confidence and less financial stress. Enjoy the episode. What if I told you your business is pain? Everyone else besides the person who built it? I think a lot of business owners resonate with that because they. You might be right there in that moment where you're like, I'm paying everyone else and their mother.

00;00;47;14 - 00;01;19;05

Unknown

Typically, most businesses run by a broken formula. There's a formula out there where it's sales minus expenses equals profit. Accountants say this. Bookkeepers say this. Even sometimes other owners are telling other owners to live this way. And it sounds logical. You make a sale, you pay everyone else and their mother, and hopefully sometime at the end of the day, at the end of the year, maybe when, you know, like the cows come home, when you can sell the business, when you can sell all your properties, whatever it might be.

00;01;19;06 - 00;01;40;14

Unknown

I want you to be able to pay yourself, but not at the very end. That's where that's a broken formula. That's also a formula for you feeling stuck like you're in your own rat race. I don't want you to live there. That's where a lot of business owners live. And they never get out of that cycle. And then you wake up a decade into your business and you're like, where's all the money?

00;01;40;15 - 00;02;03;08

Unknown

Where did it all go? I don't want you to live there. So what do you do on the flip side? The first thing is we have to get that broken formula out. It's not serving you. It's constantly going to be putting expenses first, and you'll never pay yourself first. There is the profit first formula or the wealth formula where it's sales minus profit equals expenses.

00;02;03;08 - 00;02;23;24

Unknown

You make a sale, you pay yourself first and you make sure you have profitability. And then the expenses are there to grow the business. So you never make sure the business is suffering. And we are now protecting you, the business owner, the exact person of why this business is even there. And a lot of people sometimes feel they don't deserve to get paid.

00;02;23;24 - 00;02;40;08

Unknown

Sometimes they feel like they are. It feels a little bit guilty to take money out of the business. Is this going to hurt the business? What's going to happen? Maybe you take a lot of money out and you don't feel guilt, and then you're wondering, where did all the cash go? So there's definitely extremes to this, but I want to give you that formula.

00;02;40;09 - 00;02;59;15

Unknown

Again it's sales minus profit equals expenses. You have to have all three components of that formula. You have to have sales. You have to make sure that you're actually making money. That's number one. Number two is profit. We have to make sure there's actually profit in the business, because a lot of people put their profit last, not first.

00;02;59;15 - 00;03;17;02

Unknown

And then you still have to have expenses. The expenses are going to always be there to be able to pay others, to be able to grow the business, to pay the marketing expenses. But the difference is that we need to make sure that the profit portion of that formula comes first. So I want to just teach you how do you actually pay yourself first?

00;03;17;02 - 00;03;36;15

Unknown

You might have heard that whether it was rich dad, poor dad telling you, I think Robert Kiyosaki says about a thousand times in his books that you should pay yourself first. Even has examples of him paying himself first before paying some bills and getting some collectors to come after him. Now that's a little extreme. I'd rather you have the cash to do everything, but that's the concept.

00;03;36;16 - 00;03;57;21

Unknown

Maybe you've also read The Richest Man in Babylon. A portion of all you have is yours to keep order. Another book that a lot of entrepreneurs have read, the seven Habits of Highly Effective People. One of the core habits is putting first things first. You run a for profit business. If you're listening to this, even if you don't, you have to make sure that there is margin.

00;03;57;21 - 00;04;14;03

Unknown

What is margin? Margin is safety. That means that you have a buffer of profit, but then also of cash because you need to pay yourself. So that's what I want to teach you about is how do you actually pay yourself? How is it not just words on a page like from Rich dad, Poor Dad or the Seven Habits?

00;04;14;05 - 00;04;32;15

Unknown

How do you actually pay yourself first and now not become that typical business owner that puts their profit last? One of the biggest things that I could tell you, that is probably the simplest thing of all time that you can literally do right now. You can even pause this video wherever you're watching this video, and you can go and do this.

00;04;32;15 - 00;05;02;11

Unknown

So what do you do? I would separate out a separate business checking account and call it owner's comp or owner's compensation. That is literally the pay yourself first bank account, meaning from every sale you do, from every single piece of real estate you sell, or from whatever your business is. When you get income that comes at the door, a portion of it, whatever percentage works for you at that time goes into the owner's comp account.

00;05;02;11 - 00;05;21;27

Unknown

So you make a sale. It's just say you got $10,000 in the door this week from whatever it might have been. I would want you to put a healthy amount into the owner's copy. Can you do 2000? Can you do 1000? Can you do 500? Can you do 5000 in that account? I want to start somewhere that you can do consistently because that is how you pay yourself.

00;05;21;27 - 00;05;47;09

Unknown

First, you're intentional with the dollars and that's one of the first steps of profit. First is actually knowing where all your dollars are going. But how do you pay yourself specifically? You specifically have an account that helps you pay yourself. But I also want to mention that a lot of people, usually, especially business owners, have one big bank account, that black hole bank account, all the money is coming in, all the money is going out, and you're never getting paid.

00;05;47;09 - 00;06;15;13

Unknown

Because you know why? Because you feel guilty about taking that money out. Like I alluded to earlier, I want you to not feel guilty about taking money out because you have an account dedicated to paying yourself. So if you do that and have that account and you can pay yourself consistently, I can also tell you to that once you start to pay yourself and it is consistent that no matter what your business is, you will have some stability when as an entrepreneur, we go on that roller coaster, there's lots of ups and downs.

00;06;15;13 - 00;06;40;00

Unknown

There's lots of times where we're feeling like, is this even worth it? I want you to have the money that comes to you personally that backs that up. One other thing that I want to mention to is, especially if you're an entrepreneur that has a spouse, if you are have a significant other, someone that depends on your money, whether that is a spouse, it could be a child, it could be parents, whoever that is that's reliant on your cash.

00;06;40;01 - 00;07;05;04

Unknown

That's why I want you to have an owner's comp account, because it's you being able to say, this is what I'm going to put in this account. I'm going to strive every month to be able to get this money in there. I want you to take it one step further to not just setting up that account. I want you to find two numbers that are very specific to you, especially since I just referenced maybe a spouse, significant other, maybe a child, maybe a parent, whoever's dependent on you.

00;07;05;04 - 00;07;21;25

Unknown

I want you to find two numbers in your business. And these are not complicated. You do not have to be a math ways. You just have to know your situation. So honestly, the only people that can find these numbers are you two numbers. What do you need and what do you want? Meaning what are those numbers? How do I find those numbers?

00;07;21;25 - 00;07;40;06

Unknown

What do you need? That would be how much on a monthly basis? Do you need to pay yourself so that you as a business owner are not floundering around? Just like, okay, sometimes I take this much, sometimes that much. How much do you need to pay yourself for the lifestyle that you've built? How much do you need in order to not feel like you're in the rat race every single month?

00;07;40;09 - 00;08;00;10

Unknown

Is that 5000, 10,000, 20,000? If you're living in a super expensive area, is that 50,000? I don't care what that need number is, but that's the first number to be able to pay yourself. Then from there, I want you to dream a little of why did you start this business? That's the want number. So if your knee number is 10,000 a month, what would 20,000 do?

00;08;00;11 - 00;08;17;13

Unknown

30,000 a month? Would you be able to take the trip you've always wanted? Would you be able to go out there and give like you've always wanted to give or be able to say, hey, we've got this extra cash, we can go buy that car? Or like we've had some clients do, they go out and they went to a Taylor Swift concert just like the morning she was there at that arena.

00;08;17;13 - 00;08;38;17

Unknown

So I want you to be able to do very cool things with your money. But a lot of us are held back because we never pay ourselves. We might have heard it, like I said, from profit first or from maybe from Rich dad, Poor Dad, or from other different books that we've read. But it never has been solidified by us putting money in our pocket.

00;08;38;17 - 00;08;53;01

Unknown

It's just something that we've always heard. I don't want that for you. I want you to be different. So what do I want you to do? I want you to set up that account number one, the owner's cop account. Start putting money in there from every sale you do and from every single piece of income that you get.

00;08;53;01 - 00;09;11;18

Unknown

But then another thing I'd like you to do is find your need and want number. So that way you can point that money to say. Am I getting what I need? Now? If you're watching this and you haven't made the jump full time is into the entrepreneurial world, I would have some advice for you as well. I would say still set up an owner's cap account and start moving money in there.

00;09;11;18 - 00;09;29;05

Unknown

And can you get several months worth of reserves in that account? And if you do, maybe one day you wake up and say, I have six months in this owner's comp account, maybe I could quit my W2. I want you to have an amount where you say, maybe I would feel comfortable with 6 to 12 months of reserves, then you could walk away.

00;09;29;06 - 00;09;46;28

Unknown

Now if you're a business owner, you're doing lots of deals. Maybe you need 3 to 6 months in there just to whether those storms that you know have come before and will come again. Because if you're full time, whether it's in real estate or any type of business, you know, there's ups and downs. So also I want you to build towards some reserves in that owner's account.

00;09;46;28 - 00;10;04;14

Unknown

So three quick things. If you don't do any of them, just do number one. Set up that owner's comp account. You know, put some money in there. Number two, find the need and want number. And then number three make sure on a consistent basis you're actually taking that money out. You're putting it towards the need and want. You're building it for what you really want.

00;10;04;15 - 00;10;25;20

Unknown

So that's what I would tell you. If you are not paying yourself right now, you're feeling the pain that you are feeling guilty about taking money out. You don't feel like maybe sometimes you even deserve the money. I'm telling you right now, you do. This is tactical advice for you to be able to stop paying everyone in their mother first, and how to actually pay yourself first from all these books that you've read.

00;10;25;24 - 00;10;44;20

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 to schedule a free discovery, call with us to create your path to financial clarity and freedom.