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I'm a big believer in continuing to take dividends out of a business as it continues to grow out

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and that's because you want to decrease your downside risk. Welcome to the game where we talk about

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how to get more customers, how to make more progress, how to keep them longer, and the many

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failures and lessons we have learned along the way. I hope you enjoy and subscribe.

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If I'm an entrepreneur and I'm growing my business month overall for month, when should I

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one start taking money out? And two, when should I start actively investing? These are some of the

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questions I get most frequently with the entrepreneurs that I speak with who, depending on where their

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app they might have, you know, $500,000, $1 million, $2 million in the bank and they're like,

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I'm not really sure what I should do. And so what I wanted to do is walk you through the thought

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process that I have or had around investing to give you a little bit of some frameworks to think

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through that help me make this decision making process lot easier. So first off, I'm a big believer

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in continuing to take dividends out of a business as it continues to grow and that's because you

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want to decrease your down type risk, right? Because for some reason and the statistics are very

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likely that the business will not succeed in the long term, right? You know, 90, whatever it is,

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90% or 95% of businesses fell within five years. And so it's much better in my opinion to consistently

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take money out of the business as you're growing it because there's a very high likelihood that it will

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not stick around. A, and B, many entrepreneurs have this idea that they're going to sell their

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business for some magical number sometime in the future when in reality only one percent of

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businesses ever sell. And so if that is the case, again, while I would rather not stack the chips

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under 91 to 1 bet, it does happen, but the likelihood is low. And so I would like to take chips off

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the table on a regular basis. So that is first part, which is making sure that we're taking money out.

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But the second question is, okay, well now that I have this money, this 500, this million, this

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whatever, what should I do with it, right? And so one of the big things is I just like to think

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about this through the lens of opportunity cost, which is if I'm currently making, let's say,

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500,000 a year, right, from my business in, in, in Nephri Casualitz owner earnings,

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where I get to take out of the business after re-investing in, in the growth and competitive

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advantage that we need to continue to maintain to, to grow, right? So if I 500,000 of,

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Nephri Casualitz coming to me and let's say I've got, I don't know, a million dollars saved up,

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if I were to, if I were to passively invest that, I should get about 10% issue a year, right?

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That's just going to be investing through indexes like the S&P 500, etc. Right? If I'm doing that,

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then the advantage of actively investing might be the marginal difference, it might be an extra

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5 or 10%. So that'd be a 50 to 200% increase because 10 to 15% is a 50% increase, right?

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But if I look at it in terms of real terms, just purely on how much my net worth is going to increase,

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which is the lens that we have to look at this through, which is the opportunity cost,

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if I were to spend half of my time thinking about actively investing because it will take up half

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your mind space, I promise you, because I've done this mistake before, I made this mistake before,

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then what happens is your active income will fall at a disproportionate rate compared to

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what your money is making you. So let me walk you through a numbers example. So let's say

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you've got that million dollars and you can get 10% a year, which is 100 grand, 100% passable,

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right? But the additional 50% or 100,000 a year, 50 to 100,000 a year, which would be 5 to 10%

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of that million, right? You could get through actively investing. Well, if you're currently making

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500,000 a year from your business, do you think it would be reasonable to take half or 25% of your time

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to go chase that when you could probably get your income from 500 to 750,000 in the next year,

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500 to a million? And so for me, that was always the opportunity cost of actively investing,

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which until my wealth became so large that I felt like it was the opportunity cost of the money

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that I should be making by paying more attention to my money was going to outpace my income,

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which is still almost not there. And so for me, that is why as for entrepreneurs, it's my belief that

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A, you should be ripping out cash on a regular basis because that's downside risk protection.

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It's not your upside. It is downside protection. It's the fact that what if my business does not succeed?

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And you have to think like as much as I'm a big believer in being optimistic, you also have to

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face reality and confront facts, which is the likelihood that this particular business that you

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want, I've had 13 businesses that I've started up to this point and now I want to eat more, right?

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So the likelihood that the business that you start is going to be the one that you finish with

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is extremely, extremely, extremely low, right? Extremely low. And the likelihood that you're going

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to sell the business for a big number is extremely, extremely, extremely low. And so you take this money

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out and you put it into the S&P or you put it into an index because it is passive and you can put

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it there and the idea is that you never have to think about it again. Now, the amount of money that

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you should keep in cash in my belief is you should have about six months, two years worth of normal

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living that's saved up in cash. And that's just so that you can sleep well at night and that's it,

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right? And so the other thing is that when you invest that into indexes and whatnot, you can always

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take a loan against those assets if you want to just start something big. So it's not like it's

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illiquid when it's there. You can take loans against those assets at 60 or 70% low into value,

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meaning if you have a million dollars in assets in the S&P, most banks would give you 60, 70% of

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that or at least 50, right? Depending on the stocks and your history with them, etc. That will give

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you basically for free, right? They'll give you at 1% or 2% money that you can go and reinvest

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in starting another business or buy a piece of real estate or whatever, right? And so for entrepreneurs,

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it is my belief that you should be investing most of your time in energy or almost 100% of your time

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in energy and growing your income, growing the main vehicle you have, but extracting the money and

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putting it into a low-brain vehicle that's not active, that's passive, that's truly passive,

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not real estate flipping, that's not passive, right? Truly passive. If you're in crypto, right,

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or you have some speculative stuff that you want to get into, it's probably taking up way more

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of your attention than it should be and it's actually going to make your main income suffer,

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which means your net worth will grow more slowly than otherwise would. So it's all about the

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opportunity cost of your attention. Real quick, guys, you guys already know that I don't run any

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ads on this and I don't sell anything and so the only ask that I can ever have are you guys

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that you help me spread the word so we can have more entrepreneurs, make more money, feed their

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families, make better products and have better experiences for their employees and customers.

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And the only way we do that is if you can rate and review and share this podcast. So the

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single thing that I ask you to do is you can just leave a review, take 10 seconds or one type of

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thumb to the absolute world to me and more importantly, it may change the world to someone else.

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All right, now I'm going to put this special note out here for employees. If the primary objective

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of the employee in my opinion is to increase how much your income is and so all of yours,

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and this goes for entrepreneurs too, the initial parts of your investment should be growing to

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increase your skills because that increases your basis, that increases your basic income that

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you can continue to yield from the marketplace based on your skill set. And so this is where I

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think people step, you know, they step out over dollars to pick up pennies. If you were,

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if you were saving, you know, $500 a month, there's nothing wrong with that. But I would be actively

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investing that $500 or $1000 or $2000 a month in the beginning into making my skills more valid

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because I know that if I do that in two years, I might quadruple my income because that's the

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thing is that your ability to earn is one of the greatest investments that's not just a billionaire

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saying. It really is like you get like if you develop the skill of selling, which might take you

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two years, you can go from making $60,000 a year to $250,000 a year or $500,000 a year, which puts you

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in the tops 1% just by earning that one skill. And so if you can develop that skill, it is worth the

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investment in most investments in self-improvement or so disproportionately low that it is worth the

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investment. Even if there are courses that you only get a handful of things from you are still

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as your self-adasset more valuable. And so you, I mean at the end of the day, you are the source.

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You're the source of where all the money comes from. So it's like when people don't invest in

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themselves, it makes no sense to me. I've spent every dollar possibly could gaining access,

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getting mentorship, getting coaching, getting programs, buying courses, buying books,

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and doing that stuff because I'm the source. And if I can improve me as the machine that

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generates all the flow of income, then the rest of the stuff becomes easy. And so first and foremost,

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you have to invest in that. After you have an access of that, then start pulling the dividends out

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of the business that you have, investing those things that are passive, not active. And then at the

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point where your net worth from your investment assets, what 10% of that net worth growth would be

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is an access of what you make per year, then at that point it makes sense to start shifting your

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perspective towards managing wealth and growing wealth rather than growing income. Now, like I said,

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two employees. Number one is increase your skill basis, meaning continue to invest in gaining skills

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so that you could be a more valuable company. The way you do that is by tying yourself to revenue

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streams. That means you find ways to generate the company more money, period. And that can be

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through a variety of ways. If you're a customer success or customer service or fulfillment,

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then it's going to be, how can I ascend as many customers as possible? How can I retain these

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customers? How can I track these metrics and show to the people who are deciding my competition,

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how I'm directly making a company more money? And how losing me would cost a company a lot more

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than what it would cost them to keep. If I'm on the front-end side, so it's going to be sales,

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it's going to be marketing, it's going to be acquisition-based, how can I show them how I can

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become more valuable? How can I close twice as many deals? How can I close it a higher percentage?

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How can I get more lead flow by working my pipeline better? How can I generate leads on my own

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and independent from the leads that they're generating for me? All of those things are things

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that you can do to increase how much you make. Now, like I said, if you're an employee, there's

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going to be a certain cap most of the time on which you're earning. And if that is the case and you're

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rubbing against that cap, you should keep your basis for living as low as humanly possible and

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plow as much of that money as possible into a highly liquid asset. Again, if you're in the situation

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where your wealth, the net worth that you have, is the 10% of that amount is still less than you

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make, that all of your attention should still be going to your primary net worth increase or

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which will be your income. And so if I can consolidate this video into a single statement,

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you should, it's my opinion, spend the majority of your time on the vehicle that will

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increase your net worth the fastest. And for most people, it is going to be increasing their income

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until the point where they have saved sufficient amount of assets that they put in passive,

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highly liquid things like S&Ps and indexes, etc. And at that point, when the potential to earn

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an increase your net worth is faster or greater through the assets that you have, at that point,

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it makes sense to switch your attention towards growing those assets because now the opportunity

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cost is shifted away from where your income is generated versus where your wealth is growing.

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And so that is my, at what point should you start investing? That is how I break down.

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First, invest in you, increase your skill basis so that you can generate more income.

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It is the highest return. Genuinely, I'm not saying that for jargon, it is the highest return

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that you can get. The second is that you continue to put things into passive,

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truly passive, not what people claim is passive that are really side hustles,

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but truly passive businesses so that you can continue to focus on your main income generation.

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And then when 10% of your net worth growth exceeds your income capacity currently,

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at that point, it makes sense for you to shift your perspective into growing your wealth

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and rather than your income. So I hope you found this video valuable, click subscribe,

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and I'll see you in the next video. Bye.