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

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to grow out.

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That's because you want to decrease your downtime risk.

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Welcome to the game where we talk about how to get more customers, how to make more

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customers, how to keep them longer, and the many failures and lessons we have learned

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along the way.

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I hope you enjoy and subscribe.

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If I'm an entrepreneur and I'm growing my business month over month over month, when

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should I, one, start taking money, huh?

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And two, when should I start actively investing?

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These are some of the questions that I get most frequently with the entrepreneurs that

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I speak with, depending on where they're at, they might have $500,000, $1,000,000 in

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the bank, and they're like, I'm not really sure what I should do.

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And so what I wanted to do was walk you through the thought process that I have or had around

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investing to give you a little bit of some framework to think through that helped me make this

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decision making process a lot easier.

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So first off, I'm a big believer in continuing to take dividends out of a business as it

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continues to grow.

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And that's because you want to decrease your downtime risk, right?

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For some reason, and the statistics are very likely that the business will not succeed

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in the long term, right?

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You know, 90, whatever it is, 90% or 95% of businesses fell within five years.

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And so it's much better, in my opinion, to consistently take money out of the business

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as you're growing it, because there's a very high likelihood that it will not stick around.

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A, and B, many entrepreneurs have this idea that they're going to sell their business

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

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ever sell.

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And so if that is the case, again, while I would rather not stack the chips under 91 to

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1 bet, it does happen, but the likelihood is low.

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And so I would like to take chips off the table on a regular basis.

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So that is first part, which is making sure that we're taking money out.

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

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this whatever, what should I do with it, right?

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And so one of the big things is I just like to think about this through the lens of opportunity

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cost, which is if I'm currently making, let's say, 500,000 a year, right, from my business

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in, in Nephri Cashel, it's owner earnings, I get to take out of the business after re-investing

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in, in the growth and competitive advantage that we need to continue to maintain to, to grow,

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right?

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So if I 500,000 of Nephri Cashel is coming to me, and let's say I've got, I don't know,

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a million dollars saved up, if I were to, if I were to passively invest that, I should

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get about 10% ish a year, right?

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That's just going to be investing through indexes like the S&P 500, et cetera, right?

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If I'm doing that, then the, the advantage of actively investing might be the marginal

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difference, it might be an extra 5 or 10%, so that'd be a 50 to 200% increase, because

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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 money that worth is

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going to increase, which is the length that we have to look at this through, which is

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the opportunity cost, if I were to spend half of my time thinking about actively investing

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because it will take up half of your, your mind space, I promise you, because I've done

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this mistake before, I made this mistake before, then what happens is your active income

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will fall at a disproportionate rate compared to what your money is making use.

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So let me walk you through a numbers example.

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So let's say you've got that million dollars, and you can get 10% a year, which is 100,

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grand, 100% passively, right?

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But the additional 50% or 100,000 dollars a year, 50 to 100,000 dollars a year, which

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would be 5 to 10% of that million, right?

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You could get through actively investing.

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Well, if you're currently making 500,000 dollars a year from your business, do you think

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it would be reasonable to take half or 25% of your time to go chase that when you could

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probably get your income from 500 to 750,000 in the next year, 500 to a million?

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And so for me, that was always the opportunity cost of actively investing, which until my wealth

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became so large that I felt like it was the opportunity cost of the money that I should

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be making by paying more attention to my money was going to outpiece my income, which

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is still almost not there.

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And so for me, that is why, as for entrepreneurs, it's my belief that, A, you should be ripping

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out cash on a regular basis because that's downside risk protection.

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It's not your upside.

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It is downside protection.

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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

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have to face reality in confront facts, which is the likelihood that this particular business

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you're on.

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I've had 13 businesses that I've started up to this point and now I own 8 more.

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

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with is extremely, extremely, extremely low, extremely low.

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And the likelihood that you're going to sell the business for a number is extremely, extremely,

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extremely low.

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And so you take this money out and you put it into the S&P or you put it into an index

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because it is passive and you can put it there and the idea is that you never have to

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think about it again.

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Now, the amount of money that you should keep in cash in my belief is you should have

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about six months, two years worth of normal living that's saved up in cash and that's

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just so that you can sleep well at night and that's it, right?

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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.

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So it's not like it's illiquid when it's there.

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You can take a loan against those assets at 60 or 70% loan to value, meaning if you have

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a million dollars in assets in the S&P, most banks will give you 60 or 70% of that or

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at least 50, depending on the stocks and all in your history with them, et cetera, that

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will give you basically for free, right?

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They'll give you at 1% or 2% money that you can go and reinvest in starting another

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business or buy a piece of real estate or whatever, right?

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And so for entrepreneurs, it is my belief that you should be investing most of your time

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in energy or almost 100% of your time in energy and growing your income, growing the main

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vehicle you have, but extracting the money and putting it into a low-brain vehicle that's

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not active, that's passive, that's truly passive, not real estate flipping, that's not

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passive, right?

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Truly passive.

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If you're in crypto, right, or you have some speculative stuff that you want to get

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into, it's probably taking away more of your attention than it should be and it's actually

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going to make your main income suffer, which means your net worth will grow more slowly

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than otherwise would.

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So it's all about the opportunity cost of your attention.

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Most of the nation real quick, if you are a business owner that has a big old business

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and wants to get to a much bigger business, going to $50 million plus, we would love

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to talk to you and if you like that, we would like to hear more about it.

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Go to acquisition.com and you can plan anywhere on the page and talk to one of our team and

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see if we can help you get there.

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

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If the primary objective of the employee in my opinion is to increase how much your

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income is and so all of yours, and this goes for entrepreneurs too, the initial parts

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of your investment should be growing to increase your skills, because that increases

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your basis, that increases your basic income that you can continue to yield from the marketplace

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based on your skillset.

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And so this is where I think people step over dollars to pick up pennies.

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If you were saving $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 and to make you my skills

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more valid because I know that if I do that in two years, I might quadruple my income,

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because that's the thing is that your ability to earn is one of the greatest investments

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that's not just a billionaire saying, it really is, like if you develop the skill of selling

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which might take you two years, you can go from making $60,000 a year to $250,000 a year

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or $500,000 a year, which puts you in the top 1% just by earning that one skill.

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And so if you can develop that skill, it is worth the investment in most investments in

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self-improvement or so disproportionately low that it is worth the investment.

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And if there are courses that you only get a handful of things from, you are still as

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yourself an asset more valuable.

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And so you, I mean at the end of the day, you are the source.

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You're the source where all the money comes from.

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So it's like when people don't invest in themselves, it makes no sense to me.

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I've spent every dollar possibly could, getting access, getting mentorship, getting coaching,

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getting programs, buying courses, buying books and doing that stuff because I'm the source.

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Right?

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And if I can improve me as the machine that generates all the flow of income, then the rest

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of the stuff becomes easy, right?

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And so first and foremost, you have to invest in that.

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After you have an access of that, then start pulling the dividends out of the business

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that you have and investing those things that are passive, not active.

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And then at the point where your net worth from your investment assets, what 10% of that

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net worth growth would be is an access of what you make per year, then at that point

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it makes sense to start shifting your perspective towards managing wealth and growing wealth rather

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than growing income.

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Now, like I said, two employees.

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Number one is increase your skill basis, meaning continue to invest in gaining skills so

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that you could be on more valuable with a company.

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The way you do that is by tying yourself to revenue streams.

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That means you find ways to generate the company more money, period.

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And that can be through a variety of ways.

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If you're a customer success or customer service or fulfillment, then it's going to be,

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how can I ascend as many customers as possible?

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How can I retain these customers?

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

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How I'm directly making a company more money, right?

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And how losing the customer company a lot more than what it would cost them to keep, right?

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If I'm on the front-end side, so it's going to be sales, it's going to be marketing,

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it's going to be acquisition-based, how can I show them how I can become more valuable?

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How can I close twice as many deals?

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How can I close it a higher percentage?

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How can I get more lead flow by working my pipeline better?

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How can I generate leads on my own independent from the leads that they're generating for

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me, right?

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All of those things are things that you can do to increase how much you make, right?

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Now, like I said, if you're an employee, there's going to be a certain cap most of the

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time on what you're earning.

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And if that is the case and you're rubbing against that cap, you should keep your basis

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for living as low as humanly possible and plow as much of that money as possible into

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a highly liquid asset.

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Again, if you're in the situation where you're wealth, right, the net worth that you

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have is 10% of that amount is still less than you make, that all of your attention should

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still be going to your primary net worth increase, which will be your income.

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And so if I can consolidate this video into a single statement, you should, it's my

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opinion, spend the majority of your time on the vehicle that will increase your net worth

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the fastest.

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And for most people, it is going to be increasing their income until the point where they have

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saved sufficient amount of assets that they put in passive, highly liquid things like

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S&Ps and indexes, et cetera.

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And at that point, when the potential to earn an increase your net worth is faster or

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greater through the assets that you have, at that point, it makes sense to switch your

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attention towards growing those assets because now the opportunity cost is shifted away from

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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?

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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

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return that you can get.

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The second is that you continue to put things into passive, truly passive, not what people

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claim is passive that are really side hustles, but truly passive businesses so that you can

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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.

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So I hope you found this video valuable, click subscribe, and I'll see you in the next

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video.

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Bye.