WEBVTT

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is to is to have freedom, right? So we want to not work or not have to work and have money coming towards us.

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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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progress from and how to keep them longer and the many failures and lessons we have learned

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along the way. I hope you enjoy and subscribe.

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In this video, I'm going to show you how to take an active business and make it into passive

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income, right? So the goal that most of entrepreneurs have, right, is to is to have freedom, right?

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So we want to not work or not have to work and have money coming towards us. And the thing is,

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is what I have learned is that you can make anything passive and you can make anything active.

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And one of the difficulties for entrepreneurs when you switch from entrepreneur to investor is

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that you want to take your passive things and make them more active in order to increase your

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returns. And that's a very tempting thing to do because we're entrepreneurial and we can see

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where the margin is getting lost, right? But if you always chase time, then you'll always be able

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to make whatever it is. Like if you chase time, always, then eventually you'll end up with

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all your time and you should have some leftover that is coming towards you, right? And so I'll give

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you a quick example. So Jim launched two years ago, I think it made 17 million, I mean according to

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our quality of earnings, we made 17 million in profit in 2019, 2018, 2018, excuse me, 2018.

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And this year will probably do eight million in profit. So you're like, whoa, you cut in half.

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Here's the difference. When we did 17 million, I was the business, it was 100% Alex's face wrapped

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with a monetization structure wrapped around it. I was taking calls, I was doing all of these things,

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I was definitely CEO, I was definitely in front of the marketing, I was also the product, I was doing

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all those things, right? Right now, the business basically generates half the profit, but it

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involves me for about 90 minutes a week. And so my, my dollars per hour are significantly higher

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because now I also have all these other things that I can do with the time that has earned back

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for me. And so what I want to walk through in this video is kind of the process and how to do it

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and when to do it. And so one of the issues that I see people starting out, and when I say

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starting out, you know, making a million, three million, et cetera, is that I'll get messages from

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them and they're like, dude, I think I'm ready to outsource my business. And I'm like, but why?

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Like, I don't think you've gotten to the, I mean, and maybe somebody who's at a zillion, you know,

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says to me, like, why are you doing that now? But I think for me, my answer would be like,

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I've achieved the wealth that I, that I want. I don't need to to gas it anymore. And now it's really

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using a different metric for success, which is like how, how much can I spend, you know,

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how much time can I spend with my life? My wife, how much time can I spend whenever I want in the gym,

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working out, eating this stuff I want to eat, et cetera, right? How can I have other metrics for

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success, spending time, you know, meeting people, et cetera, and doing stuff like this, which I never

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did while I was growing the business, not in this way, right? And so anyways, the thing that I see

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people do is they try and jump out of the CEO seat too soon. But what I want to do is give you

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the most model for how to do it when it's right, right? Because ultimately, if you can turn your

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active income into passive income, I just love this quote, you get paid on what you do, you get

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returns on what you own, right? Jim launch as an enterprise is far more valuable, or my fitness

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companies, because there's a couple there, are far more valuable now than they were when it made

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$17 million in profit, because then no one would ever buy it, right? Because no one's going to buy

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me, right? It's just a pros and personality brand, whereas now it is an enterprise that generates

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revenue by providing value to customers on a consistent basis, and I have nothing to do with it,

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and it has a management team at place, et cetera, right? And so as we make these transitions,

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right, going from CEO to owner, you have to go from active to passive. So this is the mental

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framework that it took me a really long time to discover when figuring this out, all right? So

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think about your trajectory as an entrepreneur, right? So first you start, you do everything, right?

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And then all of a sudden you start delegating out the things that are the lowest value time-wise,

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right? If you can pay someone $10 an hour, or $15 an hour to do, you know, 10 hours a week of

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your work, then you get 10 hours back, and then you can put higher value skills in those 10 hours,

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and then make more money. And then fundamentally, that's literally what entrepreneurship is,

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just arbitrage time over and over and over again, and then leveling up your own skillsets,

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so that with the time that you get back, you can do more valuable things. And that's, I think,

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one of the bigger issues that I see a lot too, is that people will outsource their time and then

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not fill their time back up with higher value skills, right? Now, if that's what you want to do for

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lifestyle-wise, that's cool, but like in terms of the game, if you seek to grow, then you need to

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re-re-re-put more things in your stack and take the extra 10 hours and do something even more valuable,

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maybe it's marketing again or learning a new channel or improving the product, or whatever it is,

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it's more valuable than maybe frontline support, right, or whatever. And so the idea here is going

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from active to passive. And so, as I was saying, when you replace that role, right, what you did

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is you got time back, right? And so if you do that enough times, you're always, you know, doing the

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next thing. But here's what's kind of funny, and this is the mental framework that I want to give to

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you. Imagine, like, let's say you look back at what you were doing a year ago, and it probably

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should look different than what you're doing today, right? Hopefully, if you're growing in your

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business, what you're doing then versus what you're doing now is different. And so if you look

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back to what you were doing then, and you see the progress that you made to what you're doing now,

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then rather than saying, okay, well, in 12 months, I'm going to be doing all these things,

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and all these things are gone, if you can actually jump two steps forward, then your business could

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be 100% growing at the same pace as it is now, with somebody doing both of these things that you

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were doing, and then you just owning it. Real quick, guys, if you can think about how you found

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this podcast, somebody probably tweeted it, told you about it, shared it on Instagram,

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or something like that. The only way this grows is through word of mouth. And so I don't run ads,

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I don't do sponsorships, I don't sell anything. My only ask is that you continue to pay it forward,

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whoever showed you or however you found out about this podcast that you do the exact same thing.

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So if it was a review, if it was a post, if you do that, it would mean the world to me,

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and you'll throw some good karma out there for another entrepreneur.

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All right, and I know that you're like, wait, what does he mean? I'll try and explain this again.

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So this is like, if you can understand this concept, it will set you free and allow you to turn

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your active income businesses into passive income things that you get returns on. These become

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assets that become sell, but one of the number one issues that people have is like, you can't sell

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personality brands, you can't sell their own businesses because they're so integrally involved

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in them, right? And this is one of the mistakes a lot of people make, especially smaller entrepreneurs,

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they're like, you know, my business makes, let's say, $3 million a year, right? And net profit.

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Well, if it would cost, you know, a million and a half to get all of the leadership and executives

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in order to do all the stuff that you're doing, which is very realistic, you might need four or five

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high level leaders to do that stuff, then your business is actually making a million or a million

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and a half in profit. So it's actually half as valuable. So you're doing a million and a half

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dollars a year of payroll work because you're getting paid for that and then your business is returning

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you an extra one and a half million. So you're, you're total as a person are netting $3 million,

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but the business is generating 1.5 and you are generating 1.5. If you can delineate that concept,

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it will serve you very well in business and especially with the concept that I'm saying right now.

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So the idea is what we want to do is take two steps forward from where we're at right now, not one,

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because if you take one step forward, you delegate what you're doing now and then you start doing the

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next thing right that you need to do. But if you delegate what you're doing now and then you get

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someone else to do the thing that you should be doing next, then you can take a step back and now

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you're owning the business while this person now does the thing that you were doing before and

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that is ultimately how you can take your active thing and turn it into passive. And now you're an

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owner who looks at the enterprise and then what's crazy about this is that you can actually see the

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weaknesses of your own business far better when you're outside of it looking in and see you can see

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the marketplace better, you can see what your customers are saying better. You just get so much

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more perspective and then you really become the chairman of the board and then you're really meeting

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with the CEO and you're talking to the CEO about their direct reports, how they can improve as a leader

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and what they need to do in order to kind of like and help them cast the vision for the company.

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That's really it and the thing is the vision doesn't change that frequently and so you need to be

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smart about why you're choosing to go in the direction you are but once you've made the decision,

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there's not a lot of change that has to happen right. It's really like how can we execute consistently

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to get there. And so big picture to wrap this puppy up, if you want to go from business running to

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business ownership, one, don't do it too soon and this is probably the number one mistake that I

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see people make is that they do it too soon. Two, if you are going to do it, then if you can think

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about what you get paid on versus what you can return on, then you can separate what you do versus

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what you own within the value that you have in your own network. Like you are valuable because you

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have skills. I own that like, I love this quote and I'll say it again, poor people do the wrong

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things, rich people do the right things, wealthy people own the right things. And so if you can think

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through that within your own life, it's like, well, right now you're probably doing the right things

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and you own some of the right things, right? But you're doing both of these things. You're getting paid

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here, you're getting paid here and you're getting returns here. So we want to put someone in place

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to do the things that we're getting paid for and then continue to keep the things that we're

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getting returned on. I mind you. At some point, that means that you might lose half of your income

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if it's 50-50, right? If your business makes you a million dollars a year and then you make a

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million dollars a year working your business and the business nets you two million, then you quitting,

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right? Quitting and hiring somebody else to do this thing because you take two steps forward.

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If you do that, then all of a sudden you'll get a pay decrease but your dollars per hour will go up,

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your enterprise value go up because now it is something that is sellable that operates without you,

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all right? And so that actually means that your net worth increases even though the the

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quote profit of the business decreases. And then here's what's cool is that once you've done this,

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right? Once you've eliminated this step and now you just own the thing that you get returns on,

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now you can focus on how can I how can I increase revenue here? Trying to put more fingers on my

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on my revenue, right? How can I increase the revenue that I'm making here without me being

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involved? Because it's all about the constraints that we can put on ourselves. So if I can

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increase the revenue without me doing anything, how would I do that? And then you ask better

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questions and then you get better answers and then that is ultimately how you can grow the wealth

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of the business without you spending more time or making more trade-offs that you don't want to

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make because you got it in this game for freedom, right? And so anyways, hope this was valuable for

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you. Hit subscribe because it was. Check out the next video that comes up because I'm sure it's

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sweet. And if you hated this, then I would ask that you can you can also tell me that you hated it

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and I will send you love you, right? So anyways, keeping on some lots of kitchen next video. Bye!