Valuetainment - The Biggest Reason Most Businesses Fail

00:00:00.000 Listen, this is not a motivational video, but this is probably the most important video you

00:00:03.320 can watch during a time like this while the market tanked the way that it has.

00:00:06.520 And everybody else is talking about, you know, the dreams, the Lambos, the Ferraris, the watches,

00:00:09.940 the houses. This is the message you need to hear. I can show you my house. I can show you my saving.

00:00:15.140 I can show you all that stuff. But I'm telling you, my life changed when I was 27, 28 years old,

00:00:20.560 at a quarter million dollars in the bank, and I was driving a Ford Focus, and everybody thought

00:00:25.240 I was crazy, and I want to share this mindset with you. Odds are you're going to click off this video

00:00:30.420 because you want to go get entertained. But those few of you that watch this, when 10 years from now,

00:00:35.240 the next market crash comes, you're going to sit there and say, thank God I paid attention to this

00:00:39.520 video about how Pat had a Ford Focus at 28 years old. So stick around to Leverian to get the PDF of

00:00:53.360 today's notes. But let me get right into it on why today's message is very important. I'm 26,

00:00:57.260 27 years old. When I first started making money at 21, 22, I started buying nice cars. I'd go to

00:01:03.380 Vegas, all this other stuff. And then all of a sudden, I lost everything. I'm $49,000 in debt.

00:01:08.780 I'm about to go back into the military. You've heard the story before. Then I get into insurance.

00:01:13.360 I meet a man that all he talked about is, Pat, just trust me, have cash in place. If you do anything

00:01:21.980 with me, go set aside cash. Now, my dad, for the longest time, always told me to follow and said,

00:01:28.040 always have savings that nobody else knows about. He said, it's healthy for marriage. It's healthy

00:01:33.320 for a man. It's healthy for business. It's healthy for you, period. Have cash set aside somewhere that 0.94

00:01:39.300 I don't even know about, that your wife doesn't even know about, that nobody knows about because

00:01:43.500 it gives you a certain backing. So now, today's message is about business expenses that startups

00:01:49.920 waste their money on. And a lot of people that are starting a business right now, maybe you're

00:01:55.120 even an independent contractor, a salesperson, a realtor, insurance person. Maybe you started a

00:01:59.260 small business for yourself with your partner. There's a lot of ways that you're going to be

00:02:03.160 tempted to waste money. I'm going to share with you what things to look out for, and then the

00:02:07.240 decisions on you to see what you do with it. So let's get right into it. Point number one, expensive

00:02:11.040 office spaces. You will be tempted to get a very, very sexy office space because you think the office is

00:02:17.080 going to make you the money. The office is going to make you nothing. Let me give you a story.

00:02:21.080 First office lease I signed was in Granada Hills. It was right off the 105 freeway. On a meeting I

00:02:27.220 was doing one day with my sales guys in the middle of a meeting, there was a drive-by shooting, and boom,

00:02:33.640 the shot comes from right behind me. There's a hole in the window on the back to my left,

00:02:37.780 and I'm looking at them like, everybody's like, oh, shit, what just happened? I'll go a little 0.95

00:02:40.440 closer. I'm like, okay, there's something going on out. The cops show up. Anyways, my first office was a

00:02:45.100 regular office lease I picked up, and I took it from a guy who was a countrywide rep making $400,000

00:02:51.280 a year, started as a mortgage business. Boom! Mortgage hits a, you know, the mess they went

00:02:56.760 through similar to what's going on right now. This was 06, 07. I go into the office. It's empty. I

00:03:01.520 took it over sublease. I saved 20% on the lease. Everything else, furniture, everything's about $40,000

00:03:07.560 worth of furniture. A $25,000 phone system was part of the negotiation that I got. I moved into that

00:03:12.900 office. It was safe. It was cheap. I could afford it. We started the office space, and then boom,

00:03:18.000 it took off within the insurance. So many times you'll be tempted to think, oh, if I only have a

00:03:21.920 better office, sexier office, our guys are going to be more excited. They're going to be more just,

00:03:25.660 when you're a startup, you just want to make sure to stretch the dollar as much as possible,

00:03:29.340 and the last thing you need is a sexy office space. Number two is overhiring. Let me tell you 1.00

00:03:33.340 what I do when I hire somebody that's coming on board if I'm running a startup. So let's just say

00:03:36.920 you're running a startup, or you're a new person, you're in sales, you became a broker,

00:03:40.920 and you're running an office, or you're running a small little business that you're running.

00:03:44.900 When I'm doing an interview with somebody that I bring on board, this is a question I used to not

00:03:49.020 ask early on. Now I ask this question every single time. This is the question. And I say,

00:03:53.060 hey, John, just out of curiosity, you ever worked for a startup before? I never have. So typically

00:03:58.600 when you work as like Fortune 500, Fortune 1000 companies, yeah, I've typically worked for an

00:04:02.800 established company. Okay, let me share with you the difference between a startup and the difference

00:04:08.140 between a Fortune 1000 company. I want you to really think about whether you want to have this

00:04:11.520 kind of a position or not. I said, a Fortune 1000, you can come in, you clock in, you leave,

00:04:17.260 and you're typically going to leave on time, if not a little bit even earlier. No one's going to take

00:04:20.900 notice. No one's going to know. And say your typical job expectation is this much. You hit it,

00:04:26.460 you're good. You'll get your 3% to 5% raise every year. Everything is good, safe, no one bothers you,

00:04:31.300 right? And that's many people's jobs when they work for a Fortune 1000 company. When you work for a

00:04:37.120 Fortune 1 million company or a 1 billion company, which is a startup, obviously you understand what I'm

00:04:42.120 saying here. It's a startup. And here's how a startup works. It's nonstop. It's constant. You're wearing

00:04:48.940 multiple hats. You may have one job, two jobs, three jobs. You may sit there and have a job description

00:04:53.840 of what you're doing. Sometimes you may do two other jobs outside of this because it is a startup. So

00:04:59.060 everybody's wearing different hats. One minute I'm wearing this hat. The other minute I'm wearing

00:05:02.820 this hat. The other one that I'm wearing this hat, it's startup. Now here's a good, bad, and the ugly.

00:05:07.360 The ugly is it's constant. The good is if you stick around a startup and you do something big,

00:05:12.980 long term, the big money's made many times by being part of a startup and you bring value to the

00:05:17.200 company. But for you, which do you prefer? Do you want more of a Fortune 1000 type of a company where

00:05:22.680 it's safe, it's secure, and it's quiet and nobody bothers you? Or do you want to be part of something

00:05:26.580 where you have the pride that you build something big together? You'd be amazed how many people will

00:05:30.400 just say, well, you know, I really have to think about this decision. You know what they're saying

00:05:33.680 when they say that? That they don't want to be part of a startup. They want to go to a safe place.

00:05:37.320 But you know how many times when I openly talk to people like this, you know what they'll say?

00:05:40.880 Oh, I'm so bored out of my mind. I got a job at a Fortune 1000 company. I am so bored. Every day I go

00:05:46.100 to work like, I don't care how much they pay me. My life is boring. I need some excitement in my life.

00:05:50.800 I want to be part of a startup company. Phenomenal. Then let's go do something together.

00:05:54.900 But I don't have the money to give you an expense credit card. I can't afford to give you the kind

00:06:00.240 of salary others are paying you right now because this is how much money we have that we're working

00:06:04.380 with. We've raised this much money and I can't overpay you. Are you okay with that? But in the

00:06:08.980 back end, we can do X, Y, Z. Again, hiring prematurely or over hiring when you don't have the money

00:06:15.280 nor the luxury and you need to manage expectations up front with the people you're hiring so they know

00:06:20.040 exactly the kind of situation they're getting themselves into.

00:06:23.220 Number three, the savior consultant. Avoid these guys. They'll come in and this is what they'll

00:06:26.860 sound like. Oh my God, this is your business. Let me tell you my background. Here's what I did

00:06:31.400 for only $15,000 a month with a six month contract. I'm going to be able to help your company get into

00:06:36.580 all these different markets and we're going to help this company do this, this, and you're sitting

00:06:40.060 there saying, oh my God, guys, I found a savior consultant. This guy's going to take us to the next

00:06:45.920 level. And you pay this guy $15,000 for six months. Nothing happens first month. You ask him in the

00:06:52.160 sixth week, hey man, you know, I paid you the $15,000. What is really going on? Well, first month

00:06:56.900 was really learning and we're kind of going through our needs analysis. The second month is this really

00:07:03.180 you're going to start seeing the impact of what we do for you by month three or month four. If you've

00:07:08.020 gone through this, you've heard this script before. Be careful with these savior consultants. Very careful.

00:07:13.280 The way I hire a new consultant, this is how I do it. Let me give you the right script. Hey,

00:07:17.920 Johnny, I appreciate the fact that you're an incredible consultant. How much do you believe

00:07:21.440 in what we can do here as a company? Oh, I fully believe you guys can pull it off if you guys do

00:07:24.900 the right things. Fantastic. Here's what I'd like to do with you. I'd like to see if you really believe

00:07:30.560 in what we're doing. I don't have a lot of money to stretch. I'd like to work with you on first month

00:07:35.740 $2,500 and on the second month, $3,500. On the third month, $4,500 and $5,500 and not a contract.

00:07:45.220 But if you do me good and you hit these markers that you believe you can do by the ninth month,

00:07:49.600 I give you a $30,000 bonus if you hit these markers. But I pay you by the ninth month because

00:07:54.260 you've also helped grow the company and marketing and this and that and blah, blah, blah. You'll see

00:07:58.320 how many times they'll go like this. Oh, oh, I can't do that. They're trying to tell you that we're

00:08:03.020 never going to do in the first place. Or they'll say the following, you know what? I understand

00:08:07.280 what direction you're going. I can respect the fact that you're a startup and times are a little

00:08:10.620 bit weird right now. I'm willing to work with you. That's fair because I'm confident in what

00:08:14.420 our team's going to deliver. Salute. Let's do business together. But manage expectations with

00:08:19.220 higher consultants from day one or else you're going to be wasting a lot of money. Number four,

00:08:24.500 lavish employee perks. Let me tell you a lot of times people are like, well, let me take these guys to

00:08:28.220 a nice restaurant and let me do this and let me do that. Here's what I did, okay, to build

00:08:32.900 a relationship and take care of my employees for the first about year and a half when I started my

00:08:37.420 own insurance company in 2009. Every Tuesday night and every other Sunday, I would barbecue for you.

00:08:43.780 But here's what I would do. I would go to a local Vallarta, okay, and I would buy carne asada, okay,

00:08:49.560 and I would buy chicken. I like chicken thai, and I would marinate it with my own chipotle sauce,

00:08:56.340 and I would put some beer, wine, and certain seasoning that I use in certain Middle Eastern seasoning,

00:09:00.580 and I would cook for you. That chicken would cost me 30 bucks, but I would bring it and they would

00:09:06.380 see me cooking for them. Just the fact that I'm spending time cooking for my guys showed a lot

00:09:11.400 of support to them. They liked it, and I'm showing value in them. When you're small and you don't have

00:09:16.540 a lot of money, you don't need to take people to high-end restaurants to impress them. Not at the

00:09:20.980 beginning. That can come later on, but not at the beginning. Best way to do it, maybe you cook for

00:09:25.900 them to save yourself that money and establish deeper relationships. Number five, buying expensive

00:09:30.940 tools. Look, no matter what you're doing, whether it's going to be a HubSpot or you're going to be

00:09:34.080 tracking your CRM or this or that, there's going to be so many different tools that you can buy,

00:09:38.400 and you will be tempted to want to buy the highest model tool that you want to buy for whatever you're

00:09:43.220 trying to pick up. For us, for insurance, I had the option to buy a quarter million dollar software

00:09:47.540 versus a $100,000 software versus a $25,000 software. You know which one I picked. I went with the

00:09:53.180 $25,000. Then we upgraded into the $100,000. Then we upgraded into the quarter million dollars,

00:09:57.840 and then eventually we upgraded into the $10 million software that helped the company become

00:10:02.120 a tech-enabled company. But don't sit there and say, oh my God, if we only had that software,

00:10:07.680 we'd blow up. Totally get it. You may not be able to afford the top-of-the-line software they want,

00:10:12.240 but start with what we have. And a lot of times when you work with a company, you can buy the shell

00:10:16.080 and build up. But the biggest factor is, if you know you're going to make your company win long

00:10:21.500 term, get used to selling your partners of how valuable of a partner you're going to be if they

00:10:28.100 buy into you. Meaning, many times I would say, John, I can't afford to pay $100,000, but I'd like

00:10:34.060 that software. Well, Pat, we can't afford to give it to you. Why don't you start with the $25,000 one?

00:10:38.380 I said, I totally understand it. To be quite honest with you, $25,000 is even a lot for me. However,

00:10:43.820 here's what I'd like to do with you. What's that? How about if we do $25,000 up front and I get the

00:10:51.680 $100,000 software, but 12 months from now, I give you another $25,000. And then two years from now,

00:10:58.940 I give you another $25,000. And then three years from now, if this thing's going the way it's going,

00:11:03.540 instead of paying you $100,000, by the 30, I pay you $125,000, meaning the last check is $50,000.

00:11:09.160 And they'll sit there and they'll say, what is us giving a software anyways? It's not like we need

00:11:13.680 more employees. He's not going to be using more employees. He's not going to be, you know what?

00:11:17.360 Great. Here we go. Take the $100,000 software with a three-year contract that by the end of the third

00:11:21.320 year, instead of paying the $25,000, you pay $50,000. Rather than getting $100,000, we got $125,000,

00:11:27.100 but what did I get in return? I got the $100,000 software up front for only $25,000. And I was able

00:11:32.260 to stretch the dollar and pay $125,000 over three years. So I saved myself money up front, which is when I

00:11:39.460 need the cash the most. Because if you go out of business by the second year, you're not going to

00:11:43.480 have to do the whole thing. The person's taking a risk on buying into you knowing you're going to be

00:11:46.800 there long term, but you're also selling yourself to say, I'm going to be in business. And if I am

00:11:50.220 for your loyalty, I'm going to give you an additional $25,000. That's the point with the

00:11:55.380 conversations you need to have. Not necessarily the tools. We need to sell this to people you're going

00:11:59.500 to be partnering up with. Number six, business travel. Look, at this point, when I travel, I'm generally

00:12:04.820 traveling in a private jet and life's a different life today. But here's what most people don't know

00:12:09.680 about. Up until my 10th year of running an insurance company, I flew coach myself. I would fly coach.

00:12:18.420 So this means we have millions of dollars in the bank and I'm still flying coach. And people don't

00:12:25.700 ask me, why are you still flying coach? Now, don't get me wrong. When you fly coach a long time with

00:12:29.360 American Airlines, you eventually get upgraded to business and first class. So eventually when I

00:12:34.620 became executive platinum for flying constantly six months out of the year, guess what happens?

00:12:39.880 You're naturally going to be upgraded to first class without having to pay for it. But I wouldn't

00:12:43.680 coach for a long time. Why? You know, because there's different philosophies. Some people say

00:12:47.400 you should drive, you know, fly private from day one because it gets your identity to realize you

00:12:51.900 belong at the top and first class is the way to go. No problem. I sat there and I said, uh, you got

00:12:57.940 about 200 flights a year. Your coach is going to be 450. First class is around 1500 to 2000.

00:13:03.900 $200,000. That's going to be $1,000 savings times 200. That's $200,000 in savings over the year.

00:13:09.960 $200,000 in savings is four employees at 50 or one C-suite executive at $200,000. I'm good with it.

00:13:16.620 Then I would take the $200,000 and look at the valuation of a company. If I did a 12 times EBITDA,

00:13:22.160 12 times 200, it didn't cost me $200,000. That was a $2.4 million expense to the valuation of the

00:13:28.380 company. So somebody says it's only $200,000. No, no, no, no, no, no. It's $2.4 million on the back end

00:13:34.140 because of EBITDA. So if you can't fly coach, and by the way, I'm 6'4 and a half, 245 pounds,

00:13:41.260 sitting coach on four hour flights and six hour flights. So if I can do it, you can do it as well.

00:13:46.600 But the reality is eventually when you do it right, you got savings in the bank. The last thing you're

00:13:50.680 going to be thinking about is coach. You'll be first class and eventually be driving, flying private.

00:13:54.140 But for the longest time, you don't need to fly first class. Coach will save you a ton of money.

00:13:59.260 Point number seven, control enthusiasm. Let me explain to you what I mean by this.

00:14:03.040 If you're part of a company that's got 3,000 employees, how many negative people do you think

00:14:08.440 work for that company if they got 3,000 employees? Some people will say probably none. Well, that's a

00:14:13.580 lie. If they got 3,000 employees, say 3% are negative, they probably have 90 negative employees.

00:14:20.300 You know what these people do? Well, let me tell you, man, our vice president doesn't

00:14:24.040 care about us. Look at the CEO. Look at the market. You know this is not going to work. You

00:14:28.300 know we're going out of business. It's just constant, right? When you're small, when you're

00:14:33.300 big, you can't control negativity. You're going to have negative people working a lot of different

00:14:36.600 places and they fake it when they see you. Well, guess what? When you're small and it's only 3 or

00:14:41.680 5 or 10 or 20 or 30 or 40 employees, you can't afford negative employees. You have to spot them

00:14:47.860 early and have a, you know, come to Jesus type of a conversation with them, isolated and let them

00:14:54.200 know this may not be the company for you in the most nice, polite way and let them leave. But the

00:14:58.560 worst thing you can do is just be like, oh, it's not a big deal. He's okay. Oh, it's not a big deal.

00:15:01.860 It's okay. The longer, I've done this many times, the longer you let this person stick around, the more

00:15:07.580 people are going to quit with them when they quit. The sooner you isolate it and address it, the few

00:15:12.620 people are going to go. Negativity cannot be tolerated when you're a startup at all by nobody

00:15:20.440 when you're small. So listen, the biggest thing about this season is to think like a founder. And

00:15:24.460 I did a video years ago on the qualities of a founder I want to share with you. But before

00:15:27.820 I give you that video, I want to share with you these new hats that just came out because all I

00:15:32.620 want you to be thinking about while you're going through the mess is the fact that future looks

00:15:37.300 bright. These hats just came out, limited edition, in the middles, got value attainment all over

00:15:42.500 the place. It's got future looks bright here, future looks bright here, and the value attainment

00:15:47.180 logo on the front, you can buy it in white, red or black to sport this everywhere you go

00:15:52.160 so other value attainers, when they see you, they know which content you consume. If you

00:15:56.060 want to order these limited edition hats, click here. And if you want to watch a video about

00:15:59.860 the founder's mentality, click here to watch 20 qualities of a great founder. Take care everybody.

00:16:04.500 Bye-bye.

Valuetainment - October 03, 2022

The Biggest Reason Most Businesses Fail

Episode Stats

Summary

Transcript