The Biggest Reason Most Businesses Fail

listen this is not a motivational video but this is probably the most important video you can watch during a time like this while the market tank the way that it has and everybody else is talking about you know the dreams the Lambos the Ferraris the watches the houses this is the message you need to hear I can show you my house I can show you my savings I can show you all that stuff but I'm telling you my life changed when I 27 28 years old at a quarter million dollars in the bank and I was driving a Ford Focus and everybody thought I was crazy and I want to share this mindset with you odds are you going to click off this video because you want to go get entertained but those few of you that watch this when 10 years from now the next market crash comes you're going to sit there and say thank God I paid attention to this video about how Pat had a Ford Focus at 28 years old so stick around to Liberian to get the PDF of today's notes but let me get right into it on why today's message is very important I'm 26 27 years old when I first started making money at 2122 I started buying nice cars that go to Vegas all this other stuff and then all of a sudden I lost everything I'm 49 000 in debt I'm about to go back into the military you've heard the story before then I get into insurance I meet a man that all he talked about is Pat just trust me have cash in place if you do anything with me go set aside cash now my dad for the longest time always told me to follow and said always have savings that nobody else knows about he said it's healthy for marriage it's healthy for a man it's healthy for a business it's healthy for you period half cash set aside somewhere that I don't even know about that your wife doesn't even know about that nobody knows about because it gives you certain backing so now today's message is about business expenses that startups waste their money on and a lot of people that are starting a business right now maybe you're even an independent contractor salesperson a realtor what insurance person maybe you start a small business for yourself with your partner there's a lot of ways that you're going to be tempted to waste money I'm going to share with you what things to look out for and then the decisions on you to see what you do with it so let's get right into it Point number one expensive off he says you will be tempted to get a very very sexy office space because you think the office is going to make you the money the office is going to make you nothing let me give you a story first office lease I signed was in Granada Hills it was right off the 105 freeway on a meeting I was doing one day with my sales guys in the middle of a meeting there was a drive-by shooting and boom the shot comes from right behind me there's a hole in the window on the back to my left and I'm looking at them like everyone's like oh what just happened I'll go a little closer I'm like okay there's something going on out the cops show up anyways my first office was a regular office lease I picked up and I took it from a guy who was a Countrywide rep making four hundred thousand dollars a year started his own Mortgage business boom mortgage hit say you know the mess they went through similar to what's going on right now this was 0. 607 I go into the office it's empty I took it over sublease I saved 20 on the lease everything else Furniture everything's about forty thousand dollars worth of furniture a 25 000 phone system was part of the negotiation that I got I moved into that office it was safe it was cheap I could afford it we started the office space and then boom it took off within the insurance so many times you'll be tempted to think oh if I only have a better office sexier office or guys are going to be more excited they're going to be more this when you're a startup you just want to make sure to stretch the dollar as much as possible and the last thing you need is a sexy office space number two is over hiring let me tell you what I do when I hire somebody that's coming on board if I'm running a startup so let's just say you're running a startup or you're a new person you're in sales you became a broker and you're running an office or you're running a small little business that you're running when I'm doing an interview with somebody that I bring on board this is a question I used to not ask early on now I ask this question every single time just a question and I say hey John just out of curiosity uh you ever worked for a startup before I I never have so typically when you work is like Fortune 500 Fortune 1000 companies yeah I've typically worked for an established company okay let me share with you the difference between a startup and the difference between a fortune 1000 company I want you to really think about whether you want to have this kind of position or not I said a fortune 1000 you can come in you clock in you leave and you're typically going to leave on time if not a little bit even earlier no one's going to take notice no one's going to know and say your typical job expectation is this much you hit it you're good you'll get your three to five percent raise every year everything is good safe no one bothers you right and that's many people's jobs when they work for Fortune 1000 company when you work for a fortune 1 million company or a 1 billion company which is a startup obviously understand what I'm saying here it's a startup and here's how a startup works it's non-stop it's constant you're wearing multiple hats you may have one job two jobs three jobs you may sit there and have a job description of what you're doing sometimes you may do two other jobs outside of this because it is a startup so everybody's wearing different hats one minute I'm wearing this hat the other minute I'm wearing this at the other one that I learned is that it's startup now here's a good Bad and The Ugly the ugly is it's constant the good is if you stick around a startup and you do something big long term the big money is made many times by being part of a startup and you bring value to the company but for you which do you prefer do you want more of a fortune 1000 type of a company where it's safe it's secure and it's quiet and nobody bothers you do you want to be part of something we have the pride that you build something big together you'd be amazed how many people just say well you know I really have to think about this decision you know what they're saying when they say that that they don't want to be part of a startup they want to go to a safe place but you know how many times when I open openly talk to people like this you know what they'll say 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 to work like I don't care how much they pay me my life is boring I need some excitement in my life I want to come be part of a startup company phenomenal then let's go do something together but I don't have the money to give you an expense credit card I can't afford to give you the kind of salary others are paying you right now because this is how much money we have that we're working with we've raised this much money and I can't overpay you are you okay with that but in the back end we can do XYZ again hiring prematurely or over hiring when you don't have the money nor the luxury and you need to manage the expectations up from with the people you're hiring so they know exactly the kind of situation they're getting themselves into number three the Savior consultant avoid these guys they'll come in and this is what they'll sound like oh my God this is your business let me tell you my background here's what I did for only fifteen thousand dollars a month with a six-month contract I'm going to be able to help your company get into all these different markets and we're going to help this company do this this and you're sitting there saying oh my God guys I found a savior consultant this guy's gonna take us to the next level I know you pay this guy fifteen thousand dollars for six months nothing happens first month you ask him in the sixth week hey man you know I paid you to fifteen thousand dollars what is really going on well first month was really learning and we're kind of going through our needs analysis the second month is this really you're gonna start seeing the impact of what we do for you by monthly or month four if you've gone through this you've heard this script before be careful with these savior Consultants very careful the way I hire a new consultant this is how I do it let me give you the right script hey uh Johnny I appreciate the fact that you're an incredible consultant how much do you believe in what we can do here as a company oh I fully believe you guys can pull it off if you guys do the right things fantastic here's what I'd like to do with you I'd like to see if you really believe 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 twenty five hundred dollars and on the second month you know 3 500 on the fourth month on the third month forty five hundred dollars and fifty five hundred dollars and not a contract but if you do me good and you hit these markers that you believe you can do by the ninth month give you a thirty thousand dollar bonus if you hit these markers but I pay you by the ninth month because you've also helped grow the company and marketing and this and that and blah blah blah you'll see how many times they'll go like this oh oh I ca oh oh I can't do that they're trying to tell you that we're never going to do in the first place or they'll say the following you know what I understand what direction you're going I can't respect the fact that you're a startup and times are a little bit weird right now I'm willing to work with you that's fair because I'm confident what our team's going to deliver salute let's do business together but manage expectations with higher hire Consultants from day one or else you're going to be wasting a lot of money number four lavish employee perks let me tell you A lot of times people are like well let me take these guys to a nice restaurant or let me do this and let me do that here's what I did okay to build a relationship and take care of my employees for the first about a year and a half when I started my own insurance company in 2009. every Tuesday night and every other Sunday I would barbecue for you but here's what I would do I would go to local Vallarta okay and I would buy carne asada okay and I would buy chicken uh I like chicken uh Thai and I would marinate it with my own chipotle sauce and I would put some beer wine and certain seasoning that I use in certain middle eastern seasoning and I would cook for you that chicken would cost me 30 bucks but I would bring it and they would see me cooking for them just the fact that I'm spending time cooking for my guys showed a lot of support to them they liked it and I'm showing value in them when you're small and you don't have a lot of money you don't need to take people to high-end restaurants to impress them not at the beginning that can come later on but not at the beginning best way to do it maybe you cook for them to save yourself that money and establish deeper relationships number five buying expensive tools look no matter what you're doing whether it's going to be a hub spot or you're going to be tracking your CRM or this or that there's going to be so many different tools that you can buy and you will be tempted to want to buy the highest model tool that you want to buy for whatever you're trying to pick up for us for insurance I had the option to buy quarter million dollar software versus a hundred thousand dollars software which is a 25 000 software you know which one I picked I went with the twenty five thousand dollars then we upgraded into the hundred thousand dollars then we upgrade into a quarter million dollars and then eventually we upgrade into the 10 million dollar software that helped the company become a tech enabled company but don't be don't sit there and say oh my God if we only had that software we'd blow up totally get it you may not be able to afford the top of the line software they want but start with what we have and a lot of times when you work with a company you can buy the shell and build up but the biggest factor is if you know you're going to make your company win long term get used to selling your partners of how valuable of a partner you're going to be if they buy into your meaning you may many times I would say John I can't afford to pay a hundred thousand dollars but I'd like that software well Pat we can't afford to give it to you why don't you start with the 25 000 Auto one I said I totally understand it I'm quite to be honest quite honest with you 25 000 is even a lot for me however here's what I'd like to do with you what's that how about if we do twenty five thousand dollars up front and I get the hundred thousand dollar software but 12 months from now I give you another twenty five thousand dollars and then two years from now I give you another twenty five thousand dollars and in three years from now if this thing's going the way it's going instead of paying you a hundred thousand dollars by the 30 I pay 125 000 meaning the last check is fifty thousand dollars and they'll sit there and they'll say what is a US given a software anyways it's not like we need more employees he's now going to be using more employees he's not going to you know what great here you go take the 100 000 software with a three-year contract by the end of the third year instead of paying the 25 000 just pay fifty thousand dollars rather than getting a hundred thousand dollars we got 125 000 but what did I get in return I got the hundred thousand dollar software up front for only twenty five thousand dollars and I was able to stretch the dollar and pay 125 over three years so I saved myself money up front which is when I need to cash the most because if you go out of business by the second year you're not going to have to do the whole thing the person's taking a risk I'm buying into knowing you're going to be there long term but you're also selling yourself to say I'm going to be in business and if I am for your loyalty I'm going to give you an additional twenty five thousand dollars that's the point with the conversations you need to have not necessarily the tools we need to sell this to people you're going to be partnering up with number six business travel look at this point when I travel I'm generally traveling in a private jet and Life's a different life today but here's what most people don't know about up until until my 10th year of running an insurance company I flew coach myself I would fly coach so this means we have millions of dollars on the bank and I'm still flying coach and people are asking why are you still flying coach now don't get me wrong when you fly coach a long time with American Airlines you eventually get upgraded to business and first class So eventually when I became executive Platinum for flying constantly six months out of the Year guess what happens you're naturally going to be upgraded to first class without having to pay for it but I wouldn't coach for a long time why you know because there's different philosophies here some people say you should drive you know fly private from day one because it gets your identity to realize you belong at the top and first class is the way to go no problem I sat there and I said uh you got about 200 flights a year your coach is going to be 450.

first class is around 1500 to 2000 200 000 that's going to be thousand dollar savings times 200 that's 200 000 in savings over the year two hundred thousand dollars in savings is four employees at 50 or one c-suite executive about 200 000 I'm good with it then I would take the 200 000 and look at the valuation of a company if I did a two 12 times ebitda 12 times 200 it didn't cost me two hundred thousand dollars that was a 2. 4 million dollar expensive evaluation the company so somebody's it's only 200 000 no no no no no no it's 2.