When To Take The Chips Off The Table Ep 184

Summary Notes


In the Gym Secrets podcast, the host emphasizes the importance of prioritizing personal profit extraction from a business, distinguishing it from reinvestment. He advises gym owners to draw as much money as possible from their single-location businesses, rather than expanding to multiple sites unless aiming for franchising or licensing. He cautions against spending on non-essential business items and instead recommends investing in personal skill development. The host also suggests maintaining financial discipline by regularly draining business accounts to a set level and closely monitoring cash flow. He underscores the cyclical nature of business and the necessity of preparing for downturns by saving during prosperous times.

Summary Notes

Objective of Business

  • The primary goal of a business is to generate profit.
  • Profitability distinguishes a business from a nonprofit organization.

"The objective of a business is to make a profit. That is the point. That is what separates it from a nonprofit."

This quote emphasizes that the fundamental aim of a business is profit-making, which is the key differentiator from nonprofit entities.

Personal Wealth vs. Business Growth

  • Business owners often face the dilemma of reinvesting in the business versus taking money out for personal gain.
  • It is recommended to prioritize personal wealth as businesses can be transient, but the individual remains constant.

"And so it is my belief that you should take as much money as you can out more than you probably feel comfortable with."

The speaker advocates for extracting more personal wealth from the business than might feel comfortable, suggesting that this strategy encourages thinking like a business owner focused on profitability.

Reinvestment Strategies

  • Reinvesting in oneself is always encouraged, while reinvesting in the business should be more strategic.
  • Business owners should consider the long-term game and when to secure personal financial gains.

"So as business owners, we're always trying to grow, we're always trying to reinvest in our businesses. And a mistake that I see happen many, many times and something that I made earlier on in my business career was reinvesting in the business."

This quote highlights a common error where business owners overly reinvest in their businesses at the expense of personal financial security.

Business Models and Growth

  • Single-location businesses should focus on maximizing real-time profits.
  • Expansion through multiple locations is often less profitable and should aim at proving a concept for licensing or franchising.

"And so if you have a gym, right, a single location, and you enjoy running the gym, you enjoy that business, then the objective should be to make as much money from that business in real time, which means month over month, you take as much money as you can out of the business."

The speaker suggests that owners of single-location businesses, like gyms, should concentrate on extracting maximum profits on a regular basis, ensuring the business serves the owner's financial interests.

Licensing and Franchising vs. Multiple Locations

  • Owning multiple brick-and-mortar service businesses is often not substantially profitable.
  • The real financial benefit comes from licensing and franchising after proving a business concept.

"For me, in my opinion, the only reason to have multiple locations is because you're trying to prove a concept so that you can then go into licensing or franchising."

This quote explains that the primary reason for expanding to multiple locations should be to establish a business model suitable for licensing or franchising, rather than simply increasing the number of service locations.

Mindset for Profitability

  • A mindset focused on the necessity to make money can lead to better business decisions and increased profitability.
  • This approach may seem counterintuitive but has been observed to yield positive financial outcomes.

"And what's weird is that a lot of times when you think from the frameship of shoot, I really need to make money, you tend to make money, right? And that means that your business actually gets better."

The speaker points out that a mindset fixated on the urgent need to generate profit often results in a more successful and profitable business, suggesting that pressure can enhance performance.

Financial Management for Business Owners

  • The speaker discusses the importance of financial self-awareness and discipline for business owners.
  • They emphasize the need to make informed decisions when it comes to reinvesting in the business versus taking profits.
  • The concept of running a business lean and being cautious with expenditures is highlighted.
  • The speaker provides an example using gym profit margins to illustrate the impact of spending on equipment on the bottom line.
  • They stress that poor spending decisions can significantly affect both current profits and future business valuation.

"The only outcome, besides opening in a location for the desire to franchise or license that model would be an exit, meaning you're selling the location."

This quote outlines the two primary outcomes for a business owner: expanding through franchising/licensing or exiting by selling the business.

"But the thing is, if you're selling the location, you're going to want to show as much profit as possible if you're consistently putting money back into the business."

The speaker points out that showing maximum profit is crucial when planning to sell a business, as reinvestment can affect the sale multiple negatively.

"You have to be incredibly disciplined to not just spend the excess on fun stuff or things that you think might make money."

Discipline in financial management is highlighted as key to avoiding unnecessary or unprofitable expenditures.

"So if it's like I'm going to go buy $4,000 worth of equipment, I'm going to use the example. Now, if you know what your profit margins are, which the average gym runs twelve and a half percent... to make $4,000 in profit back then you're going to have to make eight times that in revenue to make the 4000 back."

Using gym equipment as an example, the speaker illustrates how spending affects profits and the corresponding need for increased revenue to compensate for those expenses.

"So if the profit at the end of the year is $5,000 less, that is actually losing you $15,000 on your actual sale number."

The quote explains the direct relationship between annual profit and the potential sale price of a business, emphasizing the multiplied effect of reduced profits on business valuation.

"And so it's really difficult to make that money back, especially if I'm being real. For the majority of people who are small business owners, the things that they choose to spend money on are stupid."

The speaker candidly addresses the common issue of poor spending choices among small business owners and the difficulty in recouping those funds.

Personal Development and Skill Acquisition

  • The speaker suggests that business owners should invest in personal skill development rather than unnecessary business expenses.
  • They argue that enhancing one's skills can lead to greater returns than investing in the business itself.

"Leveling up your skill set is going to do more for you than probably anything that you can invest in the actual business itself. In terms of buying stuff, your skills will make you money, right?"

The speaker advocates for personal development, suggesting that investing in one's skills can be more profitable than investing in business assets.

Promotion of Speaker's Book

  • The speaker promotes their book, "100 million dollar offers," which they describe as a significant contribution to the community.
  • They mention the time invested in writing the book and its success on Amazon.

"I have a book on Amazon, it's called 100 million dollar offers that over 8005 star reviews. It has almost a perfect score."

The speaker introduces their book, highlighting its positive reception and high rating as a means to build credibility and interest.

"You can get it for Kindle. The reason I bring it up is that I put over 1000 hours into writing that book and it's my biggest give to our community."

The speaker emphasizes the effort put into the book and frames it as a valuable resource for the community, encouraging listeners to engage with it.

Partnering and Investment Strategies

  • Speaker A suggests the importance of partnering and investing in oneself.
  • They believe that unless one is making a substantial profit, the focus should be on acquiring new skills.
  • The acquisition of skills is tied to overcoming deficiencies in one's abilities or character traits.
  • Investing in communities and connections is vital for breaking false beliefs and advancing one's potential.

"I can potentially partner with you."

This quote indicates Speaker A's openness to partnerships, which is a strategic move for business growth and development.

"And so that's what you should invest in."

This quote emphasizes the importance of investing in oneself, particularly in skills and personal development, as opposed to other areas until one is highly profitable.

Financial Discipline in Business

  • Speaker A advises on the necessity of financial discipline by regularly extracting profits from the business.
  • They recommend setting a fixed amount to withdraw each month, regardless of the business's financial status.
  • This practice is meant to instill discipline and prevent excuses for not saving money.

"When you are running the business every month, take as much as you can out, have a number that you drain the bank account to every single month."

Speaker A is advocating for a consistent approach to financial management, suggesting that business owners should have a set amount they withdraw monthly to ensure personal liquidity.

"You drain it. You rip the cash out and you stack it and you do that every single month."

This quote reinforces the strategy of regularly extracting profits from the business to create a personal safety net and to encourage financial discipline.

Monitoring Cash Flow

  • Speaker A practiced monitoring all liquid assets daily until the business's cash flow became substantial.
  • Regularly tracking finances helps in understanding the flow of money and identifying patterns in income and expenses.
  • Being mindful of one's financial status can lead to better financial decisions and increased net worth.

"I looked at the total bank accounts of all assets, my personal, my savings, everything that was cash, that was liquid across all accounts every morning."

Speaker A describes a meticulous habit of daily financial review to maintain awareness of their financial situation, which they believe leads to better financial management.

"And the thing is, if you look at that in the beginning, you're not going to do it. It's going to be uncomfortable."

This quote acknowledges the discomfort that can come with starting a new financial habit but implies that the practice is beneficial in the long term.

The Importance of Saving During Good Times

  • Speaker A warns against the dangers of reinvesting all profits back into the business without saving.
  • They recount a cautionary tale of a business that failed due to a lack of savings when times got tough.
  • Consistently saving cash provides a financial safety net and a sense of achievement.

"So rip the cash out as much as you can every month, because both. That's going to increase your net worth, right."

Speaker A stresses the importance of saving money from the business to increase personal net worth, rather than leaving it all within the business.

"But they'd have a dollar to show for it now, if during the good times, they'd been consistently stacking cash."

This quote illustrates the missed opportunity of a business that did not save during profitable periods, which resulted in financial instability during challenging times.

Financial Management and Profit Taking

  • Emphasize the importance of taking money out of your business regularly to ensure personal gain and material security.
  • Discusses the concept that character, beliefs, and skills are the ultimate end goals, but acknowledges the tangible benefits of financial security.
  • Highlights that while money doesn't equate to happiness, it can prevent certain pains and hardships.
  • Stresses the importance of being financially prepared for unexpected personal expenses, such as the need for a special tutor for a child.
  • Advises against unnecessary reinvestment in business when it doesn't contribute to growth.
  • Encourages discipline in financial management to make a business more attractive to potential investors.

all the money that I had made vanish. And I can tell you it's soul crushing, and I don't want that to happen to you.

This quote illustrates the personal experience of losing all earned money, emphasizing the emotional impact and serving as a cautionary tale.

Just take money out every month so that you have something to show for it now, no matter what.

This quote suggests a strategy for ensuring that one always benefits financially from their business endeavors by regularly withdrawing profits.

money can't buy you happiness, but poverty can't buy you anything.

This quote contrasts the limitations of poverty with the common saying about money and happiness, highlighting the practical necessity of financial resources.

money can't buy you happiness, but it can sure help you avoid pain.

This quote acknowledges the practical benefits of money in alleviating life's difficulties, despite it not being a source of happiness.

take your chips off every month. It's not helping you grow your business.

This quote advises business owners to regularly secure profits as ongoing investments may not always contribute to business growth.

If you want to exit, it's still going to increase the value of your business by being disciplined in that process.

This quote points out that disciplined financial management, including profit-taking, can enhance a business's value for a potential future sale.

Business Cycles and Market Conditions

  • Discusses the cyclical nature of business and the economy, with ups and downs being an inevitable part of the cycle.
  • Advises taking profits during good times, as these are the most opportune moments before a potential downturn.
  • Mentions the flipped yield curve as an indicator of borrowed time, suggesting caution and proactive financial actions.

the game of business is cyclical, right? After every good time, there's a bad time.

This quote explains the cyclical pattern of business, where positive periods are eventually followed by negative ones.

Take some chips off the table, all right? Because you don't know what's going to happen.

This quote advises securing profits while times are good due to the uncertainty of future market conditions.

Strategic Internal Financial Plays

  • Recommends running internal financial strategies with existing clients to generate excess profit.
  • Suggests that this excess profit should not be reinvested but taken as personal earnings.
  • Emphasizes that withdrawing money from the business increases personal net worth more reliably than reinvestment does.

Just take some, scrape some cash off. Make sure you run internal plays to your existing clients at least four times a year.

This quote advises on creating additional profit opportunities by offering deals or promotions to current clients multiple times a year.

the number one thing that is guaranteed to make you more money is more money.

This quote highlights the concept that having money itself can lead to more financial opportunities and growth.

if you invest it, it is not guaranteed to do that.

This quote contrasts the certainty of increasing net worth by taking profits versus the risk associated with reinvesting in the business.

Personal Reflection and Engagement

  • Shares personal thoughts and feelings on the topic, indicating a desire to provide useful advice based on experience.
  • Encourages feedback and interaction from the audience, showing openness to different perspectives.
  • Ends with positive reinforcement and a promise to share more insights in the future.

this one was on my mind, so this is what I was feeling like.

This quote reveals the speaker's personal investment in the topic, suggesting that the advice shared is both timely and significant to them.

And comment if you do dig it. And if you don't, then I'm sorry, but hopefully you did.

This quote invites the audience to engage with the content and provide feedback, showing a willingness to connect with listeners.

Keep being awesome and I'll catch you on the flip side.

This quote closes the conversation on an encouraging note, suggesting ongoing interaction and support for the audience.

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