Boom, shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. Brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like This Old Marketing. Today, we'll be breaking down how to make money but not feel broke. To drop these vibe bombs, I have brought David Richter in the EO Fire Studios. David wrote profit first for real estate investing and owner of Simple CFO.
David helps owners keep more of what they make and not feel broke. And today we'll be talking just about that. We'll be talking about what are we doing wrong, Fire Nation, if we're actually making money in our business and still feeling broke, the three most important numbers to know as an owner. The first step you need to take as an owner to turn this thing around and owe so much more. And the big thank you for sponsoring today's episode goes to David and our sponsors.
The next wave, your chief AI officer hosted by Matt Wolf in Nathan Lance is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. AI technology is transforming the way we do business in the media landscape is fragmented. The next wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to the next wave wherever you get your podcasts.
Looking for an easier, safer way to manage passwords than a million post-it notes? Welcome to LastPass, the most accessible and easy to use password manager on the planet's visit's lastpass.com slash fire for a free trial and get started today. Every login lives in LastPass. David, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.
What's up, Fire Nation and John's super excited to be here. And as far as success goes, I believe I, I'm a author of a profit first book. So I feel like you have to put the things in your life first that you want to and not just work in the hustle, the grind. I think hustle is a season, not a lifestyle.
Uh, so that might go against the grain a little bit. I like putting in my wife, my daughter, those types of things in and the workouts and that stuff. And then the work does fit in there, but I want to make sure that I leave this earth and have the people around me that love me and I don't drive those relationships into the ground. So, but that also fuels, I believe my passion for what I do on the day to day basis too.
I love that message and Fire Nation. I really hope that you're going to get a lot out of today's conversation all about how to make money, but not feel broke. And as David did quickly mention, he is the author of Profit First for Real Estate Investing. And quick note, the author of Profit First, Michael McAllowitts, I read his book, Toilet Paper Marketing,
back in 2011 while I was on a vacation with my family in Cancun. I was working in commercial real estate. I was not super happy at all. And that book gave me a little spark. It wasn't like the flame, but it gave me a little spark to be like, you know, there's something.
else that's out there. And about a year and a half later, I launched entrepreneurs on fire. And of course, the rest is history. But I always love giving Michael McAlliwitts a nod for his past books. Of course, profit first was huge. And I've had him on for other books as well. And David, it's great to see that you kind of took what he did, you know, just in general, and really developed the niche within real estate investing. So very powerful stuff. And we have a lot to talk about because
If we're being honest with ourselves if we're making dollar dollar bills but we still feel broke we're probably playing the game wrong incorrectly. What are we doing wrong and what is the right game. So a lot of entrepreneurs go out there and they think that it's just more income more deals more whatever more sales.
And I feel like that is something that holds us back, that mentality. Cause if you're going to make sales, you need to also keep it as well too. And a lot of people think that whatever industry they're in is the game they're playing, whether it be real estate or being in restaurants or salons or whatever it is podcasting. It's like that's not the game you're playing. All of us as entrepreneurs play the game of money. That's really at the end of the day, we're getting the money to fuel the things are, whatever financial freedom looks like to us. And that's where no one's really taught us.
the game of money. And let's be honest, John, the most accountants, bookkeepers, those types of people, if you say the word QuickBooks on a podcast like this, everyone wants to probably just burn me down. You know, it's like, I'm not going to go into that, but that's what most people think of on the financial side. It's like, good God, like if you're going to make it, we have to teach you the skill of keeping it and let you know you're playing the game of money. So you need to know how to set it up and how to win.
Now, I know that I was in this camp back in the first couple of years of my business. I mean, we make money, it's coming in the door, but we feel broke. And the minute we feel like we get a little bit ahead, boom, this tax bill comes in, boom, this becomes due, boom, that happens. Why, David, why? I believe that all of us want to be great entrepreneurs. We want to feel our passion. We want to go out there and help people. We want to do the things that matter to us. And then the money trips us up.
Because we have the mentality that's force fed to us. I love how in profit first, he, Mike McCallus does say everyone out there teaches the formula sales minus expenses equals profit. You make a sale and you pay everyone else and their mother. And then hopefully at the end of the day, you have some profit, like maybe at the end of the day or when you sell the business or whenever it's just that one time future event that you're looking for.
Instead of making profit a habit every day of your life in your business and really playing the game of money to win, I think the other big thing John is no one really teaches this stuff. If you went to any type of traditional schooling or traditional college, finances were not one of the things that they taught us. Maybe they taught you how to write a check.
I'm old enough to where I took that business class course in high school where they taught me how to write a check, but not where to put the money or not what to do with it or how to be a good steward of it. If I'm going to make the money, how do I actually keep it? So it's a lot of those things that are force fed to us growing up. And then unless we break away,
Because here's the crazy thing too, John. A lot of us break away as entrepreneurs because we want to be different. We don't want to go with the flow. We don't want to do what everyone else has done, but then we're no different than all the sea of entrepreneurs that are making money and feeling broke. And it's like, I want you to be a different entrepreneur by actually having money in your pocket, being able to pay yourself, go on the vacations, do the things that you love on the journey and to be able to sell one day and say, bam, this was all worth it along the journey and at the end.
I literally cannot believe the life skills that we do not learn, the basic life skills until we end up having to teach ourselves or find some fortunate mentor who's like, oh my God, let me just take you aside here and show you these things because it is crazy how little mistakes that you can make and big mistakes, of course, as well. But even little mistakes that you make at a young age, they can really come back and haunt you. I mean, people have been paying back debts that they made
when they were 16, 17, 18 years old because they didn't understand what they were getting into. They didn't understand the process and it came back to haunt them in a big way. But I want to start at the beginning, David, what is a good first step to keep more of what you make as an owner? So I would say there's two things, the mindset and then the practical step. The mindset is if you have read prophets or never read prophets, it boils down to
Reversing that formula I said before instead of sales minus expenses equals profit. It's sales minus profit equals expenses, meaning I make a sale and I make sure I'm healthy. The company's healthy. A for profit business actually has profit. And then you pay the expenses from there. So you're filling in the first things first, which it's the same principle we've read in like rich dad, poor dad or the richest man in Babylon. All those books say the same things like pay yourself first or some version of that.
But what I loved about profit first of why I even went out there and wanted to write my own version was I wanted to make sure that there was a system to for that for entrepreneurs. That was simple to follow. So honestly, the simple system is profit versus built on the envelope method. So instead of using envelopes, you're going to open up specific bank accounts and you're going to name them. So you name every dollar that's flowing through your fingers.
So you don't have the big black hole bank account that most entrepreneurs have, that one big bank account where money comes in, money goes out into the swirling vortex of doom, never to be seen again. And that's where if you have these accounts and you name them, that's what we go into in profit first. And like the first thing I like to tell people is there's a very simple framework that most people don't know in business where what is the three numbers I need to know the most and what are the three most important numbers in business and what you make, spend and keep.
So you could start there with bank accounts. What do I have an account where the money comes in? So I know how much is coming in a bank account for where I spend and how much I spend and the return on that spend. And then how much do I get to keep? How much do I actually get to take home and pay myself as an entrepreneur? Cause I'm building this thing, not just for posterity or for legacy, but also today to feed the family and do the fun things and have that financial freedom. So I would honestly like a simple first step.
is, and I know it sounds so simple, but it has to be simple and it has to be something where I'm not teaching you a QuickBooks or the profit and loss, the balance, going into something like that on this podcast. It's literally you are already opening up your bank accounts every single day to look at them. Why don't we harness what you're already doing as an entrepreneur, open up some of these bank accounts and name your money. So it's not just one big jumbled mess. You have no clarity. You don't know what to do. You don't know what decisions to make. And now you can be focused on
Where is my money? How much is coming in? How much is going out? That's a good first step. And of course, profit first is much deeper than that with the different bank accounts and different things that you can do. But that would be a great first step that no matter where you are, if you're at like your first $10,000 in business or your first $10 million, it's like you can start there and just get more clarity from the cash perspective.
swirling vortex of doom. I mean, if that didn't hit you at your core, what will? Because we've all had that situation where money's coming in, money's going out. And we look at the end of the month and we're just like, I know I made a lot of money and I know I spent some money, but I have nothing or I'm in debt or I just have a little bit left over. Like what is happening? What is going on? We really don't know what gets measured, gets improved. That's a Peter Drucker quote, it is so true. And you will,
touched upon the three most important numbers. We're actually going to do a deep dive in a little bit here on those because it's really important to understand that entirely. But before we do, I do want to mention I wrote back in 2021 the common path to uncommon success. It's a 17 step roadmap to financial freedom and fulfillment.
And guess what? The first 16 chapters are the first 16 steps. They're very important. They're very critical and they will get you, in my opinion, to a fantastic place of making money. But guess what? Chapter 17 is David. It is called keep the money you make. That is literally Chapter 17. It's the final chapter in the book. It's the final step in the process because I know so many people.
who have done everything right with their business and they're making all the money and they're doing all the things, but they don't have any money. They don't have anything left over. So they're having to continue to grind and not spend time with their family, with their loved ones, exercise, health, those different things that we mentioned in the beginning of the episode. And that is so sad. So keep the money you make. That's one reason I moved to Puerto Rico, where I went from paying 51% tax.
to 4% tax, because I'm sure, David, you can agree that that's one way to start keeping more money that you make for sure. And then what you can do with that money, investing in your business, investing in other businesses, investing in the stock market, investing in crypto, if that's of interest to you. Whatever that might be, it gives you opportunities to do that when you are keeping the money you make. And it's really exciting. And we have so much more to talk about around this topic when we get back from thinking our sponsors.
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Last pass dot com slash fire. David, we're back. And as I mentioned before the break, you did touch upon those three important numbers that we need to know, but I really want to do a deep dive on those now. So as a business owner, we have to respect numbers. What are the three most important numbers that we need to know as an owner as an owner?
Those three most important numbers are what you make, what you spend, and what you keep. I want you to know what's coming in, what's going out, and what do I get to keep at the end of the day. And this is especially from the cash perspective, like how much cash actually came into my business, how much went out, and then how much did I actually get to keep and take home to my family and do the things that I wanted to do, or go out there and spend the money on what I wanted to spend it on.
And a lot of people don't have a simple framework for those three numbers. And a lot of us, if you're listening to this, you're a problem solver. You'll probably identify as a problem solver. If you don't know those three numbers in your business, you're usually asking the wrong question and solving the wrong problem.
because we just think that it's always a marketing issue or a leads issue. And while a lot of times it can be that, like you're just not getting enough of this in the door, is that really the end result that you're looking for? Or is it, hey, we're already getting the leads in, but why aren't we converting more? Or why aren't we able to keep more of the money in our bank account? It's like we're making all this money, but where is it going? And that's where if you can get a handle on those three, even from the bank account level to know what's coming in, what's going out, what do I get to keep?
You put more power in your hands as an entrepreneur and the power to make better decisions and solve the right problems in your business.
Fire Nation, so many exciting things to wrap your head around. And one thing I have realized, having done this podcast now for 12 plus years, David, for over 4,500 episodes, entrepreneurs are competitive. We are on fire. We want to win any game that we play. I don't care if it's dominoes, if it's Candyland with my four year old niece, like I'm taking that little shortcut ladder that she doesn't really understand yet.
I don't care. I'm taking it. How can we set up the game of money to win, win, win, no matter what? So the big piece of setting it up to win is getting those three bank accounts in place. Like I want to reiterate that if you're going to play the game of money to win, you need bank accounts that are helping you along that journey because that's what you as an entrepreneur are probably managing right now. That's what I just see out there for all the
the hundreds and hundreds and hundreds of businesses that I've seen this with. It's usually they're looking at their bank accounts and making big money decisions. If I have money, great. Let's spend it. I don't have money. What do I do to get it or where? Well, I'm not going to spend the money today. So a great way to set it up is giving you that chance to win by setting up those first three bank accounts, what I make, what I spend and what I keep. A lot of people already have that spend account. That's that swirling vortex of doom or the, you know, the out for the black hole bank account.
But then set up one to make it to see how much is coming in. So when you get money in, you can see how much in a month did I actually get? What did I actually spend from that spend account? And then you get to transfer money from there into the keep account and making sure that you're actually keeping the money. That's where I would set it up first. Another big step up front, which actually doesn't take anything but you sitting down and really asking yourself some good questions.
It's how much do I need from my business? I like teaching people. Find your keep number. How much do I want to fill up that keep bucket with? Do you know how much on a monthly basis you need from your business in order to feed your family? Do all those things have the lifestyle that you've built up to this point where it's like finding your keep number is also another very first important step.
because so many entrepreneurs, even if they start playing the game of money and in their mind, they're winning because more is coming in than going out. But if they're not pointed towards what they want, like, why did I start this day in thing? Why did I start my business? And that's what the key number should be pointing to is, hey, I'm going to make sure my bases are covered. I'm getting out of my own rat race here and making sure that I can actually have a business that pays me. But then what do I really want from the business? How much do I want to get from the business?
And then do what I want with it, whether that's giving to charity or going on vacations or buying the house or moving to Puerto Rico. When you want to, it's like, that's where getting those first things, because a lot of people, not only do they play the wrong game, they don't know they're playing the game of money, but then if they are playing the game of money, they're not playing their own game.
Like this is your game. No one else's. You need to make sure that if you're going to win, like you're winning for you. So that way you go out there and that if you build a big business and you have a lot of money coming in, you're not like, Oh my gosh, what did I do? It's more like this is awesome because here's what it's providing for me and why I started this thing. And then those bank accounts literally back up your why. If you have a keep account, it is backing up the
This is why I started this thing. This is what financial freedom means to me. And now I have something physical and tangible that I can go to and pull money from in order to support that cause, my cause of why I got into entrepreneurialism and why I became an entrepreneur and why I keep going when the going gets tough.
Fire Nation, when the going gets tough, the tough get going period end of story. And I had David think a little bit before we chat here today about a case study, a specific example or two of people that he's seen apply these principles, apply these steps to great success. So David, give us one or two of those examples.
One guy, his name is Joey English. I met him at a mastermind several years ago. It's probably been five years ago now. And he got in front of everyone and was like, and he started crying in front of the whole room. And we're like, what's going on? And he said, and he told us the story there, like my wife started working the business. She started having seizures. I started working 80, 90, 100 hour weeks. I'm just trying to grow and scale at all costs. Like I know we could do more, more, more. And then he said something I'll never forget from there. He said,
I did more deals and made more sales last year than I've ever done, but I lost more money than I've ever lost. Cause my CPA told me at the end of the year, like you lost $70,000 from your business would have been better for you to work at McDonald's. And like he's feeling like two inches tall. So we got on a call afterwards when he told that story, cause people had heard, you know, about profit first and what we were doing. And then I sat down with them and went through these steps and just guided him like you're playing the game of money.
even though you're in this industry, he was in the real estate world, even though you're in real estate, that's not really what you're playing. You could do all the deals in the world, but if you don't have the money at the end of the day, it doesn't matter. So he very much grasped onto this right away because he was sick of it. He was sick of them making the money, made more than he ever made, but like didn't have anything to show for it at the end of the day. So then he went back and found his keep number.
with his wife of like, okay, this is how much we need to bring in. And instead of scaling up so much, he came back to me and said, David, I only need to do like five flips next year as an entrepreneur. Like I need to go out there. I thought I need to do like three or four a month. I needed to grow and like have seven figures coming in. And he's like, no, actually I only need to make about $300,000 a year to bring home what I need to bring home. And he's like, that was just such a weight off my shoulder. Then the next step, he opened up those bank accounts to make spend and keep. And he,
He everyone, when we start working with him, gives us crap about, I got to set up multiple bank account, blah, blah, blah. And so he gave me that. And I'm like, did you like losing $70,000 last year? Like then just trust me. Like, so he opens up the bank accounts and then the very first year, the very first year he came back to me at the end of the year. And he said, David, I was able to take a mini vacation with the family from, you know, my keep account where I would never have done something like that before. Cause I was scared of taking money out of the business.
And then honestly, he took it to the next level. He actually got these habits in place of knowing what he made, spending cap, making sure he had the money in the different buckets. Last year, he filled up all his profit first accounts by June and didn't need to do any more sales the rest of the year because he was also keeping the money too. He just wasn't making it. He had a system to keep it. And in that bank account, Andy took like a three week road trip with his family because his big Y was spending time with family and giving the charity, but the big kicker
This is why I love this story. He texts me at the beginning of this year when we're recording this. And he said, David, I actually was able to give to this camp for kids that I've always wanted to give. And he texts me the number and it was like $71,000 and four cents or something. And I called him right away. I'm like, Joey, do you remember when we met years ago, how much you lost that first year? And he was like, Oh, dang. And I could hear the light bulb pop over the phone.
And he said, yeah, $70,000. And I'm like, yes. And you gave more in this last year from your system and didn't touch like what you make or what you spend. It was all from what you wanted to give because he set up an extra give account because he wanted to give to this camp for kids. And he didn't touch any of his other money system. So that's like one of the ones where weaned into it hard.
and keep seeing the rewards and it keeps getting greater because the money habits grow as you grow. Just think about it. If you're doing 100,000 a day, if you're doing 100,000 in top line and you don't have good money habits, where do you think you'll end up at seven figures? Or if you get good money habits wherever you are now on your journey, think of yourself five years from now, where will you be? And that's where Joey's story just hits on that point because it's like five years ago from $70,000 in the hole to this year, gave
$70,000 to a camp for kids, but still was able to take the trips and do all the other things he wanted to. So that's definitely one of the ones I love telling the most. Well, I always love hearing stories like that. Real world examples. So you find nation can see yourself in the shoes, literally and figuratively of other individuals. Now, David, if there was just one thing, just one thing that you would really want to make sure of Fire Nation understood, walked away with, did not forget from our conversation today. What would that one thing be? I always tell people,
If there's one action you can take after listening to me talk, just open one other Dane bank account. Just so that way, you can transfer even if it's 1% of everything you make. Open up one bank account transfer, 1% start to get into good money habits, where now you're not just spending everything you make, you're starting to build the wealth habits
of wealthy entrepreneurs and you'll be different. You will win the money game. You will be different than most entrepreneurs out there and you will build that habit. And then I've seen that habit as small as that is grow into keeping more than people have ever made or literally having five, six figures, seven figures saved up where they've never had anything before. And now they have that. So if you just start small, one bank account and 1%, can you start there to give yourself a better future?
for wherever you are going. And today you start with the good habits with your money. David, if Fire Nation wants to connect with you, wants to learn more from you, what is your call to action for our listeners today? Yeah, simple CFO.com forward slash EOF. So if they go there, they can actually get a copy of my book, the profit first book, and we give a profit first cheat sheet too.
So if you put a call with us there, that's what happens. And then from there, I want to make sure you know where your money's going and you're putting more money in your pocket. That's what we do all day long.
at Simple CFO and the company that I own. Fire Nation, you're the average of the five people you spend the most time with. You've been hanging out with DR and JLD today, so keep up that heat. For links to everything we talked about, visit eofire.com. Type David in the search bar. The show on those page will pop right up. David, one more time. What's that URL? Simple CFO.com forward slash EOF.
David, thank you for sharing your truth, your knowledge, your value with Fire Nation today. For that, we salute your brother and we'll catch you on the flip side. Hey, Fire Nation, a huge thank you to our sponsors and David for sponsoring today's episode and Fire Nation. Over the last decade, I've interviewed more than 4,000 of the world's most successful entrepreneurs, and I've created a revolutionary 17-step roadmap to your financial freedom and fulfillment.
I put it all into my first traditionally published book, The Common Path to Uncommon Success, personally endorsed by Seth Godin in Gary Vaynerchuk, The Common Path to Uncommon Success. It's the step-by-step guidance that you need to achieve the lifestyle of your dreams. Visit uncommonsuccessbook.com. I will catch you there or on the flip side.
The next wave, your chief AI officer hosted by Matt Wolf in Nathan Lance is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. AI technology is transforming the way we do business and the media landscape is fragmented. The next wave strives to be the leading podcast on AI technology and how you can apply it to growing your business. Listen to the next wave wherever you get your podcasts.
Looking for an easier, safer way to manage passwords than a million post-it notes? Welcome to LastPass, the most accessible and easy-to-use password manager on the planet's visit's lastpass.com slash fire for a free trial and get started today. Every login lives in LastPass.
