A Masterclass in Diversifying Your Income Streams with Keith Leimbach: An EOFire Classic from 2021

0:01Boom! 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 No Straight Path. Today, we're pulling a timeless EO Fire episode from the archives, so the giveaway may not be active, and we'll be breaking down a masterclass in diversifying your income streams. To drop these value bombs, I brought Keith Leinbach into EO Fire Studios. Keith had a 28-year corporate career, two IPOs, an 11-figure exit to Oracle, was an advisor to the POTUS, two CEO gigs, but was totally unfulfilled.

0:37For the last three years, he's created four new businesses, 10-figure revenue streams, and is happy as a clam. And today at Fire Nation, we'll talk about not being afraid, start something, pursue something. We'll talk about whatever you envision you're going to be doing three years from now, know it's going to look different. And don't feel like the first thing you think of is what you're going to end up doing. There's so many options and so much more, Fire Nation. And a big thank you for sponsoring today's episode goes to Keith and our sponsors. One of my favorite conferences to attend each year is HubSpot's annual Inbound Conference and is coming up fast.

1:13Join us in Boston from September 5th to the 8th, 2023 for an event like no other. Inbound brings together leaders across the business space, including sales, marketing, customer success, and operations teams. The goal at Inbound to help you discover all the latest trends and tactics you can implement in your business right now. Learn, be inspired, and walk away with practical tips to help you tackle your next challenge, supercharge your sales and marketing, and ignite your customer service. Inbound is featuring many must-see speakers this year, including Reese Witherspoon, Guy Raz, and Neil Patel, just to name a few.

1:51Whether you choose a general admission ticket or go the VIP route, you're sure to leave Boston feeling on fire. Visit inbound.com to get your tickets today. I remember that state of constant overwhelm with my ever-growing to-do list too. My solution, hire a VA and start delegating. Learn how to optimize your time with Belay CEO's latest book, Rise Up and Lead Well, where she shares the exact framework she has used with her own assistant to maximize productivity. Text FIRE, that's F-I-R-E, 255-123 to get your free copy. Keith say what's up to fire nation and share something interesting about yourself that most people don't know hey thanks john hi fire nation uh man that is a good question i asked my wife this the other day because i knew you'd probably ask me and she said you should tell people you have a podcast podcast isn't doing that bad it's actually growing that's pretty significantly but But I would say something that people don't really know is that I'm an avid and certified free diver.

2:56My son and I like to spear a lot of fish in Mexico. And when we're spending time doing it, I thought it probably makes sense to know how to do this safely. I'd hate to be the dad that did something bad and something bad happened. So anyway, we got certified down in southern Florida and really have a great time. My son is just an animal. He just did a four-minute, 19-second breath hold. And he's pretty awesome. Man, he must do that Wim Hof breathing exercise. I'm trying to implement that. That's funny. I just did a 90-second breath hold today, which I was pretty happy with. That's my top so far.

3:33And that's not, by the way, underwater. So it's a different ballgame. I might be breathing in a little bit of oxygen without even knowing it. So very impressed with your son. And I might have to invite you guys down to my little abode here in Puerto Rico because one thing I'm really trying to do, you know, I've got solar. I've got a garden being built out front. I'm like doing all these things to kind of go off the grid But i'm like hey if that next leg disaster comes or a hurricane whips through like I need to know how to Feed myself and my family and I think spear fishing off the coast of puerto rico here.

4:04It could be pretty fun Let's do that and it is really worth spending the time with people one who know how to fish But second really understand the science behind Breath holds because shallow water blackouts do happen. Yeah, and you don't recover So you need to dive with a buddy. You need to dive with someone that's paying attention to your diving and vice versa. And then knows what to do when something goes sideways because, you know, that's why you're there for each other. It's really good advice. I mean, one story that my dad tells a lot is when he was like dared when he was a kid to swim underwater like a couple laps of the pool.

4:35And he actually blacked out underwater. And luckily, there was a lifeguard that was able to save his life. But, I mean, he was probably minutes, you know, from being gonzo. So it is very, very important, Fire Nation, to do all the right things in that area. But back to the focus, a masterclass in diversifying your income streams. And Keith, you are a master in this. I mean, me personally, I had a very, very brief and lackluster corporate career. Yours was exciting and very successful. So why did you leave it all behind to become this thing called an entrepreneur? My dad was a great leader. And he told me once when I was growing up that he had always become the president or the leader in whatever functional name it was of every organization he ever became part of.

5:20And that was just kind of casually in conversation. But that's my dad. I just immediately took that into my soul as I must lead everything that I'm part of, which is kind of weird. But I remember graduating from college. And this is quite a while ago. And my roommate, Johnny Mattino, left me as my graduating gift a placard that I would put on my desk and it said Keith Leinbach, CEO. Because even then I was like, hey, I want to be a CEO. But when I was in school, I wrote myself a note to be opened on my 30th birthday. And I still have this note. And that happens to be a few years ago at this point.

5:56But I read it now and then because it's really enlightening for me that I didn't know the difference between these two things. One is I thought I wanted to be a CEO. And what I had wrote in that note to myself for my 30th birthday was, you better own your own business. You just turned 30. And so even then I knew what I wanted to be was an entrepreneur, but I had translated it into being a CEO. And those are very, very different things in lots of ways. And so when I graduated college, I went to school, I went to work for Accenture, which was Arthur Anderson back in those days. and I just immediately thought, you know, I'm going to be the CEO of Accenture.

6:34And then I stuck around there for nearly 10 years and ended up moving on to some different roles, but always with the aspiration to become a CEO. And then I finally became a CEO and did a couple of stints as a CEO. And two things happened. One is probably three things. The first is like, it's, it's very fulfilling from an ego perspective, but it is, that's kind of where you draw the line. The second thing is I don't really think I'm a very good CEO. There's probably stuff that I do as a CEO that's in the top 1%, but there's also a bunch of stuff that's in the bottom 1%, and you really need to be great kind of across the spectrum.

7:08I just don't think I am. And when I left the corporate world, then I thought, okay, I'm going to go create something on my own and really have a chance to lead and grow the way that I want to. Because even as a CEO, you report to the board. It's not like you don't have a boss. And so I just wanted the freedom to be able to do what I want, when I want, dress the way I want, and the list goes on. And for me, just me personally, and it's not for everybody, but being an entrepreneur checks a lot more boxes. And the thing is, that's really what I wanted to do from the get-go. I just spent 28 years trying to figure it out.

7:47I'm not a very fast learner, I suppose. You said dress like you want. And Fire Nation, this might be a little TMI here, but I mean, that was a big driver for me as well. I just got so sick and tired of wearing like a suit and a tie to work. It just wasn't something that I felt comfortable in. Some people, they love it. You know, it's like their pajamas, but for me, it just wasn't. And like getting back to the TMI thing, I mean, here I am in Puerto Rico, you know, I'm standing in my office at my standing desk and I'm just wearing my favorite bathing suit. Like that's how I love to walk around my house.

8:17That's where you're supposed to be. I might pop on some flip-flops, you know, who knows, you know, but that's, that's about the extent of it. I mean, I just, this is the Caribbean lifestyle that I chose and I absolutely love this. And I mean, I talked to Keith all about everything you've done, you know, over the years, your 28 year corporate career, two IPOs, 11 figure exit, all this great stuff in the intro. And we got some other cool things that we're going to be getting into that you've built over the years. But first off, I kind of want to get into a little bit of diversified income chat and strategy.

8:47Talk to us about diversified income from your perspective. What does that mean? I've found that no matter what your job is, for the most part, almost 99 % of use cases, that income stream is going to come to an end, full stop. And it might be because you got lucky and retired and drifted off to beautiful Puerto Rico. Or perhaps it's more likely you got fired or the company went under or whatever. Like look at who were the top 100 companies 15 years ago. None of those companies exist today or they aren't the top 15. I think I just heard that like out of the S &P 500, there's only one company remaining from like 1915 or something.

9:31And that's like GM. I mean, it's crazy this kind of turn. And those are the biggest companies in America, AKA the world. Yeah, and the most innovative. And the list goes on of all the different ways you could describe them. And then all of a sudden they aren't. And if your income is tied to that, then I, you know, as a CEO, I made a lot of money, but, you know, I didn't have enough to retire at 50 years old and live until, you know, hopefully I'm 90. And so like, what are you going to do to create income streams and diversify the way you make money? and I started talking about it as passive income.

10:04And then I realized I'm not really talking about passive income. I mean, to some extent, maybe, but when I was talking to a really smart guy and he said, Keith, what you're talking about is diversifying your income and it might not be passive. It can certainly be way more passive than punching a clock and getting paid for every hour that you're on the job or a salary based on what your boss or your board is willing to pay you. But it's having multiple streams of income. And so when you think about that, You think about a diversified portfolio, you want bonds and equities, and that's not really what I'm talking about.

10:36I'm talking about if you lost your job today, or let's say, we're talking about you as a driver for leaving your job. It's mostly because you're not fulfilled, right? So many people in the corporate world, including myself, are just not really satisfied. And so as an entrepreneur, much more satisfied. So really a fulfilling deal and use that then to drive and create different sorts of businesses that will diversify income. And so when I headed down this path, I hooked up with a buddy of mine that was in a similar position and a very senior guy. And I said, man, I'm going to go build some laundromats.

11:14I just talked to a friend of mine who dropped his daughter off. Listen, I come home and tell my wife, hey, I think we're going to get in the laundromat business. She looked at me like I had just grown a second head. I would just open my third laundromat and they're beautiful, beautiful facilities. They aren't necessarily more expensive than if you were to do it and build a junky facility. But with, you know, you can do a lot with polished concrete, paint and wallpaper and put beautiful new equipment in and just don't pack the surroundings, right? You can, you can create a nice environment that generates, it generates income.

11:47But listen, here, here's the thing that I've learned through this process that I just did not appreciate very well. So I set out on this path. I said, okay, I'm going to build car washes, laundromats, and salon suites. Those are the three things. And as I got into it, I realized, well, for car washes, one of the very expensive projects, a car wash can cost you$4 to$5 million. I'm talking about a long tunnel kind of car wash. And that thing will generate$800 ,000 of net earnings like EBITDA. And that's a pretty good gig. And if you have three or four or five of those, that's pretty fantastic. One quarter at a time, baby.

12:21Come on. Yeah, exactly. But those are, I mean, that's, those are massive projects with investors and bank money and all kinds of stuff. And the timeline to get these things live, like the question you have to be asking yourself is what is my timeline to income? Because if you're in a corporate career or some other, you know, some other thing where you're unsatisfied and you'd like to be entrepreneurial, the question you got to be asking yourself is what is my timeline to income? And then if that is really short there, you know, there are things you can do. And if you've got a long time, like I could keep my corporate job for the next two years while I build up this other thing, or I've got a giant nest egg and I could, you know, operate for three or four years and have the capital to build something out.

13:01Then, you know, then, then you, you've got some different options. Um, but you have to be really honest with that question because like my laundromats, I first decided, Hey, I think I'll build a laundromat. And then I told my wife and then we had that discussion. And then I said, well, where are we going to build them? And then we'd looked around and then I found a location. The lease took a year. Wow. And then the build out took a year. And then it's a year of ramp rate up to actually generating like what you would expect in the final state of your business model and the run rate. So you're three years.

13:28I launched into this and thought, oh, I'll have a laundromat open in six months. It's so naive. That's really hard. And so you really have to be honest with that question. I mean, get ready for this, Fire Nation. Keith has built, acquired, and washed out, not just of a couple of businesses, but a bunch of businesses. We're talking about laundromats, like he was just mentioning, car washes, salons, short-term rentals, Amazon private label franchises, and that's just the beginning of the list. I mean, he's acquired big businesses as well. I mean, Keith, this has all been part of your grand experiment, which we're talking about right now, and he's just getting started at Fire Nation.

14:07And we have a lot of awesome fire and value bombs coming up for you as soon as we get back from thanking our sponsors. The Product Boss, hosted by Jacqueline Snyder and Mina Kunlo-Citep, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. Take your physical product sales and strategy to the next level to create your dream life with hosts Jacqueline and Mina as they deliver a workshop-style, hour-long episode filled with social media and marketing strategies so you can up-level as the boss of your business. A recent episode covered the ins and outs of whether you can have a successful product business as a side hustle.

14:42Listen to The Product Boss wherever you get your podcasts. What's one thing we all wish we had more of? Time. I remember that state of constant overwhelm with my ever-growing to-do list too. So what did I do? I hired a VA and started to delegate. Lucky for you, our friends at Belay know the demands on business owners all too well, and they're here to help. Belay has highly vetted talent to help you with the numerous tasks you have on your plate. And because they've been helping business leaders like you for over a decade, they really know their stuff. Belay intentionally pairs clients with US-based fractional virtual assistants.

15:18I'm talking talent that can handle all of your administrative tasks. So you have the time and energy to grow your business and to help you get started. Belay is offering Fire Nation, their ebook, Rise Up and Lead Well for free. In this ebook, Belay's CEO provides the framework she's used with her own assistant to maximize productivity and strike the work-life balance we all deserve. Learn how to optimize your time with an assistant today. Just text FIRE. That's F-I-R-E to 55123 to get your free copy. So Keith, we're back. And so we've been going through this grand experiment of yours. And I just love how you're really setting realistic expectations.

15:56I mean, you're not going to have an idea and six months later, have it be this net profitable thing in most scenarios, in most cases. It takes time, it takes investment, it takes patience, it takes a lot of things. But at some point, we have to choose something to focus on. So how do we narrow down our options? What is your formula for this? I think the very first question, like we talked about before the break, is making sure that you know your timeline to income. And what I mean is, let's say you're making a couple hundred grand a year in a corporate job, and that's what you need to maintain your lifestyle.

16:31And that's what your wife is expecting you to bring home so that, you know, you keep everything calm around the house or husband or right for sure. And in either scenario, you have to make sure that you're real about when you're going to be able to produce that income. And so what I tell folks is if you have a long timeline and that's either because you have a giant nest egg or big enough nest egg, or you have a corporate career that you can do a little bit of stuff on the side to launch something, then pursue that path if that's what you want to do. And maybe you could start something and commercialize an idea, right?

17:01Everybody is kind of enamored with their own idea. I'm going to make money from my idea, but I'll tell you, there's two other ways to make money from other people's ideas. One's called a franchise. And, um, if you have a storefront, you still have a long path to get through a lease and a build out. So you need to be, need to be careful there, but at least you're stepping into a business that's, that's proven. I've been through the franchise process seven times now and I ended up picking one. And it's a great business that we just launched a couple of three months ago now, and it's called Smash My Trash.

17:33And so that's your favorite franchise of the seven, Smash My Trash? It is. And so for me, that fit a couple really critical areas. One is it's in the franchise world, it's a fairly nominal investment. Like you can own a territory for, you know, including the equipment that you need to operate that territory, which is a truck for about 300 ,000 bucks. And that thing will generate revenue of 500 ,000 with about a 40 % EBITDA. So you're going to make$200 ,000 by investing 300 upfront. And if you wanted to finance that through the SBA or whatever, I'm sure you can. So if you thought about a 20 % down investment on$300 ,000 and start up your 60 grand to make you 200 ,000 a year, and there's a driver and a sales guy and a bookkeeper, right?

18:24So for me, it's a great return on capital and it's low overhead in terms of staff. And compare that to, I looked at another deal is one of these, that's an indoor family entertainment center, like Skyjump or whatever those things are called, urban air, those kinds of deals. Now you're talking about a$2 million investment with a, a gigantic lease and a huge build out, and possibly 100 part-time minimum wage employees with management to return. Those stores will do$2.5 million of revenue at a 20 % EBITDA, so they're going to do$500 ,000. But think of all the brain damage in managing that. I don't want to go manage 100 people.

19:12You can just do two smash my trashes, and there you are. Exactly. Now, real quick, because it's kind of descriptive, smash my trash, but what exactly does it do? What's the whole thought process and business model? Yeah. So if you look at an open top dumpster, like a typical, they're called a 30 yard container. Like if you're in the haul off dumpster business. So 20 yard, 30 yard, 40 yard containers, that's a typical dumpster that you would see outside of like a big warehouse. Or maybe if you did a home remodel project and you chunked all the stuff into the dumpster that the guy brought over, the guy that brought it over and hauled it off, that's called a haul off.

19:46and those dumpsters typically cost, you know, say it's 350 bucks per haul off. And it doesn't mean, that doesn't matter if you're a residential guy doing a house remodel or you've got a warehouse and you're loading it up and having it hauled off twice a day. You might get a little bonus on a, on a, on a, but those things get hauled off. They've got an eight ton capacity and they're typically getting hauled off with, with maybe a thousand pounds in it. So instead of 16 ,000 pounds, they have a thousand. That's because they're loaded full of air. You've got pallets and you've got boxes and packing material and, you know, things that can be smashed.

20:17And so what this thing is, is this gigantic truck. I mean, it's the world's greatest Tonka toy ever. It's, it's got a three ton drum on the end of a big boom. And we lower it down into these open top containers and we smashed their trash. And literally the, the, the drum is operated hydraulically. It's got a huge teeth. You lower that three ton drum on a, on a dumpster full of pallets that's at 110 % full and you'll take it down to 25%. 25%. That's like 80%. That's insanity right there. I mean, I love that. Now, real quick, and we don't have to go down this road because I know a lot of people are kind of sensitive about talking about this kind of stuff, but you said that of the seven franchises you went down, smash your trash, smash my trash has been your favorite for the reasons that we just discussed.

21:06What was your least favorite franchise and why? Someone's going to charge you 7 % right off the top. So right off the top, man, before you talk about how much you're going to make in net earnings, know that 7 % or 8 % of that is going right off the top. Now, some franchises like Christian Brothers, I think it's a great franchise. It's a really well-run company. They actually kicked me out of the process. So it's not always that I opted out. And that's because they want owner-operators. And I said, I'm not really here to be an operator. I'm here to be an owner, but I'm probably not going to be there every day.

21:37And so that was a non-starter for those guys. And I just wasn't a fit for their model. It's a fabulous, I think it's a fabulous company and a great franchise. But, you know, they take the royalty off of profitability. Most of them don't. But the point of all that is if someone's going to take 7 % or 8 % off the top or the equivalent off the bottom, they better have a tremendous product, a tremendous brand, or an incredible patent on something, or maybe a tremendous process differentiation, like you couldn't figure it out on your own. So when you look at some of these franchises that I was evaluating, it was either like this family entertainment thing that was just way, way, way too much money with way too much overhead.

22:20And listen, if I'd actually done it and then we're in four months of a pandemic shutdown, right, how would you like to be paying 80 grand in rent a month on a facility that you can't get anybody to go to, right? That's awful. So I think you got to be honest with yourself about how much value is this franchise actually providing to me? Is it something that – like if it's Baskin-Robbins, right? People come to Baskin-Robbins because it's Baskin-Robbins. I think they're a franchise. 31 Flavors or 37. 31 Flavors, right? That's why I go there. Yeah, I don't go to a place down the street that's like mom and pop joined.

22:54I want to go to Baskin-Robbins because it's a huge brand, right? And that's probably worth the 8%. But if you look at some other models where, I mean, what are they really giving you? And I just thought in some cases it really wasn't. As they say, the juice wasn't worth the squeeze. Ooh, that's a good way to end on that note. And let's get down to brass tacks, Keith, because, I mean, man, let's be honest. COVID, just the economy, there's a lot of things that are going on right now. And there's just a lot of people who are out there in the world listening to this podcast who are feeling unfulfilled and they know and they want to get more out of life.

23:31So what advice would you have for those people? Give yourself a chance. When I started out on this thing, I thought, you know, in the business model I created, I was going to have these four different businesses and it just didn't work out that way. And however people envision what they're going to go do, three years down the road, it's going to look different than that looks. So just start something and you're going to find out so many things, you learn so much, you're going to find out that, geez, I don't need to build something from scratch. I could just go buy a business and three months from now I step into a revenue stream from a fantastic business that I get to grow and own and lead and all those kinds of things.

24:08And you might not have that opportunity in your own corporate career, but that is what it takes for fulfillment for you. So I would say like start to get honest with yourself about where you think you get energy and then start to define the goals for that. Write them down and put them in colors and make them real to yourself. Give your brain something visual to focus on and then break that down into really small steps. And don't feel like the first thing that you think of is what you're going to end up doing. And don't even think that if you spend a little bit of time on the side because you have time that you can spend doing it, that it is where you're going to land or that it's going to be successful.