Stu McLaren on Diversifying Your Income Stream: An EOFire Classic from 2021

0:02Who's ready to rock today, Fire Nation? JLD here and welcome to Entrepreneurs on Fire, brought Brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like The Hustle Daily. Today, we're pulling a classic EO Fire episode from the archive, and we'll be breaking down, diversifying your income stream. To drop these value bombs, I brought Stu McLaren into EO Fire Studios. Stu has been working intimately with tens of thousands of authors, speakers, coaches, consultants, and business owners to transform what they know, love, and do into recurring revenue for the past 12 years.

0:37He is a membership expert and creator of Tribe. And today at Fire Nation, we will be talking about Tribe. We'll talk about how it doesn't matter what type of business you're in, you can turn it into a revenue stream, build a relationship with a one-time customer so they can do business with you again and again, and so much more, Fire Nation. And a big thank you for sponsoring today's episode goes to Stu and our sponsors. The Gold Digger Podcast, hosted by my good friend, Jenna Kuchar, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. The Gold Digger podcast helps you discover your dream career with productivity tips, social strategies, business hacks, inspirational stories, and so much more.

1:17A must-listen episode is one of Jenna's recents on everything you need to know about affiliate marketing. Listen to Gold Digger wherever you get your podcasts. Is today your day? Visit thrivetimeshow.com to see testimonials of how Clay Clark's business coaching has helped over 2 ,000 entrepreneurs to dramatically increase profitability. It's month to month and less money than an average minimum wage employee. Schedule your free consultation today at thrivetimeshow.com. Stu, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with.

1:56JLD and Fire Nation, what's up? Okay, so when I think about like something that people would disagree with, I would say that this is one of those things that I grew up, and I don't know if people can relate to this, but I grew up with two extremely hardworking parents. I come from a blue-collar family. We didn't have a lot growing up, but what we did have came on the back of my parents just working hard. So my dad worked two full-time jobs. He worked from 9 in the morning until 3 in the afternoon in a high school with kids with special needs. and then he worked eight at night till eight in the morning, four nights a week in a group home with kids with special needs.

2:37So he worked all the time and yet he was always there for like every basketball game, soccer game, all that kind of stuff. And then my mom was very similar. My mom worked in a elementary school with kids with autism from nine in the morning till three in the afternoon. And then the three nights that my dad wasn't working during the night, my mom was working in a fine dining restaurant. So my parents just worked a lot yet they were always there for my sister and I, but that's how we got by. They just got by by working hard. And so I kind of grew up with this mentality that the way to get ahead is to work hard.

3:09And in my early 20s, I had a mentor that really shifted that perspective for me. And it wasn't about the number of hours that you put in. It wasn't about working hard and that's the way to get ahead. It really was about understanding where your maximum leverage is with what it is that you do. And I saw this kind of play out even in college. Like I, one of my really good roommates, Joe, brilliant guy. When I say brilliant, he's like one of the guys that like is, you know, top of the class, you know, top, you know, one, 2 % type deal. And I'll never forget this. This is an experience that was ingrained in my mind.

3:51We were in the business program and every morning we would be going to the same classes and everybody in our house, we'd all, you know, we're all in the same program. We'd all in the same class. We'd all get together and we'd all walk, you know, to the class. And one morning Joe was running late and he's like, guys, go ahead, go ahead without me. And we're like, you sure? He's like, yeah, I'll catch up. So the class started at 9am. We go to the class and it's like, you know, five to nine and there's no Joe. And then it's nine o 'clock and no Joe and 10 after and quarter after and 20 after. And finally, like about 25 after we see him like, you know peeking in the door and he's like oh and he see he comes in and we sits down we're like dude where were you and he's like I couldn't find the class and we're like what do you mean you couldn't find the class we've come to the same class like all semester long he's like honestly goes I just follow you guys and we're like what are you are you crazy like he's like the smartest guy in the room like what do you mean you couldn't find the class and he goes he goes here's the way my brain works he goes I only let in what I need to let in and he's like that's just information that I didn't need to let in because I could just follow you guys.

4:56And so he literally went around to like all the rooms, you know, we were on the third floor, but he was going into all the rooms looking in. But what it taught me though, and this is a perfect example. So Joe went on, he manages one of the largest funds for Fidelity. Like we're talking billions and billions of dollars. One of the most brilliant guys I know. And what it really taught me that and my, you know, what my mentor taught me early on is that just putting in time and working hard doesn't equate to success because there are plenty of people that work extremely hard, but haven't built any sort of wealth.

5:34And so at some point you've got to really look at like, where's the highest point of leverage for what it is that I can do my strengths, my skills. And once I started zeroing in on that, John, I started to realize like, yeah, there are a whole lot of things that I can do, but there are a few things that I can do at a world-class level. The more I double down on those, the more leverage I get and the more success and progress I will make. So that's really counterintuitive to the way in which I was brought up, but it took a lot of unwiring, so to speak, in order for it to begin happening and for progress to happen in my side.

6:14Well, Fire Nation, Stu is truly world-class at what he does, which is why I have featured him in chapter 13 of The Common Path to Uncommon Success, which is, of course, all about diversifying your income streams. And Stu, you did briefly mention your mentor. And I want to dive a little bit deeper into that because he played a big role in your life. And he kind of taught you about the difference between short-term riches and long-term wealth. So talk about that. Yeah. Well, in our business, we're generating income and that's great. That's wonderful. But at the end of the day, that's the short-term riches.

6:54And what my mentor really taught me was that that's a way to be able to create a foundation for long-term wealth. But you got to be thinking about how do you take what you're doing in your business and invest it to have those compounding returns. And that's the biggest difference between short-term riches and long-term short-term riches. Like great. You got cash inflow. You've, you've done a launch or some kind of a promotion or whatever it might be. And you've generated that, uh, that revenue, but what is that cash? What is that money? What is that revenue going to do for you long-term? And if it's not being invested properly and it's not compounding, then you're not going to be building those, that long-term wealth.

7:35And what's going to end up happening is once that money runs out you're going to be like at square one again, and you're going to have to have the pressure of generating more and more and more. And so you see this so often with people who aren't planning for that long-term wealth. Well, they'll have those cycles. They'll do a launch and it's like great. They generated a bunch of revenue and income for their business. And then the income dries up and they're like, oh crap. And it's like this scramble again to be able to do something else. They've got to do something else to get it going. And what my mentor really taught me was like, look, you're working and generating this, put it to use over the long term and invest it.

8:13And we talked about, you know, there's multiple ways to be able to invest it. But the whole goal is to use time to your advantage and take the cash flow that you are creating in the short term and invest it so that it works for you for the long term. That's kind of the feast and famine cycle that so many people live in. Again, you know, in real estate, you sell a house, it's awesome. You got some commissions and then you go three months without, and now you're like screaming at the end there. And you just got to Fire Nation get out of this feast and famine cycle. Like if you're going to number one, just enjoy life and have the lifestyle freedom that we're all striving for.

8:50But number two, you know, if you're really going to be building and have a business that you want to be building, which kind of leads me to my next question, because one thing I do love about you, Stu is you're, you're open, you're honest, you're transparent. So how specifically have you over the years diversified your income streams? Yeah, well, I took like what I learned from my mentor and, um, in our first home, the whole goal with our first home was that Amy and I wanted to pay it off as quickly as possible. And I know that that's actually kind of counterintuitive to, you know, a lot of advice that you may hear, but the reality of it was I wanted to get that paid off for two reasons.

9:27One, I don't know about anybody else, but as an entrepreneur, I always have this healthy paranoia, so to speak, which is like, okay, what if something crazy happens in the world and all of a sudden things come to a crashing halt and my business is not today what it was yesterday? And so I'm always trying to think about how can I safeguard myself and prepare myself? And one of the things that I wanted was I just wanted to know that worst case scenario, I would always have a home that my family could live in and be comfortable in and safe in. So Amy and I, our goal was to take our short term cash flow that we were making in the business and we invested it in our house and we paid off our house in four and a half years.

10:13Now, here's what happened. As soon as we had paid that house off, now we had all this equity that had been built up in our house. And so we went to the bank and we said, hey, we've got all this equity built up in the house. Can we pull that out and use it to invest elsewhere? And they said yes. And so here's the magic, John. Now we took what we had built up in that first house, pulled the equity out, and we invested it in a second house. And so we started to use the money that we were building up in these homes. and we purchased a second home and we started doing the long-term rentals. And long-term rentals for us was great because the money was coming in, which was paying for the house, which was building up the equity again in that home and our first home.

11:02And then we did it again and again. And so my point is, is that we really look to diversify our wealth from taking it from what we were making in the business and we invested it in long-term rentals. And so for us, we have multiple long-term rental homes and those pay for themselves. And they're building up the, not only the cashflow on a monthly basis, but because they are all cashflow positive, but they're also building up that long-term wealth. So for example, that next home, that first home that we bought is now, we bought it, I think it was$230 ,000 when we bought it. It's now, let me see here.

11:41So 14 years later, so it's now worth$600 ,000. That second home that we bought, we bought for$300 ,000. It's now worth$700 ,000. And so these properties keep going up in value, keep building up that wealth while still building the cashflow. That's one example. Another example that we've gotten into more recently is that my, and by the way, the thing that I love about the long-term rentals is that that is not my wheelhouse. I don't want a business where I'm a landlord and that I'm managing all these properties. I want to be very clear about that. My area of specialty is what I do best, which is helping people grow membership sites, right?

12:19Like that is my jam. So I didn't want to begin building this wealth that was going to take me in a totally different direction. So we have a property manager and it costs us roughly about 10 % of the rent of what we charge, but it's completely hands-free. I'm not dealing with broken toilets. Tenants aren't calling me when we don't have tenants. I'm not the one finding them. Our property manager handles all of that. So we've started to build a team that can help us manage that so that we can stay focused on what we do best. Now, the next thing that we have really explored is taking, again, the cashflow from our business and investing it in luxury Airbnbs.

12:59So my wife started a brand called the Dover Lakehouse and you can find us on Instagram if you want to go see what we do in Dover Lakehouse. And so what was fun about this is that the cashflow from this is way more significant than it is in the long-term rentals. So we, from this, make in about three months what we would need to make over the course of the year and to be able to cover all the bills and all that kind of stuff. And obviously, we make a lot more than that because we've got nine months of the year where it's positive cash flow. And so that's really great. But I will say this, it's more hands-on.

13:39So my wife, she loves that. And that is a big part of the side of the business that she is running. So it's not passive. It's not hands-free. But it certainly has a lot more cash flow. But not only we're building up the cash flow, But again, over time, we're building up the wealth as well because the property value of that continues to go up and up and up. So at the end of the day for us, it really boils down to taking what we're earning in the business, investing it in both long term rentals and short term luxury Airbnbs. And then we also put money away in a stock portfolio that our financial advisor handles for us.

14:14Again, it's not my wheelhouse. I don't I'm not spending time trading stocks and doing all that kind of stuff. but our financial advisor does that on our behalf. And again, we always set aside money each year for her to be able to do that. So that's really essentially our makeup. So I just focus on what I do best, man. And I just make money in our business. And then we have outlets to be able to channel that to build that long-term wealth. Well, one of the things you do best is recurring revenue streams. And we're gonna have you dive deep into this topic when we get back from thanking our sponsors.

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16:35See over 2 ,000 verified success stories and schedule your free one-on-one 13-point assessment with Mr. Clay Clark himself today at Thrivetimeshow.com. Knowledge will not attract money unless it is organized and directed through practical plans of action. Become the next success story. Schedule your free 13-point assessment today at Thrivetimeshow.com. All right, Stu, we're back and it's time to talk to Fire Nation about identifying the right recurring revenue streams for their business? First question to ask is like, how could I take a one-time customer and build a relationship with them where they want to do business with me every single month?

17:19And here's the good news, John. It doesn't matter what type of business you're in, whether it's a product-based business, service-based business, knowledge-based business, or community-based business, you can turn it into a recurring revenue stream. For example, right across the road from our office, there's a car wash. When that car wash was being built, you know, I just figured, oh, it's just another car wash in the city. But then our couple of the guys on our team, they came in and they're like, dude, have you gone to check out the car wash? I'm like, no, what's the big deal? They're like, it's a membership.

17:50I'm like, what? So I go over and I talked to the girl behind the counter and I said, so this is a membership? She's like, yes, you can come through the car wash one time for$9, or you can pay$10 a month, and you can come through an unlimited number of times. And I was like, this is genius, right? So they've structured the pricing to incentivize people to become a monthly recurring customer. And I said to her, I said, so how many customers have you got now? They'd been open about a month and a half at this point. She's like, it's crazy. She said, we now have over 3 ,000 monthly customers. and I was like, wow.

18:27So then I'm like, okay, sign me up. So I got a membership and because it was right across the road from our office, I dude, I was going every single day. My car was looking like prim and proper. And so my wife says to me, like, can, can you just take my car through the car wash? And I'm like, oh no, no, no, baby. It's like the membership is for my car. And she's like, yeah, well, I would like my car to be nice and clean as well. So maybe we need to get a membership for my car. And I was like, okay. So I go back. I said to the girl, I said, okay, my wife wants a membership. I'd like to sign up again.

18:58So we get a second membership. And so I said to her, I said, so how many people are you up to now? And she said, we're over 4 ,500 monthly paying customers. And so time out for a second. There are many other car washes in the city, many who are hoping that their customers are going to come back and buy from them again. Whereas this car wash right across from our office, they know with certainty that they're going to get paid by 4 ,500 customers that month. And what that does is it completely transforms the business where they now have the security and the predictability of being able to hire, being able to build, being able to expand, all of those things.

19:39So this is an example of a service. But you see this being done with products like underwear. There's a membership for men's underwear, women's underwear, where instead of, again, hoping customers are going to come back, they're sending it to their customers on a regular basis. And the perfect example of a product-based business that just absolutely blew up was the Dollar Shave Club. They took a razor where, again, people were hoping, companies were hoping that men and women would come back and get those same razors again. And they took it from hoping and they turned it into predictable sales.

20:12And that company went from zero to selling for more than a billion dollars in four and a half years because they had thousands and thousands and thousands of customers who they knew were going to pay them month in a month out. So, again, we tend to focus just on information based memberships, which I love because there's so much profitability there. But a recurring revenue membership can be applied to virtually any type of business. So Stu, you dropped so many value bombs in the common path to uncommon success. I had a hard time doing the following, but I was able to find a quote of yours that I loved.

20:53And I'd love to read it right now and then have you expound upon it a little bit. This is kind of the grand finale of our interview here today. And it's a little something I know you're passionate about called stacking the momentum. So the key is to stack the momentum by staying in the same market and going deep to discover more ways to serve your audience at a higher level. This allows you to have a diversification in your offerings with a slant toward recurring revenue streams like memberships, masterminds, and software. Then use your short-term riches, which we've been talking about, Fire Nation, to invest offline in long-term rentals and short-term luxury rentals to build lifetime wealth.

21:33And who doesn't want to be building, at least in the process of building lifetime wealth? So Stu, take it all home for us. What do you got? As entrepreneurs, we're idea people. We see problems and challenges and we're like, oh, I can help solve that. The key is that we want to channel that creative energy. for years in my early career, I was all over the place. John, I, the other day, um, did an exercise where I was, we were literally just moving. And so I was looking through all old hard drives as I'm trying to figure out, like, do I need this or not need this? And on one of these old hard drives, I opened up this folder and it was like full of all these different businesses that I had started and, and like folders of like all the logos and the branding and all the, you know, documentation and all that kind of stuff.

22:22And I'm not talking about like, you know, ideas that I would be nice to start. Like these are legit businesses that I had started. And with like going to the bank account, getting, you know, bank for each of them and like logos and all this kind of stuff. And it was just, it was crazy to me because when I looked at all of this list, they were in all kinds of random markets. It was just like that creative entrepreneurial, uh, manic, you know, uh, idea where it's like, Oh, there's a problem. I can solve that. I can a totally, completely different market. Oh, I could create something like that. And what happened was it was just like, I would go from, uh, like I make, uh, take two steps forward and then like one step back and, and then, and then another step back and then I'd take them to two steps forward.

23:03And then, you know, and it was just like, I never made any meaningful progress in any one direction. And this is common for a lot of entrepreneurs. We start something, then we stop it and we go in another direction. And you, when we start something else and we stop it and we go another direction and we lose all the momentum that we have created. And it's because we think that we've got to start something completely different in order to add more revenue to the business. And the reality is you don't, you just need to go deeper and you need to look to stack that momentum. And so what I mean by that is like, look at your customer and, and look to see helping them go from where they are to where they want to be is a journey.

23:46Nobody, nobody just makes that jump instantly. We don't just go from wanting to learn how to paint to becoming the next Picasso like that. We don't go from not knowing how to play the guitar to becoming the next Eric Clapton like that. This is a journey that people are on. And so what you want to be is thinking a little more patiently. How can I help our clients and customers with just solving one micro problem first, helping them gain momentum, getting over the hump on one pressing problem first, knowing that this is a much bigger journey that I can continue to go deeper and deeper with them and serve them on this journey as a whole.

24:22And in doing so, what's going to happen is you're going to carry the momentum that you gain from building the business in one direction, and you can carry that momentum forward again and again and again. And I'll give you an example. So in the business that we've got now, we have two sides to the business. We have one side, which is the training side of our business, that started with a signature program called Tribe. And this is where we teach and unpack how to launch, grow, and scale a highly profitable recurring membership. And this is our signature program and all roads lead to Tribe. But then after Tribe, we have our membership and then we have our Tribe mastermind.

25:04Now, what's interesting is that this most recent class of students who came through Tribe, we had more than 4 ,000 of those students come through Tribe, and more than 2 ,000 of them then joined the monthly membership afterwards. And so think about the momentum. It wasn't a completely different product. I didn't have to do a completely different product launch or anything of that nature. I carried forward the momentum from one, the Tribe program, and carried it right into the membership where now we're helping and serving people all year long. Now, here's another example of carrying that momentum forward and stacking the momentum.

25:42Inevitably, in order to create a membership, people need to use different software. And we started to realize that there was an opportunity to be able to serve our people and help them implement easier and faster by creating a software solution that could help them do that. That's ultimately now where we have launched and taken Searchy, our software. And so again, now it's stacking the momentum because what are we doing? We're helping the same audience do exactly what we have been focused on, which is create a profitable membership. But we just keep finding other ways to serve them in helping them do it easier and faster, whether it be with the membership all year long or whether it be with the software and the tools and resources.