Upgrade Your Life with Rob Luna: An EOFire Classic from 2022

0:01John Lee Dumas:Light that spark fire nation, JLD here and welcome to Entrepreneurs on Fire brought to you by High Level, the all-in-one sales and marketing platform. On today's classic episode, we'll be breaking down how to upgrade your life. To drop these value bombs, I brought Rob Luna into EO Fire Studios. Rob has over 24 years in private wealth management, advising entrepreneurs and executives, consulting for high major brands and earning the Forbes Best in State Wealth Advisor honors in both 2021 and 2022. And today we talk about how most businesses fail due to running out of cash and how to start your business with the end in mind, building enterprise value for a life-changing exit and oh, so much more.

0:39John Lee Dumas:And a big thank you for sponsoring today's episode goes to Rob and our sponsors. If you are building a real business, you need real infrastructure. High Level gives you website hosting, funnels, email marketing, automation, calendar booking, payments, and course hosting all on one platform, plus award-winning 24-7 support. Get a 30-day free trial and my full bonus stack that includes a 50-minute private call with me and much more at highlevelfire.com. Highlevelfire.com. Fire Nation, 50 days will fly right on by. The only question is, will you have something to show for it? I created a free YouTube series called 50 Days to Something, a step-by-step path to build a real product, service, or offer in just 50 focused days.

1:22John Lee Dumas:Start today for free at eofire.com slash YouTube. Rob, say what's up to Fire Nation and share something that you believe about becoming successful that most people disagree with. Fire Nation, what's up, guys? What I believe most people that are successful, what they do that most people don't agree with is they take an exorbitant amount of risk. And what I mean by that is they go all in on things. So whether it's an idea that people are telling them, hey, that sounds a little bit crazy, that's not going to work. Whether it's maxing out credit cards, whether it's borrowing money against your home, everybody that I've seen that's been very, very successful, especially first generation success has gotten there by taking an exorbitant amount of risk going all in on their business.

2:13John Lee Dumas:Because Fire Nation, what these entrepreneurs realize is that when they take these huge risks. And when they, of course, from time to time fail and miss and, you know, big swing and a big miss, it's not the end of the world. They're not living under a bridge, roasting a rat, trying to survive every single day. No, they go back to the drawing board and they try it again and they try it again and they make things happen. So as entrepreneurs, Rob, we make mistakes on a daily basis. In your opinion, what's the number one mistake entrepreneurs make when starting a business? The number one mistake they make, John, is they don't create a scalable business.

2:52They go in with the idea that they're going to sell themselves to the community. And what happens is they wind up doing a lot of the work themselves. Their customers wind up buying them instead of a business. They're not thinking of the end goal in mind. And for me and my businesses, the clients that I work with, we always start with the end, meaning, are we looking to sell this to a publicly traded company? Are we looking to sell it to a private equity company? We start with the end in mind. And when you do that, it forces you to create a business that's scalable. So I think the number one mistake that people make, they don't start a business with the end in mind.

3:33They go all in heads down, which is great as an entrepreneur, but there's no strategy in place to be able to scale. And when you start doing things without that roadmap in place, it's very hard to switch gears on your customers when they've grown up, used to, they've worked with you, used to one way of doing business, very hard to raise prices, very hard to reduce the amount of service that you're doing, those types of things.

3:58John Lee Dumas:Entrepreneurs don't create a scalable business in the way they should. And I just love that phrase that Rob used, Fire Nation, is that they build a business where the customers and clients are buying them instead of the business. And when you do something like that, Fire Nation, it's always going to be a one-to-one. It's never going to be scalable or leverageable at the level that you really want it and need it to be. Now, can we go through a specific example, maybe something that you've done in the past, Rob, or one of your customers and clients have done in the past where they did start with the end in mind and why that resulted in a good ending?

4:36Yeah. I'll talk about a customer who sold a specific, I can't say the name, but sold a specific technology to Google. And he had worked for a competitor for a long period of time. He saw a niche market. He saw an opportunity to where when we sat down and looked at the company as opportunity, we first vetted it, obviously. We saw the need that was out there. Total addressable market was large enough. And we saw that this would be an idea that Google would be interested in. And so what we started doing was looking at some of the valuations that Google had paid for similar companies in the past, what were some of the key factors, and really studied those businesses to make sure that when we went to the table to Google to present this to them, and we obviously took it to other VC firms out there, that we were putting together a business that we knew the model that they were buying.

5:29So we knew the typical valuations, we knew what type of technology. We knew the talent that they needed. And what we projected to be a three to four year turnaround and kind of a hundred X multiple of what the initial investment was, because it was primarily intellectual capital, wound up happening in about 18 months. And one of the things about entrepreneurs, as you know, John, it always takes a little bit of luck, but luck doesn't happen without preparation. So as long as you're prepared doing the work, It just so happened that Google was looking to enter this market at a very specific time.

6:02We were in there and he was able to capitalize on that because for him, that exit strategy of the end in mind being to Google is actually what he wound up doing.

6:10John Lee Dumas:Wow. I mean, think about that, Fire Nation. That is the process of what can happen when you start with that end in mind. Is there anything you wanted to end on that, Rob? No, I think that's it. And it doesn't necessarily have to be a sale to Google or going public or anything that large. And I think that's really the challenge with primarily small entrepreneurs is they think, well, I'm never going to sell to a big publicly traded company. I'm never going to go public. And they cut themselves short. And what you don't realize is that creating a scalable business that has enterprise value, that is sellable, is actually a lot easier than doing a lot of one-off stuff.

6:50and always think that your business is going to be available. For most entrepreneurs I've worked with, John, the single most valuable asset that they have when they're ready to retire is their business. And so if you're going to spend 20, 30 years in that business, make sure you're building an apps asset, not just buying yourself a job, which is what a lot of people do.

7:09John Lee Dumas:So true. And on that point, you're a big believer that entrepreneurs need to be connecting their personal financial plan to their business strategy. Why is this important? And maybe even more importantly, how do we do it? Yeah, it's tremendously important. So I'll give you a couple of examples. We were talking before this, obviously, you're out in Puerto Rico. Puerto Rico has much more favorable taxable situations for people selling a business than the state I'm in, California, for example, right? And so what I do with all my entrepreneurs prior to their exit, and some of them when they're starting their business is we really take a look at a couple of things.

7:49Number one, what does their ideal lifestyle look like? Because at the end of the day, most of us, hopefully we love the work that we're doing, but we'd probably rather spend time with our spouse. We'd rather spend time with our children. We'd rather spend time with charities that we're involved with, but we're working because we need that cashflow to be able to support that lifestyle. But the idea with a business is, the idea with investing in general is, at some point in time, that business, when it's sold, the cash flow, the investment, when turned into a portfolio, is going to create enough passive income to be able to support that lifestyle so you don't have to wake up and run that business every day.

8:30And so what I do with my entrepreneurs is we project, well, what does your ideal lifestyle look like? And it might not necessarily be today the way you're living, but in three, five years, what type of home do you want to live in? What type of car do you want to drive? Where are you going to send your kids to school? And what we do is we quantify the amount of money that they need after taxes, depending on where they're at, cash flow. And then we also quantify what does the business need to be worth in conjunction with any other investments we have. So there's a very specific goal to where they know, hey, when my business is worth$2 million or$5 million or$10 million, or maybe it's$20 million or more for some people, at that point in time, it could be converted to a passive stream of income, where work optional is what happens for me at that point in time.

9:17And also in terms of planning, there's clients that we work with where when the business valuation is low, there's certain trusts and things of that nature if you work with your financial planner where you can put those shares of the business into there. And so if you're not going to take all that income for yourself, there's second generational wealth. Point being, John, is there's a lot of personal decisions and financial planning and entrepreneurs can really benefit from if they're looking to exit at some point in time. And so back to like what we're saying in the business, having that end in mind, when you go to sell, if someone makes you an unsolicited offer, for example, and you know So your work optional number is$5 million and they're offering you$2 million.

9:58Well, that's a non-negotiable, non-starting point where if they come in at$10 million, well, you're probably going to think a lot different than that. So what I always tell entrepreneurs, understand your personal financial number, connect that with your business. And then obviously we also know, John, that businesses usually fail because they run out of cash. And so if you're starting a new business and you're depending on every dollar that's coming in to support your personal lifestyle, that's going to be an issue when you get into a potential recession like we might be facing now or anything of that nature.

10:31So making sure that personal balance sheet is buffered and able to get you through any storm that your business might face.

10:38John Lee Dumas:Businesses fail because they run out of cash. This is something to keep front of mind, Fire Nation. And something else that's super important that we've been talking about here and that Rob was definitely focusing on is the fact that as businesses, we can do things now, today, that will have huge returns on that time, energy invested down the road. A lot of times we like to just push things off, like, oh, I'll get around to doing X, Y, and Z later, next year, the year after, five years, 10 years. And then before you know it, you're like, wow, I never got around to do that thing. And if you were to look at the numbers of how that can affect the bottom line, the actual money that you'll be keeping from your business sale, from your business in general, it will be heartbreaking because it's just a, I'm not going to say it's a small number of things.

11:25John Lee Dumas:I'm not going to say it's a small amount of work, but it's work that's very doable that can have massive exponential impact due to compounding and other factors down the road when you do things right the first time. And we're going to be talking about the key components to successfully scaling a business when we get back from thanking our sponsors. There are two things I know about you for sure. You're an action taker and you love to learn. Otherwise, you wouldn't be listening to this podcast. So I'm excited to share another source of inspiration I know you're going to love, Blinkist. Blinkist is an app that takes the world's best nonfiction books and breaks them down into 15-minute reads or listens.

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12:37John Lee Dumas:Go to Blinkist.com slash fire to start your free trial and lock in an extra 30 % off today. That's Blinkist.com slash fire. Fire Nation, if you are building a real business, you need real infrastructure. That is why High Level is Entrepreneur on Fire's featured partner. High Level gives you a website builder and hosting, funnels and landing pages, email marketing, appointment scheduling, payment processing, course and membership hosting, and so much more. everything you need to succeed all under one roof. No duct tape, no juggling five platforms, just one clean system for your business. And their award-winning 24-7 support has your back when you need it most.

13:15John Lee Dumas:When you sign up at highlevelfire.com, you also get my exclusive bonus stack, a 30-day free trial, a private 15-minute call with me, JLD, access to my weekly live office hours, a digital copy of my book, The Common Path to Uncommon Success, my 50 Days to Something Execution Roadmap, and more. Visit highlevelfire.com and start building your something today. Rob, we are back and let's talk about a time when an entrepreneur has achieved some level of success and they know it's time and they're ready to both scale and grow. Can you share some of the key components to successfully scaling a business?

13:57I think the first thing is really having a framework that you are able to provide complete transparency or at least a moderate level of transparency to your employees, a level of accountability. And so for me, really, you know, John, it starts at the beginning with the vision and mission of the company. right? Most people are coming to work for you, hopefully, because they believe in the bigger picture of what you're trying to do for your clients, for your customers. And, you know, more than money is what's motivating them. And so when you have a vision and mission statement that people can get behind, they're inspired by, that's very, very important because once they do that, it really comes down.

14:42The next step is to set in every year, like I'm sure most entrepreneurs do, is what are the strategic objectives that you have every single year? And we do those with our businesses annually, meaning a few different things. Number one, we always focus on top line revenue, how much revenue, because we all need money to make sure that we're able to do things we need to do for our clients. Secondarily, what is the profit margins need to be? So, you know, and it might be if you're a startup business, you don't necessarily believe you're going to be profitable in the first or second year, but what is the burn rate going to be.

15:16So you have your top line, your burn rate, or your profit margins. And then what level of growth are you looking to have? Is that 20%, 50%, 100 % for a newer company? So now when you set those strategic objectives for your companies, what we then do is we set KPIs, or key performance indicators. And so it's important now, your team has bought into the vision and mission. We said, in order to be able to do these great things that we want to do as a corporation, here's what we need to do at the corporate level this year? And then what we start to do is we set KPIs. And so those KPIs are going to say, okay, sales team, we need to do$2 million this year in top line revenue.

15:58What is our internal sales team going to be doing? What is our external sales team going to be doing? How many calls are you going to be doing? So the KPIs then start getting set to each individual, but importantly are consistent with the strategic objectives of the overall company. So you see, when everyone knows here's what we need to do for the year, then everyone has their own role to play. And we know if we have five employees, 10 employees, or 15 employees, if one person is not hitting their KPIs, that impacts everybody. And so when you start to do those type of things, you get people tied in, you then set processes in place, you're then able to have quarterly reviews with people.

16:38It's really, when you talk about scale, it's about creating a system of processes and consistency and continuity that if you step away as a CEO, somebody else can come in, see, oh, here's our strategic objectives. Here's what this department does. Here's what that department does. Here's who's in charge of sales. Who's in charge of digital marketing this year? Here's our CFOs top line. So when you start creating that scalable framework for people, that's what we talk about in terms of creating a sellable business that someone can come in and bide, where if it's just every year shooting from the hip, let's just do whatever we can do.

17:16No one really knows what the company's trying to do. What we do with KPIs, we also tie bonuses into there. So there's always an individual bonus for hitting your KPIs, but then a group bonus if we achieve it as a team. So scalability and scaling, I think, is a big buzzword out there. But at the end of the day, what you're trying to do is get everyone on the same page working towards one common goal within their individual vertical goals that should not be siloed away from that common goal that everyone's trying to achieve.

17:48John Lee Dumas:Fire Nation, there's a lot of power here. I was taking notes on a certain number of things. First off, what is the vision and mission of your company? Create a framework to provide transparency to the employee so everybody knows. It's crazy how many times I hear stories about somebody walking up to an employee of a company, even if it's a small company, and even if it's a big company, it doesn't matter. I mean, it should all be so clear and transparent. And when they're asked, hey, what's the vision? What's the mission of this company? They literally look like deer in headlights. And then setting KPIs is so key because without a North Star, what direction are you heading in?

18:23John Lee Dumas:We need to be on the same boat with the same rudder heading in the same exact direction. So Rob, you've talked about a lot of awesome stuff today. We've talked about the number one mistake entrepreneurs make when starting a business. We talked about scaling and how that's powerful and connecting your personal financial plan with your business strategy. So many good things today. What is the one thing you really want to make sure Fire Nation gets from everything we talked about here today? Share that one thing. I think it really comes down to having that strategic roadmap in place, whether you're starting a business or maybe you've been in business for two or three years and you're bumping up against the ceiling and you don't know why.

19:04That's really what scalability is about. And I would say, again, I know a lot of people go into their business not thinking that this is going to be an asset, not thinking that this is something that I have to rely on at some point to be able to sell, to fund my retirement. I can tell you from someone who's worked with numerous entrepreneurs on the wealth management side, prior to their exit in some$25 ,000,$50 ,000, 100 million, a lot of them didn't even have$100 ,000 that were invested in stocks or 50 ,000 that were invested in real estate. They were all in on this business. But because they built that business with enterprise value in mind, not only was it just as easy to run a scalable business than it was a one-off business, I would argue easier, the value that they created for a lot of these entrepreneurs were life-changing.

19:51And what we're really proud of, a lot of it was first generational wealth. So I believe that building a business is, forget about real estate, forget about the stock market, the single most important investment that you can make. And so what you want to do, again, back to that point, start with the end in mind, start with the exit mind, and build that enterprise value to where someday you could sell all or part of that business and have a life-changing moment.

20:17John Lee Dumas:Fire Nation, life-changing moments. That's why we're working so gosh darn hard. Rob, Rob, talk to us. How can we connect with you? Any calls to action you have for our listeners today to learn more about you or anything along that call to action line? And then we'll say goodbye. Yeah, I mean, the easiest thing, if you follow me on Instagram or Twitter at TheLunaRob, or you can go to my website at robluna.com. We've got a Wealth Academy where we teach everybody about this. So if you go to our Wealth Academy, you're interested in it, there's a big discount of$1 ,000 off at checkout if you just put in the word fire.

20:55John Lee Dumas:Fire Nation,$1 ,000 off. Promo code fire. And you know, Fire Nation, you're the average. Of the five people you spend the most time with, you've been hanging out with RL and JLD today. So keep up the heat. Head over to eofire.com, type Rob in the search bar, and his show notes page will pop up with everything that we've talked about, key takeaways, links. One more time, Rob, what is that call to action? So go to robluna.com and at checkout for our Wealth Academy. Enter the code FIRE, F-I-R-E, to save$1 ,000 off membership. Rob, thank you for sharing your truth, knowledge, value with Fire Nation today.

21:33John Lee Dumas:For that, we salute you and we'll catch you on the flip side. Thanks, John. Hey, Fire Nation. Today's value bomb content was brought to you by Rob and Fire Nation. Successful entrepreneurs are great at three things, productivity, discipline, focus. That's why I created the Mastery Journal. So you can master productivity, discipline, and focus in 100 days. And we're talking step-by-step. Visit themasteryjournal.com. And I'll catch you there, or I'll catch you on the flip side. If you are building a real business, you need real infrastructure. High Level gives you website hosting, funnels, email marketing, automation, calendar booking, payments, and course hosting all on one platform, plus award-winning 24-7 support.

22:15John Lee Dumas:Get a 30-day free trial and my full bonus stack that includes a 50-minute private call with me and much more at highlevelfire.com, highlevelfire.com. Fire Nation, 50 days will fly right on by. The only question is, will you have something to show for it? I created a free YouTube series called 50 Days to Something, a step-by-step path to build a real product, service, or offer in just 50 focused days. Start today for free at eofire.com slash YouTube. Thank you.