Business Owner vs Entrepreneur: The $100M Difference

0:00Brad:Freedom comes when your money starts earning more than you do. Freedom, in my opinion, is when your passive assets are making more money than your active assets. Imagine instead of owning one business, you own like seven or eight. So if you look at the flywheel of this, it's like earn, extract, invest the profitability, it compounds and then you repeat. As I got further down the road, though, I worked out that I had to be taking money out of the business and building my wealth engine. not just my great business, but my wealth engine outside of the business. Businesses build wealth. Entrepreneurs invest that wealth.

0:37Brad:Let me explain that to you today and why it's important. So when we look at this season, we've gone to reinvent your thinking, not just building a business, but building a business that gives you freedom. Now we're looking at how we actually do that, the rebuild phase of you so that you can be in a place where freedom comes and you're excited by it, not the other way around. And then we're going to look at the rebuild phase coming forward over the next few, okay? So what do I mean by entrepreneurs investing? Let me first of all define the difference between a business owner and an entrepreneur.

1:09Brad:A business owner has one business. Entrepreneur invests in multiple businesses. An entrepreneur is defined more as someone who's looking at the capital value of the asset, so buying, building, and selling companies more so than just the cash flow and profitability of the business that a business owner would be looking at. Owner looks at cash flow profitability, entrepreneur looks more at capital value and the impact that cash flow and profitability has on capital value. Now, real entrepreneurs take the profit from one business and invest it in another. So imagine instead of owning one business, you own like seven or eight.

1:48Brad:If you had seven or eight businesses, you'd be taking the profit from all of them coagulating it and investing it into either another business into real estate into the stock market but you would be investing it so if you look at the flywheel of this it's like earn extract now that's really important to understand the business earns money you extract the profitability you invest the profitability it compounds and then you repeat so earning the money is stage one in the business. Extracting the money is stage two, what we're discussing here on this season of the Epic Entrepreneurs Podcast. Investing that money is the next phase, and we'll obviously do a season on that one.

2:29Brad:But then that compounding factor then gets you to repeat the whole thing. Eventually, you know, there's like a, when you talk about a downward spiral, it's like a vicious downward spiral. Eventually, if you're doing it properly, earn, extract, invest, compound, the repeat is a must because you're getting that compound returns and it has to be invested somewhere type thing so you want to get yourself to a point where the amount of money coming in from your investments pays for all of your lifestyle and you have to invest a percentage of it sort of thing if you can get yourself to living on less than 10 20 percent of what you make and people like what do you mean live on less than 10 percent of what i make well when you're making that much and it's compounding, you can live off of a very small percentage of your wealth, a very small percentage of the growth of the assets in your portfolio, a very small percentage of the income that comes in through your portfolio.

3:28So how do we turn business profit into a personal wealth system? Well, three things I'm gonna cover off with you.

3:35Brad:And I know as an Action Coach client listening to this, you've probably already done 30X wealth and started building your wealth plan, okay? If you haven't planned to come to entrepreneurs training or landlord training, please plan those as well. If we're going to turn our business profits into a personal wealth system, we have to look at the distinction between diversification and duplication. So in the business, you want duplication. If I've got one great business running, I wanna open it in a thousand locations. That's inside of the business, okay? What we're looking at here is taking the profits of the business and we actually want to invest it in other areas.

4:17Now, we don't necessarily grow wider. I don't want you investing where you're not great, okay?

4:22Brad:So for instance, for me, I love investing in businesses that I can license and franchise. Why do I love investing in companies that I can license and franchise? Because taking a company global to me is one of the best strategies that I know of to create serious cashflow, capital gain, wealth for me and my family type thing. So oftentimes when I hear people go into diversification, they make it actually diversification. Yes, that's a word. I've just made it up. Why? Because what they're doing is they're investing in things they don't know anything about. I had a friend of mine the other day come talk to me about, you know, should I invest in NFTs?

5:01And I'm like, dude, A, NFTs are done. B, what do you know about NFTs?

5:06Brad:He's like, nothing. I said, well, don't invest where you don't know what you're doing type thing. So I know as a business person, the first thing I love to invest in is businesses. I know my dad was really good at stock market, especially the mining area of the stock market. And I know that when we piled together and he invested in those areas, we did real good. Why? Because he was an expert at that area. He'd run mines. He's pretty good at that stuff type thing. So if we have, there is a danger obviously to having an over-reliance on one business for all of our wealth. Now, in the beginning, I know, and you probably know this as well, that you're going to put all of your assets, all of your eggs in one basket, and you're going to double down and you're going to go hard at it because you don't have much money.

5:53I know for me in the beginning, I had to put all my money into everything because I didn't have a lot of money.

5:58Brad:As I got further down the road, though, I worked out that I had to be taking money out of the business and building and building my wealth engine not just my great business but my wealth engine outside of the business now in some cases that meant selling off whole companies in other cases it meant selling off divisions of a company you know sometimes it looked like we're okay they want to buy the business and they really didn't want to buy the whole business they just wanted this particular division of the business to enhance what they're doing fantastic we'll sell that division of the business type thing and keep running these assets.

6:32But ultimately, the reinvestment lessons that you're going to learn over your lifetime is that, if I can be real blunt about this, leaving your money in the business and just say,

6:46Brad:I'm reinvesting, I'm reinvesting, I'm reinvesting, you end up burning money for the sake of burning money. Pulling a percentage of it out, yes, your business needs you to reinvest. Yes, it needs capital. And definitely that's going to be the case, but it doesn't need all of the profits. It doesn't need all of the capital. There's a percentage at which you should be pulling capital out no matter what. See, let me give you the distinction between a business owner and employee. An employee knows they have to pull money aside and invest elsewhere to create future income and future wealth for themselves.

7:19Brad:Business owners have this crazy notion that, no, no, I'll just keep reinvesting it in the business. I'll keep reinvesting, keep reinvesting. You should be pulling out some money at all times, just like an employee does to build future wealth and future income for yourself, your family, and just for peace of mind, I guess, for freedom. So five asset classes that usually we talk about, okay? So wealthy entrepreneurs, business equity is going to be on there. Now, not just your main company, but companies that you work with. And I'll give you three examples of great events that I've seen clients of mine do.

7:58Brad:First and foremost, buying their suppliers. And you see that happening all the time where it's like there's a supplier that you're 60 or 70 % of their business. Why not just buy it and roll up the profitability of it? Now you want to keep it separate so it has separate profitability because it needs to go after other businesses as well. But ultimately that's a great way of doing it. Second way, opposite of buying a supplier, buying one of your biggest customers. If you've got a customer that is buying a third from you and a third from and a third from, and they could be all yours, hey, presto, buying customers is a great way to do it.

8:33Buying competitors, going different geographies, moving across, those sorts of things. So when we're looking at business equity, reinvestment is often one of the first strategies in other entities, those sorts of things.

8:45Brad:But then we look at going into others. And my best lesson I ever got on this was invest in young people. Find people in their late 20s, early 30s wanting to start a business or have started a business and gotten through the hurdle of making sure it actually works. Invest in them because, Brad, when you get older, they're still young. You know, and I look at here in my 50s today, I'm investing in people in their 30s, in their 20s. And the fact is, when I'm in my 70s, they're going to be in their 40s and 50s in their prime out there doing amazing things. and I'm still their partner in the business type thing.

9:18Brad:I think that's important. Second, real estate. Personally, I love real estate. I think it's one of the greatest asset classes that there is because the banks give me 80 % of the money to do it. 80 % of the value of the asset is paid for by a tenant. I pay for 20 % of it. Someone else pays for 80 % of the asset. If you don't understand that, do my 30X Wealth program. It's all about that. It'll come to my landlord training. Market investment, stock market, whether it be stocks, bonds, any different, I mean, obviously different cycles, you want to be in different things, but again, don't invest where you're not an expert.

9:53But even if like just for my kids, setting them up in a low cost mutual fund in a Roth IRA, the most basic fundamental thing of all will make them multimillionaires by the time they need the money sort of thing. So just do the fundamentals, get the basics in place, go find a financial planner who'll help you with just the basics, the insurances, the tax-free investing programs that you can do. They're all there. They're all set. Take advantage of them. Third, intellectual property. I love investing in intellectual property.

10:27Brad:I think so do venture capital funds today that are buying music books because they go, hang on, we can put it in movies. We can put it in on computer games. We can put it in TV ads. We can use this music to make lots more money than the, obviously the owner of the music did in the beginning sort of thing. And finally, cash reserves. I'm always, when you're balancing out a portfolio, there's five areas and cash reserves are going to be one of the five areas. Cash or cashables, I guess is going to be the thing. So start planning your wealth engine now. Start planning your wealth company now, okay?

11:05Don't use your company as your only form of wealth.

11:10Brad:It's almost like I know that over the years, I've used my company as like an incubator for new ideas. I've used my company as an incubator for new investments type thing. So you can definitely do that, but you want to spin them out as soon as possible so that they have to make profit on their own. They have to be out there making that profit for you. any great investment advisor and you definitely should have one i mean there's no two ways about that especially as you're starting to get success if you already got success fantastic you probably got three or four advisors like our family does but when you understand generational wealth vehicles when you're getting advice and and this is what it's got to be you don't just want a vehicle for now for taxation planning for all that stuff you want generation wealth vehicles whether it's trusts or funds or ownership structures, general partnerships, limited partnerships, all the different things.

11:59Brad:You need to get that advice. The bigger you get, the more important that becomes. Who in your family owns what? The more important it becomes, the bigger you get sort of thing. So, you know, I've said it many times to you that freedom comes when your money starts earning more than you do. Freedom, in my opinion, is when your passive assets are making more money than your active assets. when you have enough passive income to pay for your life over and above your active income, life is pretty good at that point in time. You know, that's where freedom really starts to kick in. And if you think about developing like a wealth engine map for you, do the 30x wealth for sure, but make sure you're building that wealth plan for you and your family.

12:43Brad:Make sure that you have a wealth asset, the company that will invest in the future of your family or the trust, depending again, get your advice from your local expert on this. But ultimately your job as an entrepreneur is to build a business that makes enough money to not only pay the bills, but it gives you enough profitability that you can live a good life and invest a good percentage in future income, future assets, build that generational wealth. And why do I say generational wealth? I'll leave you with this final point. If you aim to build wealth for yourself, you'll build a small amount.

13:21If you aim to build generational wealth, you'll build an amazing amount. See you next week. Thanks for joining me on the$100 million podcast. If you've got value from today's episode, make sure you've subscribed and share this with all of your friends. Never miss a strategy that could change your business and your life. And remember, the fastest way to scale is to learn from those who've done it. That's what this show is all about. See you on the next episode.

13:48Thank you.