[vc_row][vc_column][vc_column_text]All right, Welcome back! In this blog, we will talk about how to use a sales-based business with a passive income or an assets-based business. We will talk about how sales work with assets. With Sales, we can potentially make a high or extremely high income, but we’re going to have a massive tax liability and we’re never really going to be building any future wealth if we are 100% sales focused. And with Assets, we can have assets for the future but may be broke the entire time as we have no income to support the growth. Therefore to build a strong financial life, we need both.
For the most part, sales can’t be sold, it’s purely income. If somebody is paying me, I can’t turn around and resell it. It’s just income… a transaction is done once with a profit to follow. But assets and passive income can be sold, in fact, nearly any business that has a passive income stream and has systems in place can be sold for a handsome multiple. Big investors are always interested in essentially “Buying more income”. [/vc_column_text][vc_video link=”https://www.youtube.com/watch?v=bGuPZIuKuuY”][vc_column_text]The first thing worth discussing is your sales and overhead. You need to have sales going on in your business to cover overhead and create a surplus to invest in. I have seen many investors and/ or business owners crumble like a stack of cards when all they have is a debt-based business and no income. In fact, I have experienced this myself. Both personally and professionally, we will have overhead. An income/ sales are necessary to cover expenses.
I personally believe it’s best to always have active sources of income. It keeps us sharp, creative, and hard-working. We just don’t want to RELY on active income. We should always be working on that active side of the business to bring in sales to cover overhead, innovate, and provide a surplus of income to reinvest. I do recommend that you keep overhead as low as possible. I have experienced what a bloated overhead does to a business.
The second is to focus on sales so you can cover your reserves. We talked about that in one of the previous videos, but it’s critical to have those reserves built. Those reserves should give you the cushion to make smart decisions, to be forward-thinking, and not to be irrational or emotional, but instead to be very strategic and smart about the decisions you make. If by chance you decide you want to scale your business a little bit or hire more employees or spend some money to test new marketing, then you can simply build out more reserves. You want to build the reserves to keep up with your business and your overhead.
Finally, the third thing is to be focused on assets and keeping the best ones. So this is probably the thing that I personally regret the most in my career to this point. I’ve purchased so many good assets over the years, fantastic deals, but because I didn’t have the first two in place, I had to sell those good assets…assets that now would have added many more millions in value. Those assets would have set me up extremely well, but because I didn’t know these first two, I had to sell the assets. When it comes to your assets and your sales, be focused on selling everything, and then keep the best.
The motto I live by is, “Keep the best, wholesale the rest.” Focus on the sales, focus on the sales, focus on sales, cover your overhead, build reserves, and then… as you get the opportunity for those good deals, those really good deals, that’s when you pounce because your reserves and overhead are taken care of, and now you can focus on obtaining and holding those really good assets. They’re going to pay you forever or long into your future.
The last stage is reinvesting and compounding. So here’s the golden goose that most people don’t ever do or even think about. We’ve talked a little bit about passive income to this point, but the mistake I feel most people make is they bring in their passive income and then they start living off of it. If you bring in a passive income source and then you reinvest that passive income source, you wouldn’t believe what that grows into. That is compounding taking place. You do that over the course of 20 or 30 years, and that is going to turn into something massive down the road. But without doing this in the right order. It’s very hard to ever get to that point. Most people build up a passive income source from something like rentals, then they start to live off of it and therefore no compounding ever takes place. They are gaining some appreciation and principal paydown every month, but they are not getting the advantage of compounding as they are essentially eating their seed.
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