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-We only live one time. So we've got to figure out how are we going to be able to live a life that is joyful? So that you can give back to other people. So that you can be the best dad you want to be, the best husband, the best business owner, the best-- but you've got to focus on making sure that you love what you do. And you schedule time for what matters. Cool?
When my dad had cancer, I didn't feel it all guilty, like I had been a bad son, or I'd been a absent son, or I hadn't done my-- I mean, that's tough, when you find out your dad has stage four cancer. But I didn't feel like, well, I guess I regret that I hadn't spent as much time with him as I'd want to. No, every Sunday it's in my schedule. You know what I'm saying?
My relationships-- I've got a lot of great relationships with people. I don't have any regret. I schedule a time for them, you know? I honestly, I don't have any like-- I don't deal with any dissonance where I'm going, I wish I would've-- I really don't feel that way. So if you don't schedule time for stuff, it won't happen. So it's very, very important that we do that, OK?
All right, so now we hop in here. Focus is essential. I'm going to read this quote to you here. This is by Andrew Carnegie, who, at one point, was the world's wealthiest man. So he says, "And here is the prime condition of success, the great secret. Concentrate your energy, thoughts and capital exclusively upon the business in which you are engaged. Having begun in one line, resolved to fight it out on that line; to lead in it, adopt every improvement, have the best machinery and know the most about it."
What he's talking about is that if you focus the sun's rays on a given point using a magnifying glass, it will set things on fire. So if you take this magnifying glass here, and you're able to focus it-- you got the sun up here-- but if you focus it, you can burn a worm. This crazy worm can be set on fire by just taking a magnifying glass-- I mean, boom. Maybe not a healthy-- it's probably going to get me arrested in some states for doing that. But you know what I'm saying? It works though.
But the thing is, is that if you're not focused, you're not going to have success. So we go back here to this daily schedule again. I'm going to just keep-- you've got to make sure your focus are in here.
So really, if you're going to focus on these areas, you're going to have to figure out what are you not going to do. I'm going to throw it out, because this is huge. What do we not going to do? So for me, I don't watch TV, unless there's like a very specific thing that relates to my goals. So guess what kind of shows I watch ?
-I watch the "History Channel." I watch biographies. I watch things that help enrich my mind. I have no time to watch idiot shows about idiot people going through idiot stuff. Now, if I have all my goals done, then I have time to do that. I don't engage in empty conversations about stupid things. I don't drift around aimlessly at the mall wondering what I should be doing. I have a very specific plan. So you're going to have to get really focused on that plan. Making sense?
-All right, now, the pro forma, Bill Gates-- world's wealthiest man. Off and on, he's always in that top tier. He says, "Knowing your numbers is a fundamental precept of business." OK? So we kind of already done this a little bit, but I want to get into the numbers and make sure that we really know our numbers, OK? So the pro forma, don't make this more complicated than what it needs to be, OK? So the number one thing you need to know is how much profit you want to make on an annual basis. And we said that goal is--
-$100,000, so we've already knocked out that. Now, the next question is, determine your hard costs. Now, a hard cost, also known as a fixed cost, is the cost every month to be in business. It's the cost that every month-- it just cost you this much just keep the lights on. Just to-- do you know what your hard costs are going to be?
-I know insurance, right? That's $3,000.
-Insurance, $3,000 a year?
-OK, so much per month?
-I think I'm paying $280.
-OK, that's $3,000 a year. We're going to keep all this stuff on an annual basis for right now, OK? What's the next on?
-Well, I'm not paying rent, because I'm doing it out of my house.
-That's what you want. You want to do that at your house. By the way, Bill Gates started out of his house. Steve Jobs started out of the garage Hewlett Packard started out of the garage. Walt Disney started out of a garage. The garage is like the place to be. Don't worry about it. OK, so insurance, what else?
-Just the marketing stuff.
-Yeah, so I'm going to help you on these numbers, OK? You're going to have to spend every month probably about $300 on door hangers. You can print them for about $0.50 a piece. And if you're going to drop off 100 a day, let's just do the math.
That's about $50 a day, $250 a week, $1,000 a month. $1,000 a month, 12 months-- so you might spend this year on door hangers-- I want you to write all these down. Because this is big stuff here. I would say your probably going to spend about $10,000 this year on print pieces. Now, that's going to be offset by income, but, whatever.
-Trade shows, they're usually $1,000 each. And we want to do 10 of them. So, you're going to spend about $10,000 on trade shows. What else? Internet optimization, the website. Usually about $50 a month. So we're going to say it will be $600 for your website. OK? And then you've got to get some back links and that kind of thing. So, I'm going to put here links. I'm going to put in here $600. And your fixed costs. Phone, you got a phone?
-$200 a month.
-Oh, these guys are really taking advantage of you in the pricing of that phone. OK, so what else?
-That's probably it. It's just a start up.
-Probably it. So, this is how much money it's going to cost you this here. So we have 3,000 10,000, we've got 23,000. Plus 1,200 is 24,200. 24,200. 24,200 plus 2,000 is 24,400. 25,400. This is your hard costs for the year. Number two, done. Boom. OK.
Number three, variable costs. Now, the variable costs are the costs associated with rendering the product or service. So every time that you do that job that you're making the $2,500 profit on, how much cost? That first package, that $2,000 package, how much cost does it cost you to do this job?
-That's why there's a big profit on it. $100 probably. So it's a lot of knowledge, and a lot of labor, but not--
-You would be walking around in the attic with a spray foam gun.
-So it's $100 of cost per job.
-OK. Sweet man.
-I mean, gas and all that other stuff, driving to places, but--
-Another $50 probably.
-$100 per job. OK, it's important you write this down. Cool? Now, the fourth area is your break even point. So how many jobs do you have to do just to break even, based off of that number there? I know. I know. This is the worst E in the whole world ever. OK, so break even. But your break even point? How many jobs did you break-- because you said $2,000 is probably the minimum job.
-You're going to have to do 13 jobs this year just to break even, which now adjusts everything else, right?
-Because we got to go add 13 on top of this stuff here. So here, we said we had to get one deal a week. We're really going to need to like 1 and 1/2 a week now, right?
-So, what we got to do here is we're going to have to do 13 plus, right? 13 plus. So we really need to do 63 deals per year. Make sense? You need to do 63 deals a year to make that financial goal. Which, really, on a daily basis or on a weekly basis, how many jobs do we have to do? Well, we really aren't going to have to do one job anymore. We have that 1.3 jobs per week, right? So we can't do-- so it's not one deal per week. It's 1.3 deals per week. You feel me?
-Now we're getting real. Now we're getting real. Now we got this thing, this whole performance-- so many entrepreneurs get overwhelmed by the accounting, though. They say, oh, yeah the numbers. I don't want to talk about the numbers. They're overwhelming. No, you have to do that. You have to know the numbers.
Now point number five. You have to know your profit per customer. So the profit per customer for you on the low end it's $2,000 per one, right?
-So, you already have that. So you now have a performa.
-So, literally, all you need to do is throughout the year, you want to keep a sheet of paper, one sheet. I would recommend an Excel document, with these items on it. And every time you find out hey, there's a new cost. I didn't realize, but I'm spending $10 per job on gas, just to get there. Well, now you crank up your variable cost per job $110. And now you're going, well, now maybe it takes me 14 deals a year to break even. Not 13. Right?
And then every time that you have a new fixed cost-- you're like, hey man, I'm think about getting a new office. Well, before you move into that office, think about, if I do that, how does that affect my break even point? Well, that means I have to do 21 jobs just to break even. Well, I don't want to do that, then. Right? So, you need to be thinking about your performa at all times and how this all ties in together. That makes sense?
-Yeah, it does.
-Any questions about that?
-No. No. It's a start up.
-OK. This is how it works.
-Later I can see this getting a lot more complicated.
-Yeah, once you start having employees and all that.
-Right, which is why you keep these five documents. This is all you need, though.
-So I run. I work with dentists and doctors and attorneys and guys have a lot of stuff, a lot of details. But guess what? They all know their profit goal. They all know their hard hard. They all know their variable costs. They all know their break even point. And they all know their profit per customer. That's all you need to do. Make sense?
-OK. Now, I want to make sure we're into this here. Kind of as a wrap up on this-- if you go home today, and you're not serious like a heart attack to do all these eight steps, you just won't get success. OK? No pressure. But you'll just be stuck, and you'll be an intender, and that's not a good place to be. Because knowledge without application is meaningless.
So your business model, that's great. It's great to have a business model. But the business model starts off with one, we have to-- we start off with solving a problem for a customer. The pain the customer has is, that you solve is, saving money?
CLAY CLARK: And the gain is?
-Yep. And then we have our big thing. Our step one, we have to determine our why. And your why is to make $100,000 a year, year one, right?
STUDENT: Year one.
-And you want to eventually get to $500,00 so you can buy a house, help your parents pay off their mortgage, reinvest. Right? You got to do that.
Now step number-- step number two, we have here is we have to make sure that-- we know our big, big why. But we have to know our annual why. This has to be posted everywhere. You've got to put it where you can see it.
-Makes sense? OK. Now point three is that we need to make sure we know how many deals per year-- and we talked about this. It's not 50 anymore, right? It's actually 63 deals per year is what you need to achieve your goals. Right?
Step number four is you have to have your daily activity figured out.
-Make it a math problem, not this like-- how do I grow my business? No. What activities do I have to grow my business? How much? If the math works, it'll work. Like I work with a dentist, and with the dentist I used to work with, we knew if we did 20,000 mailers, we would get this many responses. And if we did this many door hangers, we'd get this many responses. If we were topping Google, we would get this many responses. And so we just did the work needed to achieve his goals. And now the guy has three different locations. He's rocking and rolling. It's not like he's a genius, it's just, we know the activity.
Number five-- OK, number five is we want to know the daily schedule. So any time that you have a big goal in your life-- you're like, man I want to get in shape. I want to build relationships. Man, I want-- Well, ask yourself, when am I going to do it? Ask yourself, when am I going to do that? And then put that on the schedule.
And then point number six here is that we want to make sure we begin to develop these documented systems, our team, and our internal business controls. OK.
And our next step here is that we want to define your goals in more of a holistic sense so you think about life not just financially, but your whole life there. And then the next area is you got to get the Pro Forma nailed down.
CLAY CLARK: And what area are you going, I don't get it? Or do you feel like it's hard to do or its overwhelming? Or it's--
-I understand all this so far.
CLAY CLARK: OK, you got it.
-I think I understand what you're trying to say. I still got to do this at home, though, and I look at my receipts and see where I'm spending money.
CLAY CLARK: Yeah.
-Netflix account or something.
-Yeah. Yeah. But the big thing is that it will take you time to do this. I would just ask you, how much time will it take, and when will you do it?
-That's one of those things that I wanted to leave aside for Sunday where I reflect on the week and move ahead toward the next one.
-I agree. I agree. But this is how we're going to get there. It's not unicorns. It's not-- we're not chasing luck. OK? It's not any of that. Success is a choice. That's all it is. And so the question I would ask you is, what do you have to do? You know those step eight, those eight steps. And then the final question is, when will you do it? When are you going to do it? And if you'll think about, today, before you go home, OK, on the Sunday I get back, I'm going to do this part. On the Tuesday I get back, I'm going to do this. On Wednesday I'm going to do that. On Thursday I'm going to do that. Then we're off the races. Cool?
-We'll help you make those print pieces and all the door hangers and that kind of thing.
-Hey, I appreciate you being here. You are a great American, and I appreciate you for not hopping on the plane that was slipping off the runway. That's always a bad deal.
-Take care. Boom.
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