Profit Comes First: Taking Care Of The Bottom Line And Get Paid With Rocky Lalvani

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Welcome to the Next Level Income show where it's our goal to take your income, investments and your life to the next level. I'm your host, Chris Larson. You can get a free copy of our book@nextlevelincome.com just click on the book link. Today's show this show is sponsored by Money Insights and their investment optimizer strategy. In my book, I share how I use this strategy to invest my money in two places at one time. The strategy has been used by the wealthy for generations for estate planning, minimizing taxes, preserving wealth and increasing stability for their investments. The team can help you develop a plan to build an emergency fund, pay for college, fund a business plan for retirement, and optimize your investments. For more information, check them out@nextlevelincome.com on the show today, we have Rocky Lalvani. Rocky started with nothing when his parents immigrated to the United States when he was only two years old. In spite of a lot of struggles and his mother passing away when Rocky was seven, he's been able to achieve both financial and life success. Rocky loves to share his journey and inspire others to achieve their dream even faster. Rocky serves as chief profitability officer for business owners and he teaches them how to ensure they get paid and they make a profit a priority. Rocky, welcome to the show this morning.

Morning, Chris. Great to join you today.

Absolutely. Always enjoy our conversations. And I'm so grateful to have you talking about the profit first concept this morning. And I'm excited to jump into that. But before we do, maybe you could share more with our listeners about your background, your story as an immigrant and how you ended up where we are today.

So I came here when I was a young kid. My parents immigrated to to the United States to live the American dream. And when they came here, a lot of their friends and some of their relatives came as well. And they had to struggle, but very quickly they found success. And part of that, I think, was some unique, which I didn't realize till much later in life. They would talk about life and money. So they would have conversations. It wasn't unusual for people to ask, how much did you pay for that? How are you doing this? How much? You know, people knew what people made it work and talking about what they were doing with money. So I just grew up thinking that talking about money was natural, which it's not. For most, money is a taboo subject. And unfortunately, it's a shame because we go to 12, 13 years of school, then we go off to college. Some of us get advanced degrees and we do that all for the simple purpose of making more money. And yet they don't teach us how to make more money in undergrad in economics. I have an MBA in. And yet they never taught me how to be profitable. They never taught me how to do those things. And that's something that you kind of have to learn separately from that. And so that was a big part of my journey, is figuring that all out. I'm also a tech geek, so I was one of those people using the first electronic spreadsheets called VisiCalc way back in the day. To me, numbers tell me stories so I can look at people. I'm an enrolled agent, so I can do taxes. But if I look at a spreadsheet or a tax, it tells me stories, and it begs a lot of questions. And I can look at that piece of paper, and I know how you behave, because I can just see it. And then that helps me to help my. The people that I serve make better financial decisions and take little teeny steps that result in much bigger outcomes over time. So none of what I do is overnight success. Everything I do is based on compounding. And compounding takes time. So take little teeny steps, and over time, you will have the life you choose. But it's not a race. It's a journey.

Absolutely. And we talk about that. I talk about in my book and how real estate is really get rich, slow scheme. And these habits that you instill really make a big difference over the life of your career, over the life of your financial investments and how you do that. Tell us a little bit about what you did before you do what you do now. You said you're an enrolled agent. What was your background like 10 years before that?

So I've always had side businesses. A lot of what talking about today is the result of side businesses finding the intersection of what I love with what the world wants and is willing to pay for. But I spent most of my career kind of doing what you did. I was in the medical field in sales. And it was funny because I was selling to doctors, realized how horrible they are at the business of business. They don't understand finances at all. And part of that is they're not allowed to talk about money in med school. They're not allowed to even have these kinds of conversations. And so a lot of what I used to do was when I would talk with the fellows, I would say, hey, here's how you can build financial success as a physician. If you would just slow down for the first couple years when you get started in practice, you can have everything you want, but you've got to do everything in sequence. And too often they have so much pent up demand and then they have so much societal pressure to live like a doctor that they overspend on top of the massive debt already in and it just kind of collapses on them. You know, they make good money, so it's not like they're going to starve, but they're beholden to them. And now with the changing of what's going on in the medical industry, it's even more so. That's why you see such an increase in the rates for doctors with suicides, with depression, with walking away, because they kind of have had enough. And the rest of society faces the same things too. If you do the right things in the right order, you have success. Like I can take the same ingredients to bake a cake and if I do it in the wrong order, I'm not going to have a wonderful chocolate cake. I'm going to have a mess in my hands and life same way. Take the right steps in the right order and you will have a tremendous amount of success.

Now I've seen the same thing and we've talked about some of our shared overlap in our histories and the medical field working with doctors. And you're right, it's hard because, you know, a lot of these doctors, especially with the shift of from personal or owning their own practices to being employees, they're getting further and further away from a lot of these practices that you teach. And I talk about it in my book. A lot of our investors, a lot of the listeners of the show are physicians and they have all the right, like you said, ingredients. And all they need to do is do it in the right steps. So before we jump into profit first, I want to learn a little bit more. I lost my mother older in life, but I lost my father at age 5. And I found through introspection that it has an impact on you. It makes you think about life and time as being finite. And people have asked me over my life, what kind of drives you. And over the past couple of years, as I approach the same year that my father passed away, 41, I realized that I was looking to this point and driving as hard as I could because I knew that time was finite and we didn't have unlimited time on this earth.

It's difficult. I mean, especially at that age, you just don't even understand like the whole concept of that is very, very difficult to understand. Along the space I Realize that it made me stronger as a person. And so as much as it's a heartbreaking thing, I wouldn't be who was today if I didn't have to go through those experiences of learning about death, of learning about the importance of relationship, of enjoying the journey. Because at the end of the day, you don't know. And so, you know, one of the things that I always ask people is, if you die today, would you have regrets? And if you have regrets, go fix them. Like, you know, my only regret dying today is that I wouldn't have more time with my kids. But it's not like I didn't do something that I wanted to do and wasn't able to. And I think that part of it, too many people have regrets of not trying to. So go try.

Yeah, I think that's the number one regret of people on their deathbed is they didn't do more things, they didn't try more experiences. And yeah, I feel, again, I feel fortunate, like you kind of said, I'm fortunate to have gone through some of these losses in my life because of what it taught me. I certainly wouldn't wish that on anybody, you know, that's for sure. But that's why we're so passionate about helping people achieve financial independence. Because I really believe you can chase your passions and you can do these things and be your best person, best self in life. So listeners are saying, all right, when are we talking about profit first? What is this? So give us an overview, Rocky, and then I'd love to talk about how you work with business owners and then also how real estate investors, how you can apply it to that. So kind of walk us through the philosophy and how it works and how it differs how most people operate.

So the reality is a lot of business owners and even real estate professionals don't take the time to focus on the bottom line. We are all focused on the top line. It's a vanity number. Oh, I did, you know, X, Y, Z, I, you know, I sold millions of dollars in something. I achieved these top line results. And it's very easy because at the end of a month, it's not hard to tell how much money you made. You can, you can look at your sales and say, this is what I sold. What's very difficult for people, though, is to understand the bottom line. And for most people, they don't know the bottom line until about a year and a half later, though. It's not until you get your taxes done that you sit down and say, well, what was my Bottom line, how did I make a profit? And especially in real estate, it's deceiving because of depreciation. It kind of lowers your bottom line. So you're sitting here going, did I really make money? What does this look like? It's very difficult to understand that number. And because of that, I think people just don't focus on it because of that. They overspend, they make mistakes. Why am I running this six, seven figure business? Why is everything. Revenue is coming in and yet at the end of the day, when I look at my bank account, there's no money in it. Why am I struggling every month? And profit fixes that problem. It's a cash flow management system that allows you to watch exactly what's happening real time, looking forward, not backward. So most business owners, they look at their bank account and say, do I have money? Do I not have money? And that's how they decisions. If you look at the reports that are coming out of the from your accountant, your cash flow statements and your profit and loss and your balance sheet, like you look at all of these and not a single one of them give you a clear picture of anything. They're not comparative and they don't match what you feel. And so it's a real, real struggle. And I have an mba. They showed us all these sheets, but they never taught us how to affect the sheets and how to tie them together. Profit first does that in the simplest of ways. Most people are familiar with Dave Ramsey, I'm sure you're familiar with them. He's got an envelope system so that you give every dollar a job and you put the money where it belongs. Well, profit first is that same concept for business owners. The money comes in up front, you give every dollar a job and you put it where it belongs. So for today's discussion, let's focus on rentals. Right when you buy a rental, you sit down and you run your numbers correct. You say, okay, I'm going to buy this property X amount. This is how much it's going to cost me to borrow. This is how much my taxes are. And then you guess and say, well, I'm going to apply a vacancy factor. There are certain repairs every year and then there's long term maintenance, whatever percentages you come up with. And yet the money comes into the account. And what do you do? Do you set anything aside for repairs? Do you set anything aside for vacancy? Do you set anything aside for the new roof that you're going to need in 10 years? No, you spend it all that's where we run into trouble. So what profit first says is, hey, when the money comes in, let's create accounts for all of these things. Create an account, let's name our account vacancy. And if we've got a 5% vacancy rate, when you get $1,000 in rent, $50 into your vacancy account makes sense. Put some money into your repair account, put some money into your long term improvement account. And what this does is it, it smooths out your cash flow. So when your vacancy occurs, right now I've got a vacancy, instead of having a dip in my cash flow, I go to my vacancy fund and I move money. And now I have just like I normally do so I can cover my mortgage. When a repair comes up. It's no longer a struggle of oh, this is a bad month, can I put off this repair for two weeks? And then you upset your tenant and then your tenant moves out. And now you've got a less durable tenant moving in. And because you need the money, all of a sudden you lower your standards, which starts a whole, you know, it becomes a hamster wheel race to the bottom. And what this does is it allows you to make your decisions based on your values instead of based on bank balance because the money is always there for what you designated for it. And so you can look at your accounts, you can see where your money's going. Tax time comes, you know, if it's not being taken out with the mortgage, well, there's the tax check. Oh, I have to write a tax bill. Okay, I have money tax account because I know what the tax bill is ahead of time and I've set that up. And you can even have like if sometimes. So when we buy properties, we rehab them usually because that's what needs to be done. But sometimes there's part of the rehab that I don't need to do, but I know it's coming. So a lot of times that's the roof. Okay, I bought this property, it's got a 20 year old roof. It's no surprise, five years I'm going to need to replace that roof, right? So setting aside those accounts and pre funding them on the purchase to say, okay, I'm going to put money for the roof and over the next five years I'm going to build towards that. So when it comes time to replace the roof, it's not, it's not a struggle, the money's there, you stroke a check, you go on with life. And by being a little bit more disciplined and by setting your money aside, you don't have to worry about these things. And you know that you're profitable because at the end of the month you're only taking out of the business with early profit. You're not spending money that you should have been setting aside.

I think it's perfect. I think the first conversation we had, Rocky, we talked about how my wife and I do it in our personal lives and I talk about it in my book. And I think I referenced Ramit Sethi's 12 Minute Guide to automating your finances. It's very similar and it's so challenging when you have money flow into your account, you spend it all and then you're trying to save what's left. There's almost nothing left. But when you pay yourself first, like you're saying, put the profit first, put it where it goes and make it happen, you can automate it and short circuit our natural human nature to do.

That well, and life gets busy. You have kids, you have work, you have this, you have at, and we forget to do things. It's just, it's life. But when you have, like Ramit says, when you have the automated systems, you build wealth. I mean, that's how I built my wealth was from the day I got out of college. I set up automated saving systems that went to 401ks, credit unions, stock purchase, mutual funds, you know, just cash. And so I never saw the money to begin with and it was gone before I ever felt it. And so I never missed it. I never felt like I was living a life of missing. And at the end of the day, I mean, you all do this, go look at your credit card statement, there's a whole bunch of charges on there. Most of them are double digit, not triple digit. You know, like I don't even know how I spent Thousands of dollars, 40, 50, 80 bucks at a time. And it's not hard to do. And by automating and setting these are timeless principles. It doesn't matter whether you're in real estate, you have a job, it doesn't matter who you are. You just have to set up the automated system for you and let it run. And the less you're involved, the better the outcome.

So if you're listening and you're thinking, this sounds complicated, I got to do 10 different bank accounts for all this stuff. Rocky, how do you help individuals, how do you help business owners? Set this up, make sure it's automated, make sure it's going to be sustainable for the future.

Usually what I do is I create their allocation percentages. If we can automate it and your bank can do it for you automatically, great. If you can't, we just. The date. And depending on the person and what they want, some people do it weekly. Most people do it twice a month, some people do it monthly. You sit down, you have your percentages. It takes all of five minutes to move money. Like, this is not complicated. This is first grade math, right? It's just simple and basic. And when you do simple and basic and you keep doing it, you have success. What I do is kind of the second level I go through, especially for business owners. And we dig through all your expenses. So business owners have three kinds of expenses. The first kind of expense is directly related to their business and their sales. So, for example, if I have a clothing store to buy clothing to sell, right? We can't run a clothing store without clothing. The second thing is the expenses we need in our business, but maybe we can reduce. So if I have a clothing store, I need a storefront to run it. So how much am I spending rent? Is there a way to cut rent? How much am I spending on my software systems to run my business? We spend way too much on software. Okay, I have to market, but am I getting a return on my marketing and my sales dollars? Like, is there actual value there? And then the third vanity, right? Oh, I need a fancy car for my business. Oh, I need this, this fancy display for my business. Nobody is buying your product because it's in a fancy display, right? They're buying your product today because they have a need and desire for it. Too often I think business owners spend a lot on vanity. And so it's digging through your expenses and saying, where are you wasting money? Because most business owners, right off the top, we can find 10% waste. It's not hard to do it in your own personal life and find 10% waste.

Absolutely.

And just that 10% is such a big gap that takes you off the edge and starts building success over time. So it's finding that edge and then preventing the shiny object. Oh, I need this. No, you don't need that. You want that. And distinguishing between needs and wants. So a lot of what I do is accountability and hold them tight to that. But so you mentioned Ramit. So if you, when you go through Ramit's book, got a very different mindset about how he does stuff. We grew up in the same culture, so we think the exact same way. It's like, interesting. How do I cut my costs? How do I get my cable bill down? How do I Get my phone bill down like I negotiated with Home Depot. Like, you can negotiate with these places if you choose to. I don't think Americans understand you can negotiate. And in real estate, we always negotiate, right?

Absolutely. Oh, yeah, absolutely. Yeah.

That's a big part of it. The other thing I've noticed, so in real estate, it's have good team, but I want a wholesale team. I don't want a retail team, meaning I don't want a team who's coming in to do my kitchen. It's amazing how many people will spend $60,000 on a kitchen that I can do for five or eight grand.

We just built a house. So I hear you loud and clear. It's, you can go. You can go from, you know, 200 bucks a square foot to three or four. Like that.

Like that. And the reality is, when you're building, the value from 200 to 400 is only you. The next person has no value in the 2 to 400 because that wasn't what they picked. And so it's making wise decisions. When we go flip houses, it's like, this isn't a house for me. This is a house that's going to sell to a particular market. What does that market want? Not what do I want. So there's appropriate price points for granite. There's appropriate flooring for each price level. You have to make the right decisions for who those people are that are going to buy that property. Or in rentals. You know, in rentals, it's all about durability. Spend for durability, spend for ease of flipping. And in the sense of the mistake I made early on was I put carpet in houses, never put carpet in rentals. Just the cost of every time they move out to shampoo and everything else is astronomical. So spend a little bit more. Put in vinyl plank that's durable and lasts forever and can be cleaned for 10 bucks instead of 200 bucks.

And people like, oh, yeah, yeah, such a difference. So, Rocky, you mentioned something, you talked about mindset. So somebody's listening. They said, okay, how do you get them in the right mindset? What books do you recommend to learn more about profit first and learn how to implement this process?

So for profit first, there is a book from Mike Michalowicz. It's called profit first. And it's there. It's coming out. There is a book that's to be coming out in the near browse probably a year away. It's going to be profit first for real estate. So profit first professionals who's decided to write the book. He's going to be on my podcast. Well, he's. We already recorded but we'll have a prop first for real estate episode coming out shortly. That's the basic print. These are not new principles. So like even if you Dave Ramsey stuff, it's the same principles. There's a hundred people with the same principles. It's like gravity. Gravity works everywhere. Stop looking for this complicated fancy solution. Just do the basics and life will be great. Problem people don't do the basics.

No. I love it. I love it. So one question we always ask our guests, Rocky, is if you can go back in life and give your 25 year old self some advice, what would it be?

Go buy the real estate now. Like, I didn't buy. So I knew how to do everything in real estate. Like I know how to lay tile, run plumbing, do all this stuff. I knew how to do it as a kid putting in roofs and yet I never bought my first property until my 40s. I was, I was selling real estate in college and yet I didn't buy my first property. And that was the biggest mistake. Start. Real estate is a long term game. And so that's the struggle I have internally right now. It's like, do I want to buy more real estate at my age? Because by the time it's paid off, I'm going to be in my 70s. Like, I don't know that I'm going to need income then, like, or more income than I've already built. So then the question is, does it really make sense? And mine, you know, in probably around 2011, 2012, you know, everyone was buying real estate. So he got, he's buying all these properties and then he turned around and he realized, he goes, I'm 65 years old. Why am I buying all these properties that are going to pay me? I'm 85. This is absurd. It doesn't make sense. So think about what your outcomes are. When do you need the money? And real estate is great for young people. You're more willing to do the work and you've got the time to over time, build wealth. It's guaranteed. I mean, the simplest thing I've heard, if you want to be a millionaire, go buy a million dollars of real estate, mortgage it and pay it off and you become a millionaire. That simple, easy.

It is. No, it's perfect. And that's, that's the first thing I tell people that I mentor, that I coach, is put your life vision together. Like this is your do your investment goals and does the process fit that, and it's so important to get that in place.

So that's what Living Forward is all about. It's.

And I didn't. I didn't know that. So this is totally unplanned. But I love the book.

Living Forward is how to create your life plan. It's. It's title is a proven plan to stop drifting and get the one. And if you don't think you need to read Living Forward, then I'll give you another book. It's by Napoleon Hill. And most people don't know this one. It's called Winning the Devil and the Devil Outwitting the Devil. Outwitting the devil wins. When you're in the drift, and most people are in the drift, they're told to do something. They follow a path, and they do it without thinking. They just go with flow. And when you're in the flow, you're in the drift and the devil wins. And that's why if you look at doctors, they're in the drift, they don't realize that their entire training and everything they've gone through has put them on that path. And unless they decide to change it, they're not going to get the life they choose to live.

Yeah, it's all about being intentional about that. And I talk about in my book how much respect and how much appreciation I have for doctors out there. And we're talking about the culture of training in that. So just to be clear on that, I think you and I agree with that. And it's a big mission of mine is to help affect this profession, these people that are doing so much good out there. So, Rocky, I feel like we're just getting started. I'm going to have you back on the show at some point in the future. But for those that are listening and they want to learn more about you, how to find out more your podcast, please share with the audience how they can get in touch with you.

So there are two podcasts. One of them is all about profit first, which is the profit Answer Man. Another podcast called Richer Soul. And Richer Soul is about how do you create the life life of your dreams? It's how do you create harmony with your health, your time, your relationships, and your spirituality? So the first one is how do I make money? The second one is once I have money, what do I do on my journey to make money? How do I live life? Those are the best places. My email is rockyach of those. You can get ahold of me that way as well.

Awesome. We're going to have all that in the links in the show notes. We're going to have a link to our book, Rocky. Thank you so much for today. If you're listening and you're interested, please get a hold of Rocky. Also, like subscribe and share next level income show with your friends. And thanks for being on the show today again, Rocky.

Thanks for having me. It's been a blast.

Absolutely.