How to Turn Your Business Into a Money Machine! (2X Your Investment!)

Hey, everyone, it's Mike Andes, and you're listening to the Business Bootcamp podcast. Today we're going to be talking about how you can make your business a money machine. That's where you put money in and you expect an expected return on money out. Before we get into the show, though, a big thank you, today's sponsor, which is Gusto. If you haven't Already, go to gusto.combootcamp Try out their software completely free for 90 days, where you can not only time track all of your employees, but also pay them through direct deposit, as well as benefits for your employees, healthcare, dentistry, etc. Check it out. Today, go to gusto.combootcamp now, today we're talking about making your business like a machine. I'm the machine. A machine has a very predictable outcome. Use a machine because usually easier, usually because it's faster and because you have a. You know that when you pick up a tool, it's used for specific reason. And when it comes to your business, we use the business. We use the business to make money. But at the end of the day, there's opportunity cost. What that means is if I'm going to invest into my business, there's got to be a return on that risk that I'm taking with that money. And by spending that money on my business, it means I'm not spending that money someplace else. What the hell is that? An alpaca. I got the last one. I could invest in the stock market. I can invest in real estate. Let's go through some of the expected returns on those other asset classes. So I mentioned the stock market. If you look from 1957 all the way to 2018, the average return on an annual basis from the s and P500, which is like the 500 largest big companies that are publicly traded on the stock exchange, the average return was 8%. Now, you might be saying, well, I could do a whole lot better than 8%, because I traded Gamestop or I got Dogecoin or whatever it might be that is much higher risky, a riskier asset, and therefore, you're going to have a higher yield or a higher return expected. That being said, it's very possible that both those could crash, as they have recently, and they will continue to be up and down and much more volatile. But over the course of the past 50, 60 years, the stock market traditionally offers about an 8% return on your investment. Now, when it comes to real estate, you can usually get about a 9 to 11% return total. Or also, you can look at what's called cash on cash returns. And then we're talking like maybe 15 or 20%. Now a lot of times people use cap rate, which cap rate is basically net operating income divided by the market value of the property. And right now, with interest rates as low as they are, people are willing to go for 4 or 5% cap rate in order to invest in real estate, which means they're literally getting 4 or 5% on their money back. Now obviously, like I mentioned, there's cash on cash returns, but because you get to have leveraged debt when it comes to real estate and you might get 15, 20% cash on cash returns. Now bonds, when we look at the bond market, because again, if I'm going to put money in my business, I could also put it in stocks, I could put it in real estate. If I look at bonds over the past couple decades, bonds have traditionally only offer about 5 to 6% return. They're very stable, they don't go bad, not like they can go to zero as frequently. And so some would say that the U.S. treasury is almost guaranteed money. But now you look at the 10 year treasury, it's only 1.6% about and it's been hovering a little over 2% for the past couple years. It's not very much return. Again though, the higher the risk, the higher the return, the lower the risk. I don't have a fear as much of the government being completely dissolved and going bankrupt than I do. Gamestop or AMC for example, look at those are companies that have high risk, high return if you do invest in them. Now when we look at your business, we need to look at it the same way. Because I could take $10,000, invest in the stock market and expect that if I get an 8% return, I should expect that I get $800 per year back from that investment. Now if I was to do it in bonds, maybe I'd make 500 or $600. There's always a return on that $10,000. Now when I look at my business, I have $10,000 and I want to invest my business again. I want to put money into the machine. If I make a 10% return on that $10,000 that I invest into my business, I'm going to walk away with $1,000 from my business. In other words, I had a 10% return on the $10,000 I invested into the business. If I had a 20% return, I'd walk away with $2,000 in profit. That's the important part. So let's say you spend $10,000 on your business investing in equipment, hiring, marketing, whatever it might be, and you generate $100,000 in new revenue for the business. Let's assume now we have a 10% profit margin on that $100,000. What that means is I put $10,000 in, I get $100,000 in revenue, and I'm profitable on 10% of that, which means I basically get $10,000 back after putting 10,000, $10,000 in. That's a bad machine. Oh, that's bad. That business cannot grow or be profitable. This is the key thing though, is if I can put $10,000 in, I make $100,000 in revenue, but I'm 20% profitable. In other words, I make $20,000 back from the business. I effectively took my $10,000 and made it $20,000, doubling my investment, my ROI. My return on that investment would literally be 100% if I went from a 10% to, to a 20% net margin business. Now this is the beautiful thing when it comes to investing in your business. If you have recurring revenue and I invest in my business for a truck or a piece of equipment, or for marketing and acquiring a new customer, if I have recurring revenue, it's like the compound interest for a business owner because I am constantly getting money from that customer without having to do any sort of initial investment. Hi, doggy. You're my favorite customer. Thanks a lot. Bye. That's why I love lawn care and mowing services, is because if I go spend $100 on a customer, but every single week, I can make 50 and 50 and 50. That's like compound interest. I don't have to keep putting money in in order to get money out. Keep in mind, when it comes to business, a lot of times you're going to have to wait, have delayed gratification for two, three, or even four years before you actually see the returns on your business. I always tell entrepreneurs they need the third years when they start to see what really the fruits of all their labor. First year, you're pouring money in, you're investing, you're pouring money into the machine. Year two, you're trying to refine the machine, get all the systems right, get the right employees, get everything set up correctly. Year three is a lot of times where you actually see the results and the return from the money machine. I'm the machine now. Can you double your money in stocks? Yes. Can you double your money in real estate? Yes. But in all of those regards, you're going to have a higher risk, asset riskier asset, then traditionally, if I can spend $10,000 in my business, I can absolutely double my money within 12 months. That's 100% ROI. That's almost unheard of for most asset classes that you can invest in. That's the power of small business. But the caveat is that there's also a massive risk. When you put money out, you invest money. There's an expected amount of return you get for the risk that is assessed to that investment. So when I invest in my business, there's also a risk that I go bankrupt or that I fail. And over 50% of small businesses do fail within the first five years. So it's not to say that a small business making a money machine is completely risk free. There is a lot of risk, but because of that risk, there's also a high return. At the end of the day, this is really, in my opinion, how you should assess and analyze all future investments into your business. Whether you're buying equipment, hiring more people, doing marketing, and trying to grow your business. You've got to look at, what am I putting into the business? What do I expect out? At the end of the day, there is an absolute percentage that you can come up with as the business grows, expands, becomes more mature, and it becomes dependable that when I put X amount of dollars in, I get X amount of dollars out. And when you get to that point, that's the place where, as a business owner, we have a massive advantage to because we can keep pumping the money in as long as the money coming out exceeds the return that we can get anywhere else in the market. I'm Mike Andes. You've been listening to Business Bootcamp podcast. We'll see you next time. Hey, it's Mike here. Quick note. I just want to say a big thank you for watching this video supporting the channel. Whether you're watching other videos you subscribed or liked or not, I just want to say thank you. That's it.