Mike Andes argues you should consider reinvesting money into your own small business rather than automatically putting it into retirement accounts (IRA/401k) or passive investments like stocks or real estate. He frames a business as a ‘money machine’ with potentially much higher ROI — giving examples such as expecting $15 from a $10 investment (50% ROI), claiming business returns can outpace typical market returns, and projecting that $1,000 invested in a growing business could become a million-dollar business over several years under the right conditions. He also contrasts tax treatment, suggesting cash flow retained in business equity is not taxed the same way capital gains on stocks are.
I am taking this money.
Locking it up and I am giving it to the government. Guess what? You should probably put it in your business.
Should you invest in an IRA 401K or try to add more lawn accounts? This goes back to what we talked about earlier and that is looking at your business as a money machine. Looking at it and say, okay, what, what percent of return on my money will I get? As your business grows and you make more money, you start thinking like an investor and you start looking at your business as an investment tool. The same way that a piece of real estate or a stock or a bond or crypto for some people is considered an investment. Might have to scratch the crypto part as an investment. It's kind of speculation, but let's just say real estate and stocks for example. The same way you look at those as investments and you expect a return on the capital that you risk, you should also expect a ROI return on investment from your business. And as your business grows and as you charge the correct pricing and have a consistent profit again, usually around year three is when this becomes more consistent and you actually can trust it. That's when you start looking at your business as a money machine. I. E. If I put $10 in, I expect $15 out by the end of the year. Guess What? That's a 50% ROI. That's going to beat most stock market years. If you going to be just about every bond, that's going to be almost all real estate. It comes down to the fact that small business is the number one way to build wealth in America quickly because the ROI is unparalleled and unmatched. If I start off $1,000 today and I go start a long care business, I could theoretically in five years have a million dollar business by slowly growing it, putting the money back in, et cetera. If I have $1,000 and I have 100% return on investment in the stock market, that means that year one I would go to 2,000, 4,000, 8,000, 16,000, 32,000, I would have $32,000. If I invested a thousand dollars today in the stock market and I made a hundred percent ROI in five years I have $32,000. With that same thousand dollars, I'm confident that with the right systems in place, the right pricing in place, someone could build a million dollar business that that's worth hundreds of thousands of dollars in assets and generating cash flow. And not just a straight asset that's going to be taxed, that $30,000 will get taxed at capital gains if you were to then take that money out of the stock market, whereas the cash flow that is coming in and the asset value of my business is not taxed because equity, and it stays inside. So I really think it comes down to whether or not you're going to invest in an IRA or 401k, you got to ask yourself, okay, so over the course no of the next 20 years, and I'm locking this money up, I am taking this money.
Locking it up, and I am giving it to the government, or I'm giving it to Wall Street, I should say, because the government has sanctioned this event and not taxed me on that money. And so I'm going to lock it up for 20 or 30 years. The question has to be this, what do you expect in ROI from the money you put in every year versus what could that money otherwise do for you and your business? And if you're only confident you can make a 10% return on your, your IRA or your 401k, and by the way, you don't have any control over it, and you have a small business that you've now built that has systems in place to actually be profitable and become a money machine with a predictable ROI that's 30, 40, 50%, guess what, you should probably put it in your business. But if you don't have that confidence, the safer option for retirement, for dependability, and sometimes it's the right thing to do for your family, is to invest in something that's a little bit more stable than your business. Because guess what, you can have 50, 100%, 200% returns on your investment in your business. But you could also have negative hundreds, like lose it all. You could lose everything. Whereas going your 401k is unlikely. It's going to go to zero, it's unlikely, it's going to go to half. So it's typically a little bit more stable. But again, high risk, high returns, starting a small business, very risky. A lot of them fail over the course of the first five years. That's also. It has unmatched, unparalleled ROI when it comes to an investment vehicle. And when you change your mindset to looking at your business as an investment tool, and I put money in and I get money out on the other side instead of I work like crazy, my brains hurt, and I just work as much as I can and make as much money I can because I'm working. And the more I work, the more money I make. That switch is in my mind. When you then start working on your Business. Okay? If you're still thinking about dollars per hour when you're out in the field, all the rest of it, you're still working in the business. When you're working on your business, and we start looking at the business as a tool. As a tool, you say, okay, this little money machine is a lens. This little money machine. I'm gonna put $10,000 in, I'm gonna get $15,000 out. And I know that why, because If I spend $10,000 on a new truck and some marketing, for example, I'm expecting my revenue to go up $30,000, and I expect 20% profit on that. And so over the course of two or three years, I'm going to make X amount. Like, that's the type of thing you need to know if you're going to start investing in your business. And usually that starts happening around year three. So don't get impatient. Like, oh, man, I'm in month four or five, and that's not. I don't look at my business as a money machine. You shouldn't. You're not. You're working in the business, and that's where you should be. Should be generating revenue, making more customers. But when, usually around year three and four is when someone starts changing their mindset. They've now grown the business, they're working on it because they're starting to look at it like a tool. What can I put money in, money out, coming out with an roi. So that's what you have to determine. That's how you decide if you go IRA and 401k versus your business, what's the expected return? How dependable is it that in 20 years I'm going to be able to beat the returns of a 401k and the expected benefits of taxes that I don't have to pay versus investing that money in my small business? And as the numbers get bigger, a 401k or an IRA doesn't make as much sense. Because if you're making so much money saving 1,000 or $1,500 a year in taxes because of the tax deferment doesn't really move the needle for you. You'd rather keep the money. Like, I don't want my money going anywhere else. I want to lock my money up like there's an opportunity. I want to go spend some money. If the market dips 30% tomorrow, guess what? I'm going to be buying, and I don't want that money locked up. All right? So I don't like the idea of money being locked up behind without my control and if I take it out there's a massive penalty. I'm also very young and I'm much more risk friendly right now versus if you have a family, a 401k or an IRA might be the right option for you. I'd like to invite you to Landscape Summit. It's the conference we have in January of 2022. Go to landscape businesscourse.com conference for more details. Or we talk about P4P efficiencies and how you can grow your lawn care and landscaping business. I look forward to seeing you there.
