making net worth decisions

Summary

are you making net worth decisions right now. I keep saying that phrase out loud lately because I keep meeting business owners building something that isn’t going to be worth anything when they want out. assets are sellable. jobs are not.

1. net worth is assets minus liabilities. do the math at least once a year. you’ll start to see how many of your “assets” are really liabilities, and how much of your wealth is theoretical instead of sellable. that’s the gut check.

2. we’re getting our house ready to sell, which is its own work, the gutters, the fence, the punch list you’ve been ignoring. last year a company also tried to buy Garage Gym Athlete. unsolicited. I entertained the conversation just to learn. and what they wanted to see was a lot like selling a house. systems, processes, employees, how much was tied to me personally. we had enough in place to get a real offer.

3. that’s the lesson. early as an entrepreneur, all you’re building is a job for yourself. that’s fine, you have to get to income that supports your life. but stage two is building a sellable asset. business owners have an unfair advantage over W2 employees here. you don’t have to wait to buy real estate or index funds. you can build value into your own asset through work, team, and growth.

4. step one, clean it up. pretend I’m coming next week to make you an offer. 7 days. clean books. taxes current. contacts in one place. email marketing in a real platform. the back end organized. you already know how messy yours is. start the cleanup now.

5. step two, build a system for every part of the business, lead flow, customer onboarding, fulfillment, retention, referrals. step three, replace every job you currently hold inside the business. you started as bookkeeper, accountant, marketing, sales, fulfillment, all of it. hire and train people into those roles until you’re no longer the bottleneck. when those three steps are done, you have an actual sellable asset. before that, you have a job. try harder.

Transcript

what net worth actually is

The most impactful business is the business that genuinely improves another human, a better human business. And to grow a business like this, you have to continually improve yourself. This podcast is a documentation of that thesis, scaling businesses and also personal growth. My goal is for you to shortcut this journey.

So if you’re ready to try hard, subscribe. If you like what you’re hearing, please share and enjoy. Are you making net worth decisions right now? I find myself talking about that phrase, that question, net worth decisions. Are you making net worth decisions over and over the more I’ve been consulting with business owners lately?

So I’m going to talk about that a little bit more and hopefully you have a good response to that question because assets are sellable and jobs are not. So first, let’s go over what net worth is. So net worth is basically what you are worth. If you own one asset and that’s your house, let’s say that house is worth $500,000 and you have a $400,000 mortgage on that house, meaning you put $100,000 down.

You have $100,000 in net worth, or maybe you put down $50,000 and it’s appreciated. So now you have $100,000 net worth. And that’s how you calculate net worth. You’re going to take all of your assets and you’re going to subtract all of your liabilities. And when you do this exercise, I recommend doing it at least once a year.

You start to realize how many assets you truly have and how many assets you do not have and what your liabilities are actually costing you. And in your financial and business life, the more net worth decisions you can make for a positive growth in your net worth, the better off you will be. And what brought this up recently for me also was we are in the process of getting our home ready to sell and there’s always so much work to do.

selling the house, selling the company

We’ve moved multiple times, we’ve rented out houses, so it’s nothing new to us. And anyone who’s moved even recently, they know that there’s a ton of work in just the moving process. But getting your home ready to rent or ready to sell is an even greater feat because you want it to be perfect. Typically a house is not ready to sell today.

If I told you, hey, you need to sell your home today, you could sell it for something. But if you don’t fix that gutter, that problem that’s been there or fix the fence that you know that you should have fixed two months ago or there are all these little like punch list items you probably haven’t taken care of if you own a home right now.

But then when you go to sell your home, those all accelerate. Those all become top priority things that you have to do. And you do all this work and you make it sellable. You’re increasing the value of the asset and how people perceive it. And as I’m going through this process right now, hitting my punch list of items that also made me think of last year, a company came and wanted to buy Garage Gym Athlete.

This was completely unsolicited. I wasn’t trying to sell Garage Gym Athlete. They wanted to get on a conversation. I pushed them off a few times, ended up talking to them, and they wanted to buy Garage Gym Athlete. I did entertain the conversation because I wanted, selfishly, I wanted to know, hey, what are you willing to pay for Garage Gym Athlete?

But what they had to see to be able to give me a figure that they were willing to pay is a lot like selling your house. They had to see every back-end thing, not just your numbers. They had to see how the systems operate, the process, the employees, how involved are you in the business. They have to know all these things.

assets are sellable, jobs are not

Luckily, I was in a pretty good spot to where we have a lot of systems, we have a lot of processes, we have all of these things in place. That is ultimately what makes a business an asset and actually increases your net worth. Because assets are sellable. Jobs are not. If you start as an entrepreneur, at first, all you’re really doing is building a job for yourself.

By all means, that’s all you need to do. You need to find a way to make a new income. If you have a previous job, you need to find a way to make an income that replaces your previous job and can support your family. Whether that’s you working 60 hours a week, it doesn’t matter, that’s like stage one.

But after you get there, stage two is transitioning out of just having a job that you built for yourself and building an actual asset that’s sellable, something that’s really sellable. An asset that actually increases your net worth. Business owners have an unfair advantage over anyone else in building a net worth because if you’re a W-2 employee, you can buy houses, you can buy into the stock market, you can buy any of these things that are considered assets or of value.

But when you have a business, you can actually increase its value through your work, through your employees, through growing the company, through helping more people. That’s ultimately what you want to be doing. I have, I just thought about this for a while over the last couple of days and wanted to record this to push everyone in that direction.

To start making the right net worth decisions. So am I doing things that are actually increasing my net worth in my company? Because if you just have a job right now where a lot of it hinges upon you, you couldn’t sell your business and if you can’t sell your business, you don’t actually have a valuable asset.

step one, clean it up

You can have a million dollar company, but not an actual valuable asset because if someone won’t buy it, it’s not an asset. You can’t sell it. So you still only have a job. Even if you’re making a million dollars per year, you still only have a job. And you don’t want to find yourself in that situation in 15 years, 20 years, 30 years.

Like it might be fine right now, it might be fine for the next 5 years, 10 years, but eventually you’re going to want to have an actual asset that’s sellable, that can go on a balance sheet of you as a person and you know what it’s worth. So here are the three things that you need to start thinking about if you want to make sure that you have a sellable asset.

The first is clean it up. Just say I’m coming to your business next week, I’m going to make you an offer. Say that’s the timeline. You have 7 days to get your shit together and get going. The first thing you need to clean it up. Make sure all your books are taken care of, taxes are taken care of, all your contacts are in one place, your email marketing has a place.

You need to clean up the back end of your business and make sure it’s not so sporadic and not all over the place and unorganized. That’d be step one. And you probably already know. If you’re a business owner, you probably already know how unorganized you are, so start putting a plan in place at least to get more organized and you’re starting to build an asset already.

The second thing is build a system, build a process for everything. So when a new lead comes in, what’s the system that you’re going to use, what’s the process they go through? When a new customer, when you have a new customer, new client, what’s the system that you’re using to manage this person? What’s the process that they go through?

systems and replace yourself

What’s their customer life cycle? How do we take care of them? How do we get them to refer more people? How do they get the best outcome? All of those kind of things. So that’s ultimately what you’re looking at as the second step. As a third step, you need to try and replace every job you have. Now step three takes the longest amount of time and it also takes the most money because you have to have another human being come in to be able to replace you.

But that’s ultimately what you want. You want to work yourself out of every job because when you start as an entrepreneur by yourself, you literally have 10 jobs. You’re the bookkeeper, you’re an accountant, you’re marketing, you’re sales, you’re fulfillment, you’re just every single thing in the business.

But you have to eventually start hiring those things out and replacing every single one of those things with another human being where you’re no longer responsible. Once you’ve done all those things, it’s very clean, it’s very organized, you have a system and process for every facet of your business and you’ve replaced all of your jobs, you have an actual sellable asset.

And most business owners think that they have a valuable asset when really they just have a nice paying job. But they don’t actually have an asset that they could sell. So start thinking about that more food for thought for you this week. Push yourself in that direction to start thinking about net worth decisions because net worth decisions are what build your family legacy and will stand the test of time.

Having a really nice job, not so much. Assets are sellable, jobs are not. That’s it for this week. Try harder.