March 1, 2024 • 30 mins
Embark on an entrepreneurial adventure with us as my co-host, food truck connoisseur John Proprie, spills the secret sauce to starting your own business. We're not just talking about tasty treats, but the meaty details of crafting a business plan that stands the test of time and the seasoning of savvy investment strategies that shield your wallet. Whether you're flipping burgers or flipping open your laptop, our dialogue will equip you with the tools to lay down a strong financial framework, from the ins and outs of LLCs and EINs to the importance of operating agreements that safeguard your dreams from potential disputes.
Take a seat at our table as we slice through the legalities of business partnerships with advice that goes beyond the handshake. Navigating the landscape of equity, hours worked, and formal agreements, we serve up a platter of wisdom to ensure your business doesn't just survive but thrives – even when mixing friendship with finance. We also simmer down the financial feasibility of running a food truck, from reaching your dough – I mean, goals – like a $30,000 salary, to managing the heat of seasonal business fluctuations. Listen closely, as we dish out tips on pricing your menu for success, cutting through red tape for permits, and selecting lucrative locations that turn your food truck into the hottest spot on the block.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to the Bound's Blueprint's podcast
where we discuss the optimaltechniques for finances and
health, and then break it downto create individualized and
balanced plan.
I'm your host, Justin Gaines,here with my co host, John
Proprie.
In this episode, John and Idiscussed, John specific
situation about launching abusiness and, hopefully, some
takeaways for your situation ifyou're looking to launch a
business.
(00:20):
We have a fun episode ahead foryou.
But first, a quick disclaimer.
John and I discussed hisspecific situation.
And in doing so, there'scertain nuances that aren't
discussed in the episode thatI'm aware of.
And also specificconsiderations that I'm making
on the fly.
These episodes for educationpurpose only, for your specific
(00:41):
situation, talk with therespective professionals or
reach out to us to have aspecific conversation.
We hope you enjoy the episode.
Speaker 2 (00:48):
I wanna ask you these questions because from an
unbiased business standpoint, wecan kinda go through stuff.
I'll tell you what I've done.
How much money I've had, thethings we gotta do.
We can see basically, by theend of it, I just wanna see if
it's reasonable.
If it's, like, something sure,like, take the jump, it might be
a good risk, or if it's reallyjust need I need more money,
(01:10):
basically, something somethinglike that.
So
Speaker 1 (01:12):
Yeah.
We can talk to restaurants nowis tricky because they're or no
matter how good the numbers look, it's gonna be a high risk
commensurate.
Speaker 2 (01:19):
Yeah.
And that's all I want.
Like, you'll ask all your Iknow you've done and this is
just, I guess, to pull it inbecause it's gonna be very
conversational.
I want it to be somewhatapplicable.
But so this is all for a foodtruck, and I know you've done
the, I think, business plans,and it's always been something
you want to, like, fund at somepoint in your life.
So, you know, obviously, theways around it, what it would
(01:41):
take.
So I would be funding basicallyall of it, and it wouldn't be
fifty fifty.
So she thought of, like,seventy thirty or, you know,
once she worked up forever.
Speaker 1 (01:51):
Yeah.
So we'd also the other thingyou'd wanna do is you'd wanna
structure it where your initialinvestments on loan to the
business.
That way, all of your money.
No matter what the equitysplits are, the money that
you're putting in is beingreturned back to you.
Mhmm.
And then that's also gonnalevel the playing field a little
bit because she doesn't havemoney to put into it.
You put it alone interestbearing at the federal minimum
(02:14):
interest rate required becausethe for IRS purposes, tax
purposes, there is a federalminimum interest rate, which you
can globally, you can pull thatout that fluctuates, I think,
monthly, maybe quarterly.
But do you find out what thatis?
It's usually pretty low.
I think the last time I lookedat it, depends on the length of
the loan.
(02:34):
The last time I looked at it, Ithink it was around, like,
three and a half, four percent.
Okay.
Maybe lower.
Now interest rates are comingdown.
So Mhmm.
But that way, you have it.
So that that one is gonna takeback to you and that equity
split doesn't have to play somuch into consideration on how
much money is put in there.
Speaker 2 (02:54):
Okay.
Alright.
So let's go deeper.
I only wanna switch this aroundbecause I feel like that's more
of a middle part.
So I'm gonna switch this a lot.
We got kind of the nice introexplaining to you.
I guess the first thing yeah,we can even dive into that more.
So the first thing is myquestion, I guess, would be,
yeah, so how do we go about thatthrough a contract?
(03:15):
I'm loading her the amount I'mloading both of us the money.
Speaker 1 (03:19):
If you're loading the business the money, so you're
gonna create the business entity.
Speaker 2 (03:23):
So we do have an l l c n e I n.
Speaker 1 (03:26):
Okay?
That's an alt key.
You have a tax ID for that.
So that's good.
So you have the entity.
Now you would create you'llhave to create an operating
agreement for that entity sothat you at at the operating
agreement is gonna outline yourownership breakdown.
We'll sign that, have acontract outlining your
(03:48):
ownership agreement.
The other thing that I would dois have a contract outlining I
mean, technically, it's like abuy sell agreement.
I have a contract outlining.
If somebody wants out ofbusiness, how does that happen?
What does that look like?
Clear out on your disputeresolution clauses, how you're
gonna handle dispute type andhandle resolutions.
(04:08):
Ideally, you would go to alawyer and have it drafted up.
Just to make sure it'sbulletproof.
But if not, you can GoogleGoogle standard forms.
I could send you some of thestuff that I've had from prior
businesses.
So the LLC will then have onloan payable, no payable to you,
and you'll be the no holder.
So you'll hold the loan, theloan will be to the business.
Speaker 2 (04:32):
Like, are we joint is the contract for dividing up
the LLC or is it dividing up thebusiness?
Or are they kind of the samething?
Like, if the LLC owns thebusiness, do we have to be
there's a partnership with thebusiness.
Speaker 1 (04:45):
Okay.
LLC is the business.
Speaker 2 (04:48):
Okay.
I get confused because, like,with the food truck, we need an
LLC, but then we need, like, abusiness license as well.
So Right.
Speaker 1 (04:55):
And the LLC will be the business license holder.
Think of an LLC as the a cloneof you.
Like, it just it takes you toduplicate you.
The duplication of you is thebusiness.
Okay?
So if you did a DBA, you wouldbe the business, which just
means you hold all the risk, youhold all the liability, you're
(05:15):
exposed.
So the LLC allows you to createa clone of you that is the
business.
Speaker 2 (05:20):
Okay.
So if someone asks for personalinformation, you're really
putting in, like, the LLC'sinformation and stuff.
Correct.
Correct.
Speaker 1 (05:27):
And then that way, like, if you're getting loans,
signing up for credit cards, andthe last sort of stuff, since
you're gonna be startup yourrevenue, they're gonna ask for a
guarantor on those types ofthings.
And that's where you personallyif you're the guarantor, you
personally are guaranteeing thatthat loan or that credit card
or whatever the obligation iswill be paid.
Speaker 2 (05:51):
So so that's kinda, like, my name or her name?
Speaker 1 (05:54):
Right.
Yeah.
Whoever whoever's the guarantor, like, you're gonna put your
sole solace, you're gonna puteverything in there, all your
information.
You're guaranteeing that thatdebt will be paid.
If you go that route, whatyou'd be doing here is making
yourself to to the no holder andloaning the money to the
business.
Because we wanna think about itas is the business has its own
(06:14):
balance sheet.
If you just put the money inwithout any loan, you just put
in cash.
So say you put in thirtythousand dollars in do it.
There's thirty thousand dollarsin cash, which is an asset.
There's no liability becauseyou didn't do a no.
So now there's thirty thousanddollars in equity.
Is now being split withwhatever ownership agreement you
(06:36):
put between the two of you.
So if it's seventy thirty split, you just gave her a thirty
percent off.
Thirty thousand for ninethousand dollars or nothing.
And you put a loan in there, ano payable, thirty thousand
dollar asset, thirty thousanddollar liability, equity is zero
.
Okay.
And then if you ever were tosell the business, you know, say
(06:56):
ten years down the road, saythat it was you were making a
little bit of profit, but not aton.
You would be able to then sellthat and you have and you'll
have your client list, yourrelationships, your goodwill,
all that sort of stuff.
You can sell off the business,sell a business.
Say the business tells her, ahundred thousand dollars, but
you still have this thirtythousand dollar loan because you
(07:16):
haven't paid it back.
You would then take the hundredthousand dollars from the sale
payback loan thirty thousanddollars.
You have seventy thousanddollars left to split between
the two of you and in that inthat situation, if it's a
seventy thirty split, she getstwenty one, you get the
remainder, and then you go in avery way.
But the loan allows you toprotect your investment into the
(07:38):
business.
It's not so much there becauseyou're looking to get loan
payments and looking to pay thatoff.
It's there to make sure that inthe event of a dissolution, a
sale, any of that sort of stuff.
You have to clearly hear, Mark,what your investment is, and
you're not just giving freeequity to your partners.
Speaker 2 (07:59):
Sure.
Speaker 1 (08:00):
That's that makes sense.
Speaker 2 (08:02):
Alright.
So I'll think of myself as herand I are the LLC, which is a
person.
And I personally am kind oflike the bank doing a loan.
Correct.
Yeah.
Okay.
In my mind terms.
Speaker 1 (08:18):
Yes.
That works.
And, actually, this is, like,great timing because I actually
have to have this conversationwith one of my clients and for
today.
Speaker 2 (08:26):
That's kinda nice.
So you're, like, kind of a
Speaker 1 (08:28):
it's a sale of a business and they called me up
inside June.
Can you can you help me can youhelp me with the insurance?
And I'm gonna have the DBAlater today.
And I was like, well, time out.
Why are you getting a DBA?
We're not getting that?
We're we're gonna sit down.
We're gonna talk at therestructure.
We're gonna talk about thisbecause DBs are garbage.
DBAs are nothing.
(08:48):
Doing business as?
Speaker 2 (08:51):
It it means I'm always like the personal one.
Speaker 1 (08:54):
Right?
So, like, that's why like,we've talked about this enough,
so you knew to go get an LLCfirst.
But a lot of people, whatthey'll do is we'll just go get
a DBA doing business as whichjust says, I John Proper am
doing business as this name andallows you to put that name and
allows you to advertise with thename, the name on, you know,
mailing addresses, bills,contracts, that sort of stuff.
(09:17):
Doesn't give you any protection, doesn't do anything.
This whole setup you wouldn'tbe able to do like, you can't do
a partnership agreement with aDBA.
You know, some sort of otherentity structure in order to do
it.
I suppose you could do it withthe DBA, but it will get very
messy very quickly.
You wanna have a separateentity, which is what you have
here.
Because you're gonna have anLLC that's a partnership.
(09:38):
So we tax as a partnership.
Speaker 2 (09:41):
Mhmm.
Speaker 1 (09:42):
Because the other like, the next jump because this
is probably one of yourquestions, so I'm just gonna
bleed right into it.
The next thing here is I knowwe're talking seventy thirty
split.
You're the one putting in theinitial investment.
Yes.
You're gonna protect that witha loan.
But the other thing is is youare still taking on the risk
because there's no guaranteethat that loan gets paid back
because there's no revenue.
So you had already mentionedthat she's gonna earn her equity
(10:05):
through marketing and throughhours on the truck.
What I would do is I wouldcreate a best thing schedule
where you know how you know whatsplit you wanna get to.
So so if it's seventy thirtyand you wanna you wanna maintain
seventy percent, she wants toget to thirty.
(10:26):
You're gonna wanna create avesting schedule where based on
the number of hours worked,she'll gain a percentage of
ownership up to a max of thirtypercent, which is the point at
which she's fully invested.
And you just need to createthat schedule so that it's
clearly outlined.
The reason I would do it on anhourly basis is it'll force the
(10:50):
two of you to track her hoursAnd then in the event of a
lawsuit contesting the ownershiphere, you will have a clearly
outlined agreement that's vestedbase off hours worked.
And also an outline and a chartthat you both agreed to and
signed keeping track of all thehours that have been worked.
Because when I've seenpartnerships like this go down
(11:12):
and end up in, you know, eithera lawsuit or sitting there in
arbitration, trying to figure itall out.
It's an argument over how muchwork was put in, where the
balance is.
So if you do this all ahead oftime and you have look clearly
outlined, clearly signed,documented, you're not gonna
have any issues.
My recommendation is always toget a lawyer.
(11:35):
However, if you wanna cut backon that cost, the way to prevent
yourself from having goterribly wrong is to have as
much documentation as possible.
But as you know, I've been in asituation where I've had to
fight that and didn't have alawyer.
And so I'm telling you partlyfrom situations where this is
what I wish I had done.
And then also that arbitrationwell favorably towards me
Speaker 2 (11:59):
and
Speaker 1 (11:59):
that was because we had enough documentation there.
But some of that documentationwas gathered very last minute
through conversations, phonerecordings, text messages, and
me knowing what I was doing togather that information, you're
much better off doing it fromthe beginning.
Because the other thing you'reavoiding by doing it in the
beginning is nobody's underduress.
(12:20):
So you'll be able to maintainthose contract those contracts
and those agreements, whereastrying to run around last minute
and get it through phone callconversations and text messages,
the argument is going to be, oh, I said that and I was upset.
I didn't actually mean it.
I didn't understand.
I didn't That's
Speaker 2 (12:36):
a good point.
Under duress.
Speaker 1 (12:38):
And that's a legal term, under duress of the legal
term, and then a lot of it getsthrown out.
I'd say, from the stuff that Igathered together, probably
eighty percent of it got tossed.
Even though it supportedeverything that we already had
from photo documents and inwriting and not under dress, but
simply because it's technicallyconsidered under duress.
It gets thrown out and itdoesn't considered at all.
(13:00):
So you wanna have a documentedas well as possible in the
beginning.
Preferably with a lawyer.
If not, make sure you writedown everything and have me look
at it.
Have somebody look at it thathas experience going through it.
So that you can make sure thatthere's certain clauses.
Because there's gonna becertain clauses that, like, you
just don't think about, then alawyer would throw in there, and
(13:20):
then that way, you just makesure you just put them in a
pause.
Speaker 2 (13:23):
Yeah.
Alright.
So what I'm hearing, obviously,very good tips.
I didn't it's crazy how thingscan be twisted, but most
important things to protectourselves is over document.
You can never have enoughdocuments, especially when it's
with someone you know.
Feel like there's a I mean,we're talking about starting a
business in my case, but a lotof people do this.
(13:43):
It's very easy, I think, to letthings slide.
I'm like, oh, we're friends.
Oh, that won't happen.
So doesn't matter.
You should always do that.
And then the other
Speaker 1 (13:52):
and the other thing I would tell you is if you get
the gut feeling of, like, Weprobably should talk about this,
but I think if we don't talkabout it, it might play out in
my favor long term, talk aboutit.
Yep.
We need to talk about it.
Because I can tell you with myother with my situation, there
was definitely gut feelingswhere I was like, oh, we should
really talk about this.
Speaker 2 (14:12):
That's a good point too.
Speaker 1 (14:14):
I don't have any exposure on this.
It's really just their exposure.
They should be concerned aboutit.
They're not bringing it up.
I'm not gonna talk about it.
And now it's a contentiouspoint that we're happy to go
back and forth on where if youjust act on that governor, like,
if you have more conversations,you're gonna be better do more
stuff in writing, you're gonnabe better off.
Make sure everything's signed.
(14:34):
And honestly, I would go andhave like, typically, you can go
to a bank and they'll signthey'll allow you to sign as a
notary public.
Mhmm.
And it doesn't cost youanything.
So even if it costs you twenty,thirty dollars to have a notary
sign off that you too are theones who signed the documents.
Yeah.
(14:54):
Do it.
Make sure, like, have have yourdocuments notarized, have it
clearly outlined that yes, wesigned, and yes, it was us who
signed.
And there's a better party here.
Because if you're not gonna usea lawyer at least another
public makes it so there's somesort of formal process where it
was verified and it wasn't.
You eliminate the comments of,oh, I was drunk when I signed
(15:16):
that.
So I was in Avery, and I wasn'tin a sound mind.
I couldn't have couldn't havepossibly agreed to that.
Doing these sorts of thingsjust allows for you to protect
yourself as much as possible.
Because if you go to a lawyer,it's gonna be no advice.
Yeah.
Yeah.
Speaker 2 (15:30):
Alright.
Great tips there and then LLC.
So we've covered those twothings.
Protect yourself through that.
Alright.
So next things then.
So that's all feasible.
That's all doable.
How do I guess bring us back tothe point of financials time
and is this possible for mysituation?
So I'm just gonna pull up acouple things here that I've
(15:53):
kind of outlined and gatheredthat need to be done.
I I'll pull this up, butactually we'll first go over
financials and because that'swhere all this is gonna play
into.
We're gonna talk about theprices of everything and
everything I need done.
So
Speaker 1 (16:12):
Yeah.
So, I mean, from a financialperspective, I always back into
this.
So if you're if if you'remaking the decision to do it or
not, do it, I would back into it.
So what's the minimum amount ofprofit that you need to
generate from the business inorder for it to sustain you?
Mhmm.
Do you know that number?
Speaker 2 (16:30):
So what you're asking is the money that needs to be
made back to cover everythingput in and a year's, quote,
year's salary.
Yeah.
Speaker 1 (16:40):
Okay.
The so the year's salary part.
Speaker 2 (16:42):
Just the year's salary.
Okay.
Yeah.
Yeah.
Oh, two thousand dollars amonth, we'll say.
Speaker 1 (16:47):
Alright.
So twenty four thousand dollarsof
Speaker 2 (16:52):
ideally, like, we can round it maybe to thirty just
because that was that wasprobably scraping by, I guess.
Speaker 1 (16:58):
Yeah.
Okay.
That makes sense.
So thirty thousand profit line.
You said you're doing a foodcheck?
Speaker 2 (17:10):
Yeah.
Speaker 1 (17:15):
So this so this is why I kinda back into it.
So if you take you just takenational averages, it says fUva
trucks, net profit margin.
Net profit margin on the foodtrucks generally between seven
and eight percent.
Mhmm.
If it's extremely successful,if you get know, to double that
number fourteen to fifteen.
Mhmm.
So in the beginning, naturally,it's not gonna be that high.
(17:37):
If you took your thirtythousand and average payroll
cost is twenty five percent, sodivide that thirty thousand by
twenty five.
Percent point two five, andthen divide that by point seven
because you're only seventypercent owner.
It's a hundred and seventy oneAnd I would say those numbers
(17:58):
are probably slightly aggressive.
So if you jump if you jump thatnumber to two hundred thousand
sales, there wouldn't be anyprofit to share, but you'd be
able to pay yourself as anemployee that's gonna
effectively because you're notpaying yourself as an employee,
it would just trickle down toprofits and be shared.
But you wanna remember thatit's a payroll expense because
(18:20):
you're not paying yourselves onthing.
Speaker 2 (18:22):
Right.
Right.
So kind of bypassing thatpayroll expense to start.
Speaker 1 (18:27):
Yeah.
If you if you eliminate thepayroll expense which from a
quick search is roughly twentyfive percent of sales Mhmm.
And just dropping that twentyfive percent down into the
profit line then.
You could do it at about twohundred thousand sales.
Alright.
You're let's say you're in thenortheast though, so you're
operating.
Yeah.
You know, eight months out ofthe year.
Speaker 2 (18:52):
Yeah.
That's Oh.
The genre.
Generous.
Speaker 1 (18:54):
We call it seven months depending on the the
weather.
So you gotta do twenty eighttwenty nine so you gotta call it
thirty thousand a month.
Okay.
Speaker 2 (19:08):
Okay.
So to start so let's I guess,go with the idea.
If you agree with this, becausewe're talking about, is it
feasible?
Is it possible?
And we're gonna get into howmuch money I have.
We'll obviously base it offthat.
Will assume it's gonna breakeven and not really pay me what
I want for at least the firstyear we do it for six months.
(19:31):
Okay.
That sounds fair.
Right?
I mean, because we're not gonnahave a line the second we
opened.
Speaker 1 (19:38):
Yeah.
Generally speaking, businessestypically don't, you know, hit a
profit line until year three.
So, you know, you're stillbeing aggressive by only waiting
a year.
Speaker 2 (19:47):
Okay.
So if we use the year threeline, are people working second
jobs?
Are they living off?
What they've saved up?
What normally happens there?
Because I imagine that being,like, my full time job.
Right?
In that.
So the year
Speaker 1 (20:02):
the year three mark is a line number.
So if you're paying yourself,like, if you're one of the
employees, you probably couldget it quicker.
Mhmm.
Speaker 2 (20:09):
So I
Speaker 1 (20:10):
realize that kinda sounds like I'm backtracking,
but I'm just Yep.
We're doing this live.
So I'm Yeah.
There's no pretty while whilewe're live thinking here.
But Jen so to answer yourquestion directly, generally
speaking, a business is gonnaeither have the cash or take out
a business loan And that'sgonna cover, you know, six to
(20:32):
eight months of the operatingexpense.
And then the whole business isthat that gets you to running,
and then you're able to continueto to run those numbers and
cover your payroll.
You're breaking even and you'removing money the whole time.
I guess we need to back up alittle bit as the issue.
So typically with a food truck,you need permitting in order to
(20:52):
have a location.
Mhmm.
So the question then becomes doyou have permitting?
Do you have relationships withfood trucks?
How frequently are you gonna beopen?
Because that's what's gonnadrive it.
We're talking two fiftytransactions at a fifteen dollar
average, which our number Imean, honestly, that fifteen
dollar average, we're pullingthat number out of thin air two.
Is that gonna be the averageticket size?
(21:14):
I don't know.
You know, we need to we kindaneed to look at a menu as well,
see what the pricing is, seewhat the costs are, build that
out, and then once our averageticket price, Mhmm.
With keeping your food costs,you know, at forty percent.
So whatever your food cost addsup to divide that number by
(21:34):
point four, that's your saleprice.
Right.
And that's gonna get to youraverage ticket.
Then it's gonna tell us howmany transactions we need to hit
thirty thousand a month salenumber.
And now if we hit that thirtythousand dollars a month sale
number, how many days do we needto be open?
Or doing it the opposite way.
How many days have we opened?
(21:55):
How many transactions do weneed to hit that?
Without knowing whatrelationships you'll have as far
as farmers markets, locationsto be constantly open at it.
It's hard to say it's hard tosay if, you know, where your
frequency is gonna be.
And you get away from thepermitting thing.
The permitting is if you wannabe on, you know, state
municipality land or Yeah.
(22:15):
Parks and, you know, that sortof stuff.
You partner up with a business.
You know, a restaurant thatowns their parking lot, business
owns their parking lot.
You can get a relationship thatway Mhmm.
Where you're parked in aparking lot consistently.
You have your food truck goingfrom there.
Mhmm.
So that's another option foryou.
Speaker 2 (22:33):
So what we looked at was the permit for, like, street
parking in the city and otherlocations.
Was about a thousand, I think,a year.
But I imagine no spot unlessit's, like, our public market on
Saturday or a different marketon Sunday, you know, unless we
get into those, none of them aregonna be super high heavy
traffic.
Speaker 1 (22:54):
Right.
And that but that's the beautyof the food truck.
Is that Yeah.
We You were able to go wherethe traffic is.
Definitely.
Speaker 2 (23:04):
Okay.
So that's good.
Yeah.
That's good.
You know, I've looked at allthe permits.
That's one, business license,fire safety, two health
department ones.
I've probably added them up,and I was just being generous.
I figured all of that wouldn'tprobably add up to about, like,
fifteen hundred to two thousanddollars.
Speaker 1 (23:23):
For actually, you're probably probably at the two
thousand dollar mark prettyeasily.
Okay.
And you're also gonna need inorder to get some of those
health inspections, you're gonnaneed a relationship with a
commercial kitchen, typically.
Yep.
You know, I'd be rentingcommercial kitchen space.
Speaker 2 (23:38):
Mhmm.
So all that mixed with so let'ssay, two thousand dollars,
spending commercial space eachmonth.
Let's just bring it all up toit wasn't I did look here.
It wasn't too much.
But I think there still wassomething like around fifty an
hour.
I don't think it was terrible.
(23:58):
But so that will add up toabout two hundred a month.
We were saying so two thousanddollars, two hundred.
And then I was looking attrucks on Facebook marketplace
because I'm trying to save alittle money.
And generally, I feel like Icould find one for twenty
thousand.
Trailer truck.
(24:20):
Truck.
Oh, okay.
Yeah.
So there's one in Utica.
That is around there.
It's very small.
There's a couple like, there'sa lot in the south that my dad
was sending me.
So I don't know how feasiblethat is.
But I think there's fines.
It's not like they're readilyavailable, but there's there's a
(24:42):
couple fines that if I went foryou know, the distance I could
get them.
But ideally, I'll say, becausewe're gonna have to wrap it.
We're gonna have to make somechanges, make it our own.
So ideally, the truck wouldprobably be twenty five in total
.
Now I think that's where I'm at.
I think that I told youeverything.
(25:03):
So I guess what we're at now iswith those numbers, with my
plan, with everything I told you, and everything you know I need
to do.
How long would you think itwould take?
How much money would you do tostart it?
And I guess that's basically it.
Because once I have that, I canthen we can then look at my
current situation and be like,that's probably not feasible or
(25:26):
it is.
Speaker 1 (25:27):
Because this is where you're getting into when you
know, when I talk about lookingat businesses and, you know, I
need to see two, preferablythree financial statements.
Because what we're talkingabout here is balance sheet.
And cash flow statement.
We're gonna talk about incomestatement, which is what we were
(25:48):
talking about when we werefiguring out your profit line.
But the income statement reallydoesn't matter if cash flow
sucks.
Speaker 2 (25:55):
Mhmm.
Speaker 1 (25:56):
And the cash flow you can get from different areas
other than just your operatingone of the ways you can generate
cash flow is through a loan.
And so instead of you spendingtwenty five thousand dollars of
cash, you get a loan, thatbrings twenty five thousand in
cash in, and then you just havea monthly expense that's going
out.
To a cash flow expense.
You have a business expense onyour income statement.
(26:17):
But your balance sheet isunadjusted because you had asset
brought in and a liabilitybrought in instead of just
reallocating cash into adifferent asset class.
Yeah.
Speaker 2 (26:29):
Because if
Speaker 1 (26:30):
you buy the truck that you own out, right, your
level of sales decreases inorder for you to get your thirty
thousand dollars of incomebecause you own the vehicle, you
have a lower cash reserve, butyou don't have an expense item
associated with it.
You don't have an ongoingmonthly expense items associated
with it.
There's not continual cash flowgoing down.
Speaker 2 (26:50):
Right.
Hey.
I have twenty five thousanddollars right now.
It's my name.
We'll just round it there.
And that's actually what ittakes to live for a full year.
If I did no work or anything,I'd burn through all that money
in a year.
Right.
Assuming this makes not enoughmoney to even pay me for a year,
I imagine I shouldn't reallytouch or use any of that money.
To go towards a business?
Speaker 1 (27:15):
Correct.
To be in a strong financialposition, you'd wanna have yeah,
years worth of cash reservesthat you don't have to touch.
You know, like, you could work,not work, and it wouldn't
matter.
You'd have no income, and itdoesn't matter.
And then the remainder to fundthe operations of the business
would come from somewhere else.
Speaker 2 (27:33):
Yeah.
So that would be the law.
Speaker 1 (27:36):
Well, you would need a loan for the truck and you'd
need whatever to get thelicensing to get your initial
ingredients by so that you caneat on the first time.
Speaker 2 (27:47):
And, ideally, I plans to get the loan for the truck
and then use my money for therest.
Thanks.
So If
Speaker 1 (27:52):
I were in your they based off the quick numbers that
we threw together, I would wantforty thousand dollars to do
this.
Speaker 2 (27:58):
Okay.
That's fair.
That's So it's gonna
Speaker 1 (28:01):
take twenty five to buy the truck to get the
licensing.
For twenty five thousand, youcan open the doors but you don't
have anything in the groceryyou know, you know, any
groceries, going food, you know,all that sort of stuff, I would
want another fifteen thousandsitting there to buy groceries,
to buy the, you know, the toolsand stuff that I need.
Because stuff's gonna gosideways.
(28:22):
You're gonna need to buy stuff.
You're gonna need to buysignage, marketing, all that
sort of stuff.
So Yeah.
You know, if you had anotherfifteen, you're not gonna be
super duper stressed about
Speaker 2 (28:30):
it.
Mhmm.
Speaker 1 (28:31):
And you're gonna be able to to make it happen.
Speaker 2 (28:33):
It's pretty interesting because when I came
like, when I wanted to do thispodcast with you, basically, I
was trying to figure out if Ican do it.
Before doing all this stuff.
And really, what we're kindasaying is you have to do all
this stuff to figure out if youcan even do it.
Speaker 1 (28:49):
Well, part of the reason why I have so many
business plans in my hard driveson my computers.
And I say that plural because Ia crazy person and don't throw
hard drives and they're all in asafe.
I won't throw out a computer,but I won't throw out the hard
drive.
Literally take a hard drive.
But the reason I have all ofthose is because you have to do
this.
And then you find out.
(29:09):
That's not a good idea.
Or Yeah.
It's not gonna make me enoughmoney or, you know, whatever the
case may be or it's not theright time to do it.
And so I hold on to them forthat.
But, yes, you have to you haveto run this all through and put
yourself in the mindset.
Am I doing this?
Because if you don't getexcited and you are stressed out
just by running thecalculations, that's your gut
(29:31):
feeling telling you that it'snot a good idea.
Because the one thing I cantell you with starting a
business, especially fromscratch, is it's not easy.
It's gonna be tough.
It's gonna be hard.
It's gonna be stressful.
So if you're not excited justby running the numbers and doing
all the hypotheticals, you'reprobably best off not not
pursuing it.
Speaker 2 (29:52):
Thanks for listening to our podcast.
Speaker 1 (29:54):
We hope this helps you on your balanced freedom
journey.
Speaker 2 (29:56):
Please share your thoughts in the comments section
below.
Speaker 1 (29:58):
Until next time, stay balanced.
Welcome to the Bound's Blueprint's podcast
where we discuss the optimaltechniques for finances and
health, and then break it downto create individualized and
balanced plan.
I'm your host, Justin Gaines,here with my co host, John
Proprie.
In this episode, John and Idiscussed, John specific
situation about launching abusiness and, hopefully, some
takeaways for your situation ifyou're looking to launch a
business.
(00:20):
We have a fun episode ahead foryou.
But first, a quick disclaimer.
John and I discussed hisspecific situation.
And in doing so, there'scertain nuances that aren't
discussed in the episode thatI'm aware of.
And also specificconsiderations that I'm making
on the fly.
These episodes for educationpurpose only, for your specific
(00:41):
situation, talk with therespective professionals or
reach out to us to have aspecific conversation.
We hope you enjoy the episode.
Speaker 2 (00:48):
I wanna ask you these questions because from an
unbiased business standpoint, wecan kinda go through stuff.
I'll tell you what I've done.
How much money I've had, thethings we gotta do.
We can see basically, by theend of it, I just wanna see if
it's reasonable.
If it's, like, something sure,like, take the jump, it might be
a good risk, or if it's reallyjust need I need more money,
(01:10):
basically, something somethinglike that.
So
Speaker 1 (01:12):
Yeah.
We can talk to restaurants nowis tricky because they're or no
matter how good the numbers look, it's gonna be a high risk
commensurate.
Speaker 2 (01:19):
Yeah.
And that's all I want.
Like, you'll ask all your Iknow you've done and this is
just, I guess, to pull it inbecause it's gonna be very
conversational.
I want it to be somewhatapplicable.
But so this is all for a foodtruck, and I know you've done
the, I think, business plans,and it's always been something
you want to, like, fund at somepoint in your life.
So, you know, obviously, theways around it, what it would
(01:41):
take.
So I would be funding basicallyall of it, and it wouldn't be
fifty fifty.
So she thought of, like,seventy thirty or, you know,
once she worked up forever.
Speaker 1 (01:51):
Yeah.
So we'd also the other thingyou'd wanna do is you'd wanna
structure it where your initialinvestments on loan to the
business.
That way, all of your money.
No matter what the equitysplits are, the money that
you're putting in is beingreturned back to you.
Mhmm.
And then that's also gonnalevel the playing field a little
bit because she doesn't havemoney to put into it.
You put it alone interestbearing at the federal minimum
(02:14):
interest rate required becausethe for IRS purposes, tax
purposes, there is a federalminimum interest rate, which you
can globally, you can pull thatout that fluctuates, I think,
monthly, maybe quarterly.
But do you find out what thatis?
It's usually pretty low.
I think the last time I lookedat it, depends on the length of
the loan.
(02:34):
The last time I looked at it, Ithink it was around, like,
three and a half, four percent.
Okay.
Maybe lower.
Now interest rates are comingdown.
So Mhmm.
But that way, you have it.
So that that one is gonna takeback to you and that equity
split doesn't have to play somuch into consideration on how
much money is put in there.
Speaker 2 (02:54):
Okay.
Alright.
So let's go deeper.
I only wanna switch this aroundbecause I feel like that's more
of a middle part.
So I'm gonna switch this a lot.
We got kind of the nice introexplaining to you.
I guess the first thing yeah,we can even dive into that more.
So the first thing is myquestion, I guess, would be,
yeah, so how do we go about thatthrough a contract?
(03:15):
I'm loading her the amount I'mloading both of us the money.
Speaker 1 (03:19):
If you're loading the business the money, so you're
gonna create the business entity.
Speaker 2 (03:23):
So we do have an l l c n e I n.
Speaker 1 (03:26):
Okay?
That's an alt key.
You have a tax ID for that.
So that's good.
So you have the entity.
Now you would create you'llhave to create an operating
agreement for that entity sothat you at at the operating
agreement is gonna outline yourownership breakdown.
We'll sign that, have acontract outlining your
(03:48):
ownership agreement.
The other thing that I would dois have a contract outlining I
mean, technically, it's like abuy sell agreement.
I have a contract outlining.
If somebody wants out ofbusiness, how does that happen?
What does that look like?
Clear out on your disputeresolution clauses, how you're
gonna handle dispute type andhandle resolutions.
(04:08):
Ideally, you would go to alawyer and have it drafted up.
Just to make sure it'sbulletproof.
But if not, you can GoogleGoogle standard forms.
I could send you some of thestuff that I've had from prior
businesses.
So the LLC will then have onloan payable, no payable to you,
and you'll be the no holder.
So you'll hold the loan, theloan will be to the business.
Speaker 2 (04:32):
Like, are we joint is the contract for dividing up
the LLC or is it dividing up thebusiness?
Or are they kind of the samething?
Like, if the LLC owns thebusiness, do we have to be
there's a partnership with thebusiness.
Speaker 1 (04:45):
Okay.
LLC is the business.
Speaker 2 (04:48):
Okay.
I get confused because, like,with the food truck, we need an
LLC, but then we need, like, abusiness license as well.
So Right.
Speaker 1 (04:55):
And the LLC will be the business license holder.
Think of an LLC as the a cloneof you.
Like, it just it takes you toduplicate you.
The duplication of you is thebusiness.
Okay?
So if you did a DBA, you wouldbe the business, which just
means you hold all the risk, youhold all the liability, you're
(05:15):
exposed.
So the LLC allows you to createa clone of you that is the
business.
Speaker 2 (05:20):
Okay.
So if someone asks for personalinformation, you're really
putting in, like, the LLC'sinformation and stuff.
Correct.
Correct.
Speaker 1 (05:27):
And then that way, like, if you're getting loans,
signing up for credit cards, andthe last sort of stuff, since
you're gonna be startup yourrevenue, they're gonna ask for a
guarantor on those types ofthings.
And that's where you personallyif you're the guarantor, you
personally are guaranteeing thatthat loan or that credit card
or whatever the obligation iswill be paid.
Speaker 2 (05:51):
So so that's kinda, like, my name or her name?
Speaker 1 (05:54):
Right.
Yeah.
Whoever whoever's the guarantor, like, you're gonna put your
sole solace, you're gonna puteverything in there, all your
information.
You're guaranteeing that thatdebt will be paid.
If you go that route, whatyou'd be doing here is making
yourself to to the no holder andloaning the money to the
business.
Because we wanna think about itas is the business has its own
(06:14):
balance sheet.
If you just put the money inwithout any loan, you just put
in cash.
So say you put in thirtythousand dollars in do it.
There's thirty thousand dollarsin cash, which is an asset.
There's no liability becauseyou didn't do a no.
So now there's thirty thousanddollars in equity.
Is now being split withwhatever ownership agreement you
(06:36):
put between the two of you.
So if it's seventy thirty split, you just gave her a thirty
percent off.
Thirty thousand for ninethousand dollars or nothing.
And you put a loan in there, ano payable, thirty thousand
dollar asset, thirty thousanddollar liability, equity is zero
.
Okay.
And then if you ever were tosell the business, you know, say
(06:56):
ten years down the road, saythat it was you were making a
little bit of profit, but not aton.
You would be able to then sellthat and you have and you'll
have your client list, yourrelationships, your goodwill,
all that sort of stuff.
You can sell off the business,sell a business.
Say the business tells her, ahundred thousand dollars, but
you still have this thirtythousand dollar loan because you
(07:16):
haven't paid it back.
You would then take the hundredthousand dollars from the sale
payback loan thirty thousanddollars.
You have seventy thousanddollars left to split between
the two of you and in that inthat situation, if it's a
seventy thirty split, she getstwenty one, you get the
remainder, and then you go in avery way.
But the loan allows you toprotect your investment into the
(07:38):
business.
It's not so much there becauseyou're looking to get loan
payments and looking to pay thatoff.
It's there to make sure that inthe event of a dissolution, a
sale, any of that sort of stuff.
You have to clearly hear, Mark,what your investment is, and
you're not just giving freeequity to your partners.
Speaker 2 (07:59):
Sure.
Speaker 1 (08:00):
That's that makes sense.
Speaker 2 (08:02):
Alright.
So I'll think of myself as herand I are the LLC, which is a
person.
And I personally am kind oflike the bank doing a loan.
Correct.
Yeah.
Okay.
In my mind terms.
Speaker 1 (08:18):
Yes.
That works.
And, actually, this is, like,great timing because I actually
have to have this conversationwith one of my clients and for
today.
Speaker 2 (08:26):
That's kinda nice.
So you're, like, kind of a
Speaker 1 (08:28):
it's a sale of a business and they called me up
inside June.
Can you can you help me can youhelp me with the insurance?
And I'm gonna have the DBAlater today.
And I was like, well, time out.
Why are you getting a DBA?
We're not getting that?
We're we're gonna sit down.
We're gonna talk at therestructure.
We're gonna talk about thisbecause DBs are garbage.
DBAs are nothing.
(08:48):
Doing business as?
Speaker 2 (08:51):
It it means I'm always like the personal one.
Speaker 1 (08:54):
Right?
So, like, that's why like,we've talked about this enough,
so you knew to go get an LLCfirst.
But a lot of people, whatthey'll do is we'll just go get
a DBA doing business as whichjust says, I John Proper am
doing business as this name andallows you to put that name and
allows you to advertise with thename, the name on, you know,
mailing addresses, bills,contracts, that sort of stuff.
(09:17):
Doesn't give you any protection, doesn't do anything.
This whole setup you wouldn'tbe able to do like, you can't do
a partnership agreement with aDBA.
You know, some sort of otherentity structure in order to do
it.
I suppose you could do it withthe DBA, but it will get very
messy very quickly.
You wanna have a separateentity, which is what you have
here.
Because you're gonna have anLLC that's a partnership.
(09:38):
So we tax as a partnership.
Speaker 2 (09:41):
Mhmm.
Speaker 1 (09:42):
Because the other like, the next jump because this
is probably one of yourquestions, so I'm just gonna
bleed right into it.
The next thing here is I knowwe're talking seventy thirty
split.
You're the one putting in theinitial investment.
Yes.
You're gonna protect that witha loan.
But the other thing is is youare still taking on the risk
because there's no guaranteethat that loan gets paid back
because there's no revenue.
So you had already mentionedthat she's gonna earn her equity
(10:05):
through marketing and throughhours on the truck.
What I would do is I wouldcreate a best thing schedule
where you know how you know whatsplit you wanna get to.
So so if it's seventy thirtyand you wanna you wanna maintain
seventy percent, she wants toget to thirty.
(10:26):
You're gonna wanna create avesting schedule where based on
the number of hours worked,she'll gain a percentage of
ownership up to a max of thirtypercent, which is the point at
which she's fully invested.
And you just need to createthat schedule so that it's
clearly outlined.
The reason I would do it on anhourly basis is it'll force the
(10:50):
two of you to track her hoursAnd then in the event of a
lawsuit contesting the ownershiphere, you will have a clearly
outlined agreement that's vestedbase off hours worked.
And also an outline and a chartthat you both agreed to and
signed keeping track of all thehours that have been worked.
Because when I've seenpartnerships like this go down
(11:12):
and end up in, you know, eithera lawsuit or sitting there in
arbitration, trying to figure itall out.
It's an argument over how muchwork was put in, where the
balance is.
So if you do this all ahead oftime and you have look clearly
outlined, clearly signed,documented, you're not gonna
have any issues.
My recommendation is always toget a lawyer.
(11:35):
However, if you wanna cut backon that cost, the way to prevent
yourself from having goterribly wrong is to have as
much documentation as possible.
But as you know, I've been in asituation where I've had to
fight that and didn't have alawyer.
And so I'm telling you partlyfrom situations where this is
what I wish I had done.
And then also that arbitrationwell favorably towards me
Speaker 2 (11:59):
and
Speaker 1 (11:59):
that was because we had enough documentation there.
But some of that documentationwas gathered very last minute
through conversations, phonerecordings, text messages, and
me knowing what I was doing togather that information, you're
much better off doing it fromthe beginning.
Because the other thing you'reavoiding by doing it in the
beginning is nobody's underduress.
(12:20):
So you'll be able to maintainthose contract those contracts
and those agreements, whereastrying to run around last minute
and get it through phone callconversations and text messages,
the argument is going to be, oh, I said that and I was upset.
I didn't actually mean it.
I didn't understand.
I didn't That's
Speaker 2 (12:36):
a good point.
Under duress.
Speaker 1 (12:38):
And that's a legal term, under duress of the legal
term, and then a lot of it getsthrown out.
I'd say, from the stuff that Igathered together, probably
eighty percent of it got tossed.
Even though it supportedeverything that we already had
from photo documents and inwriting and not under dress, but
simply because it's technicallyconsidered under duress.
It gets thrown out and itdoesn't considered at all.
(13:00):
So you wanna have a documentedas well as possible in the
beginning.
Preferably with a lawyer.
If not, make sure you writedown everything and have me look
at it.
Have somebody look at it thathas experience going through it.
So that you can make sure thatthere's certain clauses.
Because there's gonna becertain clauses that, like, you
just don't think about, then alawyer would throw in there, and
(13:20):
then that way, you just makesure you just put them in a
pause.
Speaker 2 (13:23):
Yeah.
Alright.
So what I'm hearing, obviously,very good tips.
I didn't it's crazy how thingscan be twisted, but most
important things to protectourselves is over document.
You can never have enoughdocuments, especially when it's
with someone you know.
Feel like there's a I mean,we're talking about starting a
business in my case, but a lotof people do this.
(13:43):
It's very easy, I think, to letthings slide.
I'm like, oh, we're friends.
Oh, that won't happen.
So doesn't matter.
You should always do that.
And then the other
Speaker 1 (13:52):
and the other thing I would tell you is if you get
the gut feeling of, like, Weprobably should talk about this,
but I think if we don't talkabout it, it might play out in
my favor long term, talk aboutit.
Yep.
We need to talk about it.
Because I can tell you with myother with my situation, there
was definitely gut feelingswhere I was like, oh, we should
really talk about this.
Speaker 2 (14:12):
That's a good point too.
Speaker 1 (14:14):
I don't have any exposure on this.
It's really just their exposure.
They should be concerned aboutit.
They're not bringing it up.
I'm not gonna talk about it.
And now it's a contentiouspoint that we're happy to go
back and forth on where if youjust act on that governor, like,
if you have more conversations,you're gonna be better do more
stuff in writing, you're gonnabe better off.
Make sure everything's signed.
(14:34):
And honestly, I would go andhave like, typically, you can go
to a bank and they'll signthey'll allow you to sign as a
notary public.
Mhmm.
And it doesn't cost youanything.
So even if it costs you twenty,thirty dollars to have a notary
sign off that you too are theones who signed the documents.
Yeah.
(14:54):
Do it.
Make sure, like, have have yourdocuments notarized, have it
clearly outlined that yes, wesigned, and yes, it was us who
signed.
And there's a better party here.
Because if you're not gonna usea lawyer at least another
public makes it so there's somesort of formal process where it
was verified and it wasn't.
You eliminate the comments of,oh, I was drunk when I signed
(15:16):
that.
So I was in Avery, and I wasn'tin a sound mind.
I couldn't have couldn't havepossibly agreed to that.
Doing these sorts of thingsjust allows for you to protect
yourself as much as possible.
Because if you go to a lawyer,it's gonna be no advice.
Yeah.
Yeah.
Speaker 2 (15:30):
Alright.
Great tips there and then LLC.
So we've covered those twothings.
Protect yourself through that.
Alright.
So next things then.
So that's all feasible.
That's all doable.
How do I guess bring us back tothe point of financials time
and is this possible for mysituation?
So I'm just gonna pull up acouple things here that I've
(15:53):
kind of outlined and gatheredthat need to be done.
I I'll pull this up, butactually we'll first go over
financials and because that'swhere all this is gonna play
into.
We're gonna talk about theprices of everything and
everything I need done.
So
Speaker 1 (16:12):
Yeah.
So, I mean, from a financialperspective, I always back into
this.
So if you're if if you'remaking the decision to do it or
not, do it, I would back into it.
So what's the minimum amount ofprofit that you need to
generate from the business inorder for it to sustain you?
Mhmm.
Do you know that number?
Speaker 2 (16:30):
So what you're asking is the money that needs to be
made back to cover everythingput in and a year's, quote,
year's salary.
Yeah.
Speaker 1 (16:40):
Okay.
The so the year's salary part.
Speaker 2 (16:42):
Just the year's salary.
Okay.
Yeah.
Yeah.
Oh, two thousand dollars amonth, we'll say.
Speaker 1 (16:47):
Alright.
So twenty four thousand dollarsof
Speaker 2 (16:52):
ideally, like, we can round it maybe to thirty just
because that was that wasprobably scraping by, I guess.
Speaker 1 (16:58):
Yeah.
Okay.
That makes sense.
So thirty thousand profit line.
You said you're doing a foodcheck?
Speaker 2 (17:10):
Yeah.
Speaker 1 (17:15):
So this so this is why I kinda back into it.
So if you take you just takenational averages, it says fUva
trucks, net profit margin.
Net profit margin on the foodtrucks generally between seven
and eight percent.
Mhmm.
If it's extremely successful,if you get know, to double that
number fourteen to fifteen.
Mhmm.
So in the beginning, naturally,it's not gonna be that high.
(17:37):
If you took your thirtythousand and average payroll
cost is twenty five percent, sodivide that thirty thousand by
twenty five.
Percent point two five, andthen divide that by point seven
because you're only seventypercent owner.
It's a hundred and seventy oneAnd I would say those numbers
(17:58):
are probably slightly aggressive.
So if you jump if you jump thatnumber to two hundred thousand
sales, there wouldn't be anyprofit to share, but you'd be
able to pay yourself as anemployee that's gonna
effectively because you're notpaying yourself as an employee,
it would just trickle down toprofits and be shared.
But you wanna remember thatit's a payroll expense because
(18:20):
you're not paying yourselves onthing.
Speaker 2 (18:22):
Right.
Right.
So kind of bypassing thatpayroll expense to start.
Speaker 1 (18:27):
Yeah.
If you if you eliminate thepayroll expense which from a
quick search is roughly twentyfive percent of sales Mhmm.
And just dropping that twentyfive percent down into the
profit line then.
You could do it at about twohundred thousand sales.
Alright.
You're let's say you're in thenortheast though, so you're
operating.
Yeah.
You know, eight months out ofthe year.
Speaker 2 (18:52):
Yeah.
That's Oh.
The genre.
Generous.
Speaker 1 (18:54):
We call it seven months depending on the the
weather.
So you gotta do twenty eighttwenty nine so you gotta call it
thirty thousand a month.
Okay.
Speaker 2 (19:08):
Okay.
So to start so let's I guess,go with the idea.
If you agree with this, becausewe're talking about, is it
feasible?
Is it possible?
And we're gonna get into howmuch money I have.
We'll obviously base it offthat.
Will assume it's gonna breakeven and not really pay me what
I want for at least the firstyear we do it for six months.
(19:31):
Okay.
That sounds fair.
Right?
I mean, because we're not gonnahave a line the second we
opened.
Speaker 1 (19:38):
Yeah.
Generally speaking, businessestypically don't, you know, hit a
profit line until year three.
So, you know, you're stillbeing aggressive by only waiting
a year.
Speaker 2 (19:47):
Okay.
So if we use the year threeline, are people working second
jobs?
Are they living off?
What they've saved up?
What normally happens there?
Because I imagine that being,like, my full time job.
Right?
In that.
So the year
Speaker 1 (20:02):
the year three mark is a line number.
So if you're paying yourself,like, if you're one of the
employees, you probably couldget it quicker.
Mhmm.
Speaker 2 (20:09):
So I
Speaker 1 (20:10):
realize that kinda sounds like I'm backtracking,
but I'm just Yep.
We're doing this live.
So I'm Yeah.
There's no pretty while whilewe're live thinking here.
But Jen so to answer yourquestion directly, generally
speaking, a business is gonnaeither have the cash or take out
a business loan And that'sgonna cover, you know, six to
(20:32):
eight months of the operatingexpense.
And then the whole business isthat that gets you to running,
and then you're able to continueto to run those numbers and
cover your payroll.
You're breaking even and you'removing money the whole time.
I guess we need to back up alittle bit as the issue.
So typically with a food truck,you need permitting in order to
(20:52):
have a location.
Mhmm.
So the question then becomes doyou have permitting?
Do you have relationships withfood trucks?
How frequently are you gonna beopen?
Because that's what's gonnadrive it.
We're talking two fiftytransactions at a fifteen dollar
average, which our number Imean, honestly, that fifteen
dollar average, we're pullingthat number out of thin air two.
Is that gonna be the averageticket size?
(21:14):
I don't know.
You know, we need to we kindaneed to look at a menu as well,
see what the pricing is, seewhat the costs are, build that
out, and then once our averageticket price, Mhmm.
With keeping your food costs,you know, at forty percent.
So whatever your food cost addsup to divide that number by
(21:34):
point four, that's your saleprice.
Right.
And that's gonna get to youraverage ticket.
Then it's gonna tell us howmany transactions we need to hit
thirty thousand a month salenumber.
And now if we hit that thirtythousand dollars a month sale
number, how many days do we needto be open?
Or doing it the opposite way.
How many days have we opened?
(21:55):
How many transactions do weneed to hit that?
Without knowing whatrelationships you'll have as far
as farmers markets, locationsto be constantly open at it.
It's hard to say it's hard tosay if, you know, where your
frequency is gonna be.
And you get away from thepermitting thing.
The permitting is if you wannabe on, you know, state
municipality land or Yeah.
(22:15):
Parks and, you know, that sortof stuff.
You partner up with a business.
You know, a restaurant thatowns their parking lot, business
owns their parking lot.
You can get a relationship thatway Mhmm.
Where you're parked in aparking lot consistently.
You have your food truck goingfrom there.
Mhmm.
So that's another option foryou.
Speaker 2 (22:33):
So what we looked at was the permit for, like, street
parking in the city and otherlocations.
Was about a thousand, I think,a year.
But I imagine no spot unlessit's, like, our public market on
Saturday or a different marketon Sunday, you know, unless we
get into those, none of them aregonna be super high heavy
traffic.
Speaker 1 (22:54):
Right.
And that but that's the beautyof the food truck.
Is that Yeah.
We You were able to go wherethe traffic is.
Definitely.
Speaker 2 (23:04):
Okay.
So that's good.
Yeah.
That's good.
You know, I've looked at allthe permits.
That's one, business license,fire safety, two health
department ones.
I've probably added them up,and I was just being generous.
I figured all of that wouldn'tprobably add up to about, like,
fifteen hundred to two thousanddollars.
Speaker 1 (23:23):
For actually, you're probably probably at the two
thousand dollar mark prettyeasily.
Okay.
And you're also gonna need inorder to get some of those
health inspections, you're gonnaneed a relationship with a
commercial kitchen, typically.
Yep.
You know, I'd be rentingcommercial kitchen space.
Speaker 2 (23:38):
Mhmm.
So all that mixed with so let'ssay, two thousand dollars,
spending commercial space eachmonth.
Let's just bring it all up toit wasn't I did look here.
It wasn't too much.
But I think there still wassomething like around fifty an
hour.
I don't think it was terrible.
(23:58):
But so that will add up toabout two hundred a month.
We were saying so two thousanddollars, two hundred.
And then I was looking attrucks on Facebook marketplace
because I'm trying to save alittle money.
And generally, I feel like Icould find one for twenty
thousand.
Trailer truck.
(24:20):
Truck.
Oh, okay.
Yeah.
So there's one in Utica.
That is around there.
It's very small.
There's a couple like, there'sa lot in the south that my dad
was sending me.
So I don't know how feasiblethat is.
But I think there's fines.
It's not like they're readilyavailable, but there's there's a
(24:42):
couple fines that if I went foryou know, the distance I could
get them.
But ideally, I'll say, becausewe're gonna have to wrap it.
We're gonna have to make somechanges, make it our own.
So ideally, the truck wouldprobably be twenty five in total
.
Now I think that's where I'm at.
I think that I told youeverything.
(25:03):
So I guess what we're at now iswith those numbers, with my
plan, with everything I told you, and everything you know I need
to do.
How long would you think itwould take?
How much money would you do tostart it?
And I guess that's basically it.
Because once I have that, I canthen we can then look at my
current situation and be like,that's probably not feasible or
(25:26):
it is.
Speaker 1 (25:27):
Because this is where you're getting into when you
know, when I talk about lookingat businesses and, you know, I
need to see two, preferablythree financial statements.
Because what we're talkingabout here is balance sheet.
And cash flow statement.
We're gonna talk about incomestatement, which is what we were
(25:48):
talking about when we werefiguring out your profit line.
But the income statement reallydoesn't matter if cash flow
sucks.
Speaker 2 (25:55):
Mhmm.
Speaker 1 (25:56):
And the cash flow you can get from different areas
other than just your operatingone of the ways you can generate
cash flow is through a loan.
And so instead of you spendingtwenty five thousand dollars of
cash, you get a loan, thatbrings twenty five thousand in
cash in, and then you just havea monthly expense that's going
out.
To a cash flow expense.
You have a business expense onyour income statement.
(26:17):
But your balance sheet isunadjusted because you had asset
brought in and a liabilitybrought in instead of just
reallocating cash into adifferent asset class.
Yeah.
Speaker 2 (26:29):
Because if
Speaker 1 (26:30):
you buy the truck that you own out, right, your
level of sales decreases inorder for you to get your thirty
thousand dollars of incomebecause you own the vehicle, you
have a lower cash reserve, butyou don't have an expense item
associated with it.
You don't have an ongoingmonthly expense items associated
with it.
There's not continual cash flowgoing down.
Speaker 2 (26:50):
Right.
Hey.
I have twenty five thousanddollars right now.
It's my name.
We'll just round it there.
And that's actually what ittakes to live for a full year.
If I did no work or anything,I'd burn through all that money
in a year.
Right.
Assuming this makes not enoughmoney to even pay me for a year,
I imagine I shouldn't reallytouch or use any of that money.
To go towards a business?
Speaker 1 (27:15):
Correct.
To be in a strong financialposition, you'd wanna have yeah,
years worth of cash reservesthat you don't have to touch.
You know, like, you could work,not work, and it wouldn't
matter.
You'd have no income, and itdoesn't matter.
And then the remainder to fundthe operations of the business
would come from somewhere else.
Speaker 2 (27:33):
Yeah.
So that would be the law.
Speaker 1 (27:36):
Well, you would need a loan for the truck and you'd
need whatever to get thelicensing to get your initial
ingredients by so that you caneat on the first time.
Speaker 2 (27:47):
And, ideally, I plans to get the loan for the truck
and then use my money for therest.
Thanks.
So If
Speaker 1 (27:52):
I were in your they based off the quick numbers that
we threw together, I would wantforty thousand dollars to do
this.
Speaker 2 (27:58):
Okay.
That's fair.
That's So it's gonna
Speaker 1 (28:01):
take twenty five to buy the truck to get the
licensing.
For twenty five thousand, youcan open the doors but you don't
have anything in the groceryyou know, you know, any
groceries, going food, you know,all that sort of stuff, I would
want another fifteen thousandsitting there to buy groceries,
to buy the, you know, the toolsand stuff that I need.
Because stuff's gonna gosideways.
(28:22):
You're gonna need to buy stuff.
You're gonna need to buysignage, marketing, all that
sort of stuff.
So Yeah.
You know, if you had anotherfifteen, you're not gonna be
super duper stressed about
Speaker 2 (28:30):
it.
Mhmm.
Speaker 1 (28:31):
And you're gonna be able to to make it happen.
Speaker 2 (28:33):
It's pretty interesting because when I came
like, when I wanted to do thispodcast with you, basically, I
was trying to figure out if Ican do it.
Before doing all this stuff.
And really, what we're kindasaying is you have to do all
this stuff to figure out if youcan even do it.
Speaker 1 (28:49):
Well, part of the reason why I have so many
business plans in my hard driveson my computers.
And I say that plural because Ia crazy person and don't throw
hard drives and they're all in asafe.
I won't throw out a computer,but I won't throw out the hard
drive.
Literally take a hard drive.
But the reason I have all ofthose is because you have to do
this.
And then you find out.
(29:09):
That's not a good idea.
Or Yeah.
It's not gonna make me enoughmoney or, you know, whatever the
case may be or it's not theright time to do it.
And so I hold on to them forthat.
But, yes, you have to you haveto run this all through and put
yourself in the mindset.
Am I doing this?
Because if you don't getexcited and you are stressed out
just by running thecalculations, that's your gut
(29:31):
feeling telling you that it'snot a good idea.
Because the one thing I cantell you with starting a
business, especially fromscratch, is it's not easy.
It's gonna be tough.
It's gonna be hard.
It's gonna be stressful.
So if you're not excited justby running the numbers and doing
all the hypotheticals, you'reprobably best off not not
pursuing it.
Speaker 2 (29:52):
Thanks for listening to our podcast.
Speaker 1 (29:54):
We hope this helps you on your balanced freedom
journey.
Speaker 2 (29:56):
Please share your thoughts in the comments section
below.
Speaker 1 (29:58):
Until next time, stay balanced.
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy And Charlamagne Tha God!
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.