Episode Transcript
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Speaker 1 (00:01):
Hey, good morning,
happy Saturday.
Well, today I'm kind of in abad mood.
I'm just looking at yesterday'srecording.
If there's nothing more that Ican do, then I've done all that
I can and that's enough.
And today I'm just kind ofgrabby about the position I'm in
, and so I just want toacknowledge like emotions can go
sideways day after day afterday.
(00:28):
My wife and I mentioned like hey, hey, we should go over our
home budget.
I'm like cool, spend less.
She's like cool, let's like goover the details.
And I don't want to go over thedetails because I know I spend
money on nothing other than foodand gas and insurance and
utilities.
And like yesterday she comelike hey, look at this great
sale from the library.
I spent 50 cents on a handfulof books, or 50 cents per book
(00:48):
on a lot of books.
Like cool, that's eight dollarsdown the tubes when we could
have gotten those books for freefrom the library.
And so I'm thinking that's notwhat I'm saying, and so I just
have a really bad attitude whenit comes to spending money,
especially right now.
Um, I forgot to turn off autopay on the business credit card
and so our $6,000 credit cardgot fully paid off, which is
(01:10):
great because we're not accruinginterest, but then the checking
account goes to like negative1,000.
But then we get the bi-weeklyor the twice a week remittance
for a couple thousand or forlike 2,000.
And so, like we're back in thegreen, but like I'm just now
very averse and like I cringewhen it comes to spending money
right now, and so that'ssomething that I just am not a
(01:30):
fan of.
So, courtney, my wife, she'sreally good, she's very good at
not spending money on stuff, butsomething that she likes to do
is, if something's on sale orit's at a massive discount, she
likes to buy it.
And so my, when I'm in a badmood, I say, well, great, if
there's a pile of dirt for sale,only 90% off, it's only $5.
(01:52):
Are you still going to spend $5on a pile of dirt when we don't
need dirt?
And it's a terrible.
That's an example of trying tobe right and not listening to
what she's doing behind thescenes And's a it's an example
intended to belittle what shedoes, and so that's something I
need to work on.
But yeah, I'm just not like, andalso like the insurance came to
(02:13):
like hey, your once a yearinsurance payments are due and
in my head it's like cool, thegym's around for another two
months.
I don't want to pay a year ofinsurance, but they don't have a
way to pay for a monthlyinstallment.
So now I pay a one-yearinsurance bill that I'm only
going to need active for twomonths, and so I'm crabby about
that and I'm glad to haveinsurance, I'm glad to have that
(02:34):
coverage, but that's like twogrand, three grand out the
window that I'm not going tomaterialize on.
So I'm trying to battle thosenegative thoughts.
And that's three minutes of metrying to say like I just I feel
like money is going out thedoor every single day, and then
when money comes in, I assumethat's normal because we have
(02:56):
memberships on subscription, andso I think I'm just ready to
get closure at the end of thisum, whether it's personal
bankruptcy, whether it'spersonal bankruptcy, chapter 7
or chapter 11, to just cut thebleeding and to not have to deal
with the mental strain, theemotional strain, the financial
strain, and to just be done withit.
(03:22):
The members that are still hereare good, but we're 90 members
short of break even, and then weare an additional 20 members
away from me paying myself, andso like we're at 250 members, we
need to be at 360 members andlike I'm trying to calculate too
, like how long do I do?
(03:42):
I keep running this gaslightingthing, because I feel like I'm
gaslighting people and I don'tlike doing that.
But I can't just come up andsay, yep, this is the last
challenge we're done, becausethen corporate's going to throw
a fit about you're showingallegiance to your members,
you're not showing allegiance tocorporate.
Well, I mean, I owe allegianceto both.
At the end of the day, likeit's my house that's on the line
(04:05):
, my cars that are on the line,like my, my livelihood that's on
the line, I'll be loyal as faras I'm able to.
And then, at the end of the day, like I need to put my business
ahead of corporate.
I need to put my business aheadof the members and, yeah, I
that's gonna rub some people thewrong way.
Sorry, it rubs you the wrongway.
So, anyhow, corporate's goingto be here.
(04:29):
Let's see what is it.
It's like October 5th.
So, yay, happy, one year ofowning the business.
It's officially one year and aday since we bought the place.
Corporate's going to be here ina month to do like a round
table franchisee thing.
So I'll be there for that andall the other franchisees will
be there as much as they can be,but nobody's making money, like
(04:52):
there's nobody in the systemwho is profitable.
There's one that I know ofeveryone else is breaking even
and folks that are making moneyare working a lot of hours to to
pay themselves something andyeah, it's just rough overall.
And so all that to say, just aninteresting time to own a
(05:17):
business.
I caught up with someoneyesterday who's like hey,
there's two, I'm gonna ask youabout buying a gym.
I said, cool, let's talk aboutit.
And so, like two minutes beforethe call, he sends me a link to
a biz buy, sell listing for twocompetitor gyms.
So I go oh, here we go.
So it's not about the industry,it's about this particular
acquisition.
And so we hopped on the phoneand said, okay, that they're
(05:38):
asking for $400,000, cashflow isone 30.
And when they say cashflow,that's really what the sellers
benefits.
So if the seller owns a brandnew Lexus and it's a $1,000 a
month lease, that's hiddeninside of the cash flow.
So we know it's small businessaccounting, but I'm not saying
that to the buyer.
I said, all right, well, let'swork this out.
(05:58):
So at a $400,000 purchase price, let's assume like you'll get
some bank financing, some sellerfinancing You'll probably be at
a $4,000 a month businesspayment.
That's going to be after thecash flow.
So at a $130 profit.
Let's reduce that down by$50,000 a year for your SBA
(06:20):
payment.
So now it's down to $130.
This particular competitor is afranchise.
So we looked up their FTD.
It lists the LLC.
Cool, we now look at the LLC.
We find the owner.
We now have the owner.
We now look them up on Facebook.
Now that we see them onFacebook, we just make a
(06:41):
judgment call on does thisperson work in the business or
on the business?
The owner definitely looks likea CrossFit lady who works out.
It's all about protein andpush-ups and sit-ups and
marathons.
Okay, she probably works thebusiness and of her two
locations she probably works 60hours a week.
So that's an assumption we'regonna make Our $80,000 cash flow
.
She has some sellerdiscretionary benefits.
(07:02):
Probably her cell phone,probably her car, probably some
meals, probably some clothes,probably home internet, all
sorts of things that's going tobe stuffed inside the $80,000
remaining.
Let's reduce that down to,let's just say, $20,000 less.
So $80,000 now becomes $60,000.
(07:27):
She's now paying herself $60,000a year to work 60 hours a week,
based on her social media postsand all the stuff that she's
posting out there, and ask thisguy like hey, you work in a
different field.
He's, he's an engineer.
Um, so I asked him like hey,what do you make?
Straight up, tell me.
And so he's like, oh, I makeeighty thousand a year.
All right, all right, cool.
I don't know what your workschedule is, but buying this,
this business, you have a chanceat making $60,000 a year
working this schedule, plusyou'll have payroll, plus you'll
(07:47):
have rent, plus you'll havemembership sales, plus you'll
have retention, plus you'll havesocial community events, plus
the parties.
And so those aren't financialcosts, but those are time and
emotional costs.
Not to scare you off, but howdoes that sound?
It's like, oh, I don't know, 80to 60.
I could probably make that alittle bit better.
So, yeah, you definitely could.
(08:09):
After this gal owning these twogyms for nine years, based on
company LLC records, this is thebest case scenario after a
nine-year tenure.
It's probably gonna be a littleworse than that.
So let's pretend you make$40,000.
You take a $20,000 pay cutbecause people will leave
because they like the owner,they don't know you, they don't
necessarily buy into you, soyou'll probably lose some
(08:30):
members Day one.
If you're making $40,000, isthat okay?
Like, well, no, like I'd ratherdo something else.
All right, probably not for you.
Then I'm not going to tell youwhat to do.
I'd recommend not diving intothis.
For what it's worth my business.
When I bought it, I was in thetop five.
Now we're probably in like thetop 10 for revenue.
(08:54):
But after a year of ownershipabsentee ownership I'm $126,000
in the red.
I've made a couple of mistakesmistakes so we probably would
have been like one hundred andfifteen thousand dollars in the
red If I managed and owned theplace.
I would not have a manager, soI'd be fifty five thousand
dollars in the red For my gym.
Personally, we're doing morerevenue and more expenses, but I
(09:17):
would highly recommend notbuying this gym.
And then we walked through.
Okay, here.
Here's the podcast, here's theepisodes.
So all that to say.
I don't know how people get out.
I don't know how peoplediversify their investments
right now.
So there's so many people sayingbuy a business, buy a
laundromat.
The catchphrase nowadays is buya boring business.
I bought a boring ATM route andnow I make $90,000 a year
(09:41):
profit and only work 10 hours aweek.
Okay, sounds good, bro.
Um, you're talking about yourwins and your six for six on
your business acquisition sideof things.
That is not real.
That is not normal.
Either you are hiding, eitherthese gurus are hiding
everything that they've done, orthey are just extremely lucky
(10:03):
when 80% of businesses closewithin five years.
Either these gurus have themagic touch or they're not
telling about all their failures, and the folks that have
failures usually have a way torebound really nicely.
The only person that's makingmoney in my franchise system her
husband makes over a milliondollars a year from the business
that he owns, and so if the galhas a tough month, she now has
(10:27):
a cushion of someone making amillion bucks a year, and if
they only live off 200 grand ayear, they have an $800,000
cushion.
So it's a long episode.
My whole point network and talkto people when you want to
pursue something, both as acompetitor as well as in the
system, and don't just assumethat's going to go smoothly.
(10:48):
You have to assume all of thenegatives, because those are
just as likely as all of thepositives.
Statistically, everything goingwrong is just as likely as
everything going right.
So if you're going to begambling like sports betting,
you have to assume everything'sgoing to go wrong, just like
everything's's everything goingright.
So if you're going to begambling like sports betting,
you have to assume everything'sgoing to go wrong, just like
everything's going to go right.
So talk to people and figureout what does everything going
wrong look like Members quitting.
(11:10):
Your lease expires in sixmonths.
You have a banned Facebook adsaccount so you can't advertise
on social media.
You got to assume and you gotto network and ask and so at the
end of the call, guy's notgoing to buy this pair of
competitor studios.
I think it's a good idea.
He's done some great stuff withAirbnb and Turo and like if I
(11:32):
could do this over again,something that I would do is
have more assets in the business.
The downside to a gym of a$500,000 purchase price, I have
about $30,000 in like physicalassets TVs, weights, used gym
equipment, old laptops.
I have a 400,000, 470,000 oryeah, I have like a $400,000 gap
(11:59):
.
If I bought a house and triedto Airbnb it and in the last
change you can't Airbnb it, younow have a house that you can
sell.
You'll probably get most ofyour money back Houses don't
drop 90%.
They're going to be prettyreliable, so that's something
that I would do.
Personally, I want to be inasset based businesses, such as
(12:21):
buying a giant tractor andrenting it out, buying land,
renting it out to hunters,buying dumpsters and renting
them out to junkyards.
I heard of someone once who,like bought rail cars and rented
them to like BNSF, like therail companies.
So you like those.
Anyhow, I'm trying to getmyself out of a rut mentally.
(12:42):
Just got to the studio, so timeto go in.
We're doing an instructor onlychallenge, so we have the
members competing for thethousand dollars and then we
also have instructors competingfor a side bet that they have.
So it'd be like 300, $400.
And so we're just doing a lotof really good stuff and lessons
are hard, but you learn fromthem.
So we're gonna have a good day.
Really good stuff and lessonsare hard, but you learn from
them, so we're gonna have a goodday.
(13:02):
I'm going to go in with a smileon my face, we're gonna have a
good workout or test in and thenwe're going to go start the day
best we can.
That's where we're at.
That's where we're going.
Let's rock and roll.