Momentum Podcast: 468
The Hidden Cost Of Success
by Alex Charfen
When it comes to looking and starting a business, I think most entrepreneurs are doing it wrong. In fact, if you've started a business anytime in your history, you probably know you went through a process something like, “How much money do I need to make to replace what I'm doing right now, and that's my target for the business.” Well, I want you to understand if you're going to run a business, you have to make a lot more than you think.
Now, this isn't one of those podcasts where I just tell you to raise your prices gratuitously. This is a podcast where I share with you the real price of success and how you can afford it.
What's the real price of success and how can you afford it? Most people will not tell you that you need a lot more money than you think to build a successful business. It's just a fact of growing — you're going to need cash. The more money you make, the more challenges you have and those challenges require money. The information that I want to give you before you have to rudely learn it for yourself is that when you run a business you need to stack cash and make more money than you ever thought you needed. If you don't do this you will be caught off guard. When you build success you'll have expenses that you never could have anticipated. Don't ever set up your business so that you break even. Start thinking bigger.
If you're ready to get some help to create success and you want to know the real facts about what it takes to get there, join us. Go to billionairecode.com
Full Audio Transcript
Alex Charfen: When it comes to looking and starting a business, I think most entrepreneurs are doing it wrong. In fact, if you've started a business anytime in your history, you probably know you went through a process something like, "How much money do I need to make to replace what I'm doing right now, and that's my target for the business." Well, I want you to understand if you're going to run a business, you have to make a lot more than you think. Now, this isn't one of those podcasts where I just tell you to raise your prices gratuitously. This is a podcast where I share with you the real price of success and how you can afford it.
I'm Alex Charfen and this is The Momentum Podcast, made for empire builders, game changers, trailblazers, shot takers, record breakers, world makers, and creators of all kinds. Those among us who can't turn it off and don't know why anyone would want to. We challenge complacency, destroy apathy, and we are obsessed with creating momentum, so we can roll over bureaucracy and make our greatest contribution. Sure, we pay attention to their rules, but only so that we can bend them, break them, then rewrite them around our own will. We don't accept our destiny. We define it.
We don't understand defeat because you only lose if you stop, and we don't know how. While the rest of the world strives for average and clings desperately to the status quo, we are the minority, the few who are willing to hallucinate, "There could be a better future." And instead of just daydreaming of what could be, we endure the vulnerability and exposure it takes to make it real. We are the evolutionary hunters, clearly the most important people in the world, because entrepreneurs are the only source of consistent, positive human evolution, and we always will be.
I'll admit that I'm like most entrepreneurs. When I was younger, I remember thinking if I could just make six figures in a year, it would change everything. $100,000 is so much money it would make my entire life different and this was back when I was in my teens. Well, the year that I made $100,000 ... The first year I made $100,000, I made close to two, but I didn't really notice I had crossed the $100,000 mark because I was struggling with doing everything I had to do just to get to six figures. Within a few years, I was at seven figures and beyond, and I was still struggling to do everything I had to do just to be at seven figures.
In fact, I recently exchanged messages with a friend of mine who has grown his business to a run rate of over $50 million, five zero. You know what he told me? That the next 60-day period was going to be probably the third most stressful period of his entire life. $50 million business, third most stressful period of his entire life. Here's what happens when you're growing a business. It will always challenge you. There will always be stresses, and I want you to know something that most coaches, most consultants, most people in this world will not tell you. You're going to need a lot more money than you think.
It's just a fact of running a business and being successful and growing is that you're going to need cash, and I'll share with you some of the places that Cadey and I were completely blown away that we had to start spending money, because it will catch you off guard. It will shock you, and I think there's far too many people out there that are doing one of two things. Like I said in the intro, either they're trying to make as much money as you need, which you're going to need a lot more than that. I'll tell you right now, it's not going to work if you do it that way.
And second, there's a lot of people out there who are trying to be the low-cost leader, and I want you to know something. If you're trying to sell at a price cheaper than everybody else, and that's your advantage, you will lose. Period. You will lose because you're going to be shocked at how much money you have to spend on a consistent basis, and remember. This isn't just me sharing my experience with you. We coach about 70 companies worldwide right now, and at any point in any month, we have at least 5 to 10 entrepreneurs completely blown away at some new expensive they have that they never ever anticipated.
In fact, here's the epiphany that the discovery that I made was ... Yeah, that song More Money, More Problems. It might sound cliché, but it actually is. The more money you make, the more challenges you have. Your challenges just change, and the other thing is the more money you make, the more your challenges require money. So, the epiphany that I want you to have, the discovery I want you to make, the learning I want to give you before you have to learn it yourself, is that when you own a business, you need to stack cash and make more money than you ever thought you needed, because you will be caught off guard and blown away at the places you need money.
Let me share a few of them with you. So as you start growing, as you start building your businesses, as you get past six figures and seven figures. You know what happens is you have a business that's important, that is something you need to protect, that you need to make sure you're taking care of. So you're going to need coaches and attorneys and advisors and consultants and people who can shortcut your learning, help you protect your business, and help you reinforce the foundation of everything you're doing. And to get good advice and advisors and coaches and attorneys and consultants, it costs a huge amount of money.
I work with some of the best attorneys on the planet literally. I don't mess around. If I'm going to use somebody for legal advice, I go out and I find somebody who's been around for a long time, who is one of the top attorneys out there, because if I'm going to use an attorney, I want somebody who not only knows what they're doing, who knows it at the very highest level. And guess what? Those attorneys cost a lot of money. You write big checks to get the right legal advice. I'm willing to write checks upfront because I've been in situations where I didn't, and it cost me a lot more on the back end.
So when your business starts growing, as you start expanding, one of the places you're going to need money is for coaches, for advice advisors, attorneys, consultants. Today, me personally, I'm independently wealthy. My wife and I do incredibly well. There is an argument that could be made that if you looked at our net worth and our assets and how much cash flow we have coming in on our monthly basis, I could retire right now, but I don't want to. I press and I push and I work. Sometimes, I feel like I work harder today than I was a startup, because I see there's so much more opportunity for me to make.
What that means is right now I have four different coaches I work with that I pay thousands of dollars. Well, it's well over six figures a year to work with the coaches I work with. I work with Sheryl Netzky who's an entrepreneurial advisor and a legit trained Peruvian shaman and one of the most intense and incredible human beings I've ever met in my life. I work with Taki Moore who is the coach's coach. He coaches coaches all over and around the world. I'm in his black belt program. It's absolutely changed my life. Russell Brunson. I'm in Russell's inner circle. He's a personal friend of mine. He has helped me a ton, and he has systems and programs that have helped us get to where we are right now.
His personal advice, his direct advice, has helped establish almost every part of the company that we have today. On a personal basis, I work with Dave Heitmann for my health, my physiology, for my physical mindset. So, just there are four of the coaches I use, and just there I'm writing a check that's in excess of $150,000 a year to work with those four advisors. It's incredibly important that I keep writing that check because they help me on a daily basis to move things forward. Now, you're going to get caught off guard by why you need more money.
Everything in your life will get more expensive as you create an irrational amount of success. Let me share with you one such time for Cadey and I. When we bought our current house in 2011, it's about a 9,000-square-foot house with a very large lot in a luxury neighborhood here in Austin, and it was not an inexpensive property. It's a luxury property. We wrote a check. We paid cash for it. Cadey and I don't love debt. I know there's a lot of people who argue, "You shouldn't ever do that. Your house isn't an asset," all of that stuff.
Well, you know what? My argument back is you don't know how confident you can be until you have no debt in the world and you don't have to worry about money. So we wrote a check for this property. It was a percentage of our net worth. It was not a very high percentage. So it made sense to just buy it outright. We brought it out right, and then we tried to go and get insurance on it. Here's what happened. The combination of us stroking a check to buy a luxury property, and then the insurance companies that we went to doing some searches on me online, we ended up in a category called high net worth public personality. High profile public personality or public figure with high net worth.
I remember when it came back from the insurance company, declined public figure high net worth, I was like, "What the heck is that?" So we called our insurance company back and the insurance agent who was trying to get us insurance on our house. She said, "Yeah, all of the major insurance companies in the US," State Farm, Farmers, Progressive. I can't remember who else we went to. They had all denied us for homeowners insurance. At one point, we were denied for car insurance from all of them because I was a public figure with high net worth. They didn't want to take the risk.
So today the insurance policy on our home is a custom policy written by Lloyd's of London. We pay about two and a half times what a normal person or what a person with a job would pay for insurance on their home because I'm a public figure with high net worth. Everyone who's like an influencer, who's gathering likes and followers on Facebook, who thinks they're doing something huge. Well, guess what? When you go to get insurance, you may be deemed a public figure or high net worth, and suddenly everything in your world will change, and your insurance rates go through the roof. That blew us away.
Still today, to this day, we still have problems getting insurance in anyway, because I'm a public figure with high net worth. Then as soon as Cadey started getting some notoriety, forget about it. It's impossible. So we have custom written policies, one-off policies, for our home, for the valuables within our home. We have a jewelry writer for our home. But all of them had to be written custom. We couldn't just go get an insurance policy from a normal insurance company because we were so successful.
So, as you create success, the things in your life actually become more expensive. Here's a big one. I remember when Cadey and I really started creating a massive level of success with the business that we own today, and we started putting money away in the bank. We started with a quarter million, then a half million, then a million, then several million. There was a point where we were spending a tremendous amount of time just managing the money in our accounts because we wanted to make sure they were all insured, and we wanted to make sure we weren't exposed, and we wanted to make sure the money was safe. Then we started making investments.
Well, as a high-net worth individual, as soon as you start making investments, you have to build an asset structure. So we had to build an asset structure with an international trust, with asset protection devices in it. It was like setting up entire corporate structure for our personal lives. So, we spent, again, tens of thousands of dollars because we had to protect the money that we had. So we literally had to pay money because we had money.
You don't think about these things when you're first starting out. You don't think about how expensive things are going to get. How if you're a public figure, you suddenly have to pay double for your insurance. How you have to create a whole asset structure just for your personal belongings so that you can be protected, so that your assets are protected, so that you're shielded legally. When you create success, everything will get more expensive for you, and when you create success, you're going to have expenses you never thought you had.
So here's what I want you to know about the business that you're running today. Don't ever set up your business, so that you do break even, or so that you make as much money as you were making. Start thinking bigger. You have to bring in more money because it's going to take you more money to run things and to move forward. I want you to know you can't possibly estimate everything that you're going to need. Make more margin now. Bring more money into the business. Charge more. Create more value. Don't be afraid to charge what you're worth because if you're not charging enough, you're going to run into situations where you need to have the money to grow, and it just won't be there.
Then here's a big one. As soon as you start making money, I don't care what anybody says about leaving money sitting in the bank. If somebody tells you, "You shouldn't have emergency funds for you and for your business," they're crazy. Cadey and I have always left money sitting in the bank. I don't care who tells me that I'm wrong. But we have six months of our personal expenses and six months of our business expenses sitting in liquid accounts just in case there's a problem. Here's why. It makes me 10 times more confident as a business owner to know that all my bills are already paid.
It makes me so much more of a clear thinker to know that I'm not running my business month to month. In fact, it could literally last six months without a penny coming in. That means if our revenue goes to the point where we're losing 25% of what we're making right now on a monthly basis, like we go from making to losing, we could still stay in business for years. Do you know how much more confident that makes me running a business? Do you know how much more it makes me able to compete with the people who are in the same space I am?
By the fact that we make money and we have money in the bank, and we have backup, it increases our confidence level, and you should do the same thing. So, if you are running a business, start thinking about the money you need to make. Start thinking about the value you need to provide, so that you can charge more and actually start putting money away, because here's what no one tells you about making money. It gets more expensive the more you make, and this is something that a lot of people don't talk about, because quite frankly I don't think a lot of people have gotten there.
There's a lot of people out there who are selling success and trying to help you create success that they never have for themselves. But as somebody who's been there and who's been shocked at just how much it costs to get into the upper levels of revenue and the upper levels of income, I want you to know before you get there what's coming. So, create a crazy amount of value. Charge what you are worth. Raise your prices until you start feeling sales resistance, and make your margins as high as you possibly can, because your business and you as the CEO have one responsibility first. Stay in business, so you can keep making the impact that you're making.
So get your business as profitable as it possibly can be. That will help you protect yourself, your family, the people that work with you, and the clients who trust you. It takes a lot to make money. Success is a lot more expensive than you think. If you're ready to get some help creating success, and you want to know the real facts and what it takes to get there, join us. Go to billionarecode.com. There's an application there where you'll fill out about 20 questions, and those questions first will give you more insight on your business than any application you've ever filled out. But also, they will help us tell you exactly where you are on the Billionaire Code, which is the nine levels that every entrepreneur goes through to create success.
We'll tell you where you are now, what you should be focused on, and what you should focus on next. And we'll also give you a free copy of our book, The Billionaire Code Decoded to download, so that you can understand the path to entrepreneurial success and exactly how you can make it through. I want to help you grow your business, make an impact, and change the world. Go to billionairecode.com. Apply and get on a call with a member of our team and let's see just how fast we can help you grow your business, make more revenue, and make an impact.