Embark with us on an explorative voyage across the entrepreneurial seas, where Joe and I lift the veil on the often staggering costs of starting your own business. We tear down the barriers to entry, from the unforeseen expenses of bookkeeping and licensing to the financial leaps needed for scalable growth. As a seasoned self-employed adventurer, I'll share the candid realities of flexible work against the financial giants aspiring entrepreneurs must slay. We navigate through the hidden costs and licenses that loom over new ventures and the value – or lack thereof – that these investments bring as your business expands.
Join us as we scrutinize the fine line between capitalism driven by greed and the kind that genuinely enriches consumers' lives. Fueled by the actions of figures like Grant Cardone and Robert Kiyosaki, our discussion sets sail towards the ideal of responsible capitalism, showcasing the positive societal ripples from models such as Free Water. We celebrate the power of advertising-supported essentials and responsible corporate practices that not only support environmental and social causes but also pave the way for sustainable business success.
We wrap up our episode not just with financial insights, but with life hacks, like how a touch of colorful nail polish can transform your jumbled keyring into an organized delight. More than just a podcast, we're building a community where your stories and experiences are the compass guiding our journey. So grab your map, check your shoes, and join us in the laughter and learning that comes with navigating the unpredictable waters of life and business. Together, let's chart new courses and discover the treasures of entrepreneurship!
Embark with us on an explorative voyage across the entrepreneurial seas, where Joe and I lift the veil on the often staggering costs of starting your own business. We tear down the barriers to entry, from the unforeseen expenses of bookkeeping and licensing to the financial leaps needed for scalable growth. As a seasoned self-employed adventurer, I'll share the candid realities of flexible work against the financial giants aspiring entrepreneurs must slay. We navigate through the hidden costs and licenses that loom over new ventures and the value – or lack thereof – that these investments bring as your business expands.
Join us as we scrutinize the fine line between capitalism driven by greed and the kind that genuinely enriches consumers' lives. Fueled by the actions of figures like Grant Cardone and Robert Kiyosaki, our discussion sets sail towards the ideal of responsible capitalism, showcasing the positive societal ripples from models such as Free Water. We celebrate the power of advertising-supported essentials and responsible corporate practices that not only support environmental and social causes but also pave the way for sustainable business success.
We wrap up our episode not just with financial insights, but with life hacks, like how a touch of colorful nail polish can transform your jumbled keyring into an organized delight. More than just a podcast, we're building a community where your stories and experiences are the compass guiding our journey. So grab your map, check your shoes, and join us in the laughter and learning that comes with navigating the unpredictable waters of life and business. Together, let's chart new courses and discover the treasures of entrepreneurship!
Today on the Idiot's Guide, we're talking about business startups and the greed that makes it damn near impossible to stay in business. And on this week's Today Old Life Hack yeah, we're still doing that, Joe, I'm sorry. I'm sorry, not sorry actually. Have you ever fumbled through your pile of keys, wishing you could just find the right key the first time? Yeah.
Speaker 1:I know I've been there. Well, call us the problem solvers, tune in and find out. I'm your host, adam Richardson, aka the Profit Hacker, and I'm joined by the man in charge, mr Joe Haslam. Welcome to the Idiot's Guide. Well, our channel isn't just about content, it's about connections. Isn't that wholesome? It sounds wholesome, I mean honestly. By subscribing, you're joining a community of like-minded individuals who share your interests and passions. Let's grow together and forge meaningful connections along the way. Hit that subscribe button today.
Speaker 1:Now, if I was to be honest, I have kind of tried to be self-employed for a number of years and, honestly, our working relationship and how I work for you yes, you are the man in charge and it's been really advantageous because I don't have to particularly look at the damage that the industry does to businesses that are trying to start up. I don't have to do remotely that and a lot of it. Like, even if I was out, you know if I, if I am out on my own, what I do professionally doesn't really require too much. It doesn't even require a brick and mortar. I can do most everything, even now that I do in a coffee shop with my laptop. So you know, like there's, there's some advantages to being a consultant, but, um, but not everybody has that opportunity, not everybody is looking for that when they're trying to start up a business.
Speaker 1:When they're trying to start up a business and and I think the problem with that is that you know, when you look at just the absolutely insane amount it takes to start a company, um, even a freelance company like the average if you're looking at an averages that kind of thing is still outrageous. It's still, you know, somewhere in the ballpark of three to $5,000 just for you as an individual. And that's licensing, that's not having employees, there's no brick and mortar, like just to have a decent laptop for you to get started like that, and then that's, that's, that's hard to do. So I think the problem that I run into is you know, I was talking to you the other day about just like the frustrations about this looks like it's going to be in order to open my doors, for whatever it is is a mountain I have to climb and the industry has set that against you time and the industry has set that against you.
Speaker 3:Yeah, it's, it's called somewhat, it's called barriers to entry. So you learn about this when you go through, um, certain college classes where they talk about, you know, entrepreneurship or anything like that. Yeah, um, and so it's. And it's not just I mean, and I say it's somewhat because there are other barriers to entry, but the cost is a major factor.
Speaker 3:And so you think about okay, so if I want to start a business, I need to keep my books. Okay, Now my stuff. You know, when I'm looking at this, I'm financially thinking, so that's why the books are the first thing I'm thinking. Right. But you got to keep your books. Okay, you go with the cheapest option. Let's say QuickBooks. Well, quickbooks is $70 a month.
Speaker 1:I'm going to do that like ledger thing that my parents had when I was growing up. That's just this long, like legal folder and they just go line by line, handwriting everything that sounds absolute, miserable and terrible. And you know, handwriting everything that sounds absolutely miserable and terrible, and you know then you have to actually know what you're doing. That's true. That's where I go wrong, right there. I shouldn't have even thought about, I don't even know where to purchase that. So you know, like at this point I'm I quit.
Speaker 3:You can get them at office Depot.
Speaker 1:I actually have one. I give up it already sounds hard.
Speaker 3:Um, but no, that's. That's what it is is. You've got, you know, and even that you have to go out and, you know, spend 20 bucks on that, and then you've got to find filler paper and all that stuff that goes along with those. Even if you're doing it manually and if you do it wrong, you do it massively wrong. And then you go to get your taxes done, which is, you know, it can cost you anywhere from maybe 300 bucks to upwards of four or five $6,000, depending on the size of your business, depending on the account that you work with. And so now you're adding up a lot of those costs and that's just the financial side.
Speaker 3:Then you start looking at subscriptions. Okay, so I need to customer managers CRM. That's CRM, and this is what you were complaining about. If you're an individual small you're doing this, for it wasn't a CRM but it was a subscription for something. Yeah, for an individual it's like 10 bucks, but then for a small business it's 100 bucks. Yeah, for an individual it's like 10 bucks, but then for a small business it's 100 bucks. Yeah.
Speaker 3:With no added features.
Speaker 1:Well yeah, no added features, no changes to it. And then it's individualized. So each one you're like you're like just as a host, it's $100. And then any other person besides you that's added to it is is like $25 retainer to it. So you're like this can add up like you have five employees and you're over 250 bucks. Like that's ridiculous.
Speaker 3:Yeah, it gets really expensive. You know a file server, you know where you're keeping files online, so like if you're interacting with clients where you want your files they them to be able to see it. Uh, if you're keeping files online, so like if you're interacting with clients where you want your files them to be able to see it, If you're, say, a graphic designer or something, a project management program where your clients can see the images you've created, yeah.
Speaker 3:All of these things. I mean it adds up Adobe. I really like Adobe. You could get the full Adobe. For what is it? 60 bucks.
Speaker 1:We just upgraded to the Adobe is for that for 60 bucks.
Speaker 3:So, as a graphic designer, if you're using Adobe, you can get all that for 60 bucks and you can put it on two computers, which, let's say, you have five people. You're still talking. What $240?. Yeah. But to go and get that software just to communicate with your clients, which is not a professional system, it's literally just an online database it's going to cost you 300. The professional software is cheaper than the basic stuff.
Speaker 1:Right.
Speaker 3:It's. I mean, there are a lot of these things where you're running into these barriers that prevent you from being able to do it, and it's because of the greed of the individuals that start these programs, and it's not necessarily even them, because a lot of these online softwares they're going out and they're valuing themselves at 20 million dollars and they're getting uh ipos and they're getting uh uh shark tank money and all this stuff, which is really expensive, and so they have to recoup all that. Their company's not worth $20 million, it's maybe worth $20,000.
Speaker 3:Maybe, but they hype it up so they get all of this startup money and then that cost is being transferred to the people using those softwares and it's just corporate greed. Yeah. Now, I am a firm believer in capitalism. I love capitalism. It is, in my opinion, the best market system there is, you know, bar none. It's not the best market system we have. It's the best market system there is is because it allows the producers and consumers to come together on an equilibrium price.
Speaker 1:I agree with you. Capitalism at its core is literally the heartbeat of how entrepreneurship and the business industry in our nation works In the world. How it works, However, when it's abused by powers, it turns from capitalist to greed.
Speaker 3:Yeah, and there are two forms of capitalism that I like to refer to. There is responsible capitalism, and then there is greedy capitalism. Greedy capitalism is when they're looking at themselves first, they're looking at themselves first.
Speaker 1:They're looking at a product to make a profit. Well, and I think one of the you know, like I would. I'm going to quote somebody that probably some people would argue against this, but I've studied him for a number of years, but his name is Robert Kiyosaki.
Speaker 3:Don't quote him.
Speaker 1:It's not actually a quote from him, but he wrote a book called Capitalist Manifesto. He's definitely gone pretty extreme in a lot of the cases.
Speaker 1:That's an understatement when you talk about this idea of greed or capitalist exploitation that results in your own individual greed. I think one of the things that he's done really, really well as a capitalist is diversify, so it's not just like I'm going to find one good thing and I'm going to drive this so high up in price that it is the only reason why I make so much money, instead of diversifying and making sure that you have multiple streams.
Speaker 3:No, he in my opinion, he is the definition of greedy capital, because he turns around and he convinces guys like you that he's a good businessman, that he can do all this great stuff, when in reality he can't. All right, there was an expose, he did a tv show or something, um, saying that he could take you know, with I think I was a hundred dollars, he could turn around and rebuild his whole business no, that's grant cardone okay that guy, that guy is a walking dirtbag.
Speaker 1:Kiyosaki he is. I shouldn't say that, but Kiyosaki is rich dad, poor dad, cash flow business. His production of wealthy individuals far exceeds Grant Cardone.
Speaker 3:He is in the same boat, though. Okay, he is a marketing genius. Yes.
Speaker 3:Not a business genius, and there's a big difference there. Yeah, because a marketing genius can make. A marketing genius can sell you sand in the Sahara desert. That doesn't make him a good businessman. True, and that would be the definition of greedy capitalism. They are looking at increasing their own profits without thinking about the consumer. In a true capitalist market, what you're looking for is to produce a product that benefits the consumer Okay, benefits the consumer Okay. And so, whatever that may be, it could be making them emotionally happier, like doing plush toys. It could make them more efficient in their business. It could provide a service. Instead of using a paper ledger book, you have an electronic version of it. Yeah.
Speaker 3:Okay, that's true capitalism. Now you can turn that into greedy capitalism when you take advantage of people to be able to make more money off of that than the market. Because I mean, this goes into a lot of economic principles. Now, again, the number one economic principle is people will do things in their own best interest. Yeah. That is the fundamental principle of economics. It's the first lesson you learn in any economics class, macro or micro. That's the number one thing that you're taught.
Speaker 1:Well, I think you and I have had that kind of conversation to where, you know, having to say, like it's okay to be philanthropic and thinking, but you know, in even casting a vision for what you want for your company, but you can't start there.
Speaker 3:Right, you have to look at. I mean, it's a capitalist Well the industry won't let you.
Speaker 1:You have to have the capital in order to be philanthropic about what you do.
Speaker 3:Right, but a true capitalist economy looks for the benefit of the consumer and then the consumer decides whether they want to buy that product. True, whereas in greedy capitalism they are looking at their own bottom line. So we hear this all the time my number one focus is my shareholders. That's the wrong focus. Right. Because you're looking at increasing your own profits without providing that benefit to the consumers, and the problem with that is it's a short-term outlook. Okay.
Speaker 3:Because you're going to price yourself out to the point where they're not going to be able to buy your product. Look at where we are right now in our economy with the massive inflation that we're dealing with. Okay, if you want to buy a cell phone, you've got to shell out $2,000 for the newest iPhone, which comes out every year, which is no different from the prior iPhone, and so you are spending these massive amounts of dollars for something that is no improvement. Steve Jobs, great marketer. He knew exactly how to do it. The problem is long-term, and that was great for the short term. He built Apple to be what it is today the massive influence it has. But as they go on, if they continue to do those same practices of continuing to raise the prices, focusing on that marketing, we're going to have and we're already seeing it a very cash poor economy. They are phone rich, they have these massively expensive phones, but they can't go out and buy food, and so eventually, starvation will kick in and they will stop buying these massively expensive cell phones.
Speaker 1:My favorite and they will stop buying these massively expensive cell phones. My favorite, so I won't name names, but I knew a family that had a family plan and the family plan would include other family members that were benefiting off of having special discounts for different reasons, and being incorporated into this family plan was a really good, affordable way of having a cell phone. They want the top notch, most expensive, with all the bells and whistles and a payment plan to go with it, in order to pay that off in the next two years. And you're like well, I mean, I don't run it that way, but as long as you pay the bill, that's great. You know like that. That. That would be my thinking. But but I don't understand that logic about going like man. I can't afford macaroni and cheese, but I sure want that $2,000 phone.
Speaker 3:And that's exactly it. And and I've got a grant. You know these big companies, they know what they're doing, they've got great marketing teams, but it is greedy capitalism and you see that I know we started talking about. You know how this affects small businesses. That's exactly what's happening with small businesses. That's why we're seeing fewer and fewer entrepreneurs is because they can't get into the markets, because we are putting all this money into these shareholders and so we've got these.
Speaker 1:I mean you're seeing fewer and fewer I would say even in the entrepreneurial way is freelance, so you're doing it more. I'm self-employed, but I'm the only employee of that business, because my overhead is near zero. If I'm good at it, you know, yeah, there's little things like business license, but then I don't even have things like employee costs if I have employees. And then you know there's ways to work around that so that, if you have employees, you are still working on minimizing the amount of output because you have an employee Like, let's say, you know contractors, those sorts of things and so, you're right, you roll your eyes, it's true, though, like it's gone into this way where you almost have to sneak into the industry because everything out there is out to just crush you.
Speaker 3:Yeah, well, and even going into that. So, hiring contractors Now, fortunately, the IRS is going after these companies and yes, I did say fortunately. I rarely am on the side of the IRS, but in this one I am. And here's the reason businesses hire contractors is because it's cheaper for the business, not cheaper for the contractor. And so we talk about FICA taxes. So that's social security Medicare. Okay, so as a contractor, you're going to pay 15% of your income toward FICA social security Medicare. They call it self-employment tax, but it's the same thing Whereas if you're an employee, you're only paying 7% and your employer is paying the other 7%. And so if you get hired by a company as an employee, they give you a $60,000 wage. Great, a lot of that's going to go to taxes.
Speaker 3:Yeah wage, great, a lot of that's going to go to taxes, but you're going to get. So what's? 7% of 60,000, you're looking at six, maybe $5,000, in taxes for FICA. Now if you're a contractor and you get that same exact rate of $60,000, now you're going to end up paying an extra $5,000. So that $60,000 just dropped down to $55,000 just because you're a contractor.
Speaker 3:And that's why businesses do it. They're trying to take advantage of this quote unquote loophole to hire contractors when they should be hiring them as employees and providing those benefits, and so they get around all of that. They try to avoid doing that. Now there are legitimate contractors. I'm an accountant, I'm a bookkeeper, I'm a legitimate contractor. You know I have my own business, I have my own office. Sometimes those waters get a little bit murky as to what the rules are that the IRS says contractor versus employee. But you know this is going back to the same thing of it hurts small businesses when you are that contractor. Now you're paying 15% in FICA taxes as opposed to the 7%, and so immediately you're losing 5% of your profit in that scenario.
Speaker 1:Okay, so I pulled an article and it's from Business News Daily. Okay, so I pulled an article and it's from Business News Daily and the article is Startup Costs how Much Cash Will you Need, Basically, to cover some of the costs? Just to give credit where credit's due. Let me get down to this. The actual writer of this is Sammy Caramella. I hope I pronounced her name right, but yeah, she wrote a pretty good article, I feel like, and honestly, I think there's so much variety when it comes to how to start up a business.
Speaker 1:This is going to kind of broad swing across a lot of it, but I think it leans heavy on the idea that you have a startup that probably is going to be a brick and mortar, going into having like five employees kind of a thing. Okay, so you have plush toys. You have a gift shop you're going to open up. Okay, Well, you got to get that location. You're going to have some staff that you're going to need to run that place. You're going to need toilet paper for the bathroom.
Speaker 1:All of those things you know are incorporated into some of the, into the costs. So the like this is just about four, four little tips. Essentially is what the article covers and it and it really just kind of unpacks some good steps to just brace yourself so that you're a little bit more mentally prepared for these costs, Because it's not just this, the softwares that we talk about, like needing a, you know, a CRM is important when you're talking about sales management and the development marketing expenses. You know, talking about sales management and the development marketing expenses, you know all you know anything to do with like social media influence, which is basically the bread and butter of getting in front of people nowadays.
Speaker 3:You, you have all of that and anything to manage it is has a cost tied to it not only that, yeah, I just got my credit card bill for my American Express and I just had my annual $600 fee for having the privilege of having an American Express card. It's just a joke to get a credit card and the first charge ever when you get a credit card is your as a business is this fee? Yeah. And so it's $600 just to have a credit card that you have to pay off.
Speaker 1:Right. So it literally is frustrating to sit through and just think like man, there's gotta be a better way. You know, I don't think there is. I think that you know a better way. You know, I don't think there is. I think that you know it's too big of a machine at this point to where, you know, finding these, these good starting points and healthy perspective is at least a way to combat this. But it's more just kind of to prepare you for the gut punch you're going to get when you get that first statement from your car.
Speaker 3:Well, and I know you're going to go through this list, but I don't think that it is a requirement. It takes business owners that are responsible. So Mark Cuban is a great businessman is a great businessman. He, he, he is turning the pharmaceutical industry upside down by offering generic prescriptions at reasonable rates. Yeah.
Speaker 3:It's such a shocking idea to actually provide something at a reasonable cost, I mean, but it takes guys like Mark Cuban who are responsible capitalists, and so, when you start a business, be a responsible capitalist, don't be a greedy capitalist. That's what's going to allow your business to thrive long term list.
Speaker 1:That's what's going to allow your business to thrive long term. Well, and what I think what sparked this for me was I saw a video on a site that I follow called Freethink, and they were doing a spot on a water bottle company called Free Water and I was like that's a really original name. They even make fun of the fact that it's not that cool, but they didn't want it to be. They were. They were looking at it to call it Free Water, because it's free water and everyone, you know like, the biggest concept is when they're out there handing this water out to people that are everyone's coming up all skeptical, going like, well, what's the catch? You know like, why, how could you even possibly manage to do this? Like my other water over here that, you know, when you spell it backwards spells naive and I still buy it. You know, sorry, um, but I, you know like, and I and I walk around with this billboard bottle in my hand showing off the company and showing off how naive I am. But you know like, everyone, everyone kind of gets in line with that you want a better water bottle than just tap water in a bottle. You're going to pay extra and it's really just fancier tap water. But, like they, basically this company took that concept and said well, I don't need to have, but maybe a little mark on there that says what this company is that's doing this.
Speaker 1:I'm going to make it out of infinite really recyclable material, which is an aluminum bottle instead of a plastic bottle. Plastic I don't know if you guys know this or not you have a lifetime of that. It'll get thinner and thinner and thinner, to the point where it's burned up into the atmosphere, destroys our ecosystem and, you know, contributes to a lot of other worse things. So use aluminum. So they did, Okay. And then on the outside they used paper. They paper paste it with advertisements that are from multiple companies, essentially net zeroing that bottle. So the cost to produce it, to bottle the water and label it, are all covered in the cost from the advertisers who are wishing to advertise on that bottle, wishing to advertise on that bottle. You can have dozens of different advertisers, hundreds of different advertisers, all over these different bottles.
Speaker 1:Each one, then every bottle handed to someone else gives 10 cents to a foreign country, okay, or third world country in need organizationally. And then on top of that you have you know, you have these advertisers paying for the cost of this. You just incorporate a small little profit margin and you're golden. You actually pay for your. You have revenue before you even hand out that bottle. So it's an ingenious model to show, like, how to regenerate and basically create free product. And basically create free product.
Speaker 1:If that concept was taken to multiple other things that are basic needs that our society needs and thrives on, imagine just the impact that could make positively for a first world country that you know like. It benefits a third world country, but it also benefits a first world in the sense of all of these marketers already want their name out there. So now they're getting it out there. They have the same marketing costs as normal. It's it's. I feel like it was just an ingenious way and it just kind of got to the point of going like why don't we do this? Why, why haven't we been doing it this way?
Speaker 3:Yeah, it's because greed. I mean you don't need to be paying millions of dollars for CEOs. You don't. There is absolutely no reason for it. You don't need mansions all over the US, you don't need all of this stuff. But it feels good and you feel powerful when you're that CEO, when you are that person that is living in this mansion for really not doing much. I mean CEOs they sign papers, they come up with ideas. Guess what? That's what we do on this podcast. You know it's.
Speaker 3:I've worked with hundreds of small businesses and taken them from small businesses to multimillion dollar businesses, but the one thing that I always teach them is stop taking money out of the business. Leave it in the business. Take a salary, but don't take an exorbitant salary. Yeah, because it's going to destroy your business. You're going to have to cost yourself out of the market and it has allowed those businesses to thrive. And you look at some of these big companies and they are paying just exorbitant amounts to CEOs who are, in my opinion, quite worthless. You know you don't need to be paying that kind of money to those people and we as consumers remember we're in a capitalist society we, as the consumers, have the responsibility and the right to be able to say no. Yeah.
Speaker 3:Because if, if, as a small business, I say, you know, I'm not going to use that service because it's too expensive, I'm going to come up with my own. I'm going to write it in Excel, I'm going to have, I'm just going to store this stuff on my computer. Great, Now you don't need that service anymore. And the more people that do that, the less income that that business is able to generate and they realize they have to reduce their sales price. That's market equilibrium.
Speaker 3:When we look at cell phones and Apple, if we don't want to be paying Apple $2,000 for a cell phone, our responsibility as the consumer is to stop buying those $2,000 cell phones.
Speaker 3:Yeah, they're cool but they do a lot of fun stuff. But if we continue to buy those expensive phones, all we're doing is perpetuating the problem. We, as the consumers have the ultimate responsibility to avoid all of that, to stop those practices. Because if we all of a sudden stop buying $2,000 cell phones and it's not just Apple, I know I'm focusing on Apple but all of a sudden stop buying $2,000 cell phones, and it's not just Apple I know I'm focusing on Apple, but all of the other cell phone companies do the same thing. You've got the Samsung phones that are thousands of dollars. You've got all of these. The only ones that aren't expensive are the old flip phones that they sell for old people, which kind of tells you something about what they're doing. It doesn't take that much money to build these cell phones. They just know that those old people I say old people colloquially those old people are not going to spend that much money on a cell phone.
Speaker 3:So in order for them to sell that cell phone, they have to make it really cheap. Yeah. And so if we, as consumers, stop giving in to all of this hype, to all of this marketing power, now we have the power back to be able to bring the economy back into control and reduce the inflation that we're seeing. That's our power as consumers. The problem is, it takes all consumers to make that action in order to make a change. I never buy the $2,000 cell phones. Right.
Speaker 3:I've still got an iPhone se that is four years old yeah, I I buy.
Speaker 1:My most recent was, uh, is a two-year-old phone. So our like my wife and I we I just recently bought two-year-old phones for us to to use, like and that's and they're re. So I don't buy brand spanking new out of the box. I usually get them repurposed from some other service so that I don't get the shiniest newest, and it also keeps me away from having a payment plan on a phone. I feel like that is the stupidest thing to do.
Speaker 3:Well, that's how they're able to sell those $2,000 homes. Oh yeah. That's why we have mortgages the way that we do. So the reason home prices, the reason it costs $600,000 to buy a home, is not because it costs $600,000 to build the home. Right.
Speaker 3:It's because that price of that home is built into that monthly payment that you're doing, and so, based on the interest rates, based on your ability to pay, that's defining that home's price. And so, again, if we got rid of that 30 year mortgage, home prices would plummet. It's because we've all moved over to this subscription model of home ownership or subscription model of phone ownership that's allowed these prices to just skyrocket, and that is inflation. We have caused our own inflation problems as consumers and these businesses have taken advantage of that. Yeah.
Speaker 3:That greed. They know they can do that, and so they are taking advantage of it.
Speaker 1:So I want to give at least a little perspective. As far as startup costs, I think that you know you can start a business for as little as $100. Creatively, don't stay in that lane. Like you know, honestly, if it's a successful idea, you should see some decent growth and if you're, you know, like, from that idea you see the growth, then start talking, at least understanding what to expect. And this is kind of where I'm coming from with. This is this is a perspective of you know, like I said, probably more the brick and mortar you're going to open a gift shop sort of thing that there's. There's a billion other ideas you can do, but you know that even require brick and mortar options that you have to look into. So the first one is start small. You know, don't go crazy If you have an idea. You and I talked about a business idea the other day and you know my recommendation was to really run a test, run a test batch. Do it where the cost for that test isn't really going to incur anything. Maybe some minimal marketing tests to see what the market's going to gravitate to, but a cost incurred with that, no matter what way you look at it. But there are some kinds of costs that are better than others. That's the second part of this. Number two is understand what types of costs you'll have. You have costs that are one-time costs you have to buy a refrigerator for the break room, but you know. And then you have ongoing costs. You have rent for a location. You have different, you know memberships to different services, like a CRM, whatever it is, and so those are understanding what kind of things they are. It kind of goes for, for you know the on the cost that you'll incur immediately, kind of planning for that.
Speaker 1:The second part there's a couple actually, but there's essential versus optional costs. So those are like essential, obviously, is like rent. For that or growth or development reasons, it's an essential need. I wouldn't say rent is there, rent is more an ongoing, but rent is like. But but essential costs are things that you go like man, I really need to have a website designed. Okay, now you can control the. How much that cost is. You can get a $20,000 website or you can get a website company host and do it yourself. And there's because you are on the website host service, they offer training for you on there to do it yourself. So if you're on that side of a budget it's absolutely doable. Okay, and they're compelling websites at this point, like now, promoting that. That's an ongoing cost, you know. But optional costs, if there are things that you don't have to pay for right now, maybe forego that for a future time when you have a little bit more, it's like non-urgence.
Speaker 1:And then you have fixed and variable costs. This one's kind of you know, one of those things rent is a fixed cost. You will pay it until you're, until you're you shutter that door, you know. You know you have variable costs where you know the cost of goods, in particular things, um, paper costs for printing, like just just random, random things that are, you know, based on the economy, just random things that are, you know, based on the economy, society, but all of that, you know. I just say that to just kind of be prepared.
Speaker 1:There's a breakdown on this article that kind of gives you a general workup. I still think that they missed it a little bit, but I'll give them some. Here's the idea with five employees, okay, rent, co-worker, space, membership, whatever, $2,700. Okay, you're going to have a decent website design and hosting $2,000. Okay, hosting is not usually $2,000 a month, but the upfront design can run you even much more than that. If you really truly want something, payroll, that's the big punch. Five employees with about $35,000 salaries Okay, that's $175,000. Okay, now math guy across from me here is doing the math and going yeah, if you just add five times 35,000, sure there's a lot more than that added into there. So if you're not considering the costs of having five employees that's kind of where I saw the hole. I was like it's not $175,000. An employee of 35,000, what would that be? Joe?
Speaker 3:So I always add an extra 20%. Okay.
Speaker 3:So because you've got benefits, you've got your portion of FICA taxes, which is immediately seven and a half percent. So even if you don't count anything else, increase it by seven and a half percent, guaranteed. You've got unemployment insurance and then some states have disability insurance. So california and washington um, trying to think something in colorado have like family and medical leave payments where the employer is required to put some money into this. California has a state disability program and so there are extra costs. So you always want to estimate at least 20% more. So if you've got an employee for $35,000 a year, you're going to have to increase that by 7,000. That's an actual $42,000 cost for that employee. So if you're looking at five, you're looking. What is that? 210,000? Yeah.
Speaker 3:For five employees, not 175 or whatever.
Speaker 1:I knew you would math gooder than this report. So no, I like I saw that when I when I saw the payroll, I was like, hmm, that's not the total, that's not all of it.
Speaker 3:Common mistake, very common mistake total.
Speaker 1:That's not all of it. Common mistake, very common mistake. So advertising, promotion, that kind of stuff. It says 5,000. That's that's really, in my opinion, low. Usually that that could be a budget for almost monthly, but startup maybe that's. That's the dime you're at.
Speaker 3:That's 5,000 a year.
Speaker 1:I is just to start up like estimated costs. So I'm looking at this, possibly looking at some kind of I don't know. So maybe that's the math that they're doing is this is an immediate like today, this is the cost today. But even then, even the payroll is still going to be a little bit more. It might not be annualized, so you're not looking at it being over two hundred thousand dollars immediately, but, um, but, but probably close, because you're still paying the seven percent every time you pay them. So, um, okay, so total basic office supplies papers, pens, etc. Um, et cetera, $80. That's low, that's maybe a ream, that's maybe a couple reams of paper.
Speaker 1:One thing of toner in the printer.
Speaker 3:I don't think that would even cover one thing, right? I?
Speaker 2:was going to say like, well, if it's an inkjet, it's definitely not covering the ink, it might cover toner.
Speaker 1:So annualized it's $184,830. I would probably bump that easily to about $220,000.
Speaker 3:Oh, I think even more If you've got five employees and a brick and mortar, you're probably looking at $400,000 at least $400,000.
Speaker 1:Okay, that's fair and honestly, that's part of you know. I looked at the article. I felt like it was good to at least set some some clear.
Speaker 3:They forgot workers' comp insurance on there. They forgot business liability insurance. What about a business license, like just that alone. They forgot their licensing. They forgot, oh, what are some others? They forgot a lot if you have.
Speaker 1:If you're opening a brick and mortar, you have permits in order to to open whatever it is you're going to put in there, so you have to have inspectors come in. Some of those inspectors are 1500 just to get them to show up. So, yeah, it's it's. There's some things that aren't really realistic in that.
Speaker 3:So that's why I say I think $400,000 would be more realistic in that scenario. Yeah. And I think that's a pretty good estimate. So you're looking about $80,000 per employee to start a business. So if you're the only employee of the business, assume $80,000 is going to be your starting cost. Yeah.
Speaker 1:Number three is project your cash flow. A lot of people when they do this, they don't project it correctly, so they think, man, I have got a gold standard idea. It is the best on earth. No one else is doing what I'm doing and I know that tomorrow I'm going to make a million dollars. And you're like nope, nope. Most businesses fail almost, I think, like the rates, like 90% of businesses fail in the first five years Common misconception.
Speaker 3:That comes from a very old American Express study from, I think, 19. It was the 1980s or 1990s. American Express did a study of high-risk businesses and concluded not concluded in the report but in one tiny section of the report that a certain segment of businesses do fail at that rate. But it was hyped up in the news articles that 90% of businesses fail. No, that is not correct.
Speaker 1:Well then, I stand corrected, except for the fact that I'm not surprised it was American Express with their fees. Yeah, exactly that's the reason why that failed.
Speaker 3:But that's where that common misconception comes from is from this old American Express report. I don't know if we'll be able to find it because, like I said, it is old but it's become so common in our world that we think that's the case. It isn't.
Speaker 1:You've heard it here on Mythbusters.
Speaker 3:I don't know if we can use that. The reality is, most businesses succeed. Are you going to be a millionaire as a business owner? No, but most businesses actually succeed, not fail.
Speaker 1:Okay. So I think the biggest thing, though that determining whether or not you feel like you're climbing a mountain or not is having that realistic projection of your cash flow. How much is going in, how much is going out? You know all those sorts of things, and, being that you're starting slow, you're not going to be a millionaire tomorrow, so you need to make sure that, like you said earlier, a best practice with business is anything that's coming in goes into the business.
Speaker 1:Now, obviously, pay your people, pay yourself, but don't go man. I'm going to go from you know down in the dumps to living this lavish yacht lifestyle when I feel like I've made it, because you're going to hurt your business immediately, and your business may not close its doors statistically, but it's going to struggle even more. It's going to create that mountain that you just got to the top of. You know you're going to fall right back down the other side of it, because you think you've arrived and you know like and anyone who is anyone will say you put the money that you make back into your business. Take a percentage out for you, but don't take it all.
Speaker 3:Yeah, I've got a client. I've worked with him for a lot of years. I was thinking maybe we should have him on the podcast, sure, so you can talk about his experience as a business owner and where he came from. When I first started working with him, he was maybe making 20,000 in net income a year and he was not taking a salary, so his salary was that 20,000. Um, and over the years that I've worked with him, he's now a multimillion dollar revenue company and his net is, uh, I don't think it's quite to the millions yet in net income. Yeah, so like his take home, but he's also now taking a salary.
Speaker 3:But I told him you have to keep this business, keep the money in the business. Once he started making a good amount of profit that he could sustain the business and take money out Great. But it took him years to get there and for a long time he was living in a little one bedroom apartment because that's all he could afford. Yeah, and now he's looking at buying a nice big home, but it's been eight years to get to that point. He's not buying a mansion, he's buying a nice home. Yeah.
Speaker 3:And that's the thing I mean. Hopefully, 20 years from now, he'll be buying a mansion right.
Speaker 3:You know, he'll build his business and, you know, continue to grow it and he'll have this nice, massive opportunity. But that's many, many, many years of being in this business and so don't expect that next year you're going to be a millionaire. Most of these guys that you see on YouTube or TikTok that say, oh, I'm a millionaire now I'm driving around this Lamborghini. When they do the exposes on those individuals, they find out they are broke and they are renting those vehicles for their videos. Right. All to hype and market this greedy capitalism.
Speaker 1:I just got this Lamborghini. I can't leave the parking lot, but I got this Lamborghini right here, yeah yeah. So number four is figure out your financing methods. The best recommendation for that don't finance it. Financing methods the best recommendation for that don't finance it. Literally.
Speaker 1:If you're starting a business one of the most difficult things, I mean, like there's banks, do this, like banks everywhere, they'll start a business account, get a business loan and I'm here and there on that because I, you know, I hear the other end of it. It's using other people's money kind of a concept, and I think that it has to do with your plan, your vision, what you feel like you can accomplish with what you have. If you're looking at this to just kind of be like I've got nothing and I need to finance $400,000 to get this thing off the ground, start small, think, start small. Start something where you can test it and if it has the traction to be able to validate that kind of an amount, if you, you know, obviously over the over the years, you have to pay that back. So if you don't feel like it's going to do that, don't jump in being I need $400,000 for something that I have no idea whether it's going to succeed.
Speaker 3:Yeah, and you have to be disciplined. You have to be disciplined with that. You have to use that money for your product and you have to get a significant return on that product in order to be able to pay back that loan. And when that money comes back in, when you sold that product, set it aside to be able to pay the loan back. And set all of it aside because you want to grow the business. But a lot of businesses get into the point where they borrow this $400,000 and then they make 800,000 and they waste it all and now they don't have any money to pay back the loan. Right.
Speaker 3:And so you have to be smart, you have to be disciplined about how you're using that money. You cannot be frivolous as a business owner. I referenced back to those tick tock people that are driving around those Lamborghinis. They are not actually rich business people. Rich business people may have a nice car after 15 years in business and having made it very successful, but they're not buying it the first year they're in business. None of them are.
Speaker 1:I have a short that we're going to do. We're going to get a fancy car and cruise around.
Speaker 3:I'm not paying for the rent on that.
Speaker 1:Look, we've made it.
Speaker 3:All right, too smart a businessman to even pay $100 in rent on one of those.
Speaker 1:So I think you know you guys get our perspective is it's not as easy to make it out there, but it is possible to make it. You do have a lot of things stacked against you, but if you work smart and strategize before you jump in, um, it's, the likelihood is is higher. Um, you have more potential of being successful with what you're doing, with your, your concept, your idea, whatever business you love doing. Like you know it's your baby. You don't want to have to shut doors on that baby Like that's, that's a. That's a hard thing to deal with, but, um, you know, if, if you do have a brick and mortar location, you know a lot of times those locations are going to have to have a way to secure it, and that usually requires locking a door some way. Some way shape or form. And maybe there's a door to your office too that also has a lock on it and both of those require keys probably not the same key, so that you know others who have the key. You have a key and then somebody else you don't want them to have a key to your office and so like it's just, it's a mess.
Speaker 1:But you also have your house key and you're like you got this key, car key, whatever, you know, like I was in in the movies that like this is a side note when I was thinking about this, but I was like, you know, they always walk up to the car and it's like murder, dark outside, and you're like, oh, they're gonna die, you know. And they, they drop their keys. And I'm like I have auto start and a key fob that senses and unlocks when I get there. So like, why? Why is it? Like all of a sudden, you know, this person walks up, fumbles, drops their, drops their keys and they're like, oh no, and then, magically, you know, weird, somebody's there to just do some damage to that person, right, I'm watching weird movies.
Speaker 1:This is like almost every movie where there's a bad guy in a car, in a parking garage, Like that's what happens, you know. Anyway, Murder Dark. Just remember that. All right, If it's Murder Dark, this is going to help you a lot. No, not really because you won't be able to see it, but if you have a lot of keys and you need to keep track of them and not, you know, fumble through them all every single time, you need to access that key. Nope, not this one. Nope, not this one.
Speaker 1:Why don't you bust out some nail polish? You might know somebody who has a pile of nail polish and nail polish the tops of each one of them. Different colors for different things. Your office gets a green nail polish. I don't know if green is even a good color. Your house gets a red nail polish I don't know if green is even a good color. Your house gets a red nail polish. You know your storage shed gets this nail polish. And the reason why is it's just a quick way for you to glance at it. Get that key immediately and you're golden right. Any input? Joe, You're shaking your head.
Speaker 3:All my keys look different, so just looking at them tells me what the key is. Okay, so.
Speaker 1:I agree, I have another key ring that I don't take with me everywhere because I don't need it. It has a lot of keys on it and those ones there's probably four or five of them that look the same. So you know to to know the difference. I I'm I'm one of those key fumblers, but how many times I use that key ring? I literally don't. I can, I can get rid of it and it's not going to impact my world. I just keep it off of my normal keys because I don't use those keys very often, so I just have them because they are access to other things that occasionally I need to get on the key ring and won't nail polish rub off if it's been painted on metal while it's in your pocket and then it's turned your pocket to a rainbow color.
Speaker 1:Sure, I mean let it dry. Well yeah, nail polish doesn't chalk off, it chips off.
Speaker 3:So you have paint chips when it's Okay. So you've just got paint chips in the bottom of your pocket. So the next time you go to do laundry, that's when you get the rainbow pocket.
Speaker 1:You know the other thing can you could go buy those little rings that are, you know, like oh yeah, an extra two dollars per key, yeah a little, and then you only have five colors. Then you're like well, what if I have 15 keys that all look the same?
Speaker 3:you know like that sounds terrible if you have 15 keys that all look the same. I think you've got a problem with two keys.
Speaker 1:You're a janitor, all right. Well, we have reached the end of our show. I think that we need to wrap up.
Speaker 3:That's probably the best thing for me. Sorry, I have to, just I mean these life such a negative life hacks. Yeah.
Speaker 1:No, hey, listen guys, if you like what you hear, if you, if you're sticking around to the tail end of these hopefully one day we'll have some, some viewers that are doing that sooner than later but like and subscribe, leave a comment or two. We'd love to hear from you, we'd like to hear about what kind of things are interesting to you, because we want to keep this stuff important to what's going on in your life and letting the idiots help guide you a little bit by. You know, we may not be down the road farther than you, but we may have had some different experiences, I'm sure than you have, and hopefully we can add some insight into some stuff. And if we don't know, we're pretty unqualified to speak about it. And we're going to talk about it anyway. So thank you for listening, thank you for watching. Life's too short, so keep laughing and learning and remember idiots have way more fun. Check your shoes.