29 Dec Are You Prepared for the Unexpected?
What would happen if you couldn’t run your business tomorrow and needed to hire someone else? Your net income just went from $200,000 to $0, and you’re living off short, or long-term disability… or maybe you are one of the very unfortunate who has nothing!
“Would it be difficult for your business to operate if you lost your primary income? Could you make your mortgage payment, student loans, or your car payments that you worked so hard for?”
Over the last few years I’ve met with more and more business owners (CEO’s) that are very very successful, but could have lost it all in an instant.
As CEO’s we need to be prepared for the unexpected. If you don’t have a second or third stream of income that is equal to or greater than what you’re earning primarily…you need to start a second business NOW. Bad things happen to good people, and don’t think otherwise, nobody is immune to disaster
In 2002 when I started my first practice with my business partner John, we were only generating $600,000 a year. My first paycheck was around $800 for the week. Fast forward to a few years later, our practice is now generating $6,000,000 a year – but that’s not my primary source of income anymore.
“Six years later when the crash of 2008 hit, I was prepared! I had multiple flows of income from my practice, real estate company, optical lab, and investments. My passive income was far greater than that of my primary source and I actually had money to invest in more property after the crash.”
Early on I learned from my father, a few great mentors, and my business coach that the secret to being successful is to learn from others that do There is no shame in having a coach or mentor, all great CEO’s have a mentor or a coach, just like the world’s top athletes!
So, I know some of you may be saying “Oh my god , I don’t have time to start another business!” Or “how am I supposed to manage ALL that?!” The answer is simple, you don’t have to. If you can afford to take yourself out of patient care, for example, now and replace yourself… DO IT. Then take part of your time and build your other flows of income, but never take your eyes completely off your main source of income.
Here’s a quick example of business you can start that will self-manage until you can hire someone to run things for you:
- Buy miltifamily units – no less than 4 units per home
- Tax liens
- Tax deeds
There are property management companies you can hire that will take care of everything for your rental properties. Renting, cleaning, painting, maintenance, everything for a monthly fee. You can just sit back and collect “mail box money” while someone else deals with your rental units.
Now that you’re making multiple streams of income, how do you protect yourself? In the event of disaster, how do you protect yourself, your retirement and your streams? You have to segment your business into separate companies. Spend the money on the legal consulting, and CPA fees now, or risk losing it all for being cheap now. In the long run you will see that this money was well spent, if not FREE!
When I speak of separate companies, it goes something like this:
If you invest in real estate, each property should be organized into its own LLC. If one property gets into trouble or has a legal issue, all of the other properties or companies will go unscathed. If your practice, separate your clinic business, optical business, and equipment into three entities. You will want to consult with your CPA to determine if they should be an LLC or S-Corp etc. If you own the building that should also be separated into its own LLC and you should pay yourself rent. In terms of your equipment, you should have an equipment rental LLC that owns the equipment in the practice, that yes, you pay rent to. If in the unlikely event your practice (or business) goes into financial trouble, your equipment is protected from creditors. Likewise, you should put as much money as possible into your 401K and ROTH plans. In general, retirement accounts that qualify under the Employee Retirement Income Security Act (ERISA) are protected from creditors, bankruptcy proceedings, and civil lawsuits.
Take a few hours each week, even 30 minutes a day to start to plan out your financial future for you and your family! If you take even a fraction of this advice and start to become more of a CEO in your business, you will gain financial independence like I did, and will have more free time to travel, and spend with family and friends while potentially doubling or tripling your annual income!