Finance Friday: How Do I Scale My Business But Reduce My Hours?

Mindy:
Welcome to the BiggerPockets Money Podcast, show number 220, Finance Friday edition, where we talk to Stephanie about work-life balance and building a self-sustaining business.

Stephanie:
I think part of it is just the mental load of… I feel so scattered across so many different things. I don’t feel like I’m working effectively in any way, and I’m certainly not doing the work that I would enjoy the most. So yeah, a lot of my time is just like scattered between all these different clients and calls and yeah, communication management. Yeah.

Mindy:
Hello. Hello. Hello. My name is Mindy Jensen and with me as always is my Obi-Wan Kenobi [inaudible 00:00:39] co-host, Scott Trench.

Scott:
Thank you for the force of that introduction, Mindy.

Mindy:
Scott and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you’re starting.

Scott:
That’s right. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate, start or automate or systematize your own business, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.

Mindy:
Scott, I am super excited to talk to Stephanie today because she has a bit of a different problem that she needs a little bit of guidance with. We normally talk to people about their personal financial money situation. And we start off this episode talking about that, but we quickly pivot to her ridiculously successful business and her conflicting view. She’s very excited about it, but not every aspect about it. She’d like to grow it, but she’d also like to work less hours. And I think we’re in the frame of a work-life balance. And how do I, how do I get rid of the parts of the business that I don’t want and keep the parts of the business that I do?

Scott:
Yeah. You could tell immediately that Stephanie is a very high achiever. Very kind of, I would say type A, knows what’s going on, earns a really high income, has complete command of her expenses, has a perfectly clean balance sheet with no debt. We’ll get into all those things as the show gets going there. And you’re like, “What the heck is the problem here?” Right? But it is a problem, right? Because she’s got this incredible amount of income and very low expenses because she’s doing everything by the book when it comes to managing a financial position. And now, I think it’s time to make a decision about whether she is going to take on the world or get that balance and what a good problem to have, but what a real problem, right? That’s going to impact her life and it’s a big decision. And hopefully many of you, many of the folks listening are either having a similar problem or will have this problem one day.
And so, I think that this is a good position to be in. And I think a real strategic choice you’re going to make, it’s going to impact your day-to-day life, your optionality down the stream, and a lot of things. So, anyways, should we get into it, Mindy?

Mindy:
We should. Before we bring in Stephanie, I need to say that the contents of this podcast are informational in nature and are not legal or tax advice. And neither Scott, nor I, nor BiggerPockets is engaged in the provision of legal, tax, or any other advice. You should seek your own advice for professional advisors, including lawyers and accountants regarding the legal, tax, and financial implications of any financial decision you contemplate. Okay. Let’s bring in Stephanie.
Stephanie is a consultant working for herself after turning a side hustle into her sole source of income. Hooray! But she started to feel burned out by the pace. She’s on track for early retirement in a few more years, but she’s wondering about her options. She’s recently purchased her first house after making and losing multiple offers. Stephanie, welcome to the BiggerPockets Money Podcast. I cannot wait to dive into your numbers.

Stephanie:
Great. Thank you. Hi, Mindy. Hi, Scott.

Scott:
Hello.

Mindy:
So, let’s work on a… What are we calling this, Scott? I always mess this up.

Scott:
We call it a profit and loss and then a balance sheet. So, income minus expenses is your profit and loss. And then your investments minus your debts is your balance sheet or net worth.

Mindy:
So, let’s look at what’s coming in and where is it going?

Stephanie:
Yeah. So, when I decided to kind of work for myself and so, therefore, it varies month to month what’s coming in, but like what I’ve calculated so far, let’s say 2020, the average was probably a little under $16,000 per month take home after tax. And then in 2021 so far, it looks like it will be an average of $14,000 per month. And so that’s both after business expenses and after my estimated taxes. So, I won’t know until the end of the year, what exactly it works out to.

Mindy:
You make $14,000 a month. That’s yours income?

Stephanie:
Mm-hmm (affirmative).

Mindy:
Awesome.

Stephanie:
Thank you.

Mindy:
Awesome. Okay. Where’s that going?

Stephanie:
Yeah. So my expenses are decently low. So, I target around $2,500 per month, which would be $30,000 per year. And so, I certainly use Mint for tracking my expenses. So, I generally have a good read throughout the month where I’m at, but I don’t necessarily do serious budgeting and don’t really want to do that. But I can say that some of my general expenses. So, anyways, I am currently renting by kind of moving in… I’ve already closed on a house, will have that mortgage payments starting in August. So the P&I is $1,100. Escrow right now is about $250. So that’s kind of like a baseline of $1,500, but it’ll probably go up a bit when the property is reassessed for property taxes.
And then I’m expecting utilities will be $200 to $300 a month. I’m still kind of have to get into the place to figure it out exactly for myself. So that’s going to increase my kind of $200, $500 target. I don’t know if that’ll be as possible anymore starting in August. But beyond that, I have kind of an old 2008 Honda Fit, bought it cash. Car insurance is about $55 per month on that, but I spend maybe $15 in gas a month on it. My electricity bill, right now it’s like the first year of promo, it’ll probably go up a little bit to $50 starting in August, $50 per month. Groceries, I probably spend about $500 per month. Cell phone, $55 per month. And then maybe one thing… So, I do buy my own health insurance, but I think of that as a business expense. So that’s $269 per month and it’s a high deductible plan. It has an HSA with it.
So, those are some of the big baseline expenses. But certainly, the other… Hair cuts that happen, maybe two to three times a year. Other kind of general personal care expenses like that, that go along as well as books that I might buy and different things like that.

Scott:
Mindy, I think you and I should start taking notes from Stephanie here-

Mindy:
Right.

Scott:
… instead of the other way around. You seem to have it very dialed in here. You seem to make an extraordinary amount of income and it sounds like you’re conservatively estimating that income, even as you stated there. That $14,000 a month or $16,000 a month is going to be $250,000 to $300,000 pre-tax in revenue for your business, from a consulting basis. That’s amazing income. You spend $30,000 a year. That’s amazing expense sprint. What’s your balance sheet look like? What are your investments and liabilities?

Stephanie:
Yeah. So, my total net worth is probably like $420,000 right now, but $40K of that is still in equity. So kind of about $270,000 invested, kind of $100,000 in a solo 401(k). I have like a rollover, a traditional IRA that has $33,000. So, that was $100,000 in the 401(k). $33,000 in the traditional IRA, like $8,500 in the HSA. And then I also have some taxable accounts that have about $120,000 in them. And then do have kind of a small amount in cryptocurrencies. So, both stablecoins and that’s the bulk of it and then like a little bit in Bitcoin and Ether. So, total for those cryptocurrencies is $8,000. So, I think it’s pretty small amount, just try and get out. And then, yeah, I do have like a $100K in cash, like $110K right now.

Scott:
All right. I have two questions here. Sorry there, I think necessary for this though, but how old are you and how long has this situation continued?

Stephanie:
Yeah. So, I’m 30 years old and this current situation is only… I’ve only really properly been just working for myself since the start of this year, but I’ve been doing freelancing for a long time, going back to 2014. So typically I was doing that while also having a full-time job, or maybe I was doing it between jobs. I did do a master’s program that I graduated from in 2020. So, while I was doing that master’s program, I was also doing this. And so, it kind of just basically like was doing small amounts for a long time. And then once I was in my master’s, [inaudible 00:09:45] me like trying a little bit more with it, but then things just organically happening just like good opportunities that happen, it started to become more of a full-time job.

Scott:
And what kind of freelancing or consulting is this?

Stephanie:
Mm-hmm (affirmative). So, it’s Salesforce consulting.

Scott:
Salesforce consulting. Okay. So, here’s what I’m seeing here. You make an incredible amount of income. You’ve dialed in on the expenses. You don’t live in an expensive part of the country. And again, you make it a tremendous amount of money. It just appears to me that now time needs to pass is the biggest problem here, because you’re earning so much money. You have all of this cash flow coming in and your net worth is not there. I think simply because this situation with debt-free and bringing in $12,000 a month after your expenses to invest, just hasn’t continued for a very long period of time. Is that [crosstalk 00:10:41]-

Stephanie:
Yeah. Yeah, yeah. So-

Scott:
… and that’s not really helpful advice, but that’s my diagnosis.

Stephanie:
Yeah. It’s not. I think I have to… Right. But I could keep doing what I’m doing for maybe three more years. And I would probably be whatever my FI number would be, but I think I do work a lot. Like it’s very consuming. And so thinking about how do I maybe start scaling back now in a way even before I’ve really properly reached that number. I guess that’s the tension. It’s like in a way I can make a lot of money and that’s great and I love seeing it come in, but it’s still, like I said, it’s like demanding too and I have a lot of responsibility on myself as well.

Scott:
Yeah. I completely get that. I’m very surprised to hear the person who is 30 or in their thirties who makes the income you make that does not have a stressful time and making that that’s part of the deal. I think of that with that, but I think that’s great. So, it sounds like the goal is, “Okay, I’ve got this phenomenal financial position.” You clearly seem to know what you’re doing with a lot of this. You have a conservative thing, you have no debt, you dial in all your expenses, have an investing framework. We can help with some of those ideas, if you’d like, but it sounds like what you want is to begin scaling back.

Stephanie:
Mm-hmm (affirmative).

Scott:
Is that right in the next… like immediately or in the next year or two?

Stephanie:
Yeah. Maybe thinking about, I guess I have a business asset that I’ve developed in a way, but I haven’t necessarily developed it very intentionally. I do have subcontractors who work with me. So that’s part of how that income is so high, but I still have difficulty delegating and letting go in a way and kind of not being the main conduit through which postings come to me. And so, yeah, maybe thinking about what-

Scott:
I see.

Stephanie:
… the future can look like of, maybe it’s not about just hitting a FI number, but I recognize that even today, I could scale back in a way that my expenses are covered and then some, but I guess in a way just keep having all of those work that comes to me as well.

Mindy:
So, is your goal to quit working altogether? Let’s say you have your FI number already here.

Stephanie:
Mm-hmm (affirmative).

Mindy:
You’re already at that number. Would you quit completely or would you want to scale back? Do you enjoy your job? I really enjoy my job but I have more money than time. And I think that you are at that same position, you have more money than time. And I think that your estimates of how much time you’re working are probably a little bit low. We talked before we hit record about how you’re probably working about 50 hours a week. I would guess that it’s at least that, and it’s just an hour here or an hour there. “Oh, let me just check my email really quickly.” And all of a sudden you think you’re working 40 hours a week and it’s really closer to 65. So, I would say, first of all, let’s see how much you’re actually working and how much do you want to work? Like, do you want to work four hours a week? Like Tim Ferris? Or do you want to work… Are you okay working a couple of full days a week?

Stephanie:
Yeah. So I think when I think about it in my head of maybe at least like a transitional ideal life would be 20 hours a week. So, that is what I’m targeting. Maybe it would be five hours Monday through Thursday and Fridays off. I think that would be great. Like, do I want to do what I’m doing for the rest of my life? No, I don’t think so. I do think at some point I want to transition to something else. Everything I’m doing right now is really time for money, even though I can subcontract and that’s great, but I still have to do a lot of management of other people to do that. So, I’ve certainly thought about, is there a product that could be developed that would make sense to do, or maybe I just want to get to a point where I have this as like if I really need it in the future, I have this skill set, but I’m going to really like scale back. Maybe only have one client. Maybe it’s a very small amount of work.
So, I think about doing that, I guess it’s like right now, I feel like to feel secure, I still do want to grow my net worth more than it is. And so maybe thinking about the next couple of years while I’m doing that, how can I do that? But still have like a healthier life than what I’m doing right now.

Scott:
One way to approach the problem is to think about this in terms of your time value of money. You have a good problem. And I think Mindy and I share your problem at a high level where our time is very valuable. It just is, it’s a high dollar per hour value. Your time is probably worth $150 an hour, at least on an average across an annualized basis. So one way to think about what you’re trying to do here is, great, if you generate $100,000 in income after tax, you’ll reach FI in, I don’t know, five, 10 years, maybe.

Stephanie:
Mm-hmm (affirmative).

Scott:
So, you’ve got a great situation with that. How can you eliminate portions of the work you’re doing and increase the time, the dollar per hour, the average hourly rate that you’re earning by making some changes? For example, if you were to automate or hire portions of your jobs out or say no to certain types of work that were… I don’t know, lower paying on a relative basis, you might only bring in $200,000 or $150,000, but you might be able to accomplish it in half the time. And that would be I think a relatively, I mean, it wouldn’t be easy, but it would be a relatively simple exercise from a philosophical standpoint. You just make a list of all the things that you do and determine what’s the highest dollar per hour at your best guess, and then begin eliminating at the very bottom of the list on up until you feel comfortable. But would that be a helpful starting point, perhaps?

Stephanie:
Yeah, I think it is helpful. I think I get into like… Ultimately I’m trying to be very responsive and available to my clients, but that’s a double-edged sword too because, it’s like get last-minute requests and things like that all the time. I think it’s things like that that I’d like to get out of my life. I don’t necessarily mind doing the work even, it’s more so all the random things that come in throughout the day. So maybe it’s like, yeah, figuring out how to build up more of a barrier, whether it’s through myself, hiring someone else or requiring my clients to have that person, like on the other side, kind of in more of a project manager role so that I don’t have to do all of that myself.

Scott:
How do you staff your business?

Stephanie:
I’m probably not as well as I should. So, I have two developers based in India who will do anything related to kind of code and kind of more advanced stuff. I have kind of one guy working with me based in DC who kind of will like… I can delegate maybe like simpler things to do that I could do myself, but it’s great to have someone else do it. I think what I’m lacking right now is another me in a way. And it feels really difficult to find that person who can kind of like, I know my clients and their system is really well, I guess, yeah. I’ve had a hard time kind of figuring out like again, how all the… Maybe delegation of the work, the review of the work, a lot of that goes through me.
So, I think that’s what I’m missing. So basically I have several subcontractors who work with me. I don’t think that I want employees or necessarily to go that route, but I think that having people for maybe not my same skill set, but at least like a bit more can do more of the management, maybe kind of client management as well, that would be helpful.

Scott:
It sounds like you needed like an operations manager or something like that to handle a lot of those-

Stephanie:
Probably.

Scott:
… or whatever operations means in consulting, a person who can actually do significant portions of the work. You’re obviously going to have to close the big deals and handle your biggest clients directly. But would that be something that would be helpful to you?

Stephanie:
Yeah, I think it can. I think this is where maybe I hit a challenge with the subcontract model of finding that person who doesn’t have like the same rate that I do basically. And maybe that could be okay, they’re just, again, allowing me to do the work, but still I’m still having to do less. Maybe that’s my challenge of… Yeah.

Scott:
There are a lot of really smart people graduating from college and looking for jobs and all that kind of stuff. And I think we’re coming close potentially to one possible answer to your situation. You make a tremendous amount of money and it’s completely overwhelming, and it’s probably crippling your ability to earn more business because you can’t take on more clients-

Stephanie:
Yeah. Mm-hmm (affirmative).

Scott:
… at this point. So, it sounds like there we go. We’ve got a business. This is a great problem. You got to start reading up about entrepreneurship and building a business. And I think you can… I would suspect and tell me if I’m wrong here, but I would suspect that you spend a good amount of time scheduling calls and reacting to client requests and that kind of stuff, things that are not you doing consulting work, that is demanding the high hourly rates. Is that correct?

Stephanie:
Yeah. I do use Calendly, so that helps with scheduling, but certainly a lot of email communication, again, a lot of last-minute, like, “Can you do this?” And I think I’ve just gotten into this kind of bad habit with clients where at least historically I did things very quickly and so now it’s kind of like every request is like an immediate request. So, it’s hard to set expectations around that.

Mindy:
So, what I’m hearing is that in your job, there are tech things that you do and non-tech things that you do.

Stephanie:
Mm-hmm (affirmative).

Mindy:
I’m guessing that the tech things that you do are going to be more high dollar value than the non-tech things that you do. I think that there’s a lot of opportunity for you to hire somebody to oversee those non-tech things. I can schedule you and your subcontractors to do the work when I know that it takes six hours. “Oh, okay. Bob has four hours available today and two hours tomorrow.” So I can respond to this request. “Hey, I can have that done for you by the end of the week,” and give Bob a little bit of flex time in case there’s an issue. Give Bob time to do the work, give Stephanie time to review the work and turn it back in.

Stephanie:
I think part of it is just the mental load of, I feel so scattered across so many different things. I don’t feel like I’m working effectively in any way, and I’m certainly not doing the work that I would enjoy the most. So yeah, a lot of my time is just like scattered between all these different clients and calls and yeah, communication management. Yeah. Mm-hmm (affirmative).

Mindy:
Okay. You said the word enjoy, the work that I enjoy the most.

Stephanie:
Yeah.

Mindy:
Scott said list it out from highest dollar value to lowest dollar value. And that’s valid way to do it, do that too, but also list out in the order of things I like to do, things that give me migraines. I don’t want to do this stuff, but I have to because it’s my company, how much of the have to do correlates with bottom of the dollar value? I think there’s going to be a lot of correlation with what you have to do and what doesn’t make very much money. And that’s the part where you create the job for… You don’t need somebody who’s an expert in Salesforce technology and clearly I am not, you don’t need somebody who can do that. You need somebody who can manage all the stuff that takes up all the space in your head, and doesn’t pay you what you are worth at $150, $200 an hour.

Stephanie:
Yeah.

Mindy:
So, I think that’s the big one right here. That will free up a lot of your time, I think, when you make those two lists and you review them and then it’ll also help you craft the job listing. And right now, people are really wanting work-life balance. So, if you can give them this amazing job that pays well, that also provides them with work-life balance, you’ll have an employee who will stick with you forever.

Stephanie:
Mm-hmm (affirmative).

Scott:
Yeah. I think that’s right. I think it comes down to… You have a business here and the business is consuming you because it’s become so successful. It’s all based around you as a person, as an individual. And you got to break that. And if you can do that over the next three years, you’re going to get what you want and have an exploding income base. To get there, you’re going to have to sacrifice your income in the short run, because I think you’re going to have to in some capacity somehow, some way either sacrifice clients and revenue or pay an employee to begin doing some of this work, which is going to change your income. But I would think about it a little differently there.
And how can you in three years have three separate functions in your business? Somebody who’s in charge of sales and marketing, somebody who’s in charge of the operations component of that, including managing any of the contractors in India, those types of things that are going to actually do implementations there. And maybe you can begin… I’m making this up, but maybe you can begin driving more clients and having even more business while spending less time on your business with those types of things if you put in place those systems. But that’s what’s kind of becoming apparent to me here is you’ve got a business, this is your wealth profile, that your net worth is significantly greater than what you’ve got here because a lot of these clients seem like they’re recurring, repeated regular business with this.

Stephanie:
Yeah.

Scott:
And if you can kind of begin scaling that up, you’re going to be in good shape. And think about this, in two or three years, right now, I bet you, all of your clients are expecting you to help them personally based on your contracts. Is that right?

Stephanie:
In a lot of ways, I’m the person being hired. I don’t yet have someone who like clearly works alongside me as, I mean, saying like, as an equal sounds bad, but like, yeah, someone else who I could just say, “Hey, this person who’s going to like work with you on this project.” I want to get to that point, but I guess sometimes it feels overwhelming or I’m very concerned about quality, so I think I don’t even allow people to like step in and do it because I feel this need to kind of, again, no one does things exactly the way I would do it and I need to like get okay with that reality and the benefits that come to me from letting someone else do it as well.

Scott:
Well, okay. I think in that you have two options then if that’s an important factor in your business, is that high level of quality and… Well, I guess you have three options because it sounds like that may not be a requirement. But if it is a requirement and it has to be done exactly the way you want it, then that says you have two choices. One, you can bring in a partner who’s as skilled as you and begin splitting some of that income, especially if you know some people that have a similar skill set to a certain degree, and that might help double the business, or at least you can go on vacation now or those types of things, because someone else is there to take it on, or second, you can go with someone in the middle, right? Someone who’s maybe earning $80,000 to $100,000 a year, who’s got some of that skill set, but still needs to train and maybe as hungry and ambitious and you can document it and work alongside them for a year or two.
And your new clients in two years from now, if you can get a couple of new clients, they will only know this person’s work and this person.

Stephanie:
Mm-hmm (affirmative).

Scott:
And so you can be in position as things move in two years where your new clients in particular are folks that are getting used to that. And you can slowly move your current clients there. And third, if it really has to be done your specific way, that’s where you can potentially hire someone who’s more entry-level and then have them, “Hey, this is not a work-life balance job. You’re going to come to my house and you’re going to work with me every single day while I train you side-by-side on exactly how I want this done like this right here in,” I think you’re in Michigan, right? And work there. “And we’re going to train you exactly step by step on how to do every part of the business the way I want.”
And eventually if you hire the right person, there’ll be able to go and run with it. So this is what happened when I started with BiggerPockets in my personal thing, right? Joshua Dorkin, our founder was in your position. Just completely overwhelmed with all the mechanics of operating the business every which way. And he opted to hire some junior person who was one year out of college, which is me and train me up exactly on how he liked to do a lot of things. And eventually grasp it and got going with that. And that’s a great opportunity for somebody that you could be offering them if you think you’ve got a scaling business here. BiggerPockets was about the same size as your business when I joined.

Stephanie:
Yeah. That’s helpful. How did he do that with you? So, were you like a part of every email, every meeting?

Scott:
I worked alongside him side by side in a cramped office and I did everything from every part of the business that needed something that… That’s what the operations title to me at least means at a startup or a two-person company is you should be expecting to, hey, you are the CEO, Stephanie. So when you need coffee, guess what? It’s $150 an hour for you to make coffee. And it’s less for your operations manager to go and make the coffee or grab lunch because you’ve been working six hours in a row, right? If you need to book, an entry or collect a check or a deposit in the bank, because it’s above your mobile deposit threshold, that is not work that the CEO should be doing, its work the operations managers should be doing.

Stephanie:
Mm-hmm (affirmative).

Scott:
If you need to book a calendar appointment because it’s a big client and it’s not appropriate to send them a Calendly link to go and search it for themselves, that’s not something that you should be doing, right? And so, that’s kind of how I would think about it if you’re going to go that route. Ideally, you get somebody who just raises their hand and says, “Yes, I will take on every single thing that I can from you because I’d like to earn a bigger and bigger bonus or get a part of that profit share at the end of the year,” or whatever it is, you’re going to have to them. But that would be one framework to think about with this.

Stephanie:
Yeah. No, I really appreciate the way you laid it out. I think, yeah. Part of my challenge has been, like you said, feeling so overwhelmed and consumed by things, that is really difficult. Like I recognize that it’ll be compounds return, so like take a step back and think about these things and figure it out. But again, it’s so easy just to focus on the day-to-day of everything instead of doing that.

Scott:
Yeah. Now, another thing that I’m observing here is you say you work 50 hours a week. Mindy suspects a little bit more with that, but I think you have created a complex full-time or full-time-plus work environment where you can get pinged at all hours of the day and night and to untangle this, I think you’re going to need to spend three to six months or more potentially saying no, instilling processes into your business, maybe making a hire and that kind of stuff. And that is going to require even more time investment into that. And so you get to the other side to get out of that. And this happens from time to time at BiggerPockets, right? We see employees who own certain areas. We don’t tell them specifically how to go about doing things. And so, they run and they go and build, build, build, build, build, and then there is a nightmare of a system that needs to be maintained at the end of that. And it’s a full-time job-plus to maintain that system and then it’s even more on top of that to unwind the system.
And this happens, I think, to a lot of people at different points in their careers in different types of their businesses. But that’s how I would think about it is be like, “Okay, is that what’s happening to me?” And in order to unwind this appropriately, I’m either going to have to say no to revenue or I’m going to have to put in that extra effort to put in place the things that will go to tackle that. So, that’s not going to be a fun endeavor for you, but it will pay off, I think if you can get to the other side of that.

Stephanie:
And I think I have tried to get a couple more clients just to have, again, not to be so dependent on one client/I think it’s necessary to more properly bring additional people in to make sure that there’s enough work to be done. But yeah, so start kind of figuring out either having them work side by side or again letting go of that and giving them more ownership over a specific part of the project workers, specific part of the business, that yes, that would help me a lot to do that.

Scott:
Do you read or listen to a lot of books on entrepreneurship or where do your kind of interests lie in terms of self-education?

Stephanie:
So, I would say what I’ve read has been more about kind of removing yourself from the business. So, Mindy mentioned The 4-Hour Workweek. I certainly read that a long ago and that I think initially gave me the idea for hiring subcontractors, but then I re-read it recently to kind of think again about saying no for instance, or kind of thinking about who’re your best clients and removing the ones that aren’t great. I’ve kind of read some books around like work… Again about putting in protocols, right? Kind of again, as an owner, being able to put in place process so that you can step away from it. So, that’s really what I focus on. I think beyond that, no, have not focused too much on other things.

Scott:
Okay. Yeah. I think I would continue that. Maybe I would suggest a couple of very simple books, like Traction, which is an EOS book. You might be too small for Traction to apply, but I think it will still help you to kind of see what could be around the corner.

Stephanie:
Okay.

Scott:
And then The E-Myth. The E-Myth Revisited, I think would be another good one for you just because those will get you to pop out and look at working on the business rather than in the business. I think 4-Hour Workweek is probably great, but I don’t think that’s a real option for you in the short term to medium term, given that it’s a services-based business, still based on your personal name for the most part, at least not in the next three years. But you could get to a 20-hour workweek where you’re just doing the critical consulting work that involves strategy and how you’re going to go about solving the client’s problem. And then your operations team could begin implementing that strategy for you rather than having you do it. So, there’s probably something to that. I think that you can begin framing and that could significantly increase again your dollar per hour income or your overall income over the course of the next couple of years, I think if you think about those types of things.

Stephanie:
Yeah, I agree.

Mindy:
Okay. I’ve got several comments. You just said, “I think it’s important to continue to find new clients,” because then you can remove clients you don’t love.

Stephanie:
Mm-hmm (affirmative).

Mindy:
And I’m just going to suggest that you make lots and lots of lists, but who are the clients that you love and what is the work that you love to do? Because client A could ask you for a bunch of stuff you hate, which you could just simply say, “No.” Or find somebody who can handle that part so Stephanie doesn’t have to do it and continue to do the work that you love. I don’t know that you have to necessarily remove the client, although it is 100% okay to fire a client. And I think there’s a strategic way to go about that. “Oh, I’m sorry, I’m too busy. I’m not able to properly handle this for you,” as opposed to, “I hate talking to you whenever your phone number pops up on my screen.” I’m like, “Oh.”
There’s ways to diplomatically handle that, but it’s not just yes or no. There’s also, “Oh, not right now. I’m not able to handle this project for you. I have booked up significantly. I can do it in a week,” or, “I can do it in a month.” And maybe they’ll wait for you or maybe they will go and find somebody else on their own and they will fire you in a way that you still look really good.

Scott:
I know you have a second point there, but on that first point, Mindy, I think that that’s critically important to go there because your two highest level options… Look, if you just continue the status quo, you’re going to work 50 hours a week and be retired at no time, and doing super well. So, it’s not like the worst situation in the world to continue the current state. But if you want to improve this situation, you have fundamentally two choices, right? Reduce revenue to reduce your time commitment or grow the business. And I just want to harp that the reducing revenue option is probably not a terrible option for you in this and going the route that I suggested earlier of hiring somebody involves management. And if you’re going to hire somebody, you have to at least be willing in the case that it doesn’t work out to fire them and to manage according to that.
It’s different with a contractor and an employee in a lot of ways with those types of things, but that is not necessarily a better future state. It’s just a different future state. And it has different consequences with that. And so, I really like that whole… It is okay to fire a client with that and it is a big strategic option that will have consequences downstream in your life. All that said, put some takes with that kind of thing, I like the idea… Well, I like running a business. I think it’s fun. I think you can maximize your impact and help a lot more people and do something really cool, but it is a different kind of stress when you have 50 employees who are looking for their own career advancements and opportunities and want different things and all that kind of stuff.

Mindy:
Yeah. And I also think that the type of person that you are, successful entrepreneur is not going to be happy sitting around doing nothing long-term. So let’s say you crank it out like you’ve been doing for the next three years, you reach your financial independence goal, the high end of your financial independence goal. And then you’re like, “Okay, now I’m going to be done.” I don’t think you’re going to be comfortable with that. I think you’re going to be bored. I think you’re going to be looking for something to do, looking for some way to contribute to society and better the world and all of that. And why go out and try to find something new when you’ve got this thing that will continue to generate income for you at the level that you need to maintain your lifestyle without giving you a lot of day-to-day responsibilities that you don’t want to do?

Stephanie:
Mm-hmm (affirmative).

Mindy:
I think that this isn’t going to be an instant change. Scott said three to six months, I think that’s a good timeframe, but that’s also the end of this. We’re at the beginning of July. By the end of this year, you could be working 20 hours a week or 10 hours a week. If you sit down and think about what do I love? What do I not love? What pays me well, what do I think I can give away to somebody else that I will be okay with? And I love Scott’s idea of bringing on somebody else who can do the work for the new clients. You can be Stephanie, the salesperson when you’re finding the new clients and then pass them off to Bob, the new Stephanie who does all the work for them and the clients are excited and there’s a lot of people out there that don’t want to go out and find the business, they just want to do the work.

Stephanie:
Mm-hmm (affirmative).

Mindy:
So, if you really enjoy finding the business, that could be a high dollar activity for you.

Scott:
Stephanie, if you’d like we can connect in the next couple of weeks, but depending on what you decide, if you decide to go and post a job description and begin hiring, I would be willing to help you with the job description and we can post it in the BiggerPockets Money Facebook group, among other places-

Stephanie:
That would be great.

Scott:
… if that’d be something that you’d be interested in.

Stephanie:
Yeah.

Scott:
So, you can noodle on it, but I would love to hear how you’re feeling and then see if that’s a route that you are interested in pursuing.

Stephanie:
Yeah. So, I think I liked the way it was laid out of, there are kind of two options of like scaling back in a way, reducing revenue versus really going all in and building something. And I see different aspects of myself in each of them. I think I do want to create something that’s bigger than myself. I think you go into what Mindy said of… Yeah, I don’t think when I retire, I probably would not just… Anyways, I’ve done like past traveling. I think I know that’s not really the life that I want to have. I would always want to have something that I’m working on. It’s maybe like, how do I take this business, which I do like, and I do like my clients. I don’t think that I have bad clients. I think though the problem is that I don’t have clear boundaries with them and that’s what’s lacking right now and kind of like set like expectations for SLAs [inaudible 00:40:51] things like that.
So, I would like to create something where I help other people do what I’ve done in a way, because I do like this business and work allow me to work for myself, which I was never happy being an employee. So, I really like that of like kind of the independence and control over my life. And so, I do like the idea of trying to help other people to do that and kind of… It could be Salesforce to start with, it might become other things in the future, but this is where I am right now and maybe how to make this better, but also to think about that bigger picture of, as other people are brought in, how to grow it and not necessarily have it become a management headache for me either. I think that’s my biggest concern with growing something is that I’m still in this position of feeling a need to be like involved in everything or having to pull teeth, letting other people do things.

Scott:
Yeah. I think that makes sense. I think at the end of the day, you have a big decision, which you can always pivot across at a future date, but I think you’re lean in what I’m sensing and what I think is correct in my opinion, is to go in and build this business. You’ve got something interesting here that is getting going? I think you’ve got a chance to build a reasonably large business over the next five to 10 years if you can generate this kind of income with yourself and you have the chance to develop a skill set that will serve you in numerous other things later in life, regardless of whether they’re business ventures or social ventures or whatever with that. Why not take the time or take the opportunity to learn how to manage and lead and those types of things over the next little bit, while, also giving yourself the shot at creating more income and an asset that is sellable?
You could not sell your business right now for anything more than the contract value of your current clients with that, right? So if you can make it so it’s not about you, it’s about the services that your firm provides, now, all of a sudden you can sell it. Let’s say your business is doing $500,000 or a million dollars in revenue in two or three years, you could sell that business for two to three or four times revenue instead of just the contract value that you currently got with your clients with that, right? And so, that’s a real asset. At the same time, with your expenses so low, you can just pile up the investing that you’re already doing and take a shot on an employee right now, which is an investment and is probably going to have a much higher ROI than dumping money into index funds if you’re this close to the business with that.
So, I think you’ve got a lot of good options, but I think that that one becomes my favorite by far here is going down this direction of figuring out like, “What do I need done in my business? How do I convert that into a job description and a performance management protocol? And then how do I hire and execute against that? And does my life begin to change following the completion of that?”

Stephanie:
Do you think like growing a business, but let’s say a year from now, working 20 hours a week, are those compatible? I know that there are people who do it, but maybe in your experience or other people’s experience, do you think that’s actually realistic?

Scott:
I do not think that’s realistic. I think that if you want to work 20 hours a week next year, you should shrink your business, not grow it most likely. Yeah. Now, I can hear some people screaming into their makes, “No, no, it’s possible. I’ve done it.” Yeah. I think you can get there over three to five years potentially with that, and you can certainly automate it, but I think starting, you don’t have a CEO skill set, I don’t think right now, right? That would be something you’d have to develop with that. And so, I don’t think that you can grow the business substantially and work less next year. I think you can do one or the other, but I think if you zoom out to a three to five-year timeline, you can have a large reasonably automated business if you work with that end in mind, and you want to get to that point.
If your business is not automated in two years at the earliest, three years to five years, then you can’t sell your business, which you never need to sell your business, but you always want to have the option to sell your business. So, you have to automate it to do right by yourself financially at any end state with that. So, I think that would be how I would think about it. If you want to stop working right now and spend 20 hours a week, shrink your business, cut out the contracts. If you want to be in that position three to five years from now, I think you should grow it and go through the pain that every entrepreneur experiences in growing a business with those types of things so you can come out the other side in a good spot.

Stephanie:
[crosstalk 00:45:49].

Scott:
That’s my honest opinion.

Stephanie:
Yeah, no. That’s what I was looking for.

Mindy:
I’m glad you explained that Scott, because when she said, “Do you think I can cut my hours?” I’m like, “Yeah. Sure, you can, I guess in one year.”

Scott:
You can cut your hours but you’re not going to grow your business if you cut your hours, right?

Mindy:
Yeah. In one year, I think is the key in that question. I think growing the company so that you can delegate more and growing the company by hiring people to delegate more of what’s on your plate.

Scott:
You might be able to superficially grow your business. It might seem like you get a little bit more revenue in the short run, but you’re not going to build a lasting asset that is growing next year and cut your hours at the same time. I don’t think that’s a realistic endeavor with that. You might be able to attract more clients, for example, if you put operations in place and that kind of stuff. But I think you’ll be building a fizzling business without investing a tremendous amount of mind share. There’s so many mental models to learn once it comes to performance management and building out an organization that has a scalable infrastructure and that kind of stuff.

Stephanie:
I think maybe that’s what I’m lacking is the perspective of what that future work can look like, because it’s not necessarily work 20 hours a week. I think it’s just not like continue working 50 hours a week on what I’m currently working on. But I guess that’s what I have a harder time visualizing is like, what does that future look like as someone thinking about models and frameworks to use for how this business organization could run?

Scott:
Yeah. Man, so I’ve I have a boss, his name is Mike Zawalski and he’s phenomenal. He’s been a CEO for like 30 years across 15 different organizations. And so he tells me to develop what he calls the CEO toolkit, right? And the CEO toolkit is got a whole bunch of things in it, right? What’s my strategic plan. What’s the strategic planning process. What’s the performance management process, right? Here’s when we’re hiring somebody, what’s the process there? I put that together the job description. So this is one tool in terms of hiring performance management. I’ll say, “What do I want done at the fundamental level as it ties into my strategy where the business is going?” I put that down into a job description. Simultaneous, I create a second document called a scorecard and I say, “90% of candidates should not be able to meet the requirements of this scorecard.”
So, only the top 10% will be able to complete this scorecard, or be able to complete this in the first 90 to 180 days. So, I know what good looks like, at least in my opinion, for the role that I’m hiring for when I begin doing it. I interview based on that circumstance. And I have different people involved depending on who the hire is with those types of things. Then I ask the candidate to put together a 30, 60, 90-day plan for what’s going to happen. And this is an executive. This would not be necessarily someone that would be entry level if you choose to go that route with this. And then I can say, “Okay, great. After the end of 90 days, I’m going to assess this person based on whether they’ve completed enough of this list for me to feel like this was a good fit and a good decision for the business with that kind of stuff, and I can go from there.”
And so, how do you kind of develop those types of hiring and performance management protocols alongside your strategy? How do I run the business with my cadence? Is it a weekly meeting? Do I have a monthly reporting package? Do I have some sort of quarterly all-hands or whatever it is, all of those things I think are tools that you’re going to have to develop and fiddle with and learn over the next couple of years, if you want to build a bigger business and you can stop whenever you like, but you’re going to have to shrink your business at that point to get the hours back, right? Shrinking from $500,000 or a million to $800,000 to $750,000 or whatever it is is a choice you’ll be able to make really at any point, I think down the line, but all of that is challenging, I think and fun.

Stephanie:
Yeah. I guess I’ve thought about getting a business coach or doing some sort of program like that. Do you think now is the time? Again, let’s say I choose that option, is that a piece of it that I should get in place, like pretty much immediately, or should I be at a certain stage for that to be really helpful?

Scott:
A business coach I think, could be very helpful for you. I hired five coaches over the years and have found a kind of a mixed bag of whether I’ve gotten really good value out of them or not until my current coach and boss, our chairman, Mike. So, I think, yeah, go ahead and try it. I would kind of maybe treat it the same way you are treating a hire though. What do I want from this person? What does good look like in the first 90 days? If no change has happened and I do a bunch of wishy-washy fluff, this is not going to work, but if I’m actually driving towards outcomes that have the potential to change my business, maybe you’ve got a good coach there and you can kind of go with that. And you’ve got enough income to make both investments simultaneously, a coach and an employee with that. So, you have a lot of good options, I think. Stephanie, is there anything else you’d like us to chat about before we wrap up here?

Stephanie:
No, I think this was great. Thank you so much for helping to lay out my options and giving me frameworks to think about it. Yeah. I think just on my own, I wasn’t doing it. So, it’s just really helpful to have you both give your perspective and give me these things to think about and ways to think about my options and what matters to me. So, this was great. I really appreciate it.

Scott:
No. Thank you for coming on and thank you for giving us a new challenge here that I don’t think we’ve encountered on the Money Show with this, which is a great problem. I was like, “Well, you just need time to pass and you’ll be rich,” but that’s not really the issue here, right? It’s you have a business and it’s overwhelming you and you have the opportunity to either dramatically improve your life from a work-life balance perspective or build something special. Maybe do both over a period of time. And that is a fun and interesting and unique challenge that we haven’t had on here before and I had a lot of fun discussing it. So thank you.
One thing here is I’m limited to my perspective in growing a business, which I found to be incredibly challenging and demanding of my time and mental energy for a long period of time. And I have not been able to do it part-time nor would I really have that option given the circumstances of BiggerPockets with this, but I bet you that there’s a lot of Money listeners out there who have built consulting or services-based businesses that they started and worked on in the beginning. And if anyone there has advice or can contradict or find that happy medium that maybe there’s a way to grow the business and have the quality of life balance in the short run in there, maybe that would be a great discussion for the Money thread and the Money Facebook group at facebook.com/groups/bpmoney. And that might be a great place to kind of start a discussion here and see if anybody has additional advice or insights on how pacify a services-based or consulting-based business like what you have here over the next couple of years.

Stephanie:
Yeah. That’d be great. The reality is that I do want both. And so it’s trying to figure out, is there a path to that and what that can look like? So, that would be great.

Scott:
All right.

Mindy:
Stephanie, I am so excited for what the future has in store for you. I think there’s going to be a little bit more of full hands-on work from you and by a little bit more, I think like three to six months, maybe a year, but I think that by the end of next year, you are going to be in a position that you love. You have delegated all the things you don’t want to do, you get to do all the things that you like to do and you’re able to take vacations where you don’t work during the vacation and also just take time off to decompress and do the things that you want to do. And whatever that entails, it doesn’t have to be high dollar per hour things in order to further yourself down the path towards financial independence, it’s totally okay to enjoy your life. And I think by the end of next year, you’re going to have the exact life you want.
So, thank you so much for joining us today and taking time out of your incredibly busy life to share what’s going on, because I think there’s a lot of people in the same position. “I started a business and now it’s me, so I can’t just leave, but I would like to cut back a little bit.” I think there’s a lot of people who are just like you and I hope this is helpful to them as well.

Stephanie:
Great. Thank you, Mindy. Thank you, Scott. This was great.

Scott:
Thank you.

Mindy:
Okay, we’ll talk to you soon.

Stephanie:
Thanks. Bye.

Mindy:
Okay, Scott, that was Stephanie and I am so excited and a little bit jealous for her options in the future. She has pretty much everything available to her and that is a fantastic position to be in.

Scott:
Yeah, she constructed this position. Somewhere in the background that we weren’t able to dig out is an extraordinary level of competence and ability to the point where she can command this income as a consultant from multiple clients, with these things to set up processes for large businesses, right? So, she has crushed it in the past. She obviously has designed intentionally a life that is very low-cost that will give her all the options in the world downstream. And now, she’s got the choice of, “Do I want to work less or do I want to go and crush it and build a big business?” What a good problem to have. But like I mentioned earlier, I think it is a real issue and it’s going to impact your life depending on what you choose there, right? And you’re going to give up certain things in order to go after building that business that you might not be able to get back in other ways.
But personally, I’ve personally chosen the route kind of maybe being in a similar position a few years to Stephanie, to going all in, on running a business and growing a business, this one BiggerPockets and I haven’t regretted that, I think. I think I really like that. I think it’s helped me develop a skill set that will be valuable to me throughout my life and have a bigger impact over that. So I kind of encourage that later choice, but again, the point is to give yourself the option to have this decision and then have the high-level debate. It’s the best problem to have, I think.

Mindy:
Scott, you just noted her low expenses and I think we need to focus on that just for a moment. That’s super important. She has very low expenses in relation to her income. And that is what is opening so many opportunities for her. She doesn’t have to work, work, work to sustain her lifestyle. She has and it just came up casually in the conversation. She has three years of expenses sitting in cash right now. That means that she can take bigger risks with her company. She can take bigger risks with her time and she can take bigger risks with her plans because she has so much just sitting there right now. This is in addition to the four times her annual spending that she makes over and above her annual spending now.
So, I guess, she makes 5X her annual spending. That produces so many opportunities because she’s not wondering where her next meal is coming from or wondering how she’s going to pay her rent. She has no problem paying any of that. She’s got it in the bag and now she can start to take more risks. And I’m so excited for her opportunities.

Scott:
Yeah. I think she is doing phenomenal with that. I think that the emergency reserve, we don’t really get into this in the show, but I think the way she structured her financial position makes a lot of sense to me at the highest level, in spite of the fact that it’s three and a half or whatever years of spending, she also does have to pay contractors overseas and those types of things and she may have working capital constraints in her business to a certain degree, or they may come up in the future given the size of her business and the number of people that she’s working with, where I think that’s a smart approach to have a little extra cash in her position relative to, for example, if that was a salary that she’s being paid by a company, then we’d be really focusing on the asset allocation, I think a lot more than investing in the business or those types of things.
If you’re going to hire somebody she’ll have to spend some of that and that’ll change your revenue profile and all that kind of good stuff. So, I just think that as a business owner, as a consultant, that’s a responsible position that makes a lot more sense to me versus how we would be talking about it from an employee perspective.

Mindy:
Yep. And that just brings home the concept that personal finance is personal and the suggestions we’re giving to Stephanie are based on her personal position and her personal circumstances and somebody in a similar position, we would probably have different suggestions for, based on their personal position. So, I have so much fun recording these because it makes me think about what would I do? What should she do, given these specific situations, which are never exactly my situation. So, this is just a lot of fun.
I want to ask our listeners, if you have a situation that you haven’t heard before, we are trying to tell every single money story, if you would like to share your finances with our listeners and get some advice. I said, advice, I meant suggestions because of course this is not advice, we would love to talk to you. Please apply at biggerpockets.com/financereview. And if you’re not a member of our Facebook group, please join us for fun and kind of nerdy money conversations at facebook.com/groups/bpmoney.
Okay, Scott, are we ready?

Scott:
Let’s do it.

Mindy:
From episode 220 of the BiggerPockets Money Podcast, here is Scott Trench and I am Mindy Jensen saying, may the force be with you always.