I recently visited a doctor who lived a lifestyle that most would really envy. He lived on the water, had multiple watercraft, everyone in the household possessed very nice cars, they had many great toys, a sweet home gym (In addition to a gym membership), and all of the really cool stuff you need to play your hobbies at the highest level. The doctor’s wife, however, confided in me that they don’t actually have any money, have a whole lot of debt, and no prospects of ever retiring – or cutting back.
A deep, dark secret among many doctors is that while they have established successful practices and look rich on the outside, they have not shed themselves of what is often enormous debt or accumulated any legitimate wealth behind the scenes. The only time this would be OK is that the doctor has invested so much in his business, real estate, and income producing or appreciating investments that they are building mass asset value. (Building the overall asset value is actually better than playing the income game, but that’s a topic for another article and something that should be done in unison with the wealth accumulation process being discussed here.)
One of my friends and business associates became extremely wealthy selling Disney trinkets. He sells $3-$5 dollar items and manages to generate regular profits. He’s utilized his earnings to create 3 store fronts, take the shop online, and invest in many different types of real estate. It takes his business potentially dozens of sales to equal what doctors and most businesses get from one, but through tight financial principles at work and the right use of profits; he’s rich.
Here are 2 key steps to take to manage money like my Disney-souvenir-selling friend:
STEP 1: Trinket Mentality:
For an entrepreneur, having a trinket approach to the dollars going in and out is what we call a good mindset about money, or being truly cash conscious. You have to learn how to profit despite the size of the item. If you can make money when the amounts are small, you make money when they’re big. In the clinics I own and consult for, we are aware of every dollar of overhead; you keep 100% of every dollar you don’t spend on overhead and only a % of the dollars you make. Sound financial controls are rare in clinical settings. 10% less overhead is literally a million dollars+ more in your pocket if invested wisely over 10 years.
STEP 2: Shop-lift the Kitty:
Take the profits you generate out of the business and move as much as possible to personal. Some experts even have you zero out the account at the end of the month by taking everything and moving it into your own investments. In big business, this is called “Shop-lifting the kitty” and is incredibly frowned upon. However, as an entrepreneur, the purpose of the business is to generate personal wealth and freedom. Here’s why it works:
- The reason larger companies are opposed to shop-lifting the kitty is that you could be re-investing into the business to scale it as well as keeping it aside for a rainy day.
- However, if I take the money out and move it to my personal, liquid allocation portfolio it has not disappeared. I can always pull it out to invest in the company if opportunities are there or cover expenses if there is a short-fall. (I invest in my clinics and businesses on a regular basis utilizing money from my personal accounts – which grows aggressively every month because I don’t leave the money left to die or get eaten up by the overhead of the businesses).
- In the zero account out process, ownership and staff are highly motivated to perform and generate income to be successful the next month. There is no going flat, losing urgency, or relaxing because you’ve got excess dollars in the account. We recommend only keeping in the accounts what is needed to cover overhead – this keeps you focused.
The trinket entrepreneur moves every dollar out so he can invest it in real estate, new methods for the company to make money, and other personal allocations. They get this done simply selling Donald Duck keychains and Mickey Mouse snow globes. Imagine what you could do! The owner of a good health care office should be out of any bad-debt and growing 10, 000, 25,000, 50,000, or 100,000+ every month by moving out the profits. It does not take long to accumulate wealth.
People with great successes who fail to make the numbers work is almost a proverb, and it is a parable (Luke 14:28-30). Accounting practices, cash flow analysis, profit and loss (P&L) statements, budgets, EBITDA (Earnings before interest, taxes, depreciation, and amortization), and weekly, monthly, quarterly, and annual goals are mature essentials that are irreducible minimums for long-term prosperity. These terms go down like a rat sandwich to most entrepreneurs, but you need to learn to love them, date them, take them to dinner and a movie, propose to them, and get married to experience long-term success. If you need guidance and help from someone who also once hated all of this, let me know.
Have fun saving the world
Dr. Ben
