Once you learn the game of money, it is very easy to make money.
But as easy as it is to make money, it is 100 times easier to lose it all, if you make
one of these 10 mistakes I'll be talking about today.
By the way, FYI, I have made every single one of these mistakes I'm talking to you about
today.
So it's purely coming to you from experience.
So let's start off with the first mistake, here we go.
Wasted services.
Let me explain to you what wasted services means.
When you become an entrepreneur, and you start making a little bit of money, what starts
happening is all these "messiah" consultants show up and they say, "if you hire me, my
expertise is knowing how to take your business to the next level."
How much do you cost?
"I'm only $10,000 of consulting.
You know, you need to pay me."
And you're just getting started, so you have all this fear that you don't know what you're
doing, so you're kind of like, "well, I'll pay this guy $10,000" but you only have $100,000.
Now 10% of your money is gone.
Then this other person shows up.
I know how to create the website that's going to show you this.
$3500.
I know how to PR and get you into the newspaper and the news, because if you pay me, $5,000.
I know how to be your great.
. . and the next thing you know, you just lost $40,000.
And you barely got the business started.
So you've got to keep in mind that you don't want to waste a lot of your money on these
"messiah" type of consultants that show up to take all your money from you.
Next, legal team.
Let me explain to you why it's so important to have a solid legal team.
When I first started the company, and I started my financial firm in October of '09, from
the moment I started, five minutes later, I got sued.
I got sued five minutes after starting the company.
Now, when we got sued, we got sued by a $400 billion company.
What saved us is we had an incredible legal team.
Because if I would have gotten constantly bullied, I would have eventually won the case,
but if they would have dragged it out two years later, I would have run out of money.
Because these guys were pretty heavy duty.
So I got different types of attorneys.
I got three different firms.
I have general counsel, who handles my structural type of my business, C-corp, S-Corp, how to
structure, stock options, you know, equity, all this stuff.
They do it.
The other one is an industry legal attorney that I hired.
These guys are very expensive, the ones that I have are 1200 bucks an hour, $800 and up.
They're phenomenal.
Then the other one is marketing.
So if you got a sales side, if you got a commission side, on making sure everything's being done
properly, that's legal side.
Now, accounting is another one.
Initially when I started, I had a regular accountant who talked a big game, but every
time I got a hold of him he was never available, very annoying, very unprofessional, bad attitude,
had no clue what he was doing.
He lost my paperwork all the time, over paid, all this stuff.
Finally I said, "You're fired."
I went and got a real accountant firm that I hired.
At that time I think it was Cohen, I think I got Cohen Resnick at that time.
They did a fantastic job because they're a top 50 accounting firm in America.
They did a phenomenal job.
But they saved us.
So we started doing accounting properly.
It is very, very important for you to not make mistakes with your legal side, your accounting
side, tax wise, pay all your taxes early.
Don't wait.
A lot of times people get this $100,000 check or $50,000 check, and you're not getting W-2,
so they don't take your taxes automatically.
You spend the 50, as if the 50's yours, instead of spending the 50, as if the 25 is yours,
and making sure you take care of your taxes.
You don't take care of that part, you know how many people are not in business today
simply because they have tax liens or they didn't pay taxes.
They lost all of this other stuff that hurt their credit, they lost these things and people
aren't doing business with them anymore.
So legal.
Pay very close attention to that.
Next, hiring resumes vs. believers.
I made this mistake early.
I hired a resume that I brought on board and all he cared about, all he cared about was
the money he was going to make, the benefits he was going to get, the American Express
card he was going to get, because the former company he was working for, he got all that
stuff and he was expecting it from a startup.
And he pressured me, every day.
Well, you know, the former company gave me this.
The former company.
. . Finally I realized, this guy's not a believer.
This guy was a money guy.
All he wanted was to make sure he's safe.
He didn't understand the value of a startup company.
So I asked him, this is not going to be a fit.
He walked away.
He's doing good for himself.
Then I brought a true believer who was part of my board for five and a half years and
then eventually I brought him in because he's no longer somebody that had just come at it
as business.
He's going to make a lot of money but he came in as a true believer.
So don't just hire resumes.
Hire believers.
Next, residual checks.
Let me explain to you what I mean.
There's this notion, the cliche of one day you're going to have so much money, where
these checks are piling in and they're coming in and this money's going to come in and you're
at the beach and you're sitting there and you know, it's so great, and you don't work
anymore.
You're home all day long, sleep, wake up at 11:00 and you do whatever you want.
This is great.
This is the dream that's being sold, right?
I don't know if you realize kids, no matter how old they become, they're still your kids.
If you choose to have kids, you're a parent for the rest of your life.
If you build a business and you plan on growing the business, it requires attention.
No matter how big the business becomes, even a $100 billion company needs attention.
And maybe even more attention but at that time you have some leaders and board and all
that stuff that's helping you take care of the business.
If you start living the dream too early, very, very early, you're in deep trouble.
When we started the company, and I had money in place, and I put it all in the business,
I drove a GMC Acadia is what I drove.
I drove a GMC Acadia.
I sold my Z06, drove an Acadia and we were doing our part and it was all good.
And then slowly, we didn't have a house, we rented an apartment, because we stayed tight.
It wasn't about the lifestyle.
You see the Lamborghini and all this other stuff now.
This is five, six, seven years later, after having to put up with what we put up with.
Then came the lifestyle.
Next, liquid.
Liquid.
Let me tell you why liquid.
You'll see a lot of people who all of a sudden their net worth will go from zero to $17 million
on real estate, because the economy's doing very well.
And it's all good.
So everybody says, "Oh my gosh, I got such a genius.
He's so great.
He's so awesome.
He's so this.
I took over an office of somebody in Woodland Hills who at one point was worth $400 million.
His net worth went from $400 million to $20 million in two years, is what happened to
his net worth.
You know why?
Because he was all real estate.
And he wasn't liquid.
And he thought real estate and mortgage, all this stuff was going to constantly go up,
and up and up, and he was eventually going to be a multi-billionaire.
That's fine.
You can go up there and put $100,000 on roulette and say it's going to be #22 and if it comes
up, your $100,000 becomes $3.6 million.
There is a one is 36 chance that it's going to happen.
So if it happens to somebody, it's awesome.
That happens to a lot of people that become billionaires because they were at the right
place, right time, real estate, all this stuff.
That does happen.
But I don't bet my money on exceptions.
I bet my money on predictability factors.
Let me elaborate.
Every 10 years, in the world, or in a country, typically in America, some countries it's
more, but ours is generally 10 years, every 10 years a major crisis happens.
Every 20 years, a massive crisis happens.
But 10 years, a major crisis happens.
When this crisis happens, let me tell you who benefits from it.
You know who benefits from it when a major crisis happens?
Those who are liquid.
You see a lot of people that say, "I never have cash.
I never have cash."
I love cash.
I LOVE cash.
I was able to survive in '09, 2010 and 11, when no insurance companies were giving contracts,
when insurance companies were losing money, when AIG almost went out of business, when
all this stuff was happening because we stayed tight.
And that allowed us to be able to weather the storm until the good times came, and now
we can play a little loose.
But even now it's cash.
You know why?
Because if 2008 was a major mortgage crisis that happened, 2018, we could have another
crisis.
What kind of crisis could it be?
I don't know.
Oil?
War?
Something else?
But you've got to be prepared for it.
Okay, next.
Profits over Value.
A lot of times you'll see, I was advising this one attorney who was running this law
firm and his law firm's been the same size for 20 years.
And he keeps asking me.
What can I do to make my law firm bigger, man?
It's so crazy, and all this other stuff.
And then, his CFO is sitting there, the CFO own 10% of the company, he owns 90% of the
company.
"I am really dedicated!"
The CFO finally gets ticked off and says, "Can I talk openly?" and he said, "Yes."
The CFO said, "Look, I watch every single month.
Whatever profits we have, you take all of it out of our account.
All of it out of your account.
And there's nothing left in the company.
So every time I want to invest or advertise, you don't allow me to do it because you took
all the profits.
Because that person was only worried about profits, not value.
Value is a different thing.
Value is what's the value of the company.
And in order to think about the value of the company, you got to do certain things.
Profits you can take income all the time.
There was many times I could have made a lot more money, and just said, "give me the profit,
give me the profit, give me the profit."
I seek value more than I do profit.
But that's a preference.
Next, being too cheap.
Too cheap could be investing, not into your people.
Saying, "Oh, I don't need to invest in my people.
They're good to go."
Not rewarding your people.
Not investing into hiring good quality people.
I'm not talking resumes, I'm talking believers.
They require a lot more money as well.
But being too cheap, that can hurt you.
Next is unrelated businesses.
This is like imagine if Apple buys, I don't know, give me an example.
If Apple were to buy Toys R Us.
For what?
Now Amazon bought, teamed up with Toys R Us.
They did.
Why?
Because it's a storefront, it became a great merge.
Apple goes out and buys Beats.
Why would Apple buy Beats?
Well, Beats links to iTunes, links to music.
Okay, somewhat it makes sense.
Disney buys Make Studios.
Why would Disney buy Maker Studios?
It makes sense, okay?
You got some of these companies that are buying certain people that makes sense.
I made the mistake of investing into an unrelated business.
I bought a clothing line.
For what?
Waste of money.
I lost a couple hundred thousand dollars and even worse than the money I lost, I lost time.
I put time into that thing that was wasted time.
I couldn't stand the fact that I did that.
So unrelated business, zero interest in it.
If it will benefit your business, somehow, some way, consider it.
If it doesn't, focus on your business.
Next, active vs. passive investors.
All these guys are all hungry about getting an investor.
"I can't wait to get an investor."
I had a guy that comes in and said, "I'll give you $5 million."
This one guy that was interested in investing into our company.
And I said, "What connections do you have?"
Nothing.
I just know that you're going to make a lot of money and I know this company's going places
and I'd like to own a piece of it.
Here's $5 million."
I said, "Why would I even consider your investment here?
Because you're passive.
Are you going to introduce me to anybody?"
No.
"Do you know any relationships?"
No.
Do you know anything?
"No.
But I'm going to give you $5 million."
I don't need the $5 million.
I want active investors.
Let me tell you what active investors do.
So imagine you got two guys giving you money.
One is $5 million, one is $4 million.
Hypothetically.
The active investor's going to introduce you to somebody that's going to give you technology
or product or relationship or an executive that's going to take your business from doing
$17 million a year to all of a sudden $43 million a year, but he gave you $1 million
less.
But that value he brings in from his experience from the past, took the value of the company
2X.
Would you be interested in that?
See, that's the active vs. passive.
Look for active investors vs. passive investors that won't have nothing to do with your cause.
When they ask you questions, "How many times are you going to call me?
How many times do I have to go to any meetings?
How many times do I have to do anything?"
Great, no problem.
Now some people like passive.
Some just say, "Give me the money and leave me alone."
I want relationships and contacts is what I'm looking for.
Because this is leverage for me.
Next, diversify.
Let me explain to you what I mean by diversify.
This is a philosophy that I disagree with.
And let me tell you what I mean by this is a philosophy that I disagree with.
There are sometimes that new entrepreneurs take advice from someone that's been around
for 42 years in business.
For instance, if Warren Buffett gives you advice, after being worth $60 billion of what
he's doing today, that advice may not relate to your advice of you being in your year three
of business.
Let me give you a little bit more of an idea.
If a person, if let's just say I'm 22 years old.
I just have a girlfriend.
And all of a sudden, a 93-year-old man or a 72-year-old man wants to give me advice
on how to raise great grandkids.
I'm not even married yet.
"But this is how you raise great grandkids!"
You don't understand.
I don't even have a kid yet, let alone a grandkid."
Right?
There's a lot of these experts that will tell you to go diversify.
And do five businesses, and do three businesses.
When I was a kid, there was this one guy that was such a good salesman.
He sold me on this.
I ended up being in debt $49,000.
One of the best salesmen I ever met.
This guy could sell anything to anybody.
Anything to anybody.
Because he was a salesman.
He was not a believer.
All he cared about was profits.
That's all it was.
He was standing outside my door and he would sell me briefcases, suits, anything he could
sell you, he sold you.
Anything.
He still makes the same amount of money as he did 17 years ago.
Because all he looked at people was a dollar sign.
I can make 40 bucks off this guy.
Sixty bucks off this guy.
$30 off this guy.
Diversify - choose one industry, give everything to it, five, 10, 15, 20 years later, once
it becomes big, then you're worth $43 million or $193 million dollars or $300 million or
$6 million and you choose to put $500,000 in another business, that's related to your
business, you can consider that.
But not early on trying to diversify everything you have in different investments.
So these are 10 of the dumbest mistakes entrepreneurs make with their money.
If there's any other mistakes, that maybe you've made, comment on the bottom.
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