Everyone has a dream. Big, small. Grand, simple. Realistic, unbelievable. Ironically, meeting people who know what they want is simple enough. They’re everywhere. In fact, not only is Generation Y notorious for wanting, but whatever it is, they want it now.
For eight young Arizona State University alums with backgrounds in real estate, computers, engineering, cocktail waitressing, and molecular biology, drawing this so-called Map to Success should have been the easy part. We knew where Point A was: Jobs where our employers called the shots. We knew where Point B was: Retirement as soon as humanly possible. Now comes the more difficult part—all that space between those two points (most likely mountains, rivers, streams, and cliffs for the most accurate picture). But this is where most people head for the hills and run. Generation Y might say, “Well, it was a good idea, but maybe something else will come along that sounds better,” whereas that mutant strain of entrepreneurs would huff, “Gimme that damn eraser so I can draw a better map.”
For our team, the end state to make it to retirement seemed clear enough. After all, everyone in this world wants to retire and for many entrepreneurs, it’s their end goal. But one can always weed out the dreamers from the real players. Whereas Generation Y would say something such as, “I want to retire by the time I’m 50,” a true entrepreneur would say, “I want to generate $20,000 per month in passive income before I can classify myself as financially free (a.k.a. retired).” See the difference? Even if you knew you wanted to retire by your Golden Birthday, do you have any idea how big your nest egg would have to be in order to meet that goal? The answer is probably “no.” In fact, it’s downright near impossible to do so.
Let’s say you saved $3 million and kept it stagnant in the bank. Now you’re 50 and using $100,000 per year for you and your spouse to live a comfortable life of retirement. Well, everything might be fine and dandy for the first 30 years, but what if someone lives longer than 80? What about those disasters that always seem to rear their ugly heads—like a stock market crash or an unforeseen expense that puts a major dent in that nest egg? That’s precisely why many entrepreneurs associate financial freedom with passive income. It’s music to their ears. Income created without you having to be there to generate it.
And that’s exactly what we saw in the car wash business. It was the perfect vehicle to provide a significant amount of passive income for the owners with little or no effort on our part. It sounded so easy, so straightforward. Thousands of people had chosen this industry and made a killing in the past, so why couldn’t we do it, too? Little did we know we’d need one of those industrial-sized erasers for our makeshift map.
Whenever we tell people what we do, the first thing they do is frown, wrinkle their nose, and say “Why in the world would you buy a car wash of all things?” In business, the answer is simple: It’s a cash-based business with low COGS and an incredibly high profit margin. Bottom line: Rather than start from scratch, we purchased an existing business so we could review old records and project future sales, and financed as much of the deal as possible with external funds.
If our number one goal was to generate passive income, then our second goal was to generate that income with as little of our own money as possible—even if it meant backing those funds with the roofs over our heads. Leverage Other People’s Money (OPM) to lessen your exposure, but make sure you’ve got the confidence and determination to make it happen.
During the first month of ownership, the team had unexpectedly doubled average income levels with minor improvements. Although a significant amount of money was infused for major capital expenditures to give the car wash a mini face-lift, the real key to success was establishing an internal system that kept the wash running on a daily basis. Money guru Robert Kiyosaki sums it up when he relates McDonald’s to hamburgers. The burger mogul isn’t a billion dollar business because they have the best burgers on the planet—it’s their system that has enabled the restaurant to become the largest and fastest growing restaurant in the world.
In our case, even though the car wash previously existed, besides the rusted equipment and dirt it resided on, we basically had to start from scratch. Putting together manuals, procedures, employee handbooks, financial bookkeeping, marketing, customer complaints, hiring, firing—that doesn’t happen overnight. And although we made what felt like a million mistakes in the process, once all those unknowns became part of a collective, coherent system, the dream of a fully functioning car wash was finally in the line of sight.
Back to the Goal
Ask every single business owner in this world what the goal of their company is and it’s a guarantee you’ll get a ferocious glare back. How can anyone sum up how their “baby” is going to make its mark on the world in a matter of minutes? But ask New York Times bestselling author Eliyahu Goldratt what the goal of any company should be and he’ll tell you it’s one simple thing: “To make money.” It may seem blunt, perhaps even callous at first, but if it’s not guiding your business, then surviving in the long-run would be near impossible. For our car wash team, the clear cut goal “to make money” governs the majority of our day-to-day as well as long-term critical business decisions. Efficiency and technology are great, but without money, no one stands a chance.
So for all you Generation Y’ers out there who have dipped your toes in the water but not quite made the swim, jump in already. Don’t pay attention to those nasty caution signs—drowning is a moot point if you don’t make it into the water. Get organized, take the risks, make your slew of mistakes, but learn and react as fast as you can.
Acquire that coveted passive-income generating machine in the asset column of your personal portfolio, pat yourself on the back for a job well done, and then quickly move onto acquiring your next one. God only gave us one chance in life but it’s up to you to work it right. After all, one life should be plenty.
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