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In our last video, if you remember, we talked about the fact that there are 30 million businesses in the US. That’s a great number. And, remember that I said about 88% of them have less than 20 employees? Here’s what you may not know. That of all those businesses, of the 30 million businesses, only 9% or 2.7 million businesses ever hit $1 million or more in revenue. That’s not a lot of them. So, I’m here to change that. In today’s video, we’re going to talk about the five steps that you got to do, you got to follow in order to hit $1 million in revenue and do that fast in 12 months or less.
Hey everybody, welcome to Scaling to Seven Figures and Beyond. I am your host, Leo Landaverde, and I am passionate about helping businesses grow to seven figures and beyond. And, I’m very happy that today I have my good friend, Josh Gilbert, a payroll expert and great friend of mine and a strategist. We’re going to dive into this whole thing about the five steps. If you’re ready to grow your business to seven figures and beyond while creating the financial freedom and the lifestyle you want, then subscribe to this channel and don’t forget to hit the bell so you’ll be notified every time a new video comes out. I love this quote, “An entrepreneur is someone who jumps off a cliff and builds a plane on the way down.” Who said that? Reed Huffman, co-founder and CEO of LinkedIn.
And number one is mindset. Here’s why mindset is so important. As I was preparing for the content of this show and I thought it was vital that I share it with a few of my friends who know me very well, well, I just happened to run into my good friend, Josh, who not only is a great friend but a trusted business partner. We’ve referred each other business, we’ve grown our businesses together, and the more Josh heard about it, the more he wanted to be part of it, so Josh, I’m so grateful that you’re here.
Well, I’m thrilled to be here, Leo. I mean, we connected the first time we met and just instantly started doing business. But, I think what’s really interesting about this is you’ve lived it. You’ve been in the trenches, so to speak, just like a lot of people you’re talking to right now and I just thought it’d be great for them to hear from you why is mindset the first one? And, why are you a subject matter expert here? Because, I think it’d be great to get a little background on who Leo is.
Well, thank you. Josh, I am a consummate serial entrepreneur. This is my fourth company. I’ve built multiple businesses. I’ve built businesses that made it over $10 million in sales. I have small businesses. I’ve made millions and I’ve lost millions, and I think the thing that keeps coming back to me, it’s mindset. It’s whatever you think it is, whether … Henry Ford once said that whether you think you can or you can’t, you’re right. And, that really encapsulates mindset because the mentality that got you here won’t get you there.
So, here’s the interesting thing. As I said at the beginning of the video, only 9% of all businesses in the U.S. ever hit $1 million and that’s, think, it’s a mental block. A lot of people can’t make it past seven figures because they don’t believe that they can. And that’s the important thing about mindset. You’ve got to believe it. Now, there’s this concept when you … The air gets rare as you go up in higher altitude and that’s why people need an oxygen tank as they go up, for the people that have gone up Mt. Everest and the like. As you’re climbing up and you’re climbing up, the oxygen gets rarer and rarer and it’s harder to breathe.
And, you get uncomfortable and you need … So, you need to acclimate yourself to every stage of when oxygen is less. Well, the same happens to us financially. Actually, I believe in mindset so much that I wrote a book about it, The Unbreakable Mindset. And, here’s what I learned as I was going through that, that if you only ever made $500 a month, how can you hang out with people who are making $5000 a month? The air is rare at those altitudes financially. Well, let’s take it to another level. If you only have a business that only produces $10,000 in sales and you walk into a room where everybody makes a million dollars a month, how will you feel?
It’s overwhelming. You don’t know what to do.
It’s overwhelming. So mindset, it’s everything. I think one of the biggest principles that I can share with you guys on mindset is that you got to dig deep. You got to have something that drives you, that is not about the making of the money. It’s not about making the millions. It’s the why. Simon Sinek wrote a great book, Start with Why. You got to start with why. Mindset is wired. It’s like when the buzzer goes off in the morning as you get up, what gets you out of bed? What compels to get off the bed and go into … It’s your mindset. What is it that you believe in?
You got to dig deep because it’s going to be hard. And, the reason why the mortality rate in business is very, very high, and why most businesses won’t ever make it past three years, let along five years, is because they just stop trying. There’s a story of the Chinese bamboo tree and it’s a really great story. In Asia, they have a thing called the bamboo tree. Now, this thing, it needs to be watered, it needs to be cared for every day for five years. Nothing happens for the first four … Actually, nothing happens for the first almost five years, and in six to seven weeks, this tree will grow up 90 feet in six to seven weeks.
Now, it begs the question in the bamboo tree. Now, did it take five years to grow? Did it grow in five years or did it just grow in six weeks?
It’s all about the roots. Where do the roots come from? I mean, what is your why? You mentioned why. What is yours? As you started Greenland, you continued to grow, what is your why?
You know what? Thank you. Hindsight is 20/20 once you’ve gone over anything, when you can see clearly. One of the businesses that I built failed. And, I think I learned more about a business that failed than everything else. It gave me a half a million dollar MBA. I am so passionate because I know what it’s like to fail. Had I known then the things that I’ve learned now about some of these principles that I teach my clients, it would have been better. But, I am on a mission to help business owners decodify and make the whole running of a business, just make them successful.
I have clients that have MBA degrees, but nothing prepares you for business. It’s like nothing prepares you to be a parent, right? You just become a dad, and there’s no book that comes with your child. You just become a dad and you have to figure it out. Well, that’s what business is like. You’re jumping off a cliff into the unknown and you have to build a parachute on the way down. That you’re wired for, but if you don’t really have somebody helping you out, you’re not going to make it. And because I’ve been there, I have fallen and I have gotten up, I’m able to help people with just that. I want you to succeed.
I think failure is probably our best teacher. I think a lot of people would say that. So, when you lost your business and lost millions as you said, how did you pick yourself up because you had to get to a point where you were ready to write that book? So, to write Unbreakable Mind, how did you-
Unbreakable Mindset.
Unbreakable Mindset, excuse me. How did you get to the point where you could sit down and actually write it?
You have to feel the pain. I think I had to get to the point that you have to feel the pain, you have to understand what you went through and you really have to understand it wasn’t about … Your identity, or my identity was not tied to my business. What happens to a lot of business owners is their entire identity is wrapped up around the business. When your identity doesn’t live outside of the business, and it’s all wrapped up in the business and the business fails, there goes everything.
So, I had to really build my everything again outside of anything. I literally had to learn how to value what is most important. So, I had to really journal … you know what helped? Was journaling. Really reading and becoming really keenly aware of my thoughts, and I learned how to create vision boards and a lot of things that we can go into a whole separate video for that. But, I think I really had to become familiar with failure. And, the sooner that you fail, the better.
Even doing this show, the sooner we make mistakes, the sooner we get them out of the way and we go to the next level. Most people are not equipped to fail and they are afraid to fail. So, if you’re watching this video, failing, it’s okay. You’ve got to get it out of the system, you got to get it quicker out of you. So, that’s a little on mindset.
So Leo, I noticed step number two for you is model. Why model? What does that mean and maybe you could walk us through that?
Yeah, great question. So, model. Model stands for what’s your money-making model? Your money-making sweet spot? Or, how do you make money? You’d be surprised when I run into business owners and I ask them, “What do you do? And, how do you make money?” Unless it’s very obvious that I am an electrician, and I’m an attorney, or I’m a plumber. Then, I start asking questions, and I think I need to understand the model. Model is how you make money. Now, most people think … Well, I ask. I start asking questions about your model, “So, how do you make money?” “Well, I have a $5 million real estate business.”
“Great. Tell me more. What is your model? How do you make money?” “Well, we have commissions.” “Great, and what are your commissions? What is your cost of performing those commissions?” “Okay, so I have a million dollars worth of gross profit.” And then, I go, “Great. All right, so what you have is a million dollar business. You sell $5 million, it costs you $4 million to provide the $5 million, you make a million dollars so that is your model. Okay, so your model is a commission model.”
Your model is how you make money, and if you don’t know how to make money, you better figure that out real quick because if you don’t know how to make money in your business, then you’re going to be out of business pretty soon. Why do you think the mortality rate is so high in business? They don’t know how to make money, and they don’t quickly identify what their model is. It’s very easy if you buy a franchise. If you’re buying a franchise, if you buy a McDonald’s, you know it’s going to set you back a million and a half in net worth and you have to put in $1 million. You have to build the real estate, but you’re plugging yourself into a model.
A model is the vehicle to make money, not just the revenue, but the understanding of all the financial piece, and you as a business owner, you need to understand, you need to be a good steward of your own business metrics, which it’s actually point number four. But, back to the model is how do you make money? How exactly you make money, how much money you want to make and all that kind of stuff.
I’m curious. Let’s say I’m a new client of yours, but I don’t really know how to identify how I make money. Where do you start with a new client if they can’t really pinpoint that?
That’s a very good point. So, number four which we’re going to refer to in a little bit, number four is metrics. Now, I come, I get involved usually because people have been running a business for a long time and then they just can’t figure out their finances and they come to me because I take a deeper diver into their numbers. I ask for their financial statements, I ask for access to their accounting software, and I want to understand the metrics.
It’s like this. When you walk into a doctor’s office, what is the first thing that happens to you? What is the first thing you do after you meet the receptionist at a doctor’s office? Say you’re going for your annual checkup, what happens, Josh?
Other than waiting in the waiting room for a long time, typically they are going to take your vitals. Blood pressure, temperature, et cetera.
So, what happens is you come in, right? And, after they make sure that you have the insurance to pay, that you’re going to have the ability to pay, they’re going to sit you down and then they’re going to call you into a separate room and it’s going to be the nurse assistant or the nurse practitioner or somebody who is going to actually weigh you. What is your weight? What is your body temperature? What is your blood pressure? And, whatever other vitals, the pulse, plus if they have taken some blood work beforehand, before you come in, they’ll have those readings as well.
So when you walk into the doctor at last, the doctor will already know your height, your weight, your pulse, your blood pressure and whatever other readings they have and they’re going to have a pretty good idea of what’s wrong with you. Now, they may ask you, “Hey, Josh. How are you feeling?” And, you’re going to say, “I feel great.” He says, “That’s funny because your blood pressure is 180/120.” Now, if you don’t know what your blood pressure is, that’s a whole other thing, but you need to know what your blood pressure is. And, the doctor will be alarmed because they’ll say, “Wait a minute. And, your resting heart rate, it’s 100 when it should be about 60 to 70. So, is there something wrong with you?”
Maybe, but you don’t know that yet. So, I get involved on the metrics side, but then I want to know how people make money. If you’re selling something, I want to know, “Okay, how much does it cost to acquire that something that you sell?” We are all in the arbitrage business. Right? You buy low, you sell high and you profit from the difference. So, if I buy something for $1.00 and I can say, “That’s a dollar,” and I sell it for $2.00, my profit model is it’s a 50% gross profit. If I sell a million units of it, I can actually forecast into the future. Does that help? Number two is model. You’ve got to know your model.
So Leo, step three is marketing and I’m a sales guy. I’m in sales, so there’s that part of me that does marketing as well. But for someone like you who’s really helping business owners scale and understand their business better, how do you differentiate between sales and marketing when you’re talking to a new client?
Great question. So, first you need to understand what the difference is. So what is marketing? Marketing is the creating an environment where you are known and where people want to buy. Marketing is at the tip of the spear. So, you need to let people be aware of you. How do they find you? How are they going to get to know you? How are they going to hear about you? How often are they going to hear about you? All of that. You’ve heard it said that it takes about seven times of hearing a message before the message is actually heard.
Now, you’ve got the brand names … Again, back to McDonald’s … Whenever I’m on the road, it usually takes you seven times to hear something before you act on it. It’s very easy on the food side. What happens is you’re going to hear something on the radio as you’re driving to work, but the night before, you saw an ad and you’re going to see an ad, you’re going to see it multiple times throughout the night. Then, you’re driving. You hear on the radio and you stop by a doctor’s office, you went to the doctor, and you picked it up and there’s an ad for McDonald’s.
So, you’ve heard it, you’ve watched it. Now, you’re looking at it again and then … Is that coincidence once you get on the road and you get hungry that you’re going to think about McDonald’s?
Yeah.
That’s market. Now, what is sales? Sales is the act of closing in. It’s the personal connection. It’s getting people to buy. People hate to be sold but they love to buy. People love … I love to buy, but I hate to be sold. So, if you did your marketing, if you created the awareness and the branding … And, every branding has a message. If the message is right, and it resonates with people, selling, which is actually capturing of that revenue, the closing, if you will, it makes it so much easier.
Now, let me throw you some terminology. In marketing, we measure the lifetime value of a customer to the cost of acquiring a customer. So, that formula is LTV over CAC, or LTV over CAC. That’s a very important number for those of you who are raising capital. LTV over CAC. Your lifetime value of your customer over the cost to acquire the customer. So, if the lifetime value of a customer say is $5,000 and it costs you $1,000 to acquire the customer by any means necessary, by radio, TV, print, social media, and whatever else, but you’re going to get $5,000 on top, would it behoove you to spend $1,000 to make $5,000?
Absolutely.
Right, so the return would be 5X. But, the marketing drives everything. And, it’s so important. It’s what is your brand stand for? Why do you stand in the marketplace? What makes you so unique? What is your unique selling proposition? I love this book by Seth Godin called The Purple Cow. It came out in the 90s. Seth Godin is the godfather of marketing, and I love picking up that book and I have to understand the concept of marketing is what makes your unique selling proposition? What makes you so unique that people are going to stop?
You’re driving down the freeway and then you see green, green, green and black and white cows and all of a sudden, you see this purple cow. Are going to stop and pay notice? That is marketing. So, for people who want to stand out, and if you are the business where everybody is open from 8:00 to 5:00, and you open from 8:00 to 6:00, are you going to stand out for being one hour open later? Maybe, maybe not. But what would be so unique in marketing would be like, “We’re going to go from being open eight hours a day to be open 24 hours a day.” That’s eyeopening. So, marketing is what makes you so unique that you stand out and it creates an environment in which you want to be sold, because we love to buy but we hate to be sold. That’s number three, marketing.
So Leo, I’m looking at step four here, which I know you’re very passionate about, metrics. And one of the things that I’ve heard you talk about in front of prospects is KPIs or key performance indicators. Tell us what that is and why that’s so important.
Well, Josh. Thank you. Ironically, so we talked about so far mindset, model, marketing and metrics, I’m usually asked to get involved in a company at the metrics level. And, metrics has two components, it’s KPI’s for key performance indicators, and financial statements and they go hand-in-hand. Remember this whole exercise that we did talking about going into the doctor’s office and having your vitals read and checked by the doctor? Well, there’s also another analogy.
Can you imagine yourself … and, this is how I will present to you the key performance indicators, is measuring what matters in your business. Ronald Reagan said, “Inspect what you expect.” So, imagine down the road driving on a highway or a freeway, if you’re in California, and you’re driving and then all of a sudden your car, all the lights, you can see all the different things that you see on a dashboard, and then it goes away. Now, we have no dashboard. How will you know how fast you’re going or whether you needed to slow down if you don’t have a dashboard? How will you know how much gas you have and how many gas in the tank if you don’t have a dashboard? How will you know if the car is working properly, is the computer on board is working properly if you don’t have a dashboard?
The things that we take for granted in our car become very evident when you don’t have a dashboard. Same as with your business is I am passionate about building these dashboards for my clients and for our clients so they know exactly how they’re driving their business. This business, to grow, to scale, to get it to the next level, you have to act like the big boys do. The bigger companies, $100 million and above, have already figured all this thing out. They understand their model of business, but they also know how to measure what matters. Does everything matter in your business? No. But the things that matter, you need to understand those and you need to …
So, a key performance indicator could be profit per employee. It could be revenue per employee. It’s become a vanity metric for big companies like Facebook and Google, “Hey, we want a million dollars per employee.” If you have 2000 employees, you have a $2 billion dollar company. I’d like to take it to a more granular level. To me, it’s more like profit per employee, whether it’s gross profit or net profit. You may actually have your gross margin, sales minus your cost of goods. I’m very interested in knowing what your costs of goods is whenever there is a cost associated with it.
Now, if you’re in a service delivery model, as I mentioned in other videos, if you have a service delivery model, you really don’t have anything … You don’t have to buy anything to sell something. But, if you actually are in the manufacturing business, you’re in the construction business, the cost of goods sold matter. The percentage of completion, does it matter to you? Your payroll as a percentage of sale. Now, I have multiple clients in the service delivery model. They actually provide a service. There’s really only two things. You either sell the product or you provide a service. If you’re providing a service, how much of your sales is your payroll? Your wages and salaries and your benefits and all of those things, are you measuring and tracking those?
Your net profit. If you have a subordinated debt, if you’re working with a bank, you want to know your current ratio. That’s a KPI. That’s a key performance indicator. Your current assets over your current liabilities, which you’ve heard me talk about before. Your debt service coverage ratio, which is your cash flow over your debt service. That’s got to be at least 1.2, 1.25 depending on the bank. Your current ratio should be one and a half or higher over one.
Your debt-to-equity. If you’re heavily leveraged, that’ll show but a lot of companies don’t know that. They don’t even know, so here you are going to a bank trying to get financing only to find out that all your vitals were wrong and you’re actually dying and you’re on a gurney and then no bank is going to want to give you money. That’s why it’s so important to know. You need to know your metrics. So, those key performance indicators. Does that help?
Yes, very much I’m curious, though, does every industry have a different KPI? Someone that’s in manufacturing versus sales or trucking? I mean, are KPIs going to vary based on the type of business that someone is in.
Yes. The short answer is yes. KPIs, there’s a set of general KPIs that can apply to about any industry vertical, but there are specific KPIs for industries. For instance, your mentioning logistics and transportation, delivery. Our percentage of delivery, or delivering on time, on time delivery matters. If you’re FedEx, you want to make sure that everything gets delivered on time, right? You’re banking on that. Are you within 10% of the time that you say you were going to be there? Fuel efficiency, percentage of fuel over delivery. The cost to maintain the units that are going to get there as a percentage of the revenue that you’re getting from them.
All of those things matter. If you are in the manufacturing, the cost of raw goods. If you sell something for $2.00, does it really cost $.50 to make it? You want to track that. We call that gross profit. We got your revenue minus your cost of goods sold gives you gross profit.
So, every industry has specific key performance indicators. What we go in there, we identify what the industry vertical is and what are those key performance indicators that apply to that industry? And, we let our clients know, “Hey, look. This is where your industry is measuring. You should be measuring the same.” And then, we get into specific as far as the bit of business. But that’s only one component of a metrics. The other one is your financial statements. You better be looking at your financial statements. You’d better be studying and discussing your financial statements with a trusted advisor once a month.
I expect all of our clients to be discussing their financials with me. I run the 20th, the third or fourth week of the month latest. And then, you’re looking at all these things, your financial statements as your profit and loss or your income statement and your balance sheet and your statement of cash flows. They all talk to each other. In my world, accounting is the language of business. Now, if English is the international language of business, accounting is the true language of business. If you don’t know accounting, you’re not speaking business.
So, if your a business owner, you need to understand accounting. Now, do you need to know everything that I know? No, but you have to know … This is when scaling is getting the right people. Jim Collins wrote a great book, Good to Great, maybe 10, 15 years ago. But, there’s a follow up. He talks about getting the right people on the bus. Well to me, you got to get the right people on the bus in the right seats of the bus. Now as an entrepreneur, you can’t do everything but you got to get the right people to help you with the right things. And, accounting can not be ignored.
So, metrics is key. In metrics, you’re going to measure things like what we talked about in marketing, the lifetime value of a customer over the cost to acquire a customer. Those things recite in accounting and we build those metrics and those KPIs around those financials. So, they go hand-in-hand. That’s number four, metrics.
All right, Leo, let’s dive into step five, massive action. You have to start somewhere. And as you said, you don’t want to just be the same as everybody else. How do you stand out? And one of the things I know you like to talk about is momentum. How do you gain momentum? How do you take that energy, push it in motion, and get to that next level? So, what does massive action mean to you and how do you relay that to your clients?
Great. Massive action to me, it’s a critical component of the five steps. So, just to recap, we got the mindset. If the mindset is not right, nothing will work, right? Then, we talk about the model. Now you have to have a business model that works, a moneymaking model. Then three, move over to marketing side. We spent a lot of time talking about marketing. On the fourth one, we talked about the metrics. Usually when I come in involved in a company is on the metric side.
Momentum is a key … It’s like gas to fire. If you’re already dialed on everything, if you believe in your heart of hearts that you need to be at the next level, that you believe in your heart of hearts that you can actually make $50,000 a month, you can generate $50,000 a month in sales, or even $2 million in sales, and you believe that, and everything else works, well then the massive action, that’s what’s going to add gas to the fire.
Think about massive action, it’s critical today because social media, everything is everywhere now. Hold on. I got my notes here. Check this out. Liftoff, rocket fuel. I have this in my notes. So, the momentum is so critical because from zero to one takes an enormous amount of action because inertia, because gravity. 90% of rocket fuel basically on a rocket going to the moon or going into space, space rocket, it’s going to consume 90% of its energy from just getting off the ground for the first inch.
You have to attack your business with massive action because in a sea of sameness with everybody else the same and you need to stand out, you need to do so much more than everybody else just to get off the ground. Massive action means different things, but to me it’s the whole domino effect. The energy that moves the first … Different people talk about it in different books, but the concept is the same, right? Say for instance you have the first domino, and the energy, joules, that it takes to move the first domino to the next domino, it’s negligible. It’s nothing. .005 joules of energy. You can actually do it with your pinkie.
But, the momentum that it builds as it goes from the first domino to the second domino, you can basically topple over with the amount of energy the Leaning Tower of Pisa or the Eiffel Tower. Momentum is everything, and let me tell you, when you really have momentum, those habits that you’ve been working so hard kick in because you go into what I call unconscious competence. This whole [quadrum 00:30:46] of competence to unconscious competence. You are operating on a level that your competitors will not be able to attain.
As somebody with respect, you need to read that book, but you haven’t read that book.
So, Grant Cardone is a favorite author of yours. He talks a lot about massive action. How do you help your clients maybe take that first step to get the momentum? Because some people maybe can’t identify what that looks like.
Well, good. I mean, I start asking questions. What do you guys do different? What are you doing? How are you being disproportionally intentional about growing your business? Remember, mindset is already there. If you believe that you can, you will. Whether you think you can or cannot, you’re right, but they believe that already. So I ask them, “What are you doing practically to go after those sales?” “Well, we’re making five or three sales calls a day. We are thinking about sending a couple of pieces of marketing.” Would that be massive action to you?
Not at all.
Right. Massive action is how desperately do you want to get into the … For instance, if you’re doing social media postings once a week, you probably need to do are a whole lot better than that, right? You’ve got to become ubiquitous in the marketplace. Some of those guys like GaryVee and Grant Cardone, they’re seemingly everywhere, in every media. They work hard at their craft, the whole thing about mastery. It takes 10,000 hours to be good at anything. Well, that mastery happens by just putting in the work. The super athletes and all that, they didn’t get there overnight. How badly do you want it? How badly do you want to be successful?
If you’re ready to scale, you just got to put in the work. You got to believe that you can, but you got to put in the work. Something else happens on your way to scaling, on your way to becoming big. You become big as you experience big. You know I love to put myself in uncomfortable situations so we can grow, and this whole exercise about that YouTube channel is that. But, you become big as you experience big. Now, that’s not my quote. That came from Gary Keller from the one thing that you need to do as … That’s a really great concept, but the takeaway is you become big as you experience big.
As you begin to have those domino effects, you start to believe that you can and all of a sudden if you were not capable of making 10 calls an hour, now you can make those calls. I know very successful realtors who are moving 300 escrows a year that have become masters at dialing for dollars. Massive … You can have all those four pieces, but you stop working … You may believe but it’s almost dissonant to believe that you can do something and you won’t do it. I hate it when people say, “You know what? I’m going to do this,” but they don’t.
We talked about it over lunch is let your yes be yes and your no be no. It’s really a spiritual principle. In Matthew 5:17, “In all your dealings, let your yes be yes and your no be no.” So, that is massive action.
Please comment below. Let me know what you think. Of the steps that we’ve gone over so far, which one impacted you the most and why? If you want to join a community of like minded, successful entrepreneurs just like you, then join our Facebook group at the link below where I share tips, tactics, and strategies on how my clients are growing their businesses to seven figures and beyond.
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