How To Build A Profitable Business In 2024?

How To Build A Profitable Business In 2024

Today I want to talk about something that I don’t talk, which is how to build a profitable business In 2024. Most of the blog post on my website revolve around the financial education of how to use your money smartly, spend it wisely, and invest it intelligently.

But I know many of you are entrepreneurs, and that’s what today I want to take one step further and talk about how you can actually build a profitable business.

So what I want to talk about is how you can build a profitable and successful business and how you can build it sooner because finding real entrepreneurial education is hard to find, you can’t find it in a textbook.

I want to talk about 5 things that you need to understand if you want to build a profitable and successful business.

1. Understanding what is your product.

2. Understanding how you’re going to get customers who are going to give you money for your product.

3. Understanding how you will make money; this is different than how you sell your product; you’ll see what I mean.

4. How do you serve your purpose while running your business?

5. How do you get to profitability faster, how do you scale faster?

How you get to make money as Business owner?

I want to start by talking about how you get to make money as a business owner because this is a concept that took me a long time to learn, and you don’t hear a lot of people talking about this because most people think that when you start a business, the money that you make is the money that your business makes, but that’s not true.

Think of it this way: let’s assume now that you build a business, it doesn’t matter what the product is (we’ll talk about that later).

You start a business, and it’s making $100,000 a year, and out of the $100,000, it costs you $40,000 to run your business (that’s your operations cost, your marketing cost, your product costs).

It cost you $40,000 in cost expenses to run your business, which means at the end of the year, your business has $60,000 in its account.

This is what a lot of people (most business owners) consider their income. That money left over in their account is your money. But when you’re running a business like this, you’re not actually running a business, you’re really just running a lifestyle brand. You created a job for yourself.

Now, that doesn’t mean it’s a bad thing; however, it’s not a real business. And this is where now you have to understand the 3 ways that you can get paid as a business owner, and the 3 ways are:

1. Through your salary.

2. Through your profits.

3. Through your equity.

Let me walk through these 3 things because if you really want to build a business, now you have the ability to separate yourself from the business.

You can fire yourself as a CEO, hire somebody else, and still own the business, still get the profits, but you’re not involved in the day-to-day decisions. This is a different way of thinking because most of the time when people think about starting a business, they think about creating a job for themselves.

But if you really want to build a business, that means you’re creating something that you can walk away from, building something that you can sell, and they can continue to operate even if you’re not there.

In the most extreme case, you’re creating something that, if you died, your family would get, and your family does not have to operate it, but they’re still getting paid from the business that you created.

So now, how do you do that?

That means number 1, you have to understand that the work you’re doing inside the business is for a salary. It’s not for the profits.

The profits that you’re getting are for owning the business. That’s your cash flow because you have ownership in the business.

The salary that you’re generating is what you get for working in the business.

Now, if you are a solo entrepreneur or you just got a couple of people working for you, well, now you are going to be working on everything, and you might feel like,

“Well, I’m working hard to run the entire business. All this money should be mine.”

But if you really want to build a scalable business, you need to make sure you’re reinvesting this money back into the business.

That way, you can scale it, so you have operations, systems, and people working to run different parts of the business.

That way, it can run without you.

So the first thing you have to understand is the salary.

If you want to build a real business, you want to get to the point where you can start paying yourself a salary.

In the same example, let’s assume:

  • The business makes $100,000 a year, and you have $40,000 in expenses. That means you want to get to the point now where you can start paying yourself maybe a $30,000 a year salary.
  • It might not seem like much because now you were paying $60,000 to yourself, and now you’re only paying $30,000.
  • But the other $30,000 is profit.

Benefits

Now, there are a couple of benefits to doing that.

Paying Yourself Salary

The first benefit to paying yourself a salary is what I was just talking about.

  • Now you’re treating yourself like a real business.
  • You’re paying yourself a salary, and you could potentially hire somebody else to do your work for you.
  • Maybe not for $30,000, but as you scale, maybe when you get to $500,000 or a million or $10 million a year in revenue, you will be able to have enough income for yourself, enough salary that you could pay a different CEO to run it.

Tax Benefit

But the second big benefit is a tax benefit.

Right now, I don’t want to go too deep into the tax side. I want you to understand that if you classify your business as an XYZ Corporation, what that means now is you get to pay yourself a salary.

  • Now you get to pay your FICA taxes, your employment taxes, on only your salary.
  • So now you have $60,000 worth of profit on the $30,000 you pay yourself as a salary.

That’s the only income that you have to pay employment taxes on, Vs if you pay yourself all $60,000 as an LLC, well, now you have to pay the employment taxes on all $60,000.

So you can get a little bit of tax benefit by paying yourself a salary and paying yourself a separate profit.

You have to do this through an XYZ Corporation. This doesn’t mean you have to go and create an XYZ Corporation.

You can be an LLC that’s taxed as an XYX Corporation. I know this is a little bit of technical jargon.

You can talk to an accountant who can help you with this. But that’s one of the benefits that you get for paying yourself a salary as well.

You as the owner gets the profits

The second thing you have to understand is you, as the owner, get the profits. See, the profits of a company, the cash that’s left over in the bank account at the end of the year, that money goes to the owners of the company.

Now, if you’re the only owner, that money comes to you. And this is where you have to make that tough decision, especially as you’re growing.

1. What do you want to do with these profits?

2. Do you want to take that money and go out and buy a nice car and live a good life? Or do you want to take that money and reinvest it back into the business?

3. Do you want to take that money and go out and invest in rental real estate or invest it in the stock market?

And this is a very tough question because there’s no real right answer. If you want to scale your business as fast as possible, as big as possible, then you want to take that money and put it back into the business.

That means you’re not going to have a lot of money left over for yourself because maybe you’re paying yourself a small salary, but all your money is going back into the business.

When I first made a million dollars in a year, it was a crazy feeling to see that much money on my P&L, my profit and loss statements, that there’s a million to hit my bank account over the year. But in my personal bank account, my business bank account made over a million dollars.

My personal bank account only got $20,000 because the other $980,000 went right back into the business. And that was a really weird kind of revelation for me because I remember before that, I was looking on Instagram, and I would see people talking about how,

“Oh, I made $300,000 this year, and I buy myself this BMW i8,”

which at that time was a car that I really wanted. And you hear people talking about,

“You know, I made $300,000, $500,000, $700,000,”

And they’re buying these exotic cars, flying in private jets, living this crazy lavish life. And here I was making a million dollars now and having very little to personally show for it on my personal expenses because I took home very little money.

But the reason why I took home very little money was because I wanted to reinvest that mon back into the business. That way, I could build it into something bigger.

Now, you got to figure out what the right balance is. How much are you going to pull out for yourself, and how much are you going to reinvest back into the business? But then you also have the 3rd option, which is how much are you going to be investing in things like stocks and real estate? I don’t have the right answer for you, but I’ll just tell you what I do and what options you have.

What I do is I treat myself like an employee. I get paid a salary. Now, I take that salary that I get paid, and that’s the money that I’m using to passively invest in a lot of different assets.

Now, if I do pay myself a profit distribution, that’s money that I’m generally going out to invest in real estate or invest in other places actively. But most of my money now is being reinvested back into the business because that’s where I can see the fastest growth and the fastest opportunity.

Now, that also comes with the most risk because my business could go bankrupt tomorrow, and that means I lose all the money that I put in, I use all the profits that I put in, I lose all the time that I put in, and I still have all the contracts like my rent and all my other bills that I have to pay. So there are risks with every single one, and that’s one thing that you have to think about.

So those are the 2 ways that you get paid out of the 3. You get your salary, you can work to get the profits. And you also get to decide now what you want to do with those profits, if you want to do a profit distribution or whatever it is that you want to do to reward your employees. But the third thing that you get is your equity. And what I mean by equity now is the valuation of your company.

Equity

So let’s go back to the same EXAMPLE: 

  • You have a company that making $100,000 a year.
  • $40,000 is your expenses.
  • $30,000 is your salary.
  • That means $30,000 is your profit.

Now, how much is this business that you’re running worth? Is it worth $330,000?

Is it worth $300,000? Is it worth $3 million?

It gets into some foggy waters as to what is the real valuation of your business. But this valuation is also yours as the owner.

And now, if you were to go and sell this company, that equity that you can finally realize, sometimes what you see business owners do is they’ll take out debt relative to the valuation of the company.

Now, this is very risky. I don’t recommend any starting entrepreneur do this. This is a very risky move because now you’re pulling out value, you’re pulling out money relative to an invisible valuation.

So you really have to understand what you’re doing. This gets very risky. But the alternative is, if you were to ever sell your business, that money now goes to you as the owner.

So now let’s just say you could sell your business for a 10 times multiple of your profits. If you’re making $30,000 a year in profits, that means your business would be worth 10 times that profit, $300,000.

And now you could go out and sell that business and get the $300,000 in cash for you. And then you no longer have the business, and now somebody else runs the business.

But in order for you to actually sell the business, you have to be able to extract yourself from the business.

Because now you have to build an actual sellable business.

What is product?

The 2nd thing you want to understand is what is the product that you’re selling. And there are three different categories of products that you can sell. You can sell physical products; you can sell services; or you can sell digital products and services. This would be things like software or content or classes and other things like that. And there’s no right or wrong between what you pick, but they all have again their pros and cons.

Physical Product Business

If we talk about a physical product, I have created physical products before, like a sock company. When it comes to physical products, the downfall is now you have to go out and create inventory because you have to invest your money to get the product. But the nice thing about a physical product is it can be much more scalable because if you get a bunch of orders for your product, what you need is the money to be able to produce the product.

If you can get manufacturing and order, now you can produce a whole bunch of this product and sell 10 times more, 100 times more, a thousand times more products. As you make more money, you can expand your manufacturing capabilities.

Now, there are difficulties, there’s always growing pains, but generally, as you grow, once you learn how to master quality control, you will have the ability to scale your product and not really see that downfall in the dip of the quality of your product once you understand how the manufacturing process works.

Service Based Business

When it comes to something like a service-based business, the nice thing is your margins are generally much higher if you’re selling accounting services, legal services, consulting services, coaching services. These now have the ability to have much higher profit margins because if you’re a DJ or photographer, whatever you’re selling, some sort of service, you’re selling your labor, so your cost is much lower because you don’t have a physical cost to create a product.

Now, of course, if you’re doing something like videography, you’ve got to pay for the cameras, but after you pay for the equipment one time, now you can keep selling your services, keep selling your time, and your profit margins are so much higher.

The downfall with a service-based business is scaling can be a whole lot more difficult because sometimes people want to work with a particular person as opposed to a brand.

Sometimes people are going to expect a certain quality control. I shouldn’t say sometimes, every time people are going to expect a certain type of quality. But to scale that quality in a service is much more difficult than with a product-based business.

So again, you have much higher margins, but the scaling becomes more difficult because people want to work with a person, and they want to see that quality, which is much more difficult to maintain once you’re dealing with people as opposed to a physical product.

Digital Product Business

The 3rd thing is a digital product. This can be software, digital classes, anything really on the internet, content, which again is good, but you have a lot of variables here as well.

The reason why it’s good is that your profit margins are a whole lot higher, and the scalability aspect is there. But the downfall is you also have a lot of volatility.

If you’re selling a physical product and you can get your product into stores or you have a distribution channel where you know that these buyers are going to be buying your product, you kind of have that expectation of how you can expect your sales to look.

When it comes to digital products, it can be a lot more difficult depending on how you’re marketing your product because if you’re relying solely on organic, meaning social media, you have a lot of fluctuations.

If Instagram changes the algorithm, you can see your sales drop tomorrow or skyrocket tomorrow.

If you’re running paid advertisements and Facebook changes the rules and they no longer let you advertise your products on their platform, well, now you’re shut down.

So you have a lot of variables that go on when it comes to selling your product on the internet, which again can be a con, but this really just depends on what it is that you want to do. There’s no right or wrong, but you have to understand now how are you going to sell your product and understand the different types of products that there are.

All of these can work, but the key is you want to make something that’s scalable if you want to succeed as a business owner because you want to create a product that can work without you. This is something that I had to learn as well. Creating a YouTube channel is not a business.

How we get Customers?

This brings me to number 3, which is understanding how are you going to get customers. I want to piggyback on what I just said in number 2 because the internet has changed the game for how you can get customers. Now, every business has 2 things: you have products and customers.

You need these 2 things if you want to succeed.

1. Customers

2. Products

You need customers who are going to give you money and need a product to sell them.

Without either one of these 2 things, you’re going to fail.

The way it worked previously was if you wanted to build a business, you’d have to go out and build a product first, meaning you’d spend a bunch of time and money and research trying to create a product, trying to sell the product, trying to market the product, and then hope that people would actually buy the product.

If people didn’t buy the product, now you were out all the time, money, and effort, and you have to start from scratch again if you want to start another company.

Now, thanks to the internet, you can do it completely flipped.

Now you can build an audience first.

You can build your customers first and then ask them what product they want. What you’ll see is people will come to you saying,

“I love what you’re doing. I love what you’re talking about. I love the content that you have. Sell me something.”

Before I built my Media company, I remember I would get a ton of comments of people saying,

“I want to buy some education from you. Do you have an educational program? Do you have a paid newsletter? Do you have things that I can pay you to access?”

And that was strange to me because people were leaving comments saying,

“I want to buy something from you,”

when I didn’t have anything like that. That was kind of the inspiration that,

“Oh wow, I could go out and launch something now and promote it to my own audience as the beta test, get the initial customers, get the feedback, and if it works, then work to scale that. If it doesn’t work, go back to the drawing board and start something else.”

Now understanding how you’re going to get your customers is so valuable because now on the internet, you can get paid to sell your products.

What I mean by that is:

let’s assume :

I have a YouTube channel, and when I post my videos and I promote my business or any product, I’m getting paid to promote my brand. What do I mean by that?

If I go and I run advertisements on Facebook or Instagram and I have advertisements for our newsletter, I have to pay money to run those advertisements to get new newsletter readers. But when I talk about my newsletters on my YouTube channel, well, my YouTube channel is already generating revenue.

So when I make a video, I’m making money from that video, and then when I talk about my newsletters, well, now I’m making money through the video while I’m getting new newsletter readers to my business.

This is right now understanding how the internet has changed the game of how you can grow and scale your brand.

This organic growth can give you that initial traction, but it’s very hard to grow much larger without you now investing into things like paid advertising and other forms of organic advertising outside of you.

But this is a great way for you to start to get your beta testing, to get your initial testing, to get your initial feedback, to see if you have a good product, to see if customers like your product because people, if you have an audience, will be willing to try your product. You can try it out, start getting a little bit of revenue, and see if it works.

If it works, then you can work to scale that to a broader audience, to people who don’t know you, but you have that ability now to kind of lower that hurdle if you can invest some time into building the audience.

Now, building the audience is not easy; that takes time, takes effort. But that creates a whole new asset that you can keep monetizing again and again and again because if you can build an audience on a podcast, on Instagram, on TikTok, on YouTube, well, now if you try something and it doesn’t work, well, you can try something else next month, next year, whenever, however long it takes you to build a product. And now you can start asking your audience what their problems are, what problem can you solve for them. And if you can figure out a problem to solve, they can help you find a business to create.

How Can You Maximize Your Life Purpose Through Your Business?

This brings me now to number 4, which is how can you also maximize your life purpose through your business. And again, this one took me a lot of time to figure out because I started my entrepreneurial journey in college.

It kind of started in high school, but it really started in college. And the way it started in college for me was I started an event planning company, which is kind of a glorified way of saying I was a college party promoter.

When I started college, I wasn’t too into partying, but I got to know a lot of the clubs, venues, bars, and restaurants on campus, and I started hosting college parties at these venues.

That started to grow, and I was in contract with some of the biggest clubs on campus to host the weekly college parties.

I was hosting some concerts and other shows, which was cool. I was making good money, especially as a kid in college. But the problem was I hated the industry.

The entertainment industry, number 1, is very shady, it can be very dirty. You’re working with club owners, which can do a lot of behind-the-scenes stuff.

When you’re running your business, it’s going to take a lot of time out of you. It’s going to take a big piece of your life, a big piece of your mind, your heart—everything. Building a business is hard, and if you really want to be devoted to the business, which you want to be, why wouldn’t you want to be devoted to your business? It has to be something that you actually care about. It has to be something that allows you to live your life’s purpose. This took me a lot of trial and error to figure out what that meant because I’m not a coder, I’m not a tech person. I didn’t know what that meant, but I was always, once I started learning about money, I was very interested in financial education. This was something that was brand new to me, and it quickly became very passionate about it. I read one book about money, I read Rich Dad Poor Dad, and my whole life changed. I started just binging books about money and financial education, which was kind of funny to me because up until I read Rich Dad Poor Dad, I never had read a book cover to cover. English is my second language. I struggled really hard in my English classes. I would actively avoid reading books, I would actively struggle in my English classes. But then when I started reading these books about money and financial education, it made sense to me. And it was a very different kind of education that I was learning here as opposed to the math and science education that I was learning in school because my parents told me that I needed to become a doctor, so I was kind of focusing on that. When they found out that I wasn’t going to be a doctor, my dad told me, I’ll just tell you the story. My dad told me that I had to at least become an attorney to leave some pride in the family, so that’s why I went to law school. But I didn’t want to necessarily be an attorney, I wanted to be an entrepreneur, which kind of gave me that fire to want to do something outside of what I was doing in the classroom in law school. But this is where now understanding—you want to build something that you can actually be proud of, that you can actually be passionate about, and that will keep you going because money can only motivate you for so long. Money is definitely a big motivator in the early stages, right when you don’t have a lot of money. Thinking about making $100,000 a year, $10,000 a month is unbelievable. Thinking about making $50,000 a month is crazy. Thinking about making $100,000 a month is unfathomable. But if you stick with what you’re doing, if you keep learning, if you keep building, if you keep hustling, eventually you’re going to start to see things pick up and grow. When you’re going to start to see your business scale, especially if you stay disciplined. And then as you scale, you’re going to start to see more money coming in. And then as you start to see more money coming in, that’s where you start to realize, “Oh, um, is this something that I want to do? Am I actually enjoying this?” And at that point, either you’re going to find out, “I love what I’m doing, I’m so happy I picked this,” or you’re going to feel a little bit miserable because you’re doing something that doesn’t align with your morals, with your values, with something you enjoy doing, something you really want to do, with something you want to be proud of for your kids and your grandkids. So it’s a lot easier if you’re building a business to start thinking about this early on, which is if is what you’re doing going to help you align with a life purpose. And you don’t have to know what your life purpose is today, like your purpose is going to change. It’s funny when I hear people talk about finding your purpose, your purpose is going to change. But you have to at least have something that you really care about, something that really means something to you, something that really you can be proud about, and you can tell your parents and your kids and your grandkids, and you’ll be happy telling them about because you’re making a difference. So I want you to think about that as you’re building your business because that’s going to allow you to have that fuel and drive to build something that actually changes the world. Because if you just want the money, well, once you start getting the money, it’s not going to be that attractive anymore, and you’re not going to have the same drive to build a business. But if you care about changing the world, if you care about providing some value, well, that can drive you way further. And the fifth thing that you want to understand if you want to be able to build a profitable business is how do you get to your goals faster. And I know there’s a lot of different opinions on this. I’m going to tell you just my opinion, what has worked for me. When I was getting started as an entrepreneur, I was very hesitant, very, very hesitant about investing my money into my own education.

I used to be very kind of anti-online education, very anti the entrepreneurial education because a lot of people just kind of have that scammy feel, that um, I’m just trying to get my money from you feel. And so for that reason, I was actively avoiding some education.

Now that doesn’t mean I avoided all education. I read a lot of books, uh, I did invest in a coaching program when I was trying to get involved in real estate, uh, in real estate wholesaling, which was profitable for me. I invested like $3,500 in a program, and I ended up making that money back.

I think it took me like 5 months to start making any money, but I did make the money back many times over. But even after that, when I started really trying to figure out how I wanted to build my own business, I was very hesitant on that education. And I don’t know exactly what it was, but there was something that that kind of triggered a flip for me.

And I think it was who I was learning from because there are some people that are that kind of have that slimy vibe, and there are some people that didn’t.

And I remember I took a class out of one of this person that didn’t, and I paid, I think $2500 for a class on entrepreneurship and building an online business from this person, and I got so much value out of that.

And that was where I really realized the value of okay, why am I buying this online education? It’s to learn so I can reduce the time it takes for me to figure it out. Like if I can watch 8 hours of classes, I could potentially save 2 years of my own experimentation.

And that was when it started to make sense to me that okay, my time is valuable, I want to get to say $100,000 or a million dollars a year as fast as possible, how can I get there faster by paying people to learn how they did it so I can absorb some of their knowledge?

But the key is if you want to succeed when it comes to learning from other people, whether it’s classes, whether it’s books, whether it’s listening to podcasts, whether it’s coaching, it doesn’t really matter is if you want to see the most success, the most success comes not from copying a 5-step blueprint, the success comes from learning the blueprint, seeing what worked for somebody else, and then applying that information to you because if you just try to copy what somebody else did, it’s too late.

What are you learning?

See, there’s a lot of people out there that try to sell or that do sell programs on 5 steps to $10,000 a month which is kind of a very ambiguous, just we’re going to sell you this basic education program on how do you start making money online and those are the most profitable in the online education space because you’re catering to the most people because most people are just trying to figure out how do I get started.

But if you really want to succeed with this education, you got to know what it is that you want to build first. When people ask me what type of business should I start, it’s a kind of a funny question because I have no idea.

I don’t know what you’re good at, I don’t know what you like, I don’t know if you like finance, I don’t know if you like coding, I don’t know if you like numbers, I don’t know if you like what. What do you like? And based off of what do you like, how do you solve problems?

So, there’s you got to figure out what type of business it is that you want to start, and then the education comes in handy when you’re learning specific skill sets. If you’re learning how do you get customers, take classes, get coaching on how do you do SEO, take classes, get coaching on how do you do Facebook advertisements, take classes, get coaching on how do you get PR.

There’s real value in education that has specific goals just like with your financial education, learn about how do you build a financial system, about how to you invest in real estate, about how you invest in stocks. All these things have value as opposed to just how do you get rich, there’s a difference. So understand:

1. Who is teaching?

2. What are you learning?

that’s going to all or that at least for me allowed me to really benefit from learning from others which allowed me to grow quicker education the this self-education it gets more and more expensive um for lack of a better way to say it because as you grow you’re going to want more knowledge you’re going to want to learn from more people people who’ve done bigger things who’ve done bigger and better things and you’re going to want more access to people all these things cost more and more money I remember in the beginning paying 200 bucks for a class seem like a lot of money then you pay for a $500 class then maybe buy a $1,000 class then maybe buy a $2,500 class then maybe buy $110,000 coaching that maybe you pay uh $50,000 in Consulting that maybe pay $100,000 in Consulting all these things start to grow but they give you more access and more knowledge hopefully some of these things are going to fail which is upsetting but that’s a part of the game but some of them are going to teach you little things that you can make little tweaks in your business which could scale your business many times over and that’s going to allow you to scale your revenue scale your profits but there’s so many different aspects to it but it starts with you understanding you knowing what it is that your product is knowing how you’re going to get customers knowing how you’re going to get paid knowing how you can serve a life purpose and then knowing how you can scale by doing all the things that.

Leave a Comment