Why a $1.2M Side Business Can Demand Full Focus — Transcript

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1. 0:00I own a design build ADU company based
2. 0:02out of the city of San Diego.
3. 0:03>> Design build?
4. 0:04>> Uh design build.
5. 0:05>> So we're general contractor.
6. 0:06>> Yeah, general contractor. And we use
7. 0:08those verticals for our own infill
8. 0:09development deals that we we just hold.
9. 0:12So we just hold them long term, use the
10. 0:13appreciation to offset that income. My
11. 0:15wife's a real estate professional, so it
12. 0:16works.
13. 0:17>> Good old reps. Yeah.
14. 0:18>> Yeah, thanks. So we do $5 [snorts]
15. 0:20million a year. Looking to go to 10.
16. 0:23>> Okay.
17. 0:23>> Incredibly supply constrained. I work
18. 0:25with my dad, that's one thing I didn't
19. 0:26mention.
20. 0:27>> Is he talented tradesmen, workers?
21. 0:29>> Absolutely. Absolutely. So the design So
22. 0:31we the the margins are quite different
23. 0:33on both. But in the design the
24. 0:35the margins are like 80%. It's
25. 0:37ridiculous. On the construction we're
26. 0:38about 30%. We do fine. Um the One of the
27. 0:41constraints is that I work with my pops.
28. 0:42Sorry dad, if you ever see this. Um he's
29. 0:45yellow pad of paper guy and there's just
30. 0:46no way around it. So
31. 0:48we do good job. He has We've never
32. 0:49marketed once. We've never paid a dollar
33. 0:51for anything.
34. 0:51>> 80 or is he 60?
35. 0:52>> 68.
36. 0:53>> Oh.
37. 0:54>> Yeah.
38. 0:55>> He's got some years. He's got some years
39. 0:57left. Yeah, yeah.
40. 0:57>> No, he he's the man. He's the
41. 0:58>> 80 or like high
42. 0:59>> He can tough it out. You know.
43. 1:00>> [laughter]
44. 1:02>> So this is what's stopping me. There's a
45. 1:05there's a
46. 1:06uniqueness to this. So I'm actually
47. 1:07professional firefighter and have been
48. 1:08for the past 18 years.
49. 1:09>> Okay.
50. 1:10>> And so I have yet to go all in on this
51. 1:12company because that's what
52. 1:13>> Yeah, bro. Go all in.
53. 1:14>> That's that's kind of like what we do.
54. 1:16And I work 10 days a month. I'm a
55. 1:17servant I have a servant's heart. That's
56. 1:18what I enjoy doing. There's It's a
57. 1:19selfish endeavor, right? Like I I help
58. 1:21people because it makes me feel good
59. 1:22about myself.
60. 1:23>> everyone does everything. Yeah, sure.
61. 1:24Okay.
62. 1:25>> So I'm I've At this point 3 years ago I
63. 1:27should have been I should have been
64. 1:28retired. Should have left the fire
65. 1:29department, but I haven't.
66. 1:30>> Okay. So
67. 1:31>> that's what's stopping me. My question
68. 1:33is what objective criteria should I use
69. 1:35um
70. 1:36to figure out when to sell, you know,
71. 1:37the right time to leave the fire
72. 1:38department?
73. 1:38>> What are you making right now?
74. 1:39>> At fire department?
75. 1:40>> No, I
76. 1:41>> Yeah. I make $168,000
77. 1:44a year.
78. 1:45>> Yeah, [laughter] right. Um so our our
79. 1:47margins are are pretty good. We make net
80. 1:48about 1.2 million a year.
81. 1:50>> Are you 50/50 with your pops?
82. 1:52>> Uh no, he wants to go 50/50, but there's
83. 1:54there's a lot that goes back into it.
84. 1:55The reason why I got involved because he
85. 1:56got sick. He was diagnosed with cancer.
86. 1:58So, this was to make sure that his jobs
87. 2:00weren't losing money. For a long time I
88. 2:01looked at my pops you you paid $20 or
89. 2:03you paid $20,000 to do their job.
90. 2:05>> Yeah.
91. 2:05>> So, they've now saved a million dollars
92. 2:06in the bank and
93. 2:07yeah, so we're not we're we're 70/30 but
94. 2:10any point we could go 50/50 and I do
95. 2:11everything.
96. 2:12>> Okay. What is margin on the five again?
97. 2:14>> Uh overall 1.2 it's split between like
98. 2:1780 and 30. We're on the on the planning
99. 2:19side of it and I work with other
100. 2:20developers as well. So, I do their plans
101. 2:22on the front end and they do the infill
102. 2:23development because they build it much
103. 2:24cheaper than me.
104. 2:25>> Let me just So,
105. 2:26>> Yeah.
106. 2:26>> 1.2 let's assume that if you pull the
107. 2:28lever you'd be a 50/50.
108. 2:30>> Yeah, for sure.
109. 2:30>> So, the question is I make $168,000 a
110. 2:33year.
111. 2:35And in one thing.
112. 2:37And I make $600,000 a year in another
113. 2:39thing.
114. 2:40And I would like to know when I am
115. 2:41secure enough with my $600,000 a year to
116. 2:43make up for 168.
117. 2:47>> Yeah, so to reframe it actually the
118. 2:48reason
119. 2:49>> [laughter]
120. 2:50>> The catalyst for this
121. 2:51>> to Yeah, no no no absolutely and I love
122. 2:53where this is going. The catalyst for
123. 2:54this question [laughter] was me
124. 2:54listening listening to your podcast this
125. 2:55morning that you just did.
126. 2:57>> Yeah.
127. 2:57>> Um and that's I don't want to get it's
128. 2:59not about money. Like I have I have more
129. 3:01than I could ever have dreamed for. Like
130. 3:02ever ever. It wouldn't it doesn't
131. 3:04matter, right? And so, you're going to
132. 3:06get to the other side of this and so
133. 3:07I've left and I'm
134. 3:08I've created another job. I'm going to
135. 3:09have to quit another job that I don't
136. 3:11like, right? So, it's it just seems like
137. 3:13you know, you having done that gone to
138. 3:14the other side of it where are you going
139. 3:16to find meaning? What do you do on the
140. 3:17other side of this thing? Look for
141. 3:18something else to do, right? So, I'm
142. 3:19just
143. 3:20>> Well, I think I'm a big believer that a
144. 3:22man must have a quest.
145. 3:23>> Sure.
146. 3:25>> And I I am not religious but I was once
147. 3:30and one of my favorite parts about this
148. 3:32is that before God gave man a wife he
149. 3:35gave him a job.
150. 3:37And so, I see work as inextricable
151. 3:40to how we live.
152. 3:41Right? And so,
153. 3:44you I mean fundamentally you started
154. 3:46helping your pops out with this business
155. 3:47and running this business because you
156. 3:49had 20 days a month on your hands
157. 3:51because you had to do something, right?
158. 3:53>> For sure.
159. 3:54>> And so, this seems much more like a what
160. 3:56do I do with my life question
161. 3:58overall.
162. 4:00And so, if you were to leave the fire
163. 4:02department, what like I guess
164. 4:03fundamentally like why is there a
165. 4:05problem? Because I think the premise of
166. 4:08this was
167. 4:10I'm at 168. I've got 600k a year waiting
168. 4:13for me here, and if I actually spent
169. 4:14more time on it, I'm sure I could grow
170. 4:15it, which I'm sure you could, cuz you'd
171. 4:16have the time back. Um but I don't want
172. 4:19to quit.
173. 4:20And so, that was the premise of our
174. 4:21discussion.
175. 4:23And to me, that's like then don't quit.
176. 4:26It like you're like I I don't want to
177. 4:28quit. And if you tell me to quit, I'm
178. 4:29going to tell you I don't want to quit.
179. 4:30And I'm like, all right, then don't
180. 4:31quit.
181. 4:31>> [laughter]
182. 4:32>> Yeah, but no, I I do want to quit. And
183. 4:33to be honest, I was
184. 4:36And I would ask a question about like
185. 4:37all these but they when they were going
186. 4:38over all the things key man risk, I just
187. 4:39circled all of them.
188. 4:40>> Yeah. We're supply constrained.
189. 4:42>> It's ridiculous.
190. 4:43>> It's business. And if you had 10 more
191. 4:44full days a month back, you could
192. 4:46probably figure out some of these
193. 4:47things.
194. 4:47>> I think so, too.
195. 4:48>> Yeah. So, what do you do to do?
196. 4:51>> That's a good question.
197. 4:51>> Yeah.
198. 4:52>> I got a 45-minute flight tonight to
199. 4:53figure it out.
200. 4:54>> [laughter]
201. 4:56>> Like
202. 4:57what I like well, let's do it. Let's do
203. 4:59it.
204. 5:01Why wouldn't you quit?
205. 5:04Cuz the money's not a thing. So, the
206. 5:05money's gone. So, because you obviously
207. 5:07numbers-wise, obviously you quit and do
208. 5:09the business. Okay.
209. 5:11So,
210. 5:12why not?
211. 5:14>> And
212. 5:15forgive me cuz you got to all pay taxes.
213. 5:16So, I work for the most one of the most
214. 5:18affluent fire departments in the nation.
215. 5:19We work Rancho Santa Fe is super
216. 5:21affluent area in in San Diego. Um I used
217. 5:23to work for a department that ran 20
218. 5:25calls a day. We run three calls a day. I
219. 5:27work 48-hour shifts, and I get more done
220. 5:29at work than I do at home because of
221. 5:31that. I've created key man risk because
222. 5:32I can just do it at work.
223. 5:34>> Yeah.
224. 5:34>> And so, to be honest, I go home and I
225. 5:36have two young children. And so, I get
226. 5:37all that work done. When I go home, I am
227. 5:39I am there. I coach
228. 5:39>> You're like, honey, I got to go to work.
229. 5:41>> No, and she laughs. She's like, all
230. 5:43right, for sure. Whatever
231. 5:43>> Yeah.
232. 5:44>> Yeah. I'm like, oh, I'm so tired. And
233. 5:45it's like, well, we slept all night. So,
234. 5:46it's like it would be insane
235. 5:48um to walk away from that, and I have a
236. 5:50a super like high seniority position as
237. 5:52a captain.
238. 5:53>> Yeah. Well, it sounds like you're
239. 5:54getting paid for study hall.
240. 5:55>> I mean
241. 5:56I hope my chief doesn't see this, but
242. 5:58yeah.
243. 5:58>> Yeah. All right.
244. 6:00Um
245. 6:01well, fundamentally, if if you're
246. 6:03working 100% of the time that you're if
247. 6:05you're if like
248. 6:07if you become less productive as a
249. 6:08result of leaving the job, I see that as
250. 6:10a double net negative.
251. 6:11>> For sure.
252. 6:12>> So,
253. 6:15if you quit the job, would you get more
254. 6:17done in the other business? Let's just
255. 6:18ask Let me just ask cuz like the math
256. 6:20equation is can I make 168,000 more
257. 6:23dollars of profit times two cuz you got
258. 6:25to split it, right? So, 300 and whatever
259. 6:28$40,000
260. 6:29uh of profit, and you guys are running
261. 6:311215, right? And so, 25-ish percent
262. 6:35margins. So, multiply that by four. So,
263. 6:38350 by four per So, probably like, you
264. 6:40know, another 1.2 to 1.5 million dollars
265. 6:43a year, whatever the math is. Um of top
266. 6:45line. If you quit the fire fireman job,
267. 6:48that would be your break even. Can you
268. 6:50do that?
269. 6:51>> Yeah, for sure.
270. 6:52>> For sure?
271. 6:53>> Yeah.
272. 6:54>> But, I thought the time you get back
273. 6:55would be less productive.
274. 6:57>> I mean, I say that because I'm doing
275. 6:58other during the day, right? I'm
276. 6:59doing whatever I'm right? So, if I would
277. 7:01you know, dove all in, remain focused,
278. 7:03and and and went for it. And and you cut
279. 7:06the parachute, you have no choice. I
280. 7:07would have no choice. I would like to
281. 7:09think that it's in my nature to make it
282. 7:10happen.
283. 7:10>> So, you'd like to quit.
284. 7:12You're comfortable. You think you could
285. 7:14grow this thing more.
286. 7:15>> Yeah.
287. 7:15>> And you're afraid to do it.
288. 7:16>> There you go.
289. 7:17>> And you rationalize why cuz of the other
290. 7:18reasons, but you know that's not really
291. 7:19true.
292. 7:19>> Yeah, it's like a therapy session, yeah.
293. 7:21>> [snorts]
294. 7:22>> So, does that Does that give you the
295. 7:24answer?
296. 7:25>> It does.
297. 7:25>> Cool.
298. 7:26>> Appreciate it.
299. 7:26>> Rock and roll. Appreciate you.
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312. 7:47enjoy.