How to Start Your Own Business and Not Fail (LA 1248)
How to Start Your Own Business and Not Fail (LA 1248)
Transcript:
Steven Butala:
Steve and Jill here.
Jill DeWit:
Happy Friday, F-R-I-D-A-Y. Sorry, I won’t do that today.
Steven Butala:
Welcome to the Land Academy show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit:
And I’m Jill DeWit, broadcasting from sunny Southern California.
Steven Butala:
Today, jill and I talk about how to start your own business and not fail.
Jill DeWit:
I got some good stuff here.
Steven Butala:
So do I. It all comes down to one word for me, risk. And so…
Jill DeWit:
It’s not on my list.
Steven Butala:
Not all people see things that are risky, so risk, everybody sees risk differently. That’s really the takeaway from all of this. Well run through all types of businesses where I think there’s risk and not risk, and you may see no risk and I see a ton of risk.
Jill DeWit:
This is cool. You did… Because this is just how we are. The way you look at it is all the pre-work, and I look at it like the actual day one. Now, what do we do?
Steven Butala:
exactly. So I actually have something to bring to this conversation. I was an investment banker for years, and the way that investment bankers and private equity groups look at in a value business is it’s not like Shark Tank. I’ll help.
Jill DeWit:
I clearly did not go to accounting school.
Steven Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free, and thank God you didn’t.
Jill DeWit:
Which is why I have you.
Steven Butala:
Yeah, likewise.
Jill DeWit:
Thank you.
Steven Butala:
I’ve seen those accounting girls. That’s not…
Jill DeWit:
Could you imagine? Remember I talked a couple of days ago about the people that you knew had the corporate look. That’s not me. I don’t have the bob haircut or my hair pulled back so tight in a bun. I can’t do it
Steven Butala:
It’s so serious.
Jill DeWit:
I’m wearing shorts right now. Sorry, I just accidentally scratched you. Jason wrote, “Hi guys. So I have done several self-closings and recently closed on a cheap desert property in Arizona. After selling me the property in her name, the customer tells me she has a deed in her deceased mother’s name right next to it.”
Steven Butala:
So, it’s another property.
Jill DeWit:
Ooh. “And, she has her mother’s will saying she is the executor. I told her I would look into it on how to write up this deed. This property is a $200 deal, so really no budget for a title company/attorney. There’s only one other person on the will, a sister who has signed letter of authority to sell to me. Could I simply write up the deed and have her sign as executor, or possible have brothers sister quick claim their deed?” This is getting nuttier and nuttier and a little more confusing as we go, and it’s making me nervous.
Steven Butala:
I’m going to answer, okay?
Jill DeWit:
Yeah. “Anyone had a similar situation in Arizona? If it’s too much trouble, I will move on, but I hate to leave money on the table.”
Steven Butala:
It’s too much trouble. Move on. Here’s the deal. This is a very com… I put this question in here. We’ve answered it probably 20 times over the years, but it’s a very good question and it actually comes up. So if you’re brand new, I don’t want you to worry about it, but I want you to be aware of it. If you’re a seasoned investor, listen to this. You already know what I’m going to say.
Steven Butala:
When people die, they have assets. If they don’t do any type of estate planning… Most people who die have a will somewhere tucked in a drawer, and it says all my stuff goes to my daughter. Then they think they’re done, and rightfully so, because no one’s ever said anything different to them. That’s what’s in the movies and everything else. That’s just not the case.
Steven Butala:
If there’s a bunch of stuff in the garage, definitely, that covers it legally. If there’s a car and the deceased mother, she owns a car and it’s in her name, it’s got to go through probate. There’s all kinds of rules, and a lot of times with personal property like that, it’s not worth it. With real estate, now there’s some value there. Like everything, there’s cheap real estate like we’re talking about now, and multi-billion dollar real estate. That property has to be deeded before the person’s deceased into an entity that can be transferred. It’s real bad news for a lot of people. And believe me, Jill delivers this bad news to people constantly. She’s got the speech down. I’ve heard her. Recently, I’ve heard her say on the phone, “Man, I don’t know how to tell you this, but you just…” I don’t want to be the bearer of bad news here, and frankly, we can undo this for you. It’s going to take six months. There’s a bunch of stuff involved, and it’s going to be very expensive to the point where the property is going to be valueless. So when someone dies with a property in their name, it’s a lot of undoing, and that’s what’s going on here. A will doesn’t make any difference.
Jill DeWit:
I had one yesterday, as a matter of fact. I don’t know if you heard me. It was a double whammy. It was number one, the exact situation you were just describing. I don’t know how to tell you this. It was her aunt. I’m like, “Oh, this is great.” Then number two, it was an area that it’s really unfortunately not worth anything. There’s a few areas that were subdivided into such small properties. You need multiple ones to do things with, and it didn’t even… It was one of those I had to say, even if you were giving it to me, I’d have to say no, thank you.
Steven Butala:
Right.
Jill DeWit:
So, sometimes that happens.
Steven Butala:
You have to buy the property from the person that’s on the vesting deed, which means the deed right before you. And so if John Smith…
Jill DeWit:
Meaning mom and the situation?
Steven Butala:
Yeah, and she’s not around to sign it, that takes some undoing.
Jill DeWit:
Exactly.
Steven Butala:
We’ve done it. For a $500,000 property, we’ll get lawyers involved in it and we’ll undo everything, and we’ll do it for free.
Jill DeWit:
Some people, I mean, it depends on the situation, too. Jason, if you want to ask, we’ve had some… This one’s obviously not a really big deal, but if it was some people have had attorneys that could say, “Oh, you know what? The attorney who did this whole thing, we only finished it six months ago,” or we’re still in it too, sometimes. Sometimes I’ll call on they’re in the process. I’ll say, “Great. Get with your attorney. Have them roll this in. Have them do this as part of what you’re doing right now. Call me in however months when you have it all worked out. Happy to buy it from you.”
Steven Butala:
And my last point on the question is that the states all handle this all very differently. In California, you can do an affidavit of heirship, which they make it very easy. It’s one of the only easy things to do in California, of all things, all of them.
Jill DeWit:
You make it sound like buying a popsicle is hard.
Steven Butala:
It is.
Jill DeWit:
Okay.
Steven Butala:
Forget about the DMV? But in Arizona ironically, it’s very difficult to accomplish what you’re trying to do. So, some states it’s easy. That’s the good news.
Jill DeWit:
I’ll get you a popsicle.
Steven Butala:
Today’s topic: How to start your own business and not fail. So everybody sees risk differently. The good news is that you are in America, and no other country can you just whimsically on a Sunday, pop open a website and buy a convenience store. There’s no other place in the world where you can do that and end up being a business owner on Tuesday, if you do it all right.
Jill DeWit:
That’s good.
Steven Butala:
Sometimes for no money. So you have a lot of choices.
Jill DeWit:
That’s true.
Steven Butala:
A lot of times when you have tons of choices and freedom, you screw everything up for yourself.
Jill DeWit:
Boy, we know that one! Let me save you.
Steven Butala:
People like me who have shows like this say, “Jill, offer something, and let’s think about this just for five minutes before you get your checkbook out.”
Jill DeWit:
I think this is a great idea. This is what we should do. It’s free, baby. It’s free. They’re out there right now. Take over my business.com. It’s there.
Steven Butala:
Yep, that’s right.
Jill DeWit:
Be careful.
Steven Butala:
Here’s the keys.
Jill DeWit:
It’s like I used to tell the kids, as seen on TV. They’re like, “But mommy, it’s free.” Sweetie, it’s not free.
Steven Butala:
Yeah. Something paid for this commercial to get to you.
Jill DeWit:
Exactly. It’s not free, honey. That’s called fine print right there.
Steven Butala:
So I see a convenience store with a good history of sales and a reasonable rate as very risky. I see it as a single point of failure. But most importantly, what kills me about businesses like that is there’s a cap on revenue. So there’s only so many people that can walk through the door during the day, and there’s only so many products that you can sell. If you really truly do the math and a spreadsheet on it, you won’t buy it.
Jill DeWit:
That’s a good point.
Steven Butala:
If you’re just looking to not have a job and really just kind of sit behind the counter and that’s your life, or maybe you own a building, so you don’t have any rent to pay, and now you don’t have any rent, and now you don’t have any payroll, the two largest expenses of anything. So you might clear 30,000, 40,000 bucks a year that way and live a happy life, and that’s great.
Jill DeWit:
Hopefully more than that.
Steven Butala:
It’s tough. Those businesses are tough. Hopefully more than that Jill, you’re right.
Steven Butala:
So it all comes down to risk. What we do, I see as risk-free, as risk-free as it can possibly get. There’s no real startup costs to this. In our case, if you choose to join, which I don’t recommend. I think you should really spend some time on your own before you pay to get into this group that we’re in and see if it’s for you. But once you make that decision, here’s why I think this works. There’s a huge diversification. There’s a lot of places you can fail and still do great. If you buy 10 properties and three of them work and five of them, it’s not going to sink the ship, which never happens by the way. I’ve never heard of anyone saying, “”I bought 10 properties and six of them worked.
Jill DeWit:
You know what’s great, too? I’m thinking of your analogy of the liquor store or whatever it is, convenience store, and what we do. Think about, my inventory is a piece of paper.
Steven Butala:
Yeah.
Jill DeWit:
How great is that?
Steven Butala:
We’d never leave the desk.
Jill DeWit:
I could turn it on. I could turn it off.
Steven Butala:
I don’t have to go to work. I mean, a convenience store, you got to turn the lights on and get up every day. There’s a million things.
Jill DeWit:
I don’t have to pay extra utilities, only my website. I mean, that’s really it.
Steven Butala:
That’s $8.00 a year.
Jill DeWit:
And then I can again, turn it on. I can turn it off.
Steven Butala:
Yep.
Jill DeWit:
There’s a lot… I didn’t even look at stuff like that.
Steven Butala:
So this didn’t all happen by accident. I owned laundromats and nursing homes. I own all kinds of stuff before this, and Jill and I have other businesses and honestly, don’t do as well as this. When it comes to a risk standpoint, I don’t see this as risky at all. I send a bunch of mail out. The mail costs us… The big turnoff for a lot of people is it costs money to see what’s going to happen, and so that’s great. That’s just more for all of us.
Jill DeWit:
That’s okay. You know what? I was going to say the reason we have no risk is because I don’t buy it. If there’s any risk in the property, I don’t like it, don’t like the price, it’s something I don’t like, I don’t buy it.
Steven Butala:
Most of the time we know who we’re going to sell it to during the acquisition.
Jill DeWit:
Right.
Steven Butala:
And so could you.
Jill DeWit:
Exactly, especially the way I’m doing stuff right now. So, I love this. Keep going.
Steven Butala:
So the other thing too, is that on my convenience store model, and I’m not picking on convenience stores because they… Places like Circle K or Piggly Wiggly, if you’re in the South, they just roll that stuff up and make a bajillion dollars. I’m just using it as an example. You can have a job and have a convenience store. You can have a job for a decade and do this on the side to the point where it doesn’t make any sense to have a job anymore. There’s another huge risk reduction. You don’t have any money. That’s fine. If you have a great real estate deal, call us. Call anybody in the group. We’ll do it with you. There’s no reason. There’s no sentence that you… There’s no, “yeah, but” here. The yeah, but is I don’t like real estate and I don’t like data. If you don’t like real estate or you don’t like data, this is not the place for you. You can turn off the radio right now, or whatever. What did the kids listen to now? On their phone, they’re probably listening to this?
Jill DeWit:
Spotify.
Steven Butala:
This is all about-
Jill DeWit:
I’ll help you.
Steven Butala:
… using data to buy cheap assets. Yesterday, we talked about buying cars, and boats, and aircraft.
Jill DeWit:
Yeah.
Steven Butala:
With data. It’s the same thing. It’s a data thing. So I see… I mean, we can run through lists of business. Think about manufacturing facility. You have to spend what? Tens of millions of dollars to buy an existing manufacturing facility that probably needs a lot of new machines, and the customers, they may or may not pay. There’s a lot of moving parts, figuratively and literally, in a manufacturing facility. I have a buddy who makes billions of dollars a year doing that. It’s just not for me. It’s too risky for me.
Jill DeWit:
Right. So is that everything? I thought the show was going to be about… You have that all figured out. Now what do you do? How to start it and not fail. I have notes on that. If you want to talk about it.
Steven Butala:
Well, you go first and I’ll wrap it up with that.
Jill DeWit:
Okay.
Steven Butala:
There’s a lot of stuff about running a business that has nothing to do with the actual business itself.
Jill DeWit:
I agree. So this is my stuff. My stuff’s all very generic. So you got all the risk out of the way, like we’ve covered ever so briefly.
Steven Butala:
You know what? Anything. Are you in a relationship like this?
Jill DeWit:
Did you know he could talk for 20 minutes about risk?
Steven Butala:
And everything that I say in this relationship is too long. I have been squashed down, and I resort to speaking in sound bytes. That sentence that I just said, reserved to speaking in sound bites, it’s too long for Jill. That sentence is too long.
Jill DeWit:
Cut to the chase, babe. Isn’t that funny? Who knew in our relationship, he’d be the one that wants to talk, and I don’t.
Steven Butala:
It’s my only chance to say anything. All week, this is it.
Jill DeWit:
I know.
Steven Butala:
This is the only chance to talk.
Jill DeWit:
This is true. So, all right. So you got all the risks out of the way. So here are my notes about… All right. That’s great, Steve. My three notes are whatever you’re doing, number one, start before it’s perfect. We do this all the time. We are famous for launching our MVP, and it’s a mess sometimes.
Steven Butala:
It’s embarrassing.
Jill DeWit:
And things break sometimes, and it looks like poop sometimes, but we launch it anyway. Get it out there. That’s what you should do to, with your business in our world. I don’t think your liquor store should look like that. Maybe, but you know what? Your liquor store, or whatever you’re doing, it should be a little bit like I didn’t even get business cards yet. Why would I waste them because I’m not sure it’s going to happen. Don’t make it perfect. Just get it out there.
Jill DeWit:
Number two, don’t stop. You got to give it a good run. This is the thing. In our business, in any business, don’t throw in the towel too easy. So what? You had one bad mailer, big deal. Get through it. Get over it. A lot of people have said, “I hung in there and I got it now.” Some people come right out of the gate, do fantastic. Some don’t, but you’ve got to give it some time. I would say minimum, minimum six months or six mailers, 10 deals, whatever it is, don’t stop. Then what you do after that to make your business survive, you would just… You call it attacking. I didn’t want to steal your words.
Steven Butala:
That’s okay.
Jill DeWit:
I’m giving you credit for your word. I love that.
Steven Butala:
That’s the only way. Attack it.
Jill DeWit:
Exactly. You got to adjust and tweak. This may… Oh, I came in too hot here. I came in too low here. Gosh, I sold too fast. I sold too slow. I didn’t post it enough places. Whatever it is, figure it out. For me, those are my three big points here, and you got it.
Steven Butala:
Somebody told me a long, long time ago, everything in your life has to work on a spreadsheet first, and if it doesn’t work on a spreadsheet, it’s not going to work in real life. All the business owners I’ve ever talked to where they have had a failing business, if you ask them why, they’ll say, “I don’t know.” They won’t say, “Well, people stopped coming in. The product stopped.”
Jill DeWit:
Really?
Steven Butala:
Yeah. They don’t know because they’ve never worked on a spreadsheet in the first place. Here’s a great example, and this is classic restaurant ownership. If you have, let’s say 50 seats in a restaurant, and you do serve breakfast, lunch and dinner. That’s 50 times three. That’s 150 and you turn the tables twice, each shift… Gross exaggeration here. It never happens this way. So now you’ve got 150 customers, times two, that’s 300. You’re going to do 300 plates. If your average price per plate, or credit card receipt per person is $10, that’s what? Three grand. That’s all you’re going to ever make, ever, in that restaurant. Now, I’m out.
Steven Butala:
So I just did a spreadsheet on a restaurant. Not only do I not want to buy that restaurant, I don’t want to buy any restaurant ever. Why? Because I don’t want to cap. I don’t want a revenue cap. We own a company called Neighbor Scoop. It’s a membership where you can go up and look up people who owns… Click through any piece of real estate in the country, find out who owns it, the data on it, all kinds of stuff, their phone number…
Jill DeWit:
Maps.
Steven Butala:
And it’s a subscription model.
Jill DeWit:
Flood maps.
Steven Butala:
We have a bajillion subscriptions, bajillion, and it’s limitless. The more subscriptions Jill can sell, the cheaper we’ve drop the price. The more subscribers we get, it’s limitless.
Jill DeWit:
Right.
Steven Butala:
That company has exactly one employee, and she just makes sure that it works okay. She’s quite honestly, probably pretty bored. So, that is a kind of company I want. It doesn’t really exist anywhere. There’s no office space. I don’t have to get up tomorrow. When you sit down to think about buying a business, think about it. Really think about it. Put the expenses in there. Look at labor. The two biggest costs to any business are labor, employees and staff, and rent. Opening a business that’s rent specific in this neighborhood that we live in Los Angeles, you got to be off your rocker.
Steven Butala:
We were looking at places that we obviously never pulled the trigger on where the rent was $10,000 for a regular-
Jill DeWit:
Office.
Steven Butala:
Yeah.
Jill DeWit:
Yeah.
Steven Butala:
For a 2000 square foot office.
Jill DeWit:
Right. Not going to happen.
Steven Butala:
That’s how you not fail. You put it all into a spreadsheet first, and you try to make it fail in the spreadsheet before you ever spend a nickel.
Jill DeWit:
Thank you.
Steven Butala:
Was that too much? Was it too preachy?
Jill DeWit:
Nope, that was perfect. Happy you could join us today. Every Monday, Wednesday, and Friday, we were right here on the Land Academy show. Tuesdays and Thursdays, you can find us next door on the House Academy show.
Steven Butala:
Next week, join us on the Land Academy show for another interesting episode. You are not alone in your real estate ambition. It’s a fun week.
Jill DeWit:
Yeah, this is good. I think we’re happy because our beach is starting to open up.
Steven Butala:
Yeah, everybody’s happier.
Jill DeWit:
Yeah.
Steven Butala:
The sun’s out. It’s summer.
Jill DeWit:
You can put your feet in the water.
Steven Butala:
We’re allowed to actually go in a restaurant.
Jill DeWit:
Yay.
Steven Butala:
We’re allowed to do stuff.
Jill DeWit:
I’m excited.
Steven Butala:
We’re not grounded anymore.
Jill DeWit:
Yeah.
Steven Butala:
We got grounded for like a month and a half.
Jill DeWit:
Yeah, we did. That sucked. Whatever it was, it wasn’t me. You know what? That’s it. One guy ruined it for all of us. That’s it?
Steven Butala:
Yep.
Jill DeWit:
Thanks. We all got grounded. Thanks.
Steven Butala:
One meat market and [crosstalk 00:19:09] forever.
Jill DeWit:
The Land Academy show remains commercial free for you, our loyal listener. So wherever you’re watching, or wherever you are listening, please subscribe and rate us there. We are Steve and Jill.
Steven Butala:
Information.
Jill DeWit:
And inspiration.
Steven Butala:
To buy undervalued property.
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