BUSINESS LESSONS THAT AREN'T TAUGHT IN SCHOOL

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When you talk about the franchise business that you had a little bit because you had it's called super Weave Express, Yeah super so what what was the so? All right, super Weave Expressed. I'm assuming it was weaves.

Hair extensions, hairstention of full service of.

The business man.

So that's a billion dollar business. Right. We talked about the hair business, but not really in depth. But what made you want to go into as a man? What made you want to go into a woman's industry?

Man? You know?

I mean it's it's it's a supplying demand thing, right, So as entrepreneur, you know, you got a supply a product and if there's a demand for it and there's a spread, then you can make a profit.

And that's the only reason why I looked at it.

Actually, the founders of that company are actually from my hometown, port art To, Texas, and they had several locations and I sat down with them and they showed me the revenue numbers and their store was doing like half a million dollars a year, and I was like, man, I had no idea the weaves.

Yeah, it was a physical brick and mortar store.

Brick and mortar store they had, they had a stylist there, and they it was a commission based salon, so they got a percentage of the commission. But they did all the marketing, they did all that advertising, and then they assigned clients to the customers that they came in, and they also supplied the hair, so they bought it at the wholesale price sold it that retail.

So you bought a franchise correct, Yeah, brought franchi. What's that process like? Because I think we spoke about that in one of our early episodes about being a franchise e. What's that process like? And how'd you get involved?

So the whole franchise model is basically, instead of you starting a business from scratch, you are identifying somebody that already has a business that appears to be successful, and you're paying them to use their branding, to use their their business model, you know, their business plan, and in exchange, you're going to pay them up front, you know, as a as a fee to get in, and then monthly they're going to take a percentage of your revenue, you know what I mean.

And so that's that's what your franchise fee is. And the thing.

That most people don't realize is that the average business is only profitable within the fifteen to twenty percent margin range. Right, So then when you're a franchise e, if that franchise says their royalty is what it's called if it's forty eight percent, that's for eight percent of your gross So they are a top line expense. They don't wait to see if you're profitable or not on the back end.

You said that's the trade off.

Can you can you explain that when you said the average business is profitable fifteen to twenty percent in the profit market, can you explain that, like what that means to the average person that may not understand that.

So the biggest issue that I see with a lot of us, a lot of the biggest thing that we have a lack of exposure to when we start businesses. We listen to what somebody clots is their revenue, right, and that's the growth. So that's every dollar you've taken in. But that doesn't include what your what your rent cost is, what your labor cost is, Yeah, your what your what

You said that was one of your business mistakes, is getting into a business based on that revenue and not their net profit.

That's it.

How did that come about? How did you realize, like, this was a mistake that I made.

Well, this business specifically, so when we opened, we hit a home run. You know, the first year we did four hundred and fifty thousand revenue. It's like sixty percent from the retail side and forty percent from the services side, which is a hairslon. But the expenses were so high and we had to keep so much money tied up in it that at the end of the year, what was left on the table was about sixty thousand dollars.

Wow.

And then I had a partner, so now you're splitting two ways. So now for all that work, you make thirty thousand dollars a year.

Oh that's crazy? Can you can you just go into that. You said that your your net was six hundred thousand, four hundred and you you netted sixty thirty. Yeah all right, yeah thirty? How did that happen? Okay?

So number one, we went We wanted to be in the prime area, so we went and got a retail space in a shopping center. We were like between a salad beauty supply and the SAMs, and so that was like five grand a month right there off the top. Then, since neither he nor I were stylists or we know how to run us along, we had to hire a manager and we had to have an assistant. So that's

So we spent two hundred thousand on that.

So you know.

That that river new looks like it's really high, but when you look at all those fences, it gets really gets smaller. Then you got utilities, you got product, you gotta keep in us loan for the stylus to be able to use. You got marketing and advertising. We were spending like five grand a month to stay on the radio to keep people walking through the door.

You got insurance earners.

What's up?

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So it's a lot of expense that's tied to that business.

And this is what this is twenty seventeen.

This was two thousand and fourteen, twenty fifteen.

Okay, yeah, I'm glad you said that because a lot of times people don't fully understand a reason why most businesses fail, right financial issues. You don't fully understand what goes into making a business. So even if you make almost in your case, almost a half a million dollars

More exactly right. And we were open seven days a week, so there was no days off, you know. W Yeah, so even though you have a manager, and manager still looks to the owner and make final decisions.

On things, so you're on call all the time. You know.

I tell people a lot of times what you said is exactly right. You may leave the comfort of a job to start a business not really realize that you just created another job for yourself with less benefits, with nothing to fall back on, you know. So it it's got to be the right decision. You got to really understand the business you're getting into.

Now that's a fact. So what would you what would your suggestion be as far as an entrepreneur, an inspiring entrepreneur that is going out there, would you say that, you know, looking at expenses is just as important as looking at what they could potentially make.

Much more important, much more important, much more important.

Yeah, And you know, and I highly advocate getting a mentor somebody that's doing it.

And you know, because it's.

Hardly a business you're gonna find where somebody else isn't already running a business like it. And I encourage people to try to find somebody in a different market that's doing the same thing so that they're more open and willing to talk to you about the ins and outs. The nasty part that people don't talk about, you know what I mean, because they won't feel they're creating their competition.

And also, experience is always the best teacher as well. I mean, no matter how much, you're still gonna have to make mistakes to learn your own. Yeah, but like you said, you kind of curve the learning curve a lot if you actually have a mentor or you're working under somebody.

For it's not about what you what you make, it is about what you keep now yeah sure.

Yeah, and your school kind of conditions us to try to learn how to get it right on our own first. Don't cheat, don't copy off for somebody. But when you get in the world of business, your best bet is to copy the right cat.

Try to read. That's you know, that's a good point. That was excellent. Now that's actually a really good point. Never really thought about it like that.

Well, I mean, and that's something I teach too, like because I mean, so many people in corporate America that are trying to get out and I just tell them. Number one, you got to retrain the way you think about everything because school now only school teach you not to cheat. School teaches you that if you're wrong more than ten percent of the time, you are not the best.

You know, Jack mad said something interesting. If anybody that doesn't know who that is, that's the head of Ali Baba. He's one of the richest people in the world. And he said, he told he tells his son that you don't have to be an A student. It's okay to be a C student because those are the only people that have enough time to be well rounded and to

That's one of those questions we used to ask ourselves, right, It was like, should we know a lot about a few things, I'll know a little about a lot of things, right, because that makes you more well rounded when you're versed in a lot of things. Right, Like I don't have a background in business, but I'm willing to learn in these areas. Right, I might not know medicine, but I'll research on it, you know what I'm saying. So we

All right. So all right, So that was that was actually really good information as far as for anybody that's looking to get in the business and business owner. But now we're going to go into some more stuff. We're going to real estate. We're also going to go into your career as an engineer. I think that that's interesting.

In something I think we've touched on that.

We haven't really spoke about that, but all right, so we're going to that in the next segment.

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