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We’re going to talk about something that’s a little bit different because we’re not only talking about the product development process, we’re talking about what you’re going to do with your business. I brought my good friend, Aaron Young on. He is the CEO of Laughlin. If you’ve already been communicating with me, you know that’s where I send you to form your corporation or your LLC. It’s already the place that we do our business with for all of our corporations and we have multiple. We want you to hook that up. What I want to get across is that you should be thinking of yourself as a business. It’s not an invention. It’s not a product brand. It is a business and you need to be getting the full benefit of those businesses and the full protection of that. That’s what we’re going to talk to Aaron about. Aaron Young is a consummate entrepreneur. You’ve been an entrepreneur your whole life.
Thanks for having me on. I started my first entrepreneurial efforts when I was in high school. I had my first company with payroll before my nineteenth birthday. I’ve been an employer for a long time and I have started lots of companies and over a dozen multimillion-dollar businesses I’ve built. Some of them are unusually successful. We’ve had some phenomenally great failures too. That’s why I never want to make a big deal of it because maybe I’m on the precipice of crashing this company into the ground. Mr. Laughlin had passed away and Lee Morgan and I bought that company back in 2001. We utterly transformed what it was or significantly transformed what it was. We’ve got several years there. People have said it, “If you buy and sell companies, why do you still own this company?” It’s because Laughlin is such a cool business and fundamentally important to many tens of thousands of customers that are active with us. I get offers every year to sell that from people want to buy it and I don’t want to sell it. It’s the gift that keeps on giving.
I don’t do a lot of promoting on the show. That’s not what this is about. It’s about presenting great experts in there, but there are some basics you need in your company. There are some people and services that are better than others. I’ve been there. I formed a corporation through an accountant once, it was a disaster. It cost me a whole extra $1,200 the first year because he formed it two weeks too early because he didn’t want to do it right at the beginning of the next year. He wanted to get it done before the holidays. He formed it and then I had to pay the taxes for that extra year and he’s the tax guy. I’ve had lawyers form them. When lawyers form them, they’re like, “That’s it,” and they never think about it again. You have no one to ask questions of and you have no one to help you with everything. That’s what I love about you because not only do you form them, you have great lawyers, accountants and tax advisors that you work with and that are part of your community. At the end of the day, when I have a question, I have somebody to go to and somebody who’s got my back.
Laughlin was the original Nevada Incorporation Service. Anybody that’s ever heard that Nevada, Wyoming or Delaware is a good place to incorporate, Mr. Laughlin was the one who started all that for Nevada back in 1972 working with the Secretary of State’s office in that State. When I got there in 2001 and looked at what was going on, I thought, “Everything in our marketing is true but it’s only half true because there are all these misrepresentations of why you should use Nevada, Wyoming or Delaware. They all sound great, especially if you’re in a state like California, Oregon, New York, high-income tax states. They’re like, “We would like not to have to pay 11% income tax to the State of California, 10.8% to the State of Oregon so we’ll go run all of our money through Nevada,” and even the Nevada Secretary of State’s website looks like you can do it, but it’s disingenuous. The law in let’s say California or Oregon and then the law in Nevada even says, “If I’m a Nevada corporation but I’m doing business in California, I have to register with California as a foreign corporation. I have to pay California’s taxes and Nevada’s fees.” You’re paying double or more on this fantasy that you can evade state taxes.
There was all this misrepresentation that I wanted to fix. Everybody said, “Aaron, you’re going to lose all your customers. You’re going to lose all your business.” I said, “Lying to the customer is not a good idea.” It’s a horrible strategy. Second of all I said, “We may have fewer sales, but the people who buy will stay our customer.” We have almost 90% renewal rate, where before they had less than 25% renewal rate. Once people found out about the lie, they not only quit using our services because it didn’t make any sense, but we had black eyes. People were saying, “Those guys lied to me.” Forget that. That’s a horrible strategy. We had to rebuild but we’ve built a loyal client base because we don’t sell them too little, like $99 incorporation at legal, I won’t say, but it’s some radio advertising company. There’s a misrepresentation of what’s being done. What we want to do, you don’t want too much and you don’t want too little. You want exactly what you need.
Let’s talk a little bit about what they need.Lying to the customer is not a good idea. It's a horrible strategy. Click To Tweet
You may not need all the bells and whistles, but you do need wheels, transmission, an engine and safety belts, everything that’s required by the law.
Most of our audience is inventors or Amazon sellers or eCommerce sellers of some kind. They have brands where most of them do not. There are some that are much bigger, they have their own warehouses, they’re distributing and they’re doing things like that. For our startups, the earlier ones, the ones who have new products, most of them don’t have facilities because Amazon is their warehouse. They are a design development company who is a brand and they are marketing. Everything they do is virtual. They have a lot more flexibility and choices. That’s why having someone like you who can advise and say, “Is this the right thing for you?” Too many of them think, “We’re too small and we don’t need a corporation or an LLC.” That’s the part I love to touch on because that’s the biggest mistake is to not look at yourself as a business in nowadays world.
Let me make a couple of differentiators there. Let’s talk about how we would think about that. If you’re an inventor of a pen, I’ve invented this new special design thing that is unique and I believe there’s going to be an opportunity to sell millions of these things. I’m not trying to argue about this. This is my perception. You’re not a business yet.
You’re an idea about to be a business.
You might become a business. One of the guys I’m in a mastermind group with is the inventor of Pictionary, Rob Angel. Rob never did start a business. He invented something. He licensed it out to somebody who already had distribution for games and he’s become a ridiculously wealthy man. He never did have a business. He had something that was able to be turned into revenue. There’s a difference between a business and a product. However, if this thing is special and there is going to be a market for it, then you do want to protect it. One of the big misunderstandings people have is they think that I’m not a business so I don’t need to be incorporated or I don’t need to form an LLC. That is a misunderstanding of the use of corporations and LLCs.
Probably most corporations or LLCs are not designed to hold. They’re like a bucket, they hold something. They’re not designed to hold a going concern like an active brick and mortar or even digital business that has employees and has lots of customers and stuff. Most of the corporations and LLCs that are formed are meant to hold some asset. They own a piece of real estate. They own a piece of intellectual property. They own a bunch of heavy equipment. This is something we might want to talk about further as it relates to intellectual property assets.
A corporation or a business doesn’t mean you have a bunch of employees. They’re coming in and out of your store. It doesn’t have to look that way. It can simply be a holding company for holding your assets for a particular reason because there are lots of tax benefits and protection benefits.
There are people coming in out of the door or they are selling at the farmer’s market or they are selling on Amazon. There’s a business and they’re not incorporated. Those people are what’s called sole proprietor. You could have 100 employees and be a sole proprietor. The problem with being a sole proprietor or not doing something with your intellectual property is that if there’s any challenge, let’s say there’s a lawsuit, somebody sues the business. Instead of only having the business at risk, when you’re a sole proprietor, everything you own, your equity in your home, the art that your grandma gave you when she passed, the coin collection from your dad or whatever and your kid’s college savings, anything you have are all up for grabs. If you lose the lawsuit, you can lose everything. The reason corporations and LLCs exist to separate these assets from these assets so that if some problem happens over here, it doesn’t bleed over into this. In this case, your business challenge doesn’t bleed over into your personal estate. I’ve raised five teenage drivers. If you have a problem at home, you don’t want that to bleed over and have somebody that your kid rear-ended going over and taking your company or your intellectual property or your inventions.
You guys have something you call the Rockefeller Strategy, which is a real estate model of having a holding, a trust in estate for real estate retirements and all of those things. You’ve got this program. I was thinking about it. You have this wonderful event. It’s called Magnify Your Wealth. It’s one of my favorite events. I love to come to it because I learn something new. My business is always at a different stage every year when I come. I hear something new. The last time I was at one of your events, I heard something that I had been ruminating in the back of my mind about using an insurance policy model of funding future development work. I was like, “Now, I have somebody I know I can ask my questions,” but a year prior, I would have gone, “I don’t need that.” There’s always something interesting I get out of it. What I loved most about it when they talk about the Rockefeller Strategy is that I was starting to think about this as being an ideal way, especially for licensing intellectual property.
Whether you’re licensing it back to your core business or licensing it out to others, it gives you that protection separation that I found over the years. What many people may not realize is that Tom and I have been in six lawsuits over intellectual property. You cannot do as many patents and not have entanglements. Whether you have to sue someone because they’ve infringed or they’re claiming intellectual property, that your patent’s not valid. There’s a whole bunch of stuff that goes on or confidentiality. To think that if we hadn’t had businesses in all those times, which I never saw myself as an entrepreneur. The sole proprietor thing or winging it never occurred to me. I always saw us as a business, so we were always incorporated. If I hadn’t done that, that would have been dangerous. This is an advanced strategy. Talk a little bit about how that works. Your team is an expert in this but talk about why that’s important.
The legend is that John D. Rockefeller and he is the third wealthiest person to ever live on the planet in history. On his deathbed, Mr. Rockefeller told his children that the secret was to own nothing and control everything. He was a big-time player. He makes Jeff Bezos, Bill Gates and Warren Buffet look like beginners as far as wealth. His wealth was enormous that there’s nothing to rival it with anybody alive. This idea of own nothing control everything was the same idea that Sam Walton mimicked. Another guy who became the richest man in the world. Everybody who’s seriously wealthy is doing this. We call that strategy. It was a real estate strategy.
You talk a lot about that at the event because you have more real estate investors.You don't want too much, and you don't want too little; you want exactly what you need. Click To Tweet
I’ll tell you who uses it a lot, movie studios with intellectual property. We regularly have movie studios come and set up a Rockefeller Strategy and they’ll set up multiple corporations underneath the strategy to own different parts of the movie. The idea is simple in its most simplistic form. You have a holding company and an operating company. The holding company is where you put the intellectual property. That’s where you put your money, your intellectual property, your heavy equipment, anything that is critical to the progress and success of your business. Nobody knows about that company. That is a time to use Nevada or Wyoming, not Delaware. Delaware’s for publicly-traded companies or companies that are going to be purchased by public companies. Nevada is the most privately held business-friendly state. You have this private company in Nevada and then you have your operating business that’s going to trade shows, you got a website, you got a podcast, you got business cards and pop up banners. The operating business is the one that’s doing business with the public and their selling pens, but they’ve licensed the technology, the patents from the holding company to the operating company.
What happens is the holding company says, “I don’t know how successful these guys are going to be and because they owe me a lot of value back in this agreement, we’re going to put liens against the operating company so if they have a problem, we’re the first ones to get paid.” The operating company gets a lawsuit. Somebody comes after them and they win the lawsuit against the operating business. There’s a judgment of X dollars. Before the new creditor can get paid, there’s something in the law called first in time, first in line. The holding business that has the liens, remember you’re controlling both of these companies. The world doesn’t know that. They are separate legal paper people. They are utterly separate from each other. One doesn’t own the other. They have common ownership, but this one doesn’t own this one. When the judgment comes, before they have to pay a judgment creditor, they have to pay their bill back to this company. This company sucks all the value back and leaves the judgment creditor high and dry. That’s powerful stuff.
I keep thinking about that as being valuable in terms of also making it easier to spinoff and sell off the license later as well because you have that whole entity. You could sell the entity along with that if you’re not holding multiples at the same time. That’s a smart strategy as well from a patent standpoint because it makes it a smoother transition because it’s messy when you try to sell a patent out of your company.
If you look at iconic things like the Coca-Cola formula or the Coca-Cola logo, it was famously known and although this is no longer a great example. Geoffrey the Giraffe for Toys “R” Us, they’re all held in separate corporations.
The brands have value. When your brand grows into an icon like that, it has a tremendous amount of value in and of itself.
My business partner was going in a car ride with his neighbor who happened to be the CFO of Intel Corporation. They were talking about corporations and LLCs. This guy was saying as CFO, he has the responsibility to keep track of several thousand corporations and LLCs that hold all the patents and all the different pieces of intellectual property and this one contract with this one affiliate or whatever. All in separate corporations or LLCs that are not businesses, they’re holding assets that are critically important to things that big Intel Corporation is doing. Hopefully, we’ve given a number of examples of why you would want to take your intellectual property and put it into an entity to keep it separate from anything that might negatively come into your life. Like divorce or medical bills because somebody gets sick. You don’t want your valuable asset out there flapping in the wind for somebody to come and say, “We’ll take that.”
There are also great tax benefits to utilizing these strategies as to forming a company. Please form a company from the standpoint of it. If you’re earning income, if you were making money on your products, if you were doing any of that, it’s extremely important you have a corporate formation of some kind whether LLC, S corp or a C corp. Whatever it is, you need to get some advice and get that going. I get this all the time, whine from a lot of the eCommerce sellers who are getting hit with huge tax bills at the end of the year because they didn’t realize how they were categorizing their inventory. There’s a whole bunch of issues they don’t understand when you go into it. Having a company and having that can at the end of the day save you. I had a negative tax rate because I got so much back. Normally, our average is under 10% for a tax rate.
You have to have the revenue to have tax. If you don’t have any revenue, then your taxes are not a big concern. Here is the biggest problem wealthy people have. When you have more money than you are consuming, you go, “I’ve got this extra thousand dollars or million dollars, what am I going to do with it?” You say, “I’ll invest it in something. I’ll buy a building. I’ll invest it in a project. I’ll put it in gold. I’ll do something.” When that works, you’ve put this money, you’ve got another gain and there are more taxes. When you become wealthy, it becomes a full-time job figuring out what do I do with this money? If you don’t plan with an intention, if you wait until it hits you, you’ll end up paying the highest tax rates possible. If you get proactive and are looking at new tax planning, you can reduce your taxes down usually to very low numbers. You even hear about certain big corporations who pay nothing in taxes, even though they make huge profits. Any rules that are established for the big companies probably apply to you. When you hear about huge campaign donations by all these wealthy people or these companies are supporting a certain candidate. You need to understand the reason is that they want the candidate, if they get elected, to do things to help their business be more successful and pay fewer taxes every single time.
I worked for Roger Milliken, Milliken & Company in South Carolina and they are famous for being libertarians. I went to Freedom School. It was a part of the leadership orientation training they sent me to. They send me to Freedom School for a week where you learned about why the government shouldn’t interfere in businesses. Why the union isn’t helping the business grow even though you can’t get union bust. They would teach you not to union bust, but they would teach you about how we didn’t want to engender an environment because it makes everybody else lose jobs. That’s what they were talking about and noninterference thing. Roger Milliken was one of the first corporations to start to make significant donations into candidates.
I wrote this on an article a long time ago. What I learned was exactly that. In order to get what you need for your business and make sure that it’s growing, make sure that you can keep the employees employed, keep the business and growing in the region in which you want to stay in. Because when you start a business in your hometown, you do want to keep it there. You don’t intend to move it. That becomes necessary if you don’t lobby. This starts. It’s important to understand that’s what’s happening. It’s self-serving, but it’s self-serving for the corporation, which serves employees too.
It’s also our democratic process. We want to put people in office who we believe will represent our best interest. Most of those people don’t see a direct connection between their day-to-day life and what’s going on with the Capitol Building in your State or in DC. They hear all the salacious stuff, but most people don’t even know who their representatives are. For those people that have skin in the game like business owners, like people who own real assets, who own real estate and so on, they want someone who’s going to represent their desire for their personal life. The reason businesses make contributions is to get favorable treatment by the political bodies. You don’t have to be a gigantic company with hundreds or thousands of employees to get the same deductions that the big guys are getting. Somebody who is working from your spare bedroom or from the front seat of your car or whatever, can take these deductions if you’re properly organized. If you’re not, if you think of yourself, “It’s just little old me sitting in my dining room table. I’m nothing. I’m not making much money,” you will miss out on huge opportunities to live a highly pre-tax life.
It doesn’t necessarily mean that your product. The product itself doesn’t have to be making money. If you are making money, whether you’re making W-2 income and this eCommerce business is your side job. It’s your night gig, your side hustle. If that’s how you’re doing it, remember that many of these tax breaks can roll back in and get your tax back from that income. This is what happened to my dad. My dad is retired. He was pretty upset because the property taxes are no longer deductible. He took a big hit. The interesting part about that was he was coming back to me and saying like, “My children ended up no longer deductible because she aged out.” She’s no longer deductible.When you become wealthy, it actually becomes a full-time job figuring out what to with that money. Click To Tweet
They’ve doubled that deduction for the younger ones.
I got double the deduction, so I netted out even. I netted out better because I got two younger ones and one older one. I netted out better there. The property taxes were completely offset by business credits. I got a big check back and my dad was looking at me like, “I’m lucky. I barely managed to get it so I didn’t have to pay in more than $500.” That’s how he was and that was like, “I felt like I won.” That’s what’s happening. Keep in mind there are some strategies and even when you’re in the product development process, there are many discounts that credit back that you get to take. You can take them in the early years that can offset the cost that you’re spending to make your product come to life, to get your invention to market.
If you’re a C corporation, you can do what’s called a tax loss carry forward. The tax loss carry forward means all the money we’re spending to build this thing and get it going, pay the lawyers, do the patent and do all these expenses so you don’t have enough revenue. You’re spending way more than you’re making so you don’t have any tax. If you’re a sole proprietor or an S corporation, you can lose the tax loss carry forward. If you’re a C corp, the difference between what you spent and what you made instead of it evaporating at the end of the year can be carried forward for up to twenty years.
That’s a huge benefit if you’re building something that’s going to have licensing fees and/or royalties for future it. That’s a great way to look at that. We do that. I should mention to everyone. You got to consult your tax attorney and find out if it’s okay for you. Make sure that your advisor is telling you that this is okay. One of the things that we do is we don’t expense all the expenses related to a particular patent invention if we think we’re going to license it. It’s different if we’re going to within a few months bring it to market. If it takes us a year or more to development, we save those costs and we don’t expense them against the business. We hold them separately to help raise for the basis because when you start to license something like that or you make royalties on that, it’s all straight income. It’s all straight earnings and you need something to set against it. If you sell it, you also want a cost basis to set against it so that you don’t get hit on 100% of that because you didn’t have any expenses.
Your baseline was zero.
We do that. Because we have enough money in our business and maybe not enough revenue in certain years, we hold those expenses separately and you track them separately. They’re on our balance sheet but not on our P&L and not on our cashflow.
These things that we’re talking about, they’re very accessible but they’re not simple. There’s no one-size-fits-all plan. You want to be able to sit down with people. The reason I wanted you to come and speak at our event is because you bring unique knowledge for my following, my tribe and my customers. I believe that there’s a group of them who are going to benefit from having access to you. Likewise, somebody in your industry having access to somebody like Kevin Day to talk about estate planning or Jim Conaway to talk about financial strategy or whomever you choose to use. We bring people to speak at the event and the reason we call it Magnify Your Wealth is because no matter where you are, early stage or quite wealthy, we can show you how to get more bang for your buck from whatever you’ve got.
This is something I also want to mention out there. I know a lot of you are doing social good products because I hear a lot of that. There are also some great social good strategies. I love some of Jim Conaway’s strategies for social give back programs and there are some amazing things there that you may never have heard of before that are not only tax saving. They do something that you’ve wanted to do, whether you’re trying to do in your business anyway.
There are many things that the average small business owner has never heard of. They’re not weird or super exotic. I wonder if that’s legal. It’s not like that. It’s that you’re busy doing what you do. You’re good at doing what you do and there are other people who are specialists, related to money, taxes and asset protection that are highly focused on that. When you can sit down with them privately and start to work out a strategy for your unique situation, it’s super valuable. It’s why this event has continued to be successful for many years because we limit the number of people, we keep it small and we bring them in. You can sit down privately with the experts and get your specific questions answered so that you can leave there with a game plan and not a whole bunch of disparate information. You’re going, “I don’t know what to do with this,” like you get at most events. You’re going, “This sounds cool, but I don’t know what to do next.” When you leave my event, if you want to, you will have a plan.
You can execute that over the next year or over your time. You know the right people at that point. That’s what I love about it too. You have a great group of people and these aren’t people who come in and been assembled. You’ve been working with them for years and it shows because everybody has a great dynamic.
You just got invited to speak and I’ve known you for several years. I’ve been using you guys to help with my podcast. I have all these warm feelings about the Hazzards. I was listening to your interview style and I was thinking, “We’re the same in how we do this.” My point is that I want to make sure, not that I care about somebody or enjoy somebody, but I’m seeing what they’re promising is happening before I bring them in front of my audience.
This is why I brought Aaron on for you because you know that I have a “been there, done that” again and again rule with all of the experts that are on my platform. They don’t get invited in to do more than guest once if they don’t get invited into the expert platform side of it without having been someone I would refer every single day for my own clients that have done business with me for a while. That’s how we work on the expert side of it. We don’t pay referral fees or do any of that. That is not what we’re about on Product Launch Hazzards. It’s a direct relationship. We all collaborate together. I already have been referring you. Laughlin has always been getting referrals from us. We all send our clients to you. Why have I not had Aaron on and had a face put to this expert that we share with people? You don’t have a real profile and I don’t want to put a corporate logo there. I want to put a real face to it.If you follow the recipe to bake chocolate chip cookies, odds are you're going to get chocolate chip cookies, not waffles. Click To Tweet
That’s why Aaron has been invited but there’s one more thing that I want to touch on that you do that is unique. You have a podcast called The Unshackled Owner. You have a program and I love this program because there are some people who’ve already started it. They feel that pressure of it. I know you have one in your mastermind group where they’ve built this eCommerce business that has gotten to be multimillions of dollars. It’s starting to weigh on them and it’s starting to be such a day-to-day business. Your tagline or your motto is that you want to build a business that works harder for you than your work for it. I love that because becoming unshackled from a business sounds like a future retirement plan.
Thanks for bringing that up because we’ve been talking about Laughlin Associates, which I own and I love. We’ve got phenomenal people. We do great events. We do the Inner Circle, which is like a mastermind but it’s a way to get a little deeper.
It’s a nitty-gritty mastermind. We get practical movements in it and that’s what I like about your mastermind.
The unshackled owner is me. The unshackled owner is what I’ve learned over 35 years of growing successful companies. I know you have these experts on your team that you this every day. Do I know how these things work? Yes, of course. Do I do them? No, I own things but I’m not operating any businesses. I haven’t even walked in the door of Laughlin Associates for over a couple of years. I haven’t gone and visited my team there other than on video conference. We’ve got a whole bunch of people there and we’ve got many tens of thousands of clients. When I first bought it I was there four and a half days a week for the first couple of years. I had to be away from my family and down in Nevada to rethink this business using the tactics that I’ve used successfully for all these years. I thought all successful entrepreneurs we’re doing the same thing I was doing.
I’ve learned that they’re not because I have all these companies that are anywhere on the smaller end in the unshackled owner class. We might have a dentist who’s doing $750,000, $800,000 a year all the way up to a government contractor doing $80 million a year in the class. We have people with two or three virtual assistants and all the way up to my largest client with over 2,000 employees. I have clients in the class who are from all over the world, Romania, England and Canada. I’ve had people from South American countries, from Brazil, from Columbia and from Venezuela. These principles that I teach always work. Over 200 companies have gone through the class and we’ve never been asked for a refund because it works. If you learn how to bake chocolate chip cookies, if there’s a recipe and you follow the recipe, odds are you’re going to get chocolate chip cookies. You’re not going to get waffles. You’re not going to get a bike. You’re going to get chocolate chip cookies.
Most people go out there and they’re trying to make it up. They’re going, “Maybe we should put some vanilla in. Maybe we should put in some squash.” They don’t know what to do. They’re throwing stuff in going, “What I wanted was chocolate chip cookies.” As you get to a place where you either want to know from the beginning how to do it and not have to go through the pain. What normally happens is people become successful, they’ve become wealthy and they have no life? They’re a slave to their company. Those are the people primarily that come to me and say, “This sucks. I don’t want to be doing this anymore. I have all this money. I have all this opportunity. I live in a beautiful home. My family’s going on vacation but even if I go, I’m still sitting there on my laptop in the hotel room or having my cell phone with me at the pool because I have to be ready for this call. I have to be checking for this email.” You don’t have to live like that.
I want to tell a little story about one of the first times I met you. Aaron and I met at a networking event. I had been listening to his previous podcast called The Lookout. I said, “That voice sounds familiar.” It took until someone said he had a podcast that I looked at my phone and I go, “That’s the same person.” The voice had been in my head from the podcast. That’s how it happened. We got to know each other over that course. I had been working on a business plan for our design business for how we were going to grow it in and I’d been hesitant about adding employees. I had felt that burden of it. When someone hears that word shackled or unshackled, that’s the one I hear. Having many employees that it keeps me worried up at night, stressed about whether or not I have enough business on a constant basis. Retail and design businesses are up and down and seasonal. You got up and down and seasonal and they’re all weird season times because you get Chinese New Year.
March is the worst month of the whole year because of the cascade of getting paid. Thinking about that was like, “I didn’t want to grow the business because I was worried I didn’t, but I was at capacity for the amount of work we could do ourselves.” I was trying to figure out alternative ways to grow the business. I came to Aaron and one of these plans had employees in it. He looked at me and he said, “I’m going to be straight with you. I don’t think you want this business. I don’t think you want these employees.” I burst into tears. It was the right thing to say to me because it started to get me thinking about what type of business do I want? What does it look like? How does it look? Over time, we are shy of 50 employees worldwide and it doesn’t stress me like that. Growth pain stresses me but that does not. That’s partly because of what I’ve learned from you. I didn’t even take the class yet, which I’m doing. We are doing that.
People talk to me regularly and are frustrated because they’re in love with the thing they’re doing, they’re working hard, they’re spending all their savings and they’re borrowing money from friends or family. They’ve maxed out their credit cards to try to get their thing out there somehow. There are three primary reasons I can think of why things don’t work. If you’re out there struggling, let me give you a few things to think about so you know you’re not alone. One is the idea is either ahead of its time. There’s no infrastructure, there’s not a market that understands it. You’ve got this cool idea, but nobody knows what to do with it. They can’t work with you. They go, “It’s cool, but we can’t engage with you because we don’t know what to do with it.” The flip side of that coin is your idea is crummy. Your idea sucks and no offense, but many people are trying hard to push something at a market that doesn’t want it. The first reason people struggle is because of the idea. It’s great, but it’s ahead of its time or it’s something nobody wants.
We call that product market fit.
The second thing is there’s no money. You don’t have enough money to live long enough to bring your idea to the market that exists. Growth pains because when you’re growing, you never have enough capital. You’re always behind the eight-ball trying to find this balance. When you’re growing, at least you can anticipate where we want to level off for a little while and get some discretionary cash collected and that we can grow again. Growth is expensive. The second thing is do you have the money not only to get your idea patented, get your idea promoted, to buy a pop-up banner, to go to a trade show or to go to somebody who can help you? Do you have any money or can you afford the growth? That’s the other thing that kills companies, not that the product is no good, but they don’t have sufficient funding. The third thing is they don’t know what to do. They don’t know how to run a business. You can do okay for a while on your own wits, but you will get to a point if you’re successful where the business concepts have outgrown your knowledge.
I see it all the time that you’re the visionary. I see it in the product world. You’re the visionary, the designer, the brand and you’re that great side of it. We have a lot of our eCommerce sellers who are great on marketing. They’re all in this marketing world and when it’s early on, you can be there. The minute you start to have to build infrastructure, warehousing, operations and it’s not your forte, this becomes an issue. What I find is that our visionaries, our inventors in the world think that their ability to do it themselves, their ability to have great know-how means they should tackle these themselves and figure it all out. That is a recipe for disaster because that’s where we run into the hazards, the rookie errors and the hazards of launching. We also run into the problem of reinventing things that don’t need to be reinvented, having to work too hard to build this when we could be scaling it quickly with an accelerator of someone who knows what they’re talking about and they’re doing. That’s why you’re here, Aaron, because you are someone who knows what they’re talking about and knows what you’re doing.
I had a doctor call me one time on my cell phone. She said, “Can you explain bylaws to me? I’m struggling with some language.” I said, “What do you mean?” She goes, “I’ve been working on writing the bylaws for my new business.” I said, “You’re doing what? What do you bill out at per hour?” She told me, I said, “How many hours have you put in?” It was a ridiculous amount of time at hundreds of dollars an hour. I said, “We could provide that to you for $150.” She’s like, “Are you kidding me?”
You can look them over and go, “That one sounds silly. I don’t need this one.” All you have to do is edit it out.
Entrepreneurs have a tendency to say, “I can figure it out.” This is the other thing that people do that’s penny-wise and pound-foolish. What happens is you have no money when you start. You’ve been spending money and you start to make money so now you can breathe again. You can go to the grocery store. You can go out to dinner. Maybe you buy a nicer car or move into a nicer home or apartment or something. Finally, the company starts to be a burden on you and you know you need to hire somebody to help you, but hiring them means you go back down in income. What is that going to mean? There’s a reason that Mark Cuban who’s on Shark Tank. He owns the Mavericks. He’s a billionaire. He talks about, “I was eating ketchup package. I was stealing from McDonald’s and squirting ketchup in my mouth for sustenance when I was flat broke.” What we’ve got to do is bring on the right team around us to build our business and then we get to make the big money once the system works. At first you have to be willing to live low and bring on the right team. All of a sudden, the business is truly successful and you become wealthy and people are blown away. Jeff Bezos has similar stories. Gary Vaynerchuk, who’s popular, tells similar stories.
I interviewed John Paul DeJoria. He gave me a whole bar-hopping strategy for eating and when you live out of your car as he started his Paul Mitchell brand.
Paul Mitchell is a huge success and another wildly wealthy guy who’s not just hair care but his Patrón Tequila. Another friend of ours, Brian Smith of Ugg, was selling Sheepskin boots out of his trunk to surfers. He had no money. That’s how it starts. Be willing to make the investment into the business and you eat the ketchup packets, you go eat the bar food, not the food on the menu, the food on the counter until the business is solid. When the recession hit, we knew getting our team back together if we had to fire them would be difficult. My business partner and I both took gigantic pay cuts. We both ended up short selling our homes and moving into rentals during the recession, but we didn’t fire our people. We didn’t fire the team. A couple of years later when the market started coming back, we had a team ready to run the business. A successful company is like a goose that lays golden eggs. If you keep the goose healthy, safe, well-cared for, you will most of the time be the beneficiary of the success of the company, but you have to be willing to sometimes go back to eating ketchup.
Tom and I are on 40 patents. We’ve done $2 billion worth of products for our clients worldwide. We went back into rental. We downsized a lot of things and bootstrapped it back so we could build up the second business for us. We realized that we needed to have alternative income because our product business was not going well in the way that the economy and the way everything was shifting. We built that up in time and underneath us so that we would be ready to take advantage of all of that. It involves strategy. It involves great mentors like Aaron. It involves a team. It involves getting to the right events and getting to know the right people. What I want to get across to all Product Launchers is that you’re not building a product, you are building a brand. You’re building an asset that has value. When you’re building those things, you need to support them with people who know what they’re talking about.
You need to support them with tools, systems, things like corporations, tax strategies and all of those things. You want to maximize the benefit of this blood, sweat and tears you’ve put into your ideas and your inventions. You want to make sure they’re happening. You also want to make sure and this is one of the things that I love about Laughlin and I love about Aaron, they’re going to tell you you’re not ready yet to form a corporation. When this is ready and this is ready to launch, we’ll form the corporation and put the patent in it. They’re going to advise you timing too. They’re not going to sell you something too soon. It’s not in their best interest to do that and that’s critically important. Thank you, Aaron, for coming and talking with my group and thank you for having our business back. I appreciate your team and everything that you all do. I appreciate you and we haven’t gotten to talk about your lovely wife, Michelle. I do mention her on the show occasionally to people, so they do know about her. She is my personal coach and my good friend.
She’s the bomb. Michelle’s great. We celebrated many years of marriage and I couldn’t be more thrilled with the person that I married. I don’t know how we knew. I was 22 and she was nineteen. We went on our first date in September and got married in February. How did those kids get it right? I don’t know, but I’m glad that she gets a little coverage here.
Every so often I’ll throw out Michelle and give her credit for it when I’m sharing that with the community. It’s important to have support in whatever way you need it. That’s from personal, professional, your friendships and advisors. All of that support is critical to it. I could not do these businesses if I didn’t have Tom having my back and being part of my collaborative vision together. That wouldn’t work for us either. Everyone out there, Product Launchers, this is why I brought Aaron. This is why I bring Laughlin to you whenever you call me and I share that with you. This is why. I wanted you to have a person, a face to put to it, not a corporate logo because they’re not that at all. Every person behind their company has the same commitment and heart that Aaron does. I love your entire team. You have the best. We’ve modeled a lot of the customer service that we have on our podcast production business off of the customer service and the way that you guys touch base with us because it is personal.
The company is 48 years old and we have learned things. I always ask when I speak, “Is there anybody here’s a Laughlin client?” Anywhere I go in the world, somebody’s hand goes up and I never have to be worried about what that person’s going to say. I know they’ve had a good experience. I hope that somebody reading this will say, “I would like to get a little closer to that group and not feel like you’re going to get sold like crazy.” It’s a matter of getting the right pieces in place and then having a map to grow. Understanding where milestones are that you will then say, “Now, it’s time to look at doing something more.”
Our second step in our process is about planning. This is part of your planning. It’s not about the product. It’s about what my brand might look like. How I might sell it someday. How I might license it. What does the plan and understructure of that whole thing look like? It’s bigger than just product development. That’s where a lot of our people get a little narrow-focused. They get a little tunnel vision on all about their product, you and I both know that. We talk to them all the time, but this is the bigger vision. We need to open up and think about this because this is how you’re going to reap the benefits, stay secure and do all those things. Thank you so much, Aaron.
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- The Unshackled Owner – podcast by Aaron Young
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About Aaron Young
Aaron Young is a renowned entrepreneur with more than 30 years experience and several multi-million dollar companies under his belt. Aaron has made it his life’s work to arm business owners with success formulas that immediately provide exponential growth and protection. Fully embodying the concept of the unshackled business owner, he inspires others to do the same by empowering them to build strong companies while proactively protecting their dreams.
This is what Aaron knows. When you have the right systems and culture in place, you can build a business that works for you. One that is optimized for cash flow, growth and progress.
A lifelong entrepreneur, trusted advisor to CEOs, Outsourced Chief Strategy Officer and creator of The Unshackled Owner (a program for entrepreneurs looking to build a business … not just a glorified job), Aaron is armed with the expertise needed to quickly get to the heart of complex issues, identify solutions and illuminate the path to forward progress. His unique vantage point sets him apart from the crowd as a voice of real-world knowledge and authority. Connect with Aaron at www.aaronscottyoung.com.