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BUSINESS LESSONS THAT AREN'T TAUGHT IN SCHOOL · Earn Your Leisure

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  Speaker 1: An illegal alien from Guatemala charged with raping a child
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  Speaker 2: Sponsored by the United States Department of Homeland Security.
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  Speaker 3: When you talk about the franchise business that you had
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  Speaker 3: a little bit because you had it's called super Weave Express,
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  Speaker 3: Yeah super so what what was the so? All right,
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  Speaker 3: super Weave Expressed. I'm assuming it was weaves.
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  Speaker 4: Hair extensions, hairstention of full service of.
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  Speaker 2: The business man.
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  Speaker 3: So that's a billion dollar business. Right. We talked about
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  Speaker 3: the hair business, but not really in depth. But what
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  Speaker 3: made you want to go into as a man? What
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  Speaker 3: made you want to go into a woman's industry?
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  Speaker 4: Man? You know?
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  Speaker 5: I mean it's it's it's a supplying demand thing, right,
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  Speaker 5: So as entrepreneur, you know, you got a supply a
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  Speaker 5: product and if there's a demand for it and there's
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  Speaker 5: a spread, then you can make a profit.
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  Speaker 4: And that's the only reason why I looked at it.
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  Speaker 5: Actually, the founders of that company are actually from my hometown,
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  Speaker 5: port art To, Texas, and they had several locations and
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  Speaker 5: I sat down with them and they showed me the
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  Speaker 5: revenue numbers and their store was doing like half a
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  Speaker 5: million dollars a year, and I was like, man, I
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  Speaker 5: had no idea the weaves.
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  Speaker 3: Yeah, it was a physical brick and mortar store.
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  Speaker 5: Brick and mortar store they had, they had a stylist there,
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  Speaker 5: and they it was a commission based salon, so they
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  Speaker 5: got a percentage of the commission. But they did all
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  Speaker 5: the marketing, they did all that advertising, and then they
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  Speaker 5: assigned clients to the customers that they came in, and
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  Speaker 5: they also supplied the hair, so they bought it at
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  Speaker 5: the wholesale price sold it that retail.
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  Speaker 2: So you bought a franchise correct, Yeah, brought franchi. What's
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  Speaker 2: that process like? Because I think we spoke about that
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  Speaker 2: in one of our early episodes about being a franchise e.
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  Speaker 2: What's that process like? And how'd you get involved?
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  Speaker 5: So the whole franchise model is basically, instead of you
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  Speaker 5: starting a business from scratch, you are identifying somebody that
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  Speaker 5: already has a business that appears to be successful, and
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  Speaker 5: you're paying them to use their branding, to use their
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  Speaker 5: their business model, you know, their business plan, and in exchange,
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  Speaker 5: you're going to pay them up front, you know, as
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  Speaker 5: a as a fee to get in, and then monthly
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  Speaker 5: they're going to take a percentage of your revenue, you
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  Speaker 5: know what I mean.
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  Speaker 4: And so that's that's what your franchise fee is. And
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  Speaker 4: the thing.
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  Speaker 5: That most people don't realize is that the average business
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  Speaker 5: is only profitable within the fifteen to twenty percent margin range. Right,
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  Speaker 5: So then when you're a franchise e, if that franchise
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  Speaker 5: says their royalty is what it's called if it's forty
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  Speaker 5: eight percent, that's for eight percent of your gross So
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  Speaker 5: they are a top line expense. They don't wait to
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  Speaker 5: see if you're profitable or not on the back end.
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  Speaker 5: So franchises, they can be good because it takes a
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  Speaker 5: lot of the risk out of what you're doing, but
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  Speaker 5: your profitability goes down.
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  Speaker 4: You said that's the trade off.
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  Speaker 3: Can you can you explain that when you said the
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  Speaker 3: average business is profitable fifteen to twenty percent in the
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  Speaker 3: profit market, can you explain that, like what that means
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  Speaker 3: to the average person that may not understand that.
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  Speaker 5: So the biggest issue that I see with a lot
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  Speaker 5: of us, a lot of the biggest thing that we
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  Speaker 5: have a lack of exposure to when we start businesses.
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  Speaker 5: We listen to what somebody clots is their revenue, right,
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  Speaker 5: and that's the growth. So that's every dollar you've taken in.
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  Speaker 5: But that doesn't include what your what your rent cost is,
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  Speaker 5: what your labor cost is, Yeah, your what your what
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  Speaker 5: your product cost is. You know, even when you bring
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  Speaker 5: in money, if you're in a business that has a
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  Speaker 5: lot of merchandise and products, even if you have profit,
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  Speaker 5: usually if your business is grown, you got to take
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  Speaker 5: all of that revenue and put it right back in
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  Speaker 5: the business to re up on your inventory and probably
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  Speaker 5: buy more inventory to keep up with your demand. So
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  Speaker 5: there's a lot of money you can't really pull out
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  Speaker 5: that pipe. Then you got like utilities, you got taxes,
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  Speaker 5: you got all these expenses that come along with running
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  Speaker 5: a business, and then what's left is profit. So and
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  Speaker 5: most of the time that's fifteen to twenty percent, especially
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  Speaker 5: if you're brick and mortar.
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  Speaker 2: You said that was one of your business mistakes, is
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  Speaker 2: getting into a business based on that revenue and not
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  Speaker 2: their net profit.
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  Speaker 4: That's it.
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  Speaker 2: How did that come about? How did you realize, like,
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  Speaker 2: this was a mistake that I made.
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  Speaker 5: Well, this business specifically, so when we opened, we hit
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  Speaker 5: a home run. You know, the first year we did
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  Speaker 5: four hundred and fifty thousand revenue. It's like sixty percent
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  Speaker 5: from the retail side and forty percent from the services side,
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  Speaker 5: which is a hairslon. But the expenses were so high
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  Speaker 5: and we had to keep so much money tied up
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  Speaker 5: in it that at the end of the year, what
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  Speaker 5: was left on the table was about sixty thousand dollars.
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  Speaker 2: Wow.
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  Speaker 5: And then I had a partner, so now you're splitting
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  Speaker 5: two ways. So now for all that work, you make
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  Speaker 5: thirty thousand dollars a year.
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  Speaker 3: Oh that's crazy? Can you can you just go into that.
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  Speaker 3: You said that your your net was six hundred thousand,
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  Speaker 3: four hundred and you you netted sixty thirty. Yeah all right,
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  Speaker 3: yeah thirty? How did that happen? Okay?
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  Speaker 5: So number one, we went We wanted to be in
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  Speaker 5: the prime area, so we went and got a retail
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  Speaker 5: space in a shopping center. We were like between a
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  Speaker 5: salad beauty supply and the SAMs, and so that was
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  Speaker 5: like five grand a month right there off the top. Then,
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  Speaker 5: since neither he nor I were stylists or we know
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  Speaker 5: how to run us along, we had to hire a
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  Speaker 5: manager and we had to have an assistant. So that's
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  Speaker 5: seventy grand right there. And then you know the revenue
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  Speaker 5: for the hair extensions, you know, only about thirty thirty
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  Speaker 5: five percent that's profit.
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  Speaker 4: So we spent two hundred thousand on that.
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  Speaker 3: So you know.
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  Speaker 5: That that river new looks like it's really high, but
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  Speaker 5: when you look at all those fences, it gets really
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  Speaker 5: gets smaller. Then you got utilities, you got product, you
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  Speaker 5: gotta keep in us loan for the stylus to be
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  Speaker 5: able to use. You got marketing and advertising. We were
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  Speaker 5: spending like five grand a month to stay on the
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  Speaker 5: radio to keep people walking through the door.
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  Speaker 4: You got insurance earners.
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  Speaker 3: What's up?
• 6:18
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• 6:21
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  Speaker 4: So it's a lot of expense that's tied to that business.
• 9:09
  Speaker 2: And this is what this is twenty seventeen.
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  Speaker 4: This was two thousand and fourteen, twenty fifteen.
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  Speaker 3: Okay, yeah, I'm glad you said that because a lot
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  Speaker 3: of times people don't fully understand a reason why most
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  Speaker 3: businesses fail, right financial issues. You don't fully understand what
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  Speaker 3: goes into making a business. So even if you make
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  Speaker 3: almost in your case, almost a half a million dollars
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  Speaker 3: a year, you still might be broke. You end up
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  Speaker 3: making thirty thousand dollars just like you could have worked
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  Speaker 3: a part time job really and now, but that business
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  Speaker 3: is probably taking like ten hours a day for you
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  Speaker 3: to actually run maybe even.
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  Speaker 5: More exactly right. And we were open seven days a week,
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  Speaker 5: so there was no days off, you know. W Yeah,
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  Speaker 5: so even though you have a manager, and manager still
• 9:43
  Speaker 5: looks to the owner and make final decisions.
• 9:45
  Speaker 4: On things, so you're on call all the time. You know.
• 9:47
  Speaker 5: I tell people a lot of times what you said
• 9:49
  Speaker 5: is exactly right. You may leave the comfort of a
• 9:51
  Speaker 5: job to start a business not really realize that you
• 9:53
  Speaker 5: just created another job for yourself with less benefits, with
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  Speaker 5: nothing to fall back on, you know. So it it's
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  Speaker 5: got to be the right decision. You got to really
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  Speaker 5: understand the business you're getting into.
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  Speaker 3: Now that's a fact. So what would you what would
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  Speaker 3: your suggestion be as far as an entrepreneur, an inspiring
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  Speaker 3: entrepreneur that is going out there, would you say that,
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  Speaker 3: you know, looking at expenses is just as important as
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  Speaker 3: looking at what they could potentially make.
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  Speaker 4: Much more important, much more important, much more important.
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  Speaker 5: Yeah, And you know, and I highly advocate getting a
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  Speaker 5: mentor somebody that's doing it.
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  Speaker 4: And you know, because it's.
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  Speaker 5: Hardly a business you're gonna find where somebody else isn't
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  Speaker 5: already running a business like it. And I encourage people
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  Speaker 5: to try to find somebody in a different market that's
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  Speaker 5: doing the same thing so that they're more open and
• 10:36
  Speaker 5: willing to talk to you about the ins and outs.
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  Speaker 5: The nasty part that people don't talk about, you know
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  Speaker 5: what I mean, because they won't feel they're creating their competition.
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  Speaker 5: But a lot of times, a lot of them just
• 10:45
  Speaker 5: want to vent and they want to talk about, you know,
• 10:46
  Speaker 5: the real issues, and they don't want to confide in
• 10:49
  Speaker 5: their friends that their immediate circle because everybody looks up
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  Speaker 5: at them puts them on a pedestal for having this business.
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  Speaker 5: But so it kind of gives you an opportunity to
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  Speaker 5: be a sounding board and really learn the business.
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  Speaker 3: And also, experience is always the best teacher as well.
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  Speaker 3: I mean, no matter how much, you're still gonna have
• 11:06
  Speaker 3: to make mistakes to learn your own. Yeah, but like
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  Speaker 3: you said, you kind of curve the learning curve a
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  Speaker 3: lot if you actually have a mentor or you're working
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  Speaker 3: under somebody.
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  Speaker 2: For it's not about what you what you make, it
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  Speaker 2: is about what you keep now yeah sure.
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  Speaker 5: Yeah, and your school kind of conditions us to try
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  Speaker 5: to learn how to get it right on our own first.
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  Speaker 5: Don't cheat, don't copy off for somebody. But when you
• 11:25
  Speaker 5: get in the world of business, your best bet is
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  Speaker 5: to copy the right cat.
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  Speaker 3: Try to read. That's you know, that's a good point.
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  Speaker 3: That was excellent. Now that's actually a really good point.
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  Speaker 3: Never really thought about it like that.
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  Speaker 5: Well, I mean, and that's something I teach too, like
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  Speaker 5: because I mean, so many people in corporate America that
• 11:39
  Speaker 5: are trying to get out and I just tell them.
• 11:42
  Speaker 5: Number one, you got to retrain the way you think
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  Speaker 5: about everything because school now only school teach you not
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  Speaker 5: to cheat. School teaches you that if you're wrong more
• 11:49
  Speaker 5: than ten percent of the time, you are not the best.
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  Speaker 5: All A students got to be writing ninety percent of the
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  Speaker 5: time or more consistently to stay to stay up up
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  Speaker 5: on that pedestal, whereas you got a lot of people
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  Speaker 5: that were and d students failed. They comfortable failing twenty
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  Speaker 5: thirty percent of the time all the time, and at
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  Speaker 5: the end they got the same diploma you got.
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  Speaker 3: You know, Jack mad said something interesting. If anybody that
• 12:10
  Speaker 3: doesn't know who that is, that's the head of Ali Baba.
• 12:13
  Speaker 3: He's one of the richest people in the world. And
• 12:15
  Speaker 3: he said, he told he tells his son that you
• 12:17
  Speaker 3: don't have to be an A student. It's okay to
• 12:20
  Speaker 3: be a C student because those are the only people
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  Speaker 3: that have enough time to be well rounded and to
• 12:25
  Speaker 3: experience a lot of different things. Because if you've the
• 12:28
  Speaker 3: theory is that a lot of times it's like doctors, right,
• 12:32
  Speaker 3: a lot of times they don't know anything about a
• 12:35
  Speaker 3: lot of stuff because they focus so much on medicine
• 12:39
  Speaker 3: and passing all the tests. They don't know how to
• 12:41
  Speaker 3: write a check. Right. So what you're saying actually makes
• 12:45
  Speaker 3: a lot of sense, and it is an issue with
• 12:46
  Speaker 3: the school system because even if you look at a
• 12:48
  Speaker 3: sport like baseball, you bat three hundred, you got four hundred.
• 12:54
  Speaker 3: That's less than fifty percent. Yeah, you expect somebody to
• 12:57
  Speaker 3: do eighty ninety percent. Yeah, it's not realistic. In the
• 13:00
  Speaker 3: real world, you make mistake. Especially if you're going to
• 13:03
  Speaker 3: be broad range and have knowledge on a lot of
• 13:05
  Speaker 3: different things. It's hard to just truly master five different subjects.
• 13:10
  Speaker 2: That's one of those questions we used to ask ourselves, right,
• 13:12
  Speaker 2: It was like, should we know a lot about a
• 13:13
  Speaker 2: few things, I'll know a little about a lot of things, right,
• 13:16
  Speaker 2: because that makes you more well rounded when you're versed
• 13:18
  Speaker 2: in a lot of things. Right, Like I don't have
• 13:20
  Speaker 2: a background in business, but I'm willing to learn in
• 13:22
  Speaker 2: these areas. Right, I might not know medicine, but I'll
• 13:24
  Speaker 2: research on it, you know what I'm saying. So we
• 13:26
  Speaker 2: got to keep ourselves well around it. That's why I
• 13:28
  Speaker 2: always stressed, like, education doesn't stop in school, right, right.
• 13:31
  Speaker 2: It goes beyond the four walls of the or the
• 13:33
  Speaker 2: building of school. It goes in the living environment. It
• 13:36
  Speaker 2: goes in the home, it goes into communities. It's all over,
• 13:39
  Speaker 2: it surrounds us.
• 13:41
  Speaker 3: All right. So all right, So that was that was
• 13:43
  Speaker 3: actually really good information as far as for anybody that's
• 13:45
  Speaker 3: looking to get in the business and business owner. But
• 13:46
  Speaker 3: now we're going to go into some more stuff. We're
• 13:48
  Speaker 3: going to real estate. We're also going to go into
• 13:50
  Speaker 3: your career as an engineer. I think that that's interesting.
• 13:52
  Speaker 2: In something I think we've touched on that.
• 13:54
  Speaker 3: We haven't really spoke about that, but all right, so
• 13:57
  Speaker 3: we're going to that in the next segment.
• 14:23
  Speaker 6: You just realized your business needed to hire someone yesterday.
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  Speaker 6: job sites. With INDEED sponsored jobs, your post jumps to
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  Speaker 6: Indeed data, sponsored jobs posted directly on Indeed have forty
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  Speaker 6: five percent more applications than non sponsored jobs. Don't wait
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  Speaker 6: any longer. Speed up your hiring right now with Indeed,
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  Speaker 6: dollars sponsor job credit to get your jobs more visibility
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  Speaker 6: at indeed dot com slash p O d k A
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  Speaker 6: t z thirteen. Just go to indeed dot com slash
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