Daily Task: 15 minutes
Schedule your social media posts for next week. Instructions here.
Project Focus: ROI
This week, we’re going to improve the ROI on your expenses.
Today, we’re going to make a plan for the future.
The key to investment success is to buy things in the short-term that will pay you forever.
For example, you invested money to start a business, but you will derive cash flow from that business for decades.
Another common investment is to buy the building in which your business operates. You save up a downpayment for two years; then pay off that loan over another 8 years; and you receive rent from your business for decades (and then rent from other businesses forever when you retire).
Find one place today where you can pay upfront and reap a long-term return.
We call these “cash flow assets”. Thinking about them helps you make better buying decisions because it forces you to consider ROI in everything.
For example, if you own a gym, you might ask “Should I install a sauna?”
Before you do, you want to plan out the long-term return on your investment. If the sauna costs you $10,000 to install:
How much will you charge to use it? How many uses will be required to break even? How long will it take to sell that many uses? What are the ongoing costs to maintain, power and clean the sauna? How does that affect your breakeven period? How long does an average sauna last? If you continue to sell uses of the sauna at the same rate, how much can you potentially earn (including the costs of maintenance)?
If you don’t charge to use it, how can you measure the return on the investment? Will members stay longer? How much longer? Does the corresponding increase in LTV pay for the sauna? How quickly? How long does the average sauna last? How much do you stand to earn in increased LTV, minus the costs of maintenance and cleaning, over the lifetime of the sauna?
You can do the same calculation for rent. Look at an empty 10-foot area in your garage or salon. How much does that 10 square feet cost you in rent, utilities, etc? Are you earning a return on the investment in that space?
You can do the same for staff. If you’re paying a salary, you’re buying all of their time upfront. Are you receiving the maximum return on their time?
Today, find one way to pay up front and earn a return forever: invest in a cash-flow asset.
Of course, the BEST example of upfront investment for long-term HIGH returns is mentorship.
Here are 10 examples of cash-flow assets across various service businesses that can provide long-term returns on upfront investments:
Invest in setting up an in-house dental lab to create crowns, dentures, and other appliances. This reduces reliance on third-party labs, speeds up service times, and increases profitability.
Restaurant: Outdoor Seating Area
Invest in building a patio or outdoor seating area. This space can attract more customers, especially in good weather, and potentially allow for special events like private parties, increasing your revenue per square foot.
Spa: High-End Massage Chairs
Purchase high-quality massage chairs for a relaxation lounge. You can charge clients for using the chairs while they wait for their appointments, turning waiting time into a revenue-generating opportunity.
Hair Salon: Retail Product Display
Invest in a well-designed retail display for hair care products. This not only enhances the aesthetic of your salon but also increases product sales, providing a steady stream of revenue.
Auto Repair Shop: Diagnostic Equipment
Buy advanced diagnostic tools that allow you to offer more specialized services. These tools can lead to faster, more accurate repairs, increasing customer satisfaction and repeat business.
Yoga Studio: On-Demand Video Platform
Invest in creating an on-demand video platform for yoga classes. This allows you to sell virtual memberships or individual classes, providing a passive income stream long after the initial content creation.
Café: Coffee Subscription Program
Implement a coffee subscription service where customers pay upfront for a monthly supply of coffee. This ensures steady cash flow and increases customer loyalty, as they are more likely to visit your café regularly.
Consulting Firm: Proprietary Software
Develop proprietary software that clients can use to manage their operations or analytics. Licensing this software can provide a recurring revenue stream while also enhancing the value of your consulting services.
Dental Practice: In-House Lab
Invest in setting up an in-house dental lab to create crowns, dentures, and other appliances. This reduces reliance on third-party labs, speeds up service times, and increases profitability.
Real Estate Agency: Virtual Tour Equipment
- Purchase high-quality virtual tour equipment to create immersive online property tours. This attracts more clients and allows you to charge a premium for listings, increasing your commission potential.
Veterinary Clinic: Preventative Care Plans
- Offer prepaid preventative care plans for pets that include regular check-ups, vaccinations, and screenings. This creates a steady cash flow, ensures client retention, and leads to better health outcomes for pets, reducing emergency visits and fostering long-term client relationships.
