Quick note before we dive in:
Big news:
The big beautiful bill passed which means 100% bonus deprecation is back and it's PERMANENT.
If you bought property and placed it into service after January 19th, 2025 you can get a cost seg study and take 100% bonus depreciation in year one.
That's 2.5X more bonus depreciation than the previous rate of 40%.
I get all of my cost seg studies from RE Cost Seg. If you want to see how much you can save with this new law, click here.
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Don't chase status, chase leverage:
A lot of careers are like hot-dog-eating contests.
If you get really good at eating hot dogs, you get rewarded with more hot dogs!
But you don't want more hot dogs... You want more money and time and you want this for no additional work at all.
In reality, what you really want is leverage.
The Goal: A high return on time.
I think the goal of every entrepreneur should be to have enough money coming in the door every month with minimal effort so that you can do what you want to do when you want to do it.
And to achieves this, you have to choose a career with a high return-on-time.
You need to pick something where you can work now, and get paid for your efforts years into the future, even if you stop working later on.
What you need is leverage because leverage leads to freedom. And with freedom, you can build a great life. Without it, it's virtually impossible as someone else controls how much you earn and how you spend your time.
A note on leverage:
If you are easily replaceable, do not own assets or shares in your company that make you money while you sleep, have no other options, and have people waiting in line to fill your spot, you have virtually zero leverage and your life will likely suck.
But if you are hard to replace, own assets or shares, have a lot of other options and nobody to fill in for you if you leave, you have a lot of leverage and you will be able to call the shots.
What leads to a good life, flexibility, income, and the ability to seize opportunities worth going for is leverage, not status.
Leverage is the key to life, so let’s talk about getting some.
What is leverage?
Leverage is something that maximizes your advantage or multiplies your effort.
Imagine a pulley system that makes lifting something heavy much easier.
This applies to business as well.
For example, a person can work alone for one hour and get only one hour worth of work done. But if you own a business and have forty employees, they can get forty hours of work done in one hour for you.
Most people have a very small amount of leverage.
They work two thousand hours a year in exchange for, say, $30,000. They trade one hour of their time for $15.
Other people with a large amount of leverage can work a thousand hours a year in exchange for $300,000. They trade one hour of their time for $300.
Some people have extreme leverage. They have several sources of income, and many of them are passive meaning they do not need to do work or spend time in exchange for money.
They have stocks that pay dividends, or they own real estate that somebody else manages while they collect the rent.
No one decision from their boss or business partner can influence their quality of life. Nobody has power over them. They are insulated from risk because they are diversified.
A story about this:
I talked to a gentleman at a cocktail party a few years ago. He opened up and told me his story.
He bought three rental properties with about $60,000 down of his own money in 2017.
He still had a full-time job, but he did this on the side. Then he hired a property management company to run them so he wouldn’t have to spend much time on the properties.
Now he makes around $5,000 per month on those assets while building equity as the properties in his area have gone up by 50%+ since 2017 all without ever having risked it all on a new idea in an uncertain marketplace.
He chose a boring investment, and the income from those properties has given him a a massive return on time and added a ton of freedom to his life.
He still works his full-time job, which he enjoys, but he is one of many people who have started to gain leverage and stopped trading their time for every dollar they earn.
On the other side, I have a lawyer friend who works seventy hours a week. Sure, he earns a lot of money, but he had no control of his time.
He can't work remotely. He had to get permission several months in advance for any vacation, and it could be canceled at a moment’s notice for a trial.
Hell, he was expected to miss the birth of his first kid for work.
If he stopped working, he stopped getting paid. If his boss said jump, he said how high.
He didn’t have any leverage. His boss did. His clients did. He could not call the shots.
But many of the successful entrepreneurs I know work fewer than forty hours per week. Some earn millions per year. They don’t do manual labor. They could decide if they want to take the day or the week off or go on a trip tomorrow with no one there to say no.
So what do my entrepreneur friends know that my lawyer friend had to learn the hard way? There’s only one answer to that question:
Leverage.
Leverage is what allows them to work so little and become wealthy while others are working so hard just to get by.
So how do we get leverage in all areas of life and business so that things get easier and we can begin operating at a higher level? It depends on these three things.
1. Network
It isn’t just about who you know, it’s about who knows you.
To make money, you need other people to work for you, make decisions for you, help you, and partner with you.
You need vendors. You need people to buy from you. You need investors and experts who can advise you. You need people you can reach out to who can add value to your life while you add value to theirs.
Your network is critical. Eventually, if you know people who know how to run companies, you can pay them to run your companies for you. If you know people with money, you can convince them to invest with you when you want to buy a property or an asset.
If you know people who can work for your companies, they can recruit others to join them. If you know people who are connected, you will be somebody they think of when they spot an opportunity.
Very few people succeed in business alone.
2. Skills
How good are you at making things happen? Building companies or accumulating assets that send you money every month takes skills. It requires a lot of hard decisions. It requires a certain mindset. It requires knowing how to do a lot of things.
Sales. Leading other people. Hiring. Management. Delegation. Decision making. Without experience or practice, you don’t have any of these skills.
People aren’t born with the ability to lead other people. The same goes for hiring, delegating, decision making. They suck at all of it. But if you can build skills that nobody else has, then you are hard to replace and people need your expertise.
So how do you gain the skills? You get out and practice.
All the important skills I discuss are like muscles.
If you wanted to build muscle like Arnold Schwarzenegger, what would you do?
Read about muscles, spend your time making workout plans, get all the necessary supplements and powders, watch videos of Arnold, and think about building muscles? No. You’d go to the gym and lift weights. It’s the same for business.
Reading alone won't help you become better unless you get out and put some of this stuff into action. Skills are acquired in the gym by lifting the weights.
3. Capital
Let me tell you a secret:
It is ten times easier to build a great business when you aren’t strapped for cash in your personal life.
If you can run your company without worrying about paying your bills or putting food on the table, it is a massive advantage.
You can make payroll without stress. You can invest in equipment and marketing. You can invest in growth without increasing your stress.
How much cash do you have in the bank? How much cash do you have coming in every month?
Cashflow lets you hire people, make investments, and, most importantly, take risks. You will be at a disadvantage as an entrepreneur unless you have personal cash flow coming in the door to support your life.
At the beginning, you may have little to no cash flow, but from the moment you are cash flow positive, your life begins to get easier and less stressful.
Entrepreneurs who are wealthy from previous endeavors are able to move faster, invest in growth, and hire ahead of revenue.
They can grow companies much faster than a broke bootstrapper who needs to live on their company in the early days and can’t afford a mistake.
Business is a chicken-and-egg problem in all three of these areas.
It is a massive advantage to do business when you have the network, skills, and capital to grow quickly, but you can’t get the network, skills, and capital until you’ve practiced and built a company.
The most successful entrepreneurs play business on easy mode and achieve leverage because they have slowly and steadily acquired the network, skills, and capital to do so.
They are good at doing what needs to be done to make money. They started with a disadvantage and slowly built their advantage.
It takes time and it takes effort. You can’t build leverage overnight and grow a network, skill set, and income streams out of thin air.
Think of leverage like a ladder. There are rungs on the ladder that lead to higher and higher levels of leverage and thus success. You can’t skip steps. It is a process but is the most important thing you can do to become more free and disconnect your earning power from your time spent on work.
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A few posts to check out:
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Onward and upward,
Nick Huber
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