• The difference between cash and cash flow
• Understanding inflation and its impact on your business
• Strategies for reinvesting profits to grow your med spa
• The importance of creating multiple income streams
• Smart investment options for med spa owners
• Balancing lifestyle choices with long-term financial goals

Transcript: 

Hey, everybody. Cameron Hemphill, here your host for Medical Millionaire. Hey, thanks so much for tuning in to our podcast. Our goal is to give incredible value and insight into the medical esthetics space. And I’m excited. I just got back from a really cool conference in Dallas, Texas.

We were down there at esthetic next, which is put on by an EMR company, esthetic record. And it was really great to be back network. Shake hands, talk to some clients, face to face, talk to some potential new clients. I actually did a speaking engagement on stage, talking about how to run your practice like a business, and it was very well received, and a lot of people came up and talked to me after and it just goes to show that if you can position yourself to engage and take the time to work on your practice and have it run like a business, you’re going to put yourself in a position for ultimate success, right?

And so again, we talk to medical spot owners, esthetics injectors constantly all day long. And we see ones that are just they’ve completely figured it out. They’re trying to take their practice to the next level. And we see new med spas opening up left and right, and they want to get in. And like we see every single level right, somebody that doesn’t even have a website, somebody that doesn’t even have a location, somebody that wants to go from one location to two or two to five, or five to 20, we see everything, right?

We see ones that are doing six figures, seven figures, multiple, seven figures. So throughout this journey, we want to help you take your practice to the next level, right? So what I want to get into today is something that I’m actually very passionate about. It has to do with business as well, of course, but it talks about how cash flow is king. Cash is not king, but cash flow is king.

Okay, so I want to hone on in on this and and drill into what that means, right? So let’s talk about cash. What is cash, right? It’s, it’s that piece of paper that you can flap around. You can use it in exchange cash for a service or a good, right? Well, what is the difference between cash and cash flow. Most of you may know, however, cash flow is really the heartbeat of a business. It’s the sales, it’s the revenues, it’s all of the cash coming into the business. So you can actually look at your Statement of Cash Flows on your accounting and QuickBooks, if you guys have access to stuff like that, what is your cash flows?

What is your cash experience, right? So the reason why cash is not king, but cash flow is king, is because, for several reasons. For one, you have inflation that takes place, and right now we are dealing with inflation that is at a higher level than we’ve experienced, more than historic, like historical, historically, inflation tends to rise at about 3% per year per annum. Well, CPI Consumer Price Index is trending right around five, five and a half percent right now, which I actually disagree with, CPI. CPI, meaning Consumer Price Index, is basically the index of what goods are rising grocery stores, milk, gas, right?

And they’re gaging that at about 5% right now, which is above normal inflation at 3% okay? Now, why am I talking to you about the economics behind it? It’s because the value of your cash, it goes down over time, right? So if you have $1 that’s that’s sitting on your desk, or $100 sitting on your desk, and a year or two years go by, based off of the current CPI index, that dollar is losing $5 value. If it’s $100 okay, you’re using you’re losing 5% per year, okay?

And that 5% goes from 100 bucks to 95 bucks to 90 bucks. So your purchasing power diminishes. Okay? So what does that. Mean, right? That means that cash is not King. Cash is trash, right? So you have to have the cash flows, and you have to exceed the hurdle rate, right? You have to exceed the inflation rate, right? So when you have a cash flow business, a business that is producing cash flows, right?

Let’s say that your your top line revenues for the month are $100,000 and let’s say you your you have your margins are at 50% okay, your your net like your gross net profit. Call it $50,000 and you have your your reoccurring costs, you have your payrolls, you have your lease you have your expenses. So if you’re operating at net 20% and you bring in $100,000 in top line revenue, and you operate at 20% which is actually a pretty good business in the brick and mortar space, your net income is $20,000 okay, that’s your cash flows.

Okay, so what do you do with those cash flows? Let’s break this down. So I think that number one what you got to get in business. And the next time I get on stage, I’m going to drill into this hard, because you got to get your money right. That’s what need you need to understand in order to also make everything keep cranking. Okay, so what do you do with that $20,000 do you reinvest it into your business? Do you go buy something that you’ve wanted to buy? How smart are you with your money?

Are you intelligent with your money? Are you taking that $20,000 and making a strategic hire? Are you going to invest in a bigger facility? Are you going to negotiate a bulk discount on purchasing a products with your vendors? Are you going to invest in a laser treatment? Are you going to spend it on marketing? Are you going to distribute it and then go buy an asset that produces additional cash flows? Are you going to invest in stock market?

Are you going to invest in cryptocurrencies like, what are you doing with that money? Because if you’re taking that money and you’re putting it into a savings account at a CPI rate of 5% and you’re at $20,000 in positive cash flows, right, a year from now, the scale is much different. At $20,000 at 5% you’re losing $1,000 per year on that money, right? So, so, because it 10% on 20,000 that’s $2,000 a 5% it’s, it’s, it’s $1,000 right? If you just run the quick math.

So here has an example of what the wealthy do. This is what the wealthy do. And I’ve been studying the wealthy for a long time in how they become affluent, how they become rich, and how they maintain wealth, and how they create generational wealth, and you’re in this position right now. So if you have a business that’s producing positive cash flows, you obviously want to reinvest in your business. You want to reinvest in education, training, self development, books.

How do you become better, right? You want to maintain health. You want to invest in your well being. Well, you should always take a portion of that, and you should invest in an asset that produces additional cash flows, okay, and this is how you ultimately beat the hurdle rate, which will gobble you up if you don’t do this. Okay? What is the hurdle rate? Okay, the hurdle rate is something that Michael Saylor has taught me recently. Okay, he owns a company called micro strategies, a publicly traded company, and he talks about the hurdle rate a lot.

He talks about the cost of capital, and what he thinks the cost of capital is right now is about 15% meaning the actual inflation rate is about 15% Not in, not in, like Consumer Price Index, CPI, but in, basically, assets. Looks at, look at what’s happened around you. Home prices everywhere have shot up dramatically, right? So if you look at what’s happened, are the home prices going up or is the value of the of the dollar going down, right?

There’s a big argument there. Like a lot of people are thinking the value of the dollar is going down, which it is because inflation is high. And a lot of people think that CPI is an imaginary number, and really inflation is more like 15% so the cost of capital is actually about 15% let’s peg it at 15% so what do you have to do? Well, you have to basically convert those positive cash flows into a machine that produces positive cash flows, right?

So if you’re taking that $20,000 in positive cash flows from the business, and again, I’m running this on $100,000 a month business that they operate at 20% net income, $20,000 if you’re taking that and you’re living high and you’re buying expensive stuff, bags, purses, you know, shoes like, like, you’re living high and you’re basically still in the same position you are next next month. Like, you have to basically go have $100,000 month and hit that net income to support your lifestyle.

You’re not getting ahead. What happens if an economic change shifts? What happens if we’re shut down? What happens if things get more expensive? What happens if inflation goes to 20, 3040, 50% right? You have to be prepared for stuff like this. So this is something that I am extremely passionate about, and would strongly encourage you to take some of those distribution of capital and invest it into something that’s going to produce additional cash flows.

Okay, so let’s talk about some things that produce additional cash flows. Additional cash flows is an asset that produces cash flows. Okay, what’s the difference between an asset versus a liability? Right? A liability is a car. You pay a payment on a car, you go get a loan, you pay a payment has an interest rate, it depreciates in value.

What’s an asset? An asset is something that produces income and goes up, especially during inflation, right? Something that produces income and appreciates in value, right? Real Estate appreciates in value. Index funds, stocks appreciate in value over time based upon historical S, p5, 100 indexes, right? So those are the things that you want to start getting your mind wrapped around. If you don’t work with a financial advisor, maybe you should talk to people.

Talk to people about real estate, talk to people about start getting your your mind wrapped around the intelligence of investing your hard work into something that’s going to produce cash flow over time. Okay? So you can go buy real estate with those cash flows. And let’s say you want to go buy an investment property that costs, let’s call it $200,000 okay, and you want to go buy an investment property that costs $200,000 well, you’re gonna need at least 20% down.

If it’s a single family residence, right? 20% down. So if you have a $200,000 acquisition of a single family investment property, right, you’re gonna need 20% down to that, which is going to be $40,000 right? So you’re gonna have $40,000 down in order to acquire that well, if you’re running a business that is doing $100,000 a month in revenues and your net profit is 20,000 it’s gonna take you two months in order to acquire that asset, then you’re going to have to put somebody in there.

And let’s just say your mortgage payment is going to be $1,000 and you bring in a tenant that it’s going to bring in 1500 now you have yourself an extra $500 in additional cash flows, and you have a valuable real estate asset that’s going to go up in value, right? So it’s a one two punch. Now I’ll get into another discussion of talking about real estate specifically, and how to take your hard earned, hard earned cash and convert that into assets.

And I can talk about cash on cash return cap rates, like all the real estate terminology stuff, because I own real estate and I absolutely love it, right? And so it’s, important that once you’re at this level and you’re like, oh my gosh, I’m making good money, you need to start addressing the real question, how are you going to protect this money? How are you going to basically not let your lifestyle exceed what the reality is right.

It’s okay to live with frugality, humility, live within your means, and basically stack cash and convert that cash into additional cash flows, because if you just have a big savings account, again, the inflation, the hurdle rate is going to. Kill you over time, right? You have to invest in something that’s going to beat that inflation in order to basically to never lose buying power. So if this is something that’s on your mind, and you’re in a position, you’re like, oh my gosh, my business is making money. Things are doing great.

I think I’m going to go buy a new car. I think I’m going to go buy something fancy, maybe a new watch, or a new outfit, or some like think about this stuff, right? And a good rule of thumb, what most people say is is invest 20% or save 20% I honestly think that we live in a world right now that you actually need to save 50% right? So now run those numbers. So if you have a business that’s doing $100,000 a month, and you have you operate at 20% that’s 20 grand, okay, now you have 10,000 because you’re gonna store 10,000 Well, the IRS wants a little bit, a little bit of that as well, right?

So now you gotta put a little bit, a little bit away for the IRS. Okay, so really be mindful of what you do with the profits that you’re making with your business and invest them? Okay, think long term, right? So anyway, I appreciate everybody for joining and listen in again.

My name is Cameron Hemphill, if you found this content valuable, please share it. Keep the conversation going. Head into iTunes. Leave us a five star rating. We love that.

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