I stepped down as CEO…and created a PASSIVE INCOME machine..

Summary

• The primary goal for entrepreneurs is to gain freedom by creating a business that generates passive income rather than requiring active involvement.
• You can transform any business from active to passive, but be wary of turning passive investments into active ones just to increase returns.
• Proper timing in shifting from an active role to a passive one is crucial to maintaining growth without sacrificing personal time.
• I learned that as the involvement in my business, Gym Launch, decreased, my profits were halved from $17 million to $8 million, but my personal time investment went down to about 90 minutes per week, increasing my dollars per hour.
• To successfully move from entrepreneurship to investment, I advise focusing on your profitability as a person and as a business entity separately.
• Delegate tasks and outsource gradually, with the lowest value tasks first, and invest the regained time in activities that provide greater returns or value.
• Aim to take two leaps forward: Delegate not just your current tasks but also the next level of responsibilities. This enables you to step back and take an ownership role, ultimately making the business an asset.
• Understand that a business heavily reliant on your personal brand is less sellable compared to one that is enterprise-focused with a management team.
• Being less involved operationally allows for a clearer vision and a stronger strategic focus for your business.
• Differentiate between earning through labor and earning through ownership to adjust your approach from "doing" to "owning" the right aspects of your business.
• The transition might lead to a temporary reduction in personal income but can result in a higher overall net worth due to the increased sellability and scalability of the business.
• Emphasize the long-term strategy of increasing the business's revenue without direct involvement for true freedom and wealth accumulation.
• Make this shift only when the business is stable and you have acquired enough wealth to afford the loss of active income.

Video

How To Take Action

I would suggest that entrepreneurs who want to achieve freedom focus on turning their active involvement into passive income. Start by doing an audit of your current tasks and pinpoint which ones you can outsource or delegate. Hire someone for the least valuable tasks, like admin work, and use your time for higher value activities.

Gradually move towards taking a step back from the daily operations. When delegating tasks, don't just think about what you are doing now, but consider the next level of responsibilities you would take on. This allows you to not just delegate but also prepare your business to function without you in the long run.

When considering profitability, separate your role as an individual from the business entity. Think about how much you earn for the work you do versus what the business earns passively. This will help you to distinguish between your labor and the business assets. Don't forget, a business that relies less on you is more sellable and valuable.

The shift may initially reduce your income, but if you do this at the right time—when your business is stable and you have enough wealth—it can result in an increase in net worth. Aim to increase the business's revenue without your direct involvement which leads to more freedom and wealth accumulation.

Remember, don't rush to transition from an active role to a passive one too quickly. Make sure you're financially ready for it and that the business is in a strong state. Being patient and deliberate in this process will help you avoid common pitfalls and achieve the freedom and financial security that you're aiming for.

Quotes

"You get paid on what you do; you get returns on what you own"

– Alex Hormozi

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"Poor people do the wrong things, rich people do the right things, wealthy people own the right things"

– Alex Hormozi

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"Imagine like let's say you look back at what you were doing a year ago and it probably should look different than what you're doing today"

– Alex Hormozi

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"You're always doing the next thing but here's what's kind of funny and this is the mental framework that I want to give to you"

– Alex Hormozi

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"If you can increase the revenue without me doing anything how would i do that, then you ask better questions and then you get better answers"

– Alex Hormozi