I just lost $1,000,000 cash

during the time this video was filmed where I was skiing and filming an interview I had no idea that I would lose 1 million dollars thanks to stupid ideas guys come on skiing is easy who knows who the jury is gonna believe right so I guess first things first a hat or no hat I guess I'll let you decide I don't know I probably got hat hair though anyway we all have probably heard of some variation of the saying one man's misfortune is another man's fortune well I guess whether you're a man or a woman let this be your fortune and my misfortune so my misfortune really hit big in 2018 and that's when we have this here corporate tax return and this personal tax return here I guess this is the form 1120 and this is the 1040 I don't really know what those mean I'm just reading the little box at the top left corner and today I'm going to use these forms to break down exactly how I lost 1 million dollars and hopefully you can take some lessons from this and not make the same mistakes so in case you're new here my name is Kevin I go by meet Kevin I'm a 27 year old real estate broker and I started selling real estate at the age of 18 I sold real estate while I was going to college and real estate has always been a great source of income except I have this problem where I just can't be satisfied with what I'm doing I always have to do something new and what I'm gonna go through is an example of a very real failure maybe even multiple failures and honestly sometimes I just wonder if I would just be better off not having bright new ideas and just stay the course just make my money go put it in an index fund and sit around and do nothing else I mean that that sounds nice I could just hang out with friends and family which is the whole purpose of making money anyway but yet for some reason I'm up at 5:00 a.m. recording YouTube videos and expanding my business into 20 different directions all the time well 2018 was no different I decided that helping people buy and sell houses wasn't enough instead I would finally get rid of the most annoying part of the process the construction and remodeling aspect of what I did see if you look at my Yelp page in the normal reviews and in the filtered reviews you'll see that a lot of people mentioned that I helped them remodel properties I helped them get paint on carpet done blinds done lighting plumbing and whatever and the reason for that is I always went to my clients and said if you're thinking about selling this property we should spend a dollar and get two to three dollars back in market value by doing some basic things - a house kind of think of it like boob lights and door handles for some reason paint carpet boob lights and door handles make people a lot of money in real estate and so I would actually get more business by telling people hey if we do this you'll make a lot more money and it was totally true except I always had to deal with all of the vendors and I always thought oh this is a little bit of a hassle and constantly chasing vendors and they're not showing up or they're not doing things my way if only they could just do things consistently show up when I tell them to show up and do things perfectly well then you know what everything would just be peachy well speaking of peachy I then thought well fine then I'll take everything into my own hands I'm going to open a general contracting firm as a sister company to my real estate sales business that way I would control the entire process somebody would come to me and say hey Kevin would you mind helping us sell our house we need to do a little bit of painting a little bit of flooring light fixtures boob lights and all else no problem I could then sit there and say not only can I make all that happen for you but I could literally sound so dumb looking back the concept is good okay I could literally sit there and say not only can I sell your house for a certain price but here let me write you a licensed contracting proposal right now how many boob lights you want how many outlets you want how many square feet of flooring here you go here's your listing contract and your license contracting proposal so I can sell your house and fix it up all in one fell the concept in my opinion is still pretty awesome because if you think about it this literally means that clients can one-stop shop with you they can literally call me and say Kevin take care of my house no problem hey you want to buy a house and you want to turn it into a rental no problem we'll fix it up for you and then we can manage it for you too in fact I had names and logos for all of this already made up see I'm meet Kevin the trademarked no pressure agent providing more and the sister company was meet and done which meet and Don was cool because all you had to do was meet Kevin and then you were done and I thought this is brilliant and we even have another part of the company called meet and manage meet and stage because why not at the same time you have a real estate sales company also have a real estate construction company and a property management company and a staging company because after all if people are going to meet Kevin they should meet Kevin and be done right yeah this is so weird me talking about this is actually getting me excited about my original idea again it's that same madness that had me taking the test to become a licensed asbestos contractor and a regular licensed contractor and getting my lending license so we can do meet and loans oh my gosh haha no no Kevin no no don't do it again anyway think what you want I thought I had a brilliant idea from all respects top to bottom I thought how could this possibly fail I'm making good money as a real estate agent helping people buy and sell I've got enough business to provide clients to the other funnel so to speak the sister company this is brilliant let's do it let's create a startup let's fund this startup and let's go all in well that's where I made my first mistake I went all in like literally let's just spend everything and go all in on this idea and if there's a single lesson you take away from this make sure it's this one test small and then grow big but see I was too Cavalier to do that that's because if we go to the first page of my corporate tax returns for 2018 you'll see that my gross receipts that's the income that just the sales division received which was just me like I didn't have licensed agents working for me as helpers or whatever these were all my buyers my sellers my clients there's some around 60 transactions it's a lot of work anyway the total gross receipts for 2018 on this s corporate tax return again this is just the sales division the other the construction company and all the other stuff that was a separate corporation so just the sales the gross receipts for that company were six hundred eighty thousand eight hundred and three dollars so you can see that like Wow okay well if you've got gross receipts coming in a six hundred eighty grand that's that's pretty good yeah you could fund some losses if if for some reason you were inclined to fund some losses you've you've got some extra income that you could spend and you know the cool thing about the United States is they say hey well if you have income and you spend that income on business related expenses we'll let you write that off and save money on taxes here's an example of that these right here are the Apple earpods Pro twos they cost $249 which means if I spend $249 I take technically $249 out of my pocket and I give it to Apple except when I write that off as a business expense on the other hand I'm gonna save about $125 in taxes because I live in the great state of California which when you've combined the great state of California with the United States federal government you're giving away about 50 cents of every dollar of income you make unless of course you spend it on things like engraved air pods ah I need to move to Texas see I said that because Texas doesn't have a state income tax and then I would only be paying like 38 percent of taxes less than a 50 percent so to Texas would literally save me 12% in taxes and I'd be inclined to spend less money on stuff I don't need different story okay so in 2018 my sales company made six hundred eighty thousand dollars and then there were expenses of the sales company I had an assistant helping me with my transactions not somebody that really went out and did their own business just somebody helping me with paperwork really great person by the web so I had to pay their salary I also bought my Tesla and was able to write that off like a really good chunk of it like 50 grand of it and so there were expenses associated with this company of about three hundred thousand dollars which means net net this corporation made me about three hundred eighty thousand dollars that I was able to take on over to my personal tax return so this is the interesting number that I'm gonna show you in just a moment here but just so you know how this works if you have multiple corporations they each produce income hopefully ideally and and that trickles down over to your personal tax return so let's say the meet Kevin company makes a hundred thousand dollars and has zero expenses and the meet and done company makes a hundred thousand dollars and has zero expenses then you take this hundred thousand dollars hundred thousand dollars put it together and boom your personal tax return has an income of about two hundred thousand dollars this is obviously very oversimplified but if let's say meet Kevin made a hundred thousand dollars and meet and done made negative fifty or last money because it was a newer company then my personal tax return would say fifty thousand dollars of income well it says something very different stand by for that so I was so gung-ho about this company and my visions and my ideas that I had a lot of beautiful marketing designed beautiful for sale signs business cards I bought a warehouse so I could Casey nice that the storage unit that we built all of that lumber I but and we installed together so we could have our construction and staging hub and we had our 3d scanning business we had so many cool parts and everything was just amazing in terms of spending money that is I was really good at oh I've got marketing now let's put that on a gray Sprinter van but a gray Sprinter van that's not enough let's now also order a red Sprinter van a custom red sperner van because who wouldn't want a fire engine red Sprinter van but then if I have a fire engine red Sprinter van and a grey Sprinter van well they don't match so let's get a quote to repaint the gray Sprinter van matching red so I have two red Sprinter vans and at the same time let's get them detailed every week because even though they're construction vehicles the cars have to be clean which did I mention I made an app for the company as well yeah remember I said I want to win and now you might start thinking to yourself oh well Kevin I know why you failed it's because you spent money frivolously well maybe you're making good money in the sales company yet over here you're just basically giving it away all in the name of well it's a tax write-off yeah right well I know it may look frivolous but let me show you the real problem that tanks companies in America and and I don't want this to be like anti inspirational there's there's a good positive message at the end here that's why I say I'm like the happiest what is it called not millionaire but like negative losing millionaire like if you lose a million dollars in a year you got to have a like a name or a title for that right now before I tell you one of the biggest reasons why 50% of small businesses in America closed their doors after five years and after ten years 70% of those small businesses are gone before I walk you through the biggest cause of that a very important takeaway lesson for you let me mention this I know this is a bit of a negative topic because well it's I lost a million dollars and how I lost him think about this I may have lost a million dollars but that meant I had million dollars to lose because I didn't go bankrupt in fact fortunately my successes outweigh my losses but there are still a lot of lessons to be learned the nice thing for you though is you can have my entire brain in the real estate investing course the do-it-yourself a property management and rental renovations course which by the way was just released and 70 percent of the content is already live and the other 30 percent is being released over the next week so check that out and consider that you could get all of the knowledge that I have from making a lot of money to losing a lot of money to making a lot of money again all in these courses for a lot less than a million dollars you can even use that coupon code down below we'll see you there alright so here's the real kiss of death when it comes to businesses employee costs I've heard people like Grant Cardone say employers don't cost you money employees make you money that's wonderful when you have commissioned employees Grant Cardone the problem with what Grant Cardone says though is it kind of ignores the fact that there are two types of employees one is an employee that's paid hourly or on salary and another is a commissioned employee which Grant Cardone sells a lot of online educational products and hey I'm not judging I sell online educational stuff to like again my real estate course or property management course like I get it you know I'm not trying to slam him for doing that but he has a lot of Commission sales reps selling his online educational courses which means they only make money if they sell and in such a scenario if a commission employee only gets paid if they sell products which creates income for grant yeah in that scenario grant cardones right employees don't cost you money they make you money and if they're not making you any money on commissions you fire them and you find somebody else or you train them better or whatever right on the flip side when you have employees that are working hourly or on a salary whether or not the company is producing a profit has nothing to do with the employees pay so let me now break down how crazy pay is for employees as a boss especially in margin businesses now I'm gonna break this down because that was a mouthful at my peak I had 13 employees working for one company in fact here's an email from QuickBooks which shows you a list of 13 names those are all employees I was putting bread basically on their table I was responsible for their livelihood I was responsible for making sure money showed up in their bank accounts that was like totally surreal experience being an employer while I can't wish it upon everybody I'll tell you the lessons I learned invaluable but let me show you by just picking one employee and sharing with you a little bit about how the system actually works and then I'm gonna explain the margin part which is the most important part so as a construction company I needed to have a really good foreman and let's say I was willing to pay that foreman a $28 a per hour they would be a working foreman somebody who could do framing a little bit of electrical plumbing tiling you know jack-of-all-trades craftsman and I could guarantee them 50 hours per week because they're so good that I was willing to pay them 10 hours of overtime just to make sure I had their full dedication at this company so initially you might be thinking to yourself okay well $28 I mean that's that sounds reasonable well here's how business actually works it's not just $28 28 hours times 40 hours per week is 1100 $20 but then I have 10 hours of overtime which are paid at time and a half so for 10 hours they get paid $42 per hour which is $420 being a general contracting company though I have to provide something called workers compensation insurance which means if they accidentally injure themselves on the job they fall off a ladder they can't work they're entitled to receive pay while they're disabled or unable to work that's called workers compensation insurance and I have to pay 30% of my payroll to workers comp insurance which 30% of that pay is $462 then because I'm an employer I have to pay half of their payroll taxes which works out to about one hundred seventeen dollars and eighty one cents on this amount and somewhere around seven point six five percent for my portion of their payroll taxes because I want it to be a really good boss I also provided all of my employees with 48 hours of sick time and 100 hours of annual vacation time for this employee that worked out to about seventy-five dollars on per paycheck then I had to pay liability insurance which while that's not exactly based on my payroll payroll is a factor in it and liability insurance worked out to about fifteen dollars and forty cents per paycheck for this employee that would mean if we installed some plumbing and the pipes burst we would have insurance to cover our work that's generally what you get when you hire a licensed contractor you get insurance that you know if something goes wrong you can call my insurance company because we also worked with things like asbestos lead and mold I also had an Environmental Policy which cost about five dollars per paycheck for this employee then again because I want it to be a good boss I also contributed two hundred dollars to each employees health insurance if they wanted it so that worked out to about fifty dollars per paycheck I also reimbursed viola chor car usage or I paid gas for the vehicles they were using if they were using company vehicles and obviously company vehicles have costs so I usually spent about thirty dollars per paycheck at the minimum for gas I then also gave a tool allowance of twenty five dollars a per paycheck and a phone reimbursement of ten dollars per paycheck because every time employees would open up their phone to log in to our time tracking app which was called t sheets they would be using their phone and their data so I thought it was only fair to reimburse them for their usage of their phone and there or whatever and obviously they were responding my text messages and stuff using their phone so why not and then I would often pay for little incidentals like t-shirts or uniforms or food and I usually put that at about $25 per paycheck so all in all this particular employee would make one thousand five hundred forty dollars per paycheck gross but I would be paying two thousand three hundred fifty five dollars for this employee per paycheck so if I multiply his weekly pay by fifty two weeks he's making about eighty thousand dollars but having him as an employee actually costs me about a hundred twenty two thousand dollars so if employees are so expensive and employees are partly the kiss of death of small businesses how then do companies succeed how do startups make money how do companies become apples well here's exactly how and this is the crucial key you take a company like Apple that sells you these air pot pros for $250 they take advantage of something known as a large profit margin apples net profit margin is about 21 percent which means when they sell me these for $249 they pocket net after everything about $52 right here is an apple laptop that cost me four thousand nine hundred dollars at 21% this laptop sale made Apple a thousand $29 it's insane and see employees that love working for Apple because of people who work for Apple are generally considered to be very well-paid and a lot of people love working for Apple but why can Apple pay their employees well and keep people very happy because they have a fat profit margin that's why iPhones are expensive that's why I Mac's are expensive that's why air pod pros are expensive they make a lot of money so they can return that to their employees well unfortunately and I didn't look this up at first and this might be the one thing that I've actually learned from school about business unfortunately too little too late Harvard wish I knew this beforehand Harvard did a study on the construction industry and basically came to the conclusion that it's nearly impossible for a small business general contractor to make enough profit to have enough of a profit margin to scale and grow beyond their own skill in other words the general contracting business is so reliant on the individual general contractor that it's basically a non scalable business and that explains why the only really large general contracting companies that exist in America are like insurance restoration companies and if you don't know insurance restoration companies charge you like 80 bucks to change an outlet I'll change an outlet for you for 10 dollars ok like massive profit margin so there's another lesson for you you want to make money in business big profit margin think Apple think insurance restoration but how now with all of this information did I lose a million dollars well let's break it down for you first we had six hundred eighty thousand dollars of a real estate income but because of deductions and advertising and my tests law and things like that I had about three hundred eighty thousand dollars left if I now go to my individual tax return form 1040 which if you're over 18 and you make any money you got one of these two and you drop on down to align seven adjusted gross income remember how I said income from one company income from another they go together and then you get that number over here well one company here was $380,000 let's just say the other company had enough of a negative to make my adjusted gross income for 2018 negative one hundred ninety nine thousand six hundred ninety dollars in other words I filed my taxes with a two hundred thousand dollar loss for just two thousand eighteen which if you take three hundred eighty thousand dollars of income and a negative one hundred ninety nine thousand dollar net for taxes that means the meat and dine company lost me about five hundred seventy nine thousand dollars in 2018 I may have spent a lot of money on lost leaders to really develop this startup and spend a lot more than I should have well so that explains about five hundred seventy nine thousand dollars of a million dollar loss but then there was two thousand nineteen and even though I ended up closing the company gee I wonder why in 2019 I still had some losses carry over to 2019 from that company those losses were about a hundred thousand dollars that still only puts us at six hundred only puts us at six hundred seventy nine thousand dollars in losses what else well at the same time all this was going on I thought it would be a great idea to build a YouTube channel and after I started hanging around people that did pranks and really dramatic and fun things I thought you know what why not do pranks and Finance combined for this oh that's why you ended up getting sued so you might remember the whole don't sue me bro campaign where I was selling don't sue me bro merch for a while yeah I made about three hundred dollars in profit from the don't sue me bro merchandise but I spent about two hundred thousand dollars in total legal expenses for attorneys flights and everything a massive part of that was sticking up against Grant Cardone and then I had another small minor issue with workers comp because after I closed meat and done and despite the fact that I had paid my premium on time every single month workers comp decided to triple what I owed them when they changed the category my employees were categorized within despite them having told me it was okay if I divide out the categories but lawsuits are really expensive and if there's one thing that I could tell you is even if you're right the process to actually get in front of a jury or a judge is like two to three years of agony and like literally agony and during the entire time even if you're right the other side will try to make you look wrong which you might think to yourself well why does that matter well it matters because if you go in front of a jury juries are known to be unpredictable which means oh if you're in front of a jury and somebody's telling a bad story about you and you're like but I'm right but I'm right who knows who the jury is gonna believe right so meeting got losses pranks leading to lawsuits and well because of all this drama and closing a company and legal things they also lost about 150 thousand dollars in potential real estate commissions throughout the second half of 2019 what I dramatically had to scale back my real estate sales business just to try to get through life closing down prior obligations and dealing with other issues so here's another lesson for you have insurance see I didn't have media insurance when I made a prank style YouTube videos that insurance would have saved me a lot probably a hundred ninety five thousand dollars also testing my idea before hiring thirteen employees and spending money on a warehouse and lost leader construction projects and advertising and opening like five different micro businesses within one business would have also saved me a lot of money so now why did I start the video off by saying I'm probably the happiest person to ever have lost a million dollars well I say it because it's all behind me now and 2020 it's going to be an amazing year I cannot wait to continue producing amazing content for all of you I really hope to see every single one of you in my real estate investing course a my do it yourself property management course my course for real estate agents or my personal finance course which comes out in February also if you want to come meet me in Vegas I'll be holding a one-day in-person crash course event at the Bellagio on February 20th that's the day before the 10x growth conference for with Grant Cardone also by no means do I want to discourage you from opening a business or being an entrepreneur I'm all for it even though the success rate for entrepreneurs isn't that super high I really do encourage you to pursue your dreams and your passions and if you decide to subscribe to my channel if you have not yet know that all of the advice that I share on this channel comes from well mistakes or successes that I've made or had so know that everything I share with you comes from a very real place and hopefully my income goes up from where it was follow me on Instagram thanks so much for watching and until next time [Music]

Channel: Meet Kevin

Views: 262,557

Rating: 4.7781663 out of 5

Keywords: lost, 1 million, one million, lost money, business failure, failure, business, entrepreneur, real entrepreneur, making money, real estate, real estate sales, real estate agent, real estate broker, real estate investing, property management, lawsuits, sued

Id: 8dqgazgzQwc

Length: 29min 42sec (1782 seconds)

Published: Thu Jan 16 2020