Creative passive income streams for busy entrepreneurs might sound like one more thing on a business owners already long to-do list, but today’s guest says passive income streams are actually an excellent way to grow your business faster. And when we come back, we’ll find out how.

 

This is Business Confidential Now with Hanna Hasl-Kelchner helping you see business issues, hiding in plain view that matter to your bottom line.

 

Welcome to Business Confidential Now. I’m your host, Hanna Hasl-Kelchner, and today, I’ve got a great guest for you. He’s Chris Miles and he calls himself the Cash Flow Expert and Anti-Financial Expert. Chris is a leading authority on teaching entrepreneurs and professionals how to get their money working for them like today.

 

In fact, the clients he advises through his company Money Ripples have increased their cash flow by almost $300 million in the last 12 years. Chris has been featured in U.S. News and on CNN Money. And he hosts his own podcast, The Chris Miles Money Show. So, let’s get this show on the road. Welcome to Business Confidential Now, Chris.

 

Yeah, so excited to be here, Hanna.

 

Why business owners need passive income streams to be more successful

 

Well, Chris, you know, entrepreneurs, small and medium-sized business owners, they are incredibly busy lot. And while they’d like to make more money, they’re already crunched for time doing what they’re doing. So, please, help me understand why business owners need other passive income streams.

 

Well, you just said it, that’s why. We want to buy back our time, don’t we? We already have so much going on in our businesses that we need other streams of income coming in. So, I think buying back your time where your work optional is one reason. Another reason is for the main reason where the last two years, we’ve actually witnessed this world get turned upside down.

 

We actually found that certain businesses could become what they call non-essential, right, where we got shut down for two months because you know, if this pandemic goes crazy, then what are we going to do? And even more recently, even people that aren’t business owners, people that are even employees, they could be military. They could be first responders. Hey, if you don’t comply to every little thing that they have, you could be shut down. You could be out of a job.

 

And so, I think now more than ever, everybody needs multiple streams of passive income where you’re not relying just on that mainstream. Now that being said, don’t think that you shouldn’t be generating income in your business because that should be your number one investment, right?

 

Especially if you’re just starting out, you’re trying to get that thing off the ground. What I’m really talking to is as you start to get your business off the ground, especially as you get profitable, then one of the most important things you need to do is not get stuck in that entrepreneur rat race, right? Where small business owners do this all the time and there’s bigger rat races. Everybody’s got a different sized hamster wheel that they’re on. And many businesses are sometimes – some of my friends will have tens of millions of dollars that they’re making revenue in their business.

 

Yet, if their business was shut down, they’re in trouble financially. They’ve got nothing, and just because the only income they really have coming in is through that business. And so as you become profitable, you want to make sure you start taking that money and create a passive income streams where you don’t have to work for it, where you don’t have to create another part-time side hustle or business or anything else, but somewhere you can actually get your money working for you, so you have to keep working hard for money.

 

How to start creating passive income streams for busy entrepreneurs

 

Well, that sounds ideal. I mean, who wouldn’t want that? But where do you recommend a business owner start?

 

Yeah, where you should start is first ignore everything you’ve heard from financial advisors, which is why I’m the anti-financial advisor, right? Because as you understand, I actually started out as a financial advisor about 20 years ago. I did the traditional mainstream thing and probably the same person that drove you nuts that came to you saying you should spend nothing, save everything, and not save it in your business, but instead put into their mutual funds. Right? Put into their products because that’s what they get paid commissions on.

 

And I remember my brother-in-law, he came from a family that were entrepreneurs. His dad actually was homeless at age 16, went and got his first auto dealership at age 19. And by 21 in the 1960s, he was a millionaire. All right? So, he came from that kind of stock, that kind of family. They were hard workers and they knew how to hustle and sell and make good money in their business. And I remember the question he posed to me when I was a financial advisor was, “Okay, Chris, you’re saying if I just give you $10,000.00 to play with, you can make me maybe 12%?”

 

And I said, “Well, I can’t guarantee anything, but that’s what the market does,” right? Which is bull crap. They don’t actually return that much, but he said, “Well, Chris, that’s $1,200.00. But Chris, I can take $10,000.00, put that in my business, buy a semi-truck, turn around and sell it, flip it to a customer and make a $20,000.00 profit in a couple of months. So, why should I invest with you?” I was like, “Well, you should be diversified. You shouldn’t put all your eggs in one basket.”

 

And the truth was that all there was a half truth to that. The thing is, my spin was because I was trying to sell him something, and luckily, he didn’t do anything with me. And so what I tell people now and what I discovered because I had a friend who is a real estate investor and he told me. He said, “Chris, how many of your clients are actually financially free where they don’t worry about money?”

 

My answer was none, not even the retired ones, because they still worried about running out of money. He said, “All right, Chris. Well, how about this? How many financial advisors are financially independent and free, not because of the commissions earning, but actually doing the investing you’ve been recommending, which so far hasn’t helped anyone?” And I said, “Well, there’s guys have been working here since the 1970s and they’re still paycheck to paycheck.”

 

“So, I’m going to say nobody’s financially free.” He said, “Well, then here’s what you got to do.” And so, he got me more into that world of real estate investing. Now, here’s the thing. It doesn’t mean you have to become this active real estate investor. You’re trying to find properties or anything like that. In fact, a lot of times you don’t have to do anything with properties, but there’s this whole world that most people never realized that even though millions of us have become financially free, including myself, I became financially independent the first time I was 28.

 

Why passive income streams offer better returns and create financial independence

 

You could become financially independent, investing in things like real estate or in the places that consider alternative investments where they pay income, right? Actual passive income. And there’s a big difference here because in the stock market, they tell you, “You should pull out less than the interest you earn because you don’t want to run out of money, especially with inflation.”

 

The problem is, if you finally save up a million dollars to go and invest in these mutual funds, they’re telling you now you should only be pulling out maybe 3% a year. That’s $30,000 a year, and then you get taxed on that. That’s like living in poverty. So, the thing is like with a lot of these types of investments, it could be rentals, but you’re not managing it.

 

Somebody else manages it for you, but rentals that you just buy and then you collect the checks. You could be doing things where you’re pulling money together with other people to buy things into apartment buildings, self-storage units. You could be doing things with like mineral rights or oil. You could do things with raw land. You could do things with lending where you become the bank for these people doing these projects and you get paid double digit returns each year.

 

There’s so many different options. You can do that again. You don’t do the work. You’re just the person financing it. And the great thing is, the difference is you’re making it easily double-digit returns. So, conservatively, my clients usually get at least 10% on any deal that they’re doing. What that means is that same person that had a million bucks who is hoping to maybe make $30,000.00 a year from their mutual funds, now they can make $100,000.00 a year and sometimes even not pay a lot of tax on that money either.

 

They can actually get some tax benefits on it and now they’re making way more money, getting their dollars a stretch more, which is exactly the kind of things we try to do as entrepreneurs.

 

Factors to consider when evaluating passive income streams for busy entrepreneurs

 

Absolutely. So, what factors should somebody be considering when creating passive income streams? Because investing in apartment buildings or some of these real estate options that you were describing may not be for everyone because it may not be totally hands off. There’re still the people that manage it and there has to be contact with them. So, that’s not quite as simple as you make it sound, although the returns are very attractive. So, what factors should we consider when creating passive income streams?

 

Well, it can’t be that simple. It doesn’t have to be complex because again, those people are doing the deals. You’re just the person financing it. And so if you’re getting the standpoint that you’re not actually actively in doing the investments and there’s plenty of people that will raise capital to say, “Hey, we’ll raise capital. We’ll get some bank money, but we’ll get some capital for the down payments of these things.”

 

“And then we pay you a certain return or we share in the profits as it’s paying out the rents and the cash flow.” You don’t have to be involved in the day-to-day operations at all, which is the way I like it, and I’m one of those people too. Even though I invest in all these things, I don’t deal with the day-to-day operations. I don’t get told even on the rental properties I have.

 

I don’t know when they have to get a stove fixed or things like that. I might see the bill later on from the property manager, but they cover it, you know? They just take it out of the rents and then it’s done. You know, I don’t have to deal with the day-to-day minutia and I can be free. So, our deal is out there, of course, that you have to get involved with.

 

But that’s not what I recommend doing. You much rather be on the passive side. So, when you’re looking for it, when you look for those kind of deals, you want to make sure you’re not roped into that kind of thing. Also, you want to make sure you find people that have been doing this for at least 10 to 15 plus years. You don’t want to be doing deals with people where they just came, especially if it’s real estate investing. You know people that said, “Hey, I started doing this in 2018. I’ve made lots of money.”

 

Well, congratulations. Everybody did. Welcome to the marketplace. How can you do it better, or how have you been able to perform when it was the last recession? Did you come out of the last recession stronger or did you lose money? Did you make money? Did you end up learning some lessons that makes you a better investor now?

 

And so those kind of things to do and you try to put it together yourself or you can align with people that already have a vetted network of those kind of deals and those kind of investors that really have paid through multiple recessions. And they know how to make it work to where you can be hands off and so get paid passive income.

 

The experience is definitely a factor to consider when looking for organizations or groups of people that can generate passive investment, or as you say, passive income streams. Really, the phrase I was looking for, and just to clarify, I wasn’t suggesting that when somebody is investing in a rental property, that they are fixing stoves and calling the plumber for a leak and things like that. They still have to deal with the management company.

 

And that could be a plus or a minus depending on who it is. So, besides experience in having weathered recessions and having consistent performance, what other things should somebody be looking at when trying to identify sources of passive income?

 

I think the biggest thing that you’re looking at, besides just vetting the person, I’ll tell you. If you’re ever investing money with a person, the person is the most important and you should really know who they are. And really, if they have integrity, do they pay like they should? Beyond that, also you should consider before you do different investments, does it really align with what you’re trying to accomplish?

 

So, for example, I had somebody I just met with recently, their chiropractor out in the Midwest, and they’re kind of looking for passive income. They’re looking for that ability to be work optional. Right? So, that they can they can either keep the practice going or they can just step away and say, “Cool, I can be done. I can retire,”  right, or just do my next thing.

 

Well, for her, one of the things that I found interesting in her situation was she was constantly just putting money away, socking away into their IRAs and 401(k)s. She’s 40 years old. Her goal is to retire at 50. Well, the only problem with that is if you want to retire, you’ve got to make sure that the vehicle matches the goal. If she’s trying to retire at 50, a 401(k) or an IRA would be the worst place to put money because you can’t touch that money without a penalty until you’re 59 and a half.

 

So, really, unless you’re waiting until 60, that’s not a good option. Now, if you’re saying, “Hey, I’m going to be 65 or 70 in the next five or 10 years,” perfect. But then again, it probably won’t do you much good because they won’t give you tax break anyways because you’re going to be cashing out in the short term. So, a lot of times I’ll tell people, “Hey, well, why were you locked in your money up in prison? Get your money out of prison.”

 

Get it out of places. It might be stuck in equity in your home that could be used. She actually had – I’ve had people with equity in their office buildings that they could be using to invest and create more passive income off of that way, above and beyond the mortgage payment. You could be doing things where you get money out of just savings sitting around. I find so many business owners lately, especially after getting all the government funding and loans and things like that.

 

After 2020, people have been sitting on cash saying, “Well, now what? What would I do with that?” I can’t just throw it in my business and hope it get a return because you have a point of diminishing returns if you keep doing that.

 

And so, what do I do with this money? So, if you’ve got money, sitting around in savings or locked up in prison and those 401(k)s or IRAs that may not be a good fit, you’ve got to be careful. And I would say the additional point to that is also  you want to make sure that those investments, like you said, you may not want to be dealing with actually owning property. Because if you own property, you can have a property manager like you said. There might be a few occasional management of managing the property managers.

 

Okay. Well, let’s look at investments. If that’s not something you want to do, let’s look at investments where that’s not required, which there’s plenty of those out there, too. So, you got to understand really what you want your life to look like. How do you want to design it? So, that when you have these investments, they don’t become something that feels like another job. You want to make sure you’re doing something that actually feels like fun for you versus something that’s just creating more work and more pain.

 

How passive income streams indirectly generate business growth

 

Well, I couldn’t agree with you more about not creating more work for yourself. Just a different kind. All right? It pays you of higher return, but it’s just one more monkey on your back that you’re looking for freedom, including some financial freedom. So, are there certain types of passive income streams that are better than another in terms of generating like business growth? Because that was one thing that you had mentioned to me earlier in our correspondence before the program that it could actually help grow your business. Tell me more about that, please.

 

Yeah. Thinking of that same chiropractor, that’s the one thing I said to her as well. It’s not a direct connection that your business grows because you’re investing in the business. Although there’s ways to do that, you can even invest in franchises, but that takes time and attention away from the business.

 

You may not want to do that, but what I told her is my experience has been unique where as I see clients that are entrepreneurs and they start to build and grow that passive income outside of their business, they start to relax. They start to change and shift from an emotional perspective. And what happens is that they stop becoming less about hustle, less about desperation, and if you’ve ever seen anybody in business, especially if you’ve ever been to a networking event, you already know that desperation drives business away.

 

I call it business breath, right, where that person is so desperate that they’re throwing out their cards left and right to anybody, not really building any good connection. They’re just saying, “Please call me. Please, please do business with me,” right? And those people don’t get business. They work 10 times harder to get the same business they could get if they just relaxed a little bit. And so what I’ve noticed over time is that as these people start to really build up their passive income.

 

And they realized, “Well, I don’t need that one customer or that one client. We don’t have to keep making this money. I’m actually more free to have these options and choices that I don’t have to keep hustling each and every month.”

 

What happens is they come from a state of power and abundance. And when that happens, you naturally start attracting better customers and clients. And that’s what I told her to. I said, “I’ve seen it time and time again in the chiropractic industry and I’ve had over 300 chiropractic clients along with dentists and people like that, where in that industry, when they start to relax more, their conversion rates go up. Their patient conversion rates go up.”

 

So, they have more people actually saying yes and paying them money versus before. So, even though it’s not like these passive income things, you’re investing directly in your business, but by merely the fact that you are able to relax more because cash flow is nice at home and you can relax a little bit more, you naturally show up more powerfully. You make better decisions as a business owner or CEO, and you end up just getting more business coming in with less effort.

 

It’s really like the less that you need money, the more money you tend to make. And it’s one of those weird situations, but it’s crazy how it shows up. And I’ve watched people grow their businesses much bigger because they’re not just relying on that one business to do it all the work for them. They have other things in place. They can stand and look more objectively at their business, figure out what’s going to be the best thing for my business to be profitable, and they make a lot more money.

 

How busy entrepreneurs can find the right passive income streams for them

 

Let’s say there are some listeners out there right now that say, “Hmm, how do I cash in on that? How do I find passive income streams? Because you’re telling me that, for example, you’re the anti-financial advisor. So, going to my broker at one of these brokerage firms, is that the avenue? How do I go about finding passive income streams?”

 

Yeah, you definitely won’t find it from a broker or a financial advisor because they can’t make commissions off of the kind of investments that are really the best out there. And that’s just the name of the game. So, the best way to do that is one, you can always listen to our podcast, the Chris Miles Money Show, where  often I’ll bring on guests to talk about these different ideas.

 

I don’t recommend people go and invest just based off of that, but it exposes you to that world to realize it’s much bigger than you realize, than you knew because financial advisors don’t offer it because they don’t get paid commissions to tell you about these different types of investments. And in truth, many of them are ignorant to them anyways because they’re not trained to be financial experts, they’re trained to be financial salespeople.

 

So, that’s a great way to do it. Also, our website MoneyRipples.com. If you go there, we’ve got lots of resources on there as well and we even have a passive income calculator that can show you what you can do, like how much you could actually increase your passive income in the next 12 months.

 

Mistakes to avoid when selecting passive income streams for busy entrepreneurs

 

Great resources. Thank you for that, Chris. In your experience, what are some of the mistakes that people make when first getting into this area of passive income streams?

 

They often will – like when we talk about real estate, right? I want to talk about real estate investing. Then, the first thing that pops up in people’s heads are, “Oh, so I need to buy a property in my backyard?” And then most of the time, that’s one of the worst things they can do. And many times, especially here in the western half of the United States, like I am, the prices are high; rents are low.

 

And so people will say, “Oh yeah, I was told. I read Rich Dad Poor Dad. I was told to get a rental property. So, I went and got a rental property.” I’m like, “Great, that’s awesome. Well, are you making any money?” “No, but I might make $100.00 a month, maybe off this thing.” “Okay. Well, that’s not worth it.” Many times I see entrepreneurs in California, a great example because anytime I have anybody on the West Coast, California, Oregon, Washington, say, “I have a rental property here.” My natural response is sell it.

 

“Well, you don’t know the numbers.” Don’t have to know them. I already know. I have this one client. He’s out in San Diego. He had $700,000.00 of equity in his rental property. It was actually his very first home he bought. He kept it. He was renting it. $700,000.00 of equity, only profiting $200.00 a month, and I told him. I said, “Listen, you need to sell that property.”

 

“If you sell that and you take that $700,000.00 and you put it into almost anything, you should be able to cash well, at least $6,000.00 to $7,000.00 a month rather than $200.00 bucks a month.” And he’s like, “Oh, but my wife, she really loves that property because it has sentimental value.” I was like, “Well, you know what else has more sentimental value? $6,000.00 or $7,000.00 more a month. You can have all the kinds of sentimental value you want, and I’m sure your wife might appreciate it if that’s the case.”

 

That’s the kind of mistakes I see people make is they just go willy-nilly, try to do it without any guidance, and really that guidance is essential. You want to make sure it doesn’t have to be someone like me. It could be someone that you know, that’s experienced, that’s done this for years. They can say, “Listen, we can help hold your hand and guide you. Here’s ways to do it. That will be safer so that you don’t just get a return of your money, but you get a return – not just get return on your money, but to get a return of your money. You get to keep it and make money with it, too.”

 

Well, thank you so much, Chris, for your time. This has been awesome and I hope our listeners will take some of your advice to heart and start creating some passive income to grow their business, and also to check out your podcast, The Chris Miles Money Show. Chris’s contact information and link to his show can be found in the show notes at BusinessConfidentialRadio.com.

 

And if you know someone who wants to generate more cash flow through passive income, be sure to tell them about Chris and this podcast episode. Share the link. Please leave a positive review so others can find out about it too, and thank you for listening to Business Confidential Now with Hanna Hasl-Kelchner. Have a great day and an even better tomorrow.