SPI 679: Becoming a Family-First Entrepreneur with Steve Chou

SPI 679: Becoming a Family-First Entrepreneur with Steve Chou

Steve Chou: The four burners theory states that your life is composed of four burners, work, friends, family, and health.In order to excel at any one thing, you have to turn off at least one burner, and if you want to be really good at something, you have to turn off two. So if you want to be really good at work, in this case it would be a business, then you gotta turn off one, maybe two burners. When my wife and I first started, we sacrificed our friends ~~and our,~~ and probably our health burner. And then once the child arrived, we, we kind of switched off the burners and that sort of thing.

Pat Flynn: Raising a family and running a business at the same time is very difficult. Sometimes we put all of our energy into entrepreneurship, so much so that it affects the family in a negative way, of course. And then the opposite can be true as well. How do we balance these two things, and whether you are a parent now or not, or just in general curious about optimization and how to balance a lifestyle with business, then this is definitely an episode for you.

We have Steve Chou here today, somebody who I am a dear friend with, despite him being a graduate from Stanford. We always tease each other cuz I’m from Cal, rival to Stanford. Anyway, you might hear some of that banter here in this episode, but, but we’re good friends. We, we have spoken at or been to each other’s events and he’s just an amazing family man.

And he wrote the book called The Family-First Entrepreneur. And I love that because it is, I mean, many people get into business so that we can help our families. However, a lot of people see the opposite thing happen. The business actually takes us away from the family. So again, how do we balance that?

How do we, how do we manage this? These are all the themes in his book and themes that we’re gonna be talking about today. In fact, we get a really personal story up front about how things didn’t go well, which is really the origin behind this book and his business. And he’s got two kids. I’ve slept in his guest room at one point.

So I can attest to the fact that he is somebody who has learned from those lessons and really cares about family. And just, I love Steve. He’s awesome. So hope you enjoyed this episode, Steve Chou from MyWifeQuitHerJob.com. You might remember that you url, it’s a very memorable one. He’s a great YouTube channel as well, but now is also the author of The Family-First Entrepreneur.

Hope you enjoy.

Announcer: You’re listening to the Smart Passive Income Podcast, a proud member of the Entrepreneur Podcast Network, a show that’s all about working hard now, so you can sit back and reap the benefits later. And now your host, the most helpful strategy he’s learned to grow his business over the last 10 years is this—saying no. Pat Flynn.

Pat Flynn: Steve, welcome back to Smart Passive Income, my friend.

Steve Chou: So happy to be back, Pat. It’s been a while. It’s been a while.

Pat Flynn: It has been a while and I know that for a long while you’ve been working on this book and I, I, this is gonna be the topic of our discussion today because the book is all about building a business and still being a family person, still making sure you’re taking care of your kids and, and putting them at the almost front and center.

I mean, it’s called The Family-First Entrepreneur. And it’s interesting cuz it’s like, you know, we often feel like we have to choose one over the other with our time sometimes. What inspired you to just put your head down and write this book?

Steve Chou: You know, I wrote this book because I’ve just realized, at least for me, that 99% of the entrepreneurship advice out there doesn’t apply to me. Right?

Think about it this way. Most of the entrepreneurship advice you see out there is given by single guys who don’t have any responsibilities whatsoever. And that just was not representative of me. And I would say it’s not representative of a lot of people, right? So most of the advice you see out there is you gotta work 80 hour weeks, you gotta hustle like crazy just to make anything successful. But you can, in fact, create a really good business as you have Pat and still have lots of time for family, and you certainly do not have to work 80 hours a week for sure.

Pat Flynn: That’s a really important message. I remember when I started business, you know, it was Tim Ferris was, was the main voice and a lot of people who were jet setters and travel moguls and that kind of lifestyle’s not normal. And if you have a family, it’s it’s just like, well, I can’t do that and I don’t have that time. I got responsibilities. I have a career, I have a family, I’ve got kids. And, and with kids, it’s like you never know when you’re gonna have time. And, and so I think I know the answer to this question, but for people with families who are busy, who don’t have a lot of time, is it even possible to still be an entrepreneur?

Steve Chou: You know, it’s a, it’s, it was a struggle for me. I mean, the answer of course is yes, but for me, my, I mean, just to be straight up, my ego always got in the way. So when we first started our business, in case your listeners don’t know who I am, we started because my wife wanted to quit her job in order to stay at home with our first child.

And where we live in the Silicon Valley, you pretty much need two incomes to get a good house and a good school district. So when she told me she was gonna quit, I was a hundred percent on board. But we need to find something else. So we started that business because of family, but what ended up happening is we, we hit six figures in profit in our first year, and it’s just started growing.

And I got all excited. I got carried away and I kept wanting to grow it every single year. And so we’d set these income goals and then we’d hit them and then we’d move the goal post the next year. And we were selling handkerchiefs at the time and. It just got very overwhelming and it got overwhelming because I wanted to hit seven figures no matter what.

Meanwhile, I didn’t even realize that I was alienating my wife. And I wasn’t seeing my family as much, and I kind of lost track of the whole reason why I started the business in the first place. Wow. The answer is yes, but you have to be very deliberate about how you start your business and how you run it.

Pat Flynn: For many people listening, you might be like, first of all, hold up Steve. Six figures from selling handkerchiefs? I know that to be true. And you’ve told the story here before, so we’re not gonna dive into that here. We’ll reference that episode number at the end for everybody. But even more important than that is why seven figures?

What was driving you to to that mark?

Steve Chou: The main reason was because I was in mastermind groups with a lot of different business owners that were killing it. And when you hang out with people like that, you wanna do the same. You know, I just wanted it for my ego really? Did those people have families too?

Those people did not have families. But here’s what I’ve discovered, and maybe you can share with me your experiences. Also, some of these mastermind groups I was in where people were like, there was this one guy in my group who hit like $2 million in six months and he actually came on my podcast. I interviewed him and it was a great episode.

We talked about, you know, how he did and everything. As soon as we hit stop on the record button though, I was like, how, how miserable was that? And he’s like, oh man, that was the most stressful year of my life. We had to grow. Everything was outta control. We had to hire so much and I’d never been more stressed in my entire life.

And you don’t actually get to hear those stories because that’s not what’s sensationalistic, you know, for podcast. I mean, I wish I had that part of the recording, but I’m pretty sure that that person did not want that part of the recording to go live. Cuz the topic was how did you hit 2 million in six months?

But that’s, that’s actually more common than you think.

Pat Flynn: So, correct me if I’m wrong, in these mastermind groups, especially, typically it’s a, it’s with a, a lot of people who are all about the business and that’s all the conversation is about. It, it’s not a holistic conversation about life, it’s just business numbers, marketing growth.

Are you still in those groups or how have those groups evolved over time since you’ve learned from, from those mistakes?

Steve Chou: Yeah, I’ve, so I’ve, I’ve been in and out of groups and maybe you have too. I tend to stick with the ones that kind of fall in line with my values. That particular one that I was just talking about was just all about business.

Here’s the other thing I’ve actually found also is that a lot of people go for revenue cuz that’s the vanity number, right? I had a buddy who was doing very well. He was making six figures. And his revenue was like 300,000 or 400,000, but he’s doing a solid six figures. He really wanted to hit the seven figure mark, and, and I could relate to that.

He hit the seven figure mark, busting his butt hiring and everything, but he ended up with the same profit. And at the end of the day, he was thinking to himself, why did I go through all that work, build this team, create all this extra stress when in fact I was making around the same amount of money?

It’s cuz of that vanity number.

Pat Flynn: That’s a very common story actually. I hear that all the time, dude. So now that you’ve lived through that, actually before we even get to the strategies and stuff, like, I want to know what the conversation’s like with where, with your wife, when you had your ego first and you were trying for seven figures and you weren’t seeing your kids as much and you, you were putting a, a huge burden on, on your wife, what happened? How did you snap out of that, if you will?

Steve Chou: I can’t take credit for that. So my wife actually sat me down and she was kind of in tears and she said, I don’t wanna do this anymore. I hate running this business. We keep busting our butts to make extra money that we don’t even spend. We actually did our finances and we spent about $150,000 a year as a family and we were making like 10 x that, or even more than that.

So why were we busting our butts? For something that we don’t even need. Here’s the thing, most people don’t even think about these things when they start a business and you, it is really easy to lose track of why you started in the first place. So what my wife did is she sat me down, we had this talk, she told me all those things and I was like, yeah, you’re right.

Once she told me all these things and how she was feeling, I was like, none of this makes sense. So immediately what we did is we stopped all revenue goals. Right, because those are stressing us out and we put together a set of rules and we, it was, it was actually all documented about how many times I can travel, or if something really comes up, how do we evaluate that against what we’re missing?

And we put that down in a dock. So whenever something like that comes up now, we refer to this document.

Pat Flynn: You have almost like a, a, a family constitution of, of the way things. Oh, you’ve got one too. We’ve talked about it. Yeah. We ha we don’t have that written. It’s not behind some glass case in the house, although it might as well be because it’s that important and we often forget those things.

Right. And it, it’s key. I think number one, your wife and my wife would get along very well, would have a lot of things to talk about as entrepreneur wives. Number two, those conversations don’t, it doesn’t have to get to that point of, of breakage. Right. And, and I know this is the purpose of the book, is to get ahead on this for people.

So what, what’s the advice for the brand new entrepreneur who has a family or is going to start a family soon? Maybe there’s even a baby on the way, but they have these goals of, of grandeur with business and what’s the approach that we take? How do we settle now before things break and, and, and become unsettled later?

Steve Chou: Is your audience familiar with the four burners theory at all? Have, have you heard of the four burners theory?

Pat Flynn: Probably not.

Steve Chou: Okay. We can, we can go over it though. Let’s just talk about it real quick cuz it’s important. The four burners theory states that your life is composed of four burners, work, friends, family, and health.

In order to excel at any one thing, you have to turn off at least one burner, and if you want to be really good at something, you have to turn off two. Basically, this theory states that there’s always trade offs for everything. So if you want to be really good at work, in this case it would be a business, then you gotta turn off one, maybe two burners. All right? So if you know that already, then you already know that there’s trade offs in mind. So if you’re just starting out, you don’t have kids, just know that if you want to excel in business or achieve financial freedom in the beginning, you’re gonna have to make some sacrifices.

When my wife and I first started, we sacrificed our friends and our, and probably our health burner. We worked a lot, and you’re gonna have to work a lot in the beginning. And we gave that up. We got the business up and running, thankfully, before the child arrived. And then once the child arrived, we, we kind of switched off the burners and that sort of thing.

I don’t know where you want to go with this Pat.

Pat Flynn: But no, I like where it’s going though. Can the burners in this theory or this, this, this exercise be dialed up and dialed down, or are they either always on or always off?

Steve Chou: No, they can always be dialed up and down. Okay. Right. So for example, we started out with just, we, we dialed down the friends and the health burner, but then once things were in steady state, we turned back our other burners.

And there’s, of course, there’s ways to cheat the burner theory by hiring and that sort of thing. Mm-hmm. But you can’t really outsource the family burner. Or you could, I guess you could hire a nanny. But then what was the reason why you started the business in the first place? I found, and we, we had a similar audience, right?

Pat, most people wanna start a business not to make a billion dollars. They just want to be able to hang out with who they want to hang out with and do what they want to do. But everyone, almost everyone I know gets, gets kind of lost in the, in the money after a while.

Pat Flynn: Yeah. And, and, and a lot of it is because starting a business is not actually that difficult anymore.

You, you can, you can do it, you can start seeing revenue come in, but a few things happen when that happens. Number one, you get so obsessed with growing that number that then ne nothing else matters anymore, right? The money burner’s just like burning everything and, and, and you only got that one on and everything else falters because of it.

And we’ve seen it. We’ve had people in our lives who we know who’s, who’s lost their relationships because of the things that they’ve done. They’ve lost their health as a result of these kinds of things. How does a person listening to this then approach right from the start, what’s the formula or how does one focus their time and energy to maintain relationships, maintain health, but also build a business or, and, and we’ve already determined that it is possible, but how?

Steve Chou: I mean, I have a set of rules that I follow and maybe we can, it’s helpful to talk about them.

Yeah. The first thing is just realizing that if family, for example, is gonna be your primary thing, you’re not gonna create like the next Amazon.com, or the next Facebook.com, right? In order to start a really good business and still prioritize some of the other things, there’s trade offs and there’s rules that I follow, which I, I’m actually very curious about what your opinions are on this, so, okay.

One thing that I do is I only focus on strategies where I can produce one thing and have it generate traffic in the long term. So, for example, I’m not really big on social media and my friends that do Instagram, well, for example, they post seven times a day. I have a friend who does Facebook really well, makes a lot of money.

She has to post 21 times a day, and when they stop the traffic stops, right? Contrast that to SEO and YouTube, where if I create a, there’s, there’s posts that I had that I created 10 years ago that still generate traffic today. There’s YouTube videos that I created three years ago that still generate traffic today.

So I like those traffic strategies where I just do it once and I get long-term traffic, so that’s why you won’t see me on social media as much.

Pat Flynn: I love that I am very much in that same camp I am on social media, but more just to share with people what’s going on in my life. Not even as a traffic generation strategy.

I, I rarely link to things hoping it’ll get more traffic other than if I’m in the middle of a promotion or something, but, In general, I take the same approach. I, I love working hard now, so I could reap the benefits later as, as people hear every single podcast episode and a lot very similarly, like a lot of things that I did a long time ago are still working for me today in, in, in some way.

And it’s like a, a new way of investing not money so that your money works for you, but time so that those things that you create work for you over time. Green Exam Academy, my website to help architects pass an exam, which was created in 2008, still is generating an income today, now 15 years later with zero work.

And this is where with zero work today. Not, not say it didn’t require work in the beginning. So based, based on this how can a person determine what is eventually going to become passive versus the trends and what’s hot now, because yeah, it, it, like right now a lot of people are starting on TikTok, for example, because it has a large algorithm that you know, will get you in front of a large amount of people.

But like you said, I, the moment you stop, it kind of stops. So do you have any strategies or filters that even in the future with technology that we don’t even know exists yet a person can, can use to figure out what might be best for them in this situation?

Steve Chou: I mean, you mentioned TikTok, and right now TikTok might get banned.

There’s a real possibility that it’s gonna get banned. So number one, don’t depend on any platform for everything. I rely on email and SMS specifically. Those are my two most important properties. The way I do it, no matter which platform I’m on, whether it be TikTok, YouTube blog or whatever, I always try to get some on my email list, and then I also try to get them on my SMS list.

Here’s what I do it. I actually try to get both at the same time. Usually I’ll give out some sort of league magnet. In my case, I teach e-commerce, so I’ll give out a six day mini course on e-commerce for an email, and then as soon as they sign up for email, I immediately take them to a different screen and I say, Hey, would you like a bonus lesson on how to sell on Amazon?

Leave your number. And about 40% of the people that sign up for email actually give me their number. And what my strategy has always been is to cross pollinate my audiences. I want the same person on email, sms, Instagram, Twitter, as many people as possible on many different platforms as possible. Cuz you never know where they happen to be looking at any given time when you have to send something out.

Pat Flynn: And if one happens to be banned, the others will help still keep you afloat. I there’s a lot of, I think even yesterday there were like hearings. About TikTok and there was a, a, a woman who was an influencer who was speaking in front of all these, you know, decision makers in, in Washington about her business and what she was doing.

And obviously she’s fighting to keep TikTok, but her business solely relies on TikTok.

Steve Chou: I thought I saw the slime girl came on. Like 90% of our business was TikTok.

Pat Flynn: Yeah, right. Which is, again, it’s like if you diversify it, it it, it helps. But at the same time, I want to talk about the idea of diversification, but also you can’t diversify if you haven’t started yet.

So where, where would you suggest a person who has an interest, a passion, a expertise an idea to begin? Are they building a thing to sell? Are they creating content or building an audience first?

Steve Chou: That’s a great question. So my answer to that question is always dependent on the timeframe. If your goal is to make money within a year, I personally think that e-commerce is probably the best way.

Right? You’re selling a product in exchange for money right away. I. If you have a timeframe of three years or longer, I’d say content is better. So what ends up happening is e-commerce will start and then revenue will go up, you know, up into the right. With content, and I don’t know if this was the case for you, Pat, but I didn’t really make any money with my content for two years when I started.

But then all of a sudden, once it started catching fire, started hockey sticking up. And the great thing about content is that the cost of goods is not that high compared to e-commerce. In the content space. I would say today, if I were to start all over from complete scratch, I would say start a YouTube channel.

If you don’t mind doing video, because Google or YouTube is really good at proliferating content. If you don’t like doing video, I would go with a blog because once again, Google’s really good at getting your content out there and to establish really deep connections as you teach all the time. I think podcasting is still a really good medium as well.

Pat Flynn: Would you consider doing all of them or just pick one?

Steve Chou: I would always pick one. I’m he here. Here’s what we didn’t actually discuss the trade offs of starting a business, for me at least, was always ego. I see all these people doing really well, and I know I’m making this trade off for family and I’m seeing all these other people get ahead and, and I don’t want to, I want to do those things.

I belong to this group from Stanford, it’s called the Mayfield Fellows Group. And that group was all about starting, you know, venture backed startups. And every year there’s this retreat and I go there and everyone’s talking about their million dollar exits. Like Kevin’s Syrum isn’t that group of Instagram.

Everyone’s going around what they accomplished. And I’m sitting here going, yeah, I’m still selling handkerchief and whatnot. It hurts my ego, right? So the way I counteract that is I just work on one thing every single year. So this year obviously is the launch of my book. Last year it was YouTube. The year before that, I think it was TikTok, the year before that it was ads.

And so I just focus on one thing, like if you try to do everything, you’re not gonna be good at anything. But if you can focus on one thing for an extended period of time, have all the systems in place before you move on. That’s the way I like to operate.

Pat Flynn: Last year was YouTube. I know this cuz you and I have had some celebratory moments.

Every time we both sort of hit a milestone, we like share that with each other. I know your channel’s been growing. What, what are the biggest things you learned by focusing on, on YouTube, and if a person were listening and they were interested in going down that route, give ’em some tips if you can.

Steve Chou: Yeah, YouTube is fantastic because people can see you and listen to you at the same time. It’s much more deep than I, I would say, like a blog or even a podcast. I would say my tips for YouTube, and I know you just gave a webinar on it, right? So, yeah. Yeah. And, and you’re kicking butt on it. My channel is different from Pat’s.

It’s probably more like your SPI channel, I would say. I always try to deliver content that other people would pay for, and I try to keep it very concise and I hook ’em in right in the beginning. So they want to learn what they wanna learn, and then I just teach along the way. And what’s nice about YouTube also is that you can add little elements of your personality, which you can’t really do on a blog if you wanna rank and search.

Very true. And then I always end by saying, Hey, now that I’ve taught you this skill, make sure you watch this video next. And then I expand upon that. And the idea is you want to keep people on YouTube for as long as possible, watching all of your videos. Yes. And then of course there’s titles and thumbnails.

You want to make sure to be a little clickbait and get people to actually click and watch that video. But you do those two things that I tell you and your channel will start taking off. Guaranteed.

Pat Flynn: So where does your channel start when you decided to focus on YouTube and where is it now?

Steve Chou: I started three years ago. Where before I was just using YouTube as as video storage. Really? Right. I have like a lead magnet and I just point people over there. I wasn’t really doing anything with it. And three years later I’m at 200 K subs. And that channel makes over $35,000 a month just on AdSense alone. And it, it’s now the number two driver of email subs for my platform as well.

It’s been fantastic.

Pat Flynn: How are you collecting emails from YouTube when the goal is to keep people on YouTube?

Steve Chou: So what I do is I give a really good tip and then I say, Hey, by the way, if you enjoyed that last tip, sign up for my free six day mini course below. And to me that’s, that’s something that. I, I don’t know if it’s hurting the channel or not, but it, it doesn’t seem to be. People sign up and it hasn’t really hurt.

Do you do anything similar with yours?

Pat Flynn: Well, on Deep Pocket Monster, no. But on the Pat Flynn channel, of course, I mean, we have our all access pass in the courses that we promote, and there’s a balance there that has to be had. But yes, maybe you get a few people leaving you to, which decreases the reach a little bit, but at the same time, if you know you’re converting them, then it’s worth the trade off.

So that’s, that’s always a, a tough question to answer. So I appreciate your insight on that.

Steve Chou: I think it’s important to do in the middle of the video. Because if they do it, they’ll probably come back and watch the rest of it. Especially if you do it after one really good tip that you’re giving that really impresses them.

Pat Flynn: You’re delivering value first. You have an ask, which is actually to give more value to them, especially if they’re the, you’ve peaked their interest, and I like that. Putting in the middle of the video. That’s, that’s great. The book has become your latest focus. Correct. Tell me about that. This is your first book that you’ve published?

Steve Chou: My first book, that’s correct.

Pat Flynn: How was the experience for you?

Steve Chou: I vastly underestimated the work.

Pat Flynn: How long did you think it was gonna take?

Steve Chou: I thought it was gonna be a year long project. Instead it’s been three.

Pat Flynn: Oh my gosh.

Steve Chou: And you have what? Four books?

Pat Flynn: I have three under my belt. One in the works right now.

And this book is my first traditional published book. So this is, this is new in that regard for me, but I still come across the same experience of, you know, some good days, some bad days of writing some really good moments and great stories that I didn’t even know I had in me and then, and then other days where I’m just like, I’m just regurgitating the same thing I’ve always said.

So it’s, it’s, it’s definitely a journey. What helped you the most when putting this thing together?

Steve Chou: I think the number one thing that I did that was the best decision I made was getting some help. So I’m using Jeff Goins. I have like a thousand blog posts, and he really helped me kind of compile all those into something really cohesive and help fill in the blanks.

And he, Jeff Goins, is the best selling author and he’s gone through this many times and just having access to his network, his skills. I wouldn’t have been able to publish this book without him, for sure. It’s traditionally published. Traditionally published, yeah. And that process in itself is, was pretty extensive.

Pat Flynn: Yeah. It, it, it is. I mean, a proposal and just like you have, you’ve gotta like sell yourself and all those kinds of things. Who, who did you end up publishing with?

Steve Chou: Harper Collins. In fact the editor is good one, the same one that does Gary Vee’s books. So I was really happy with that.

Pat Flynn: Congratulations dude. That is huge.

Steve Chou: Thanks. Yeah, appreciate it.

Pat Flynn: And Jeff is great. He’s helping me on my book as well. I don’t know if you knew that.

Steve Chou: Yeah, I did. He told me. Yeah.

Pat Flynn: Okay. So we’ll see who he cared about more. No, I’m just kidding.

Steve Chou: I broke ’em in for you.

Pat Flynn: Yeah, that’s true. Thank you. No, Jeff is great.

And you know, I, I can’t agree more with just like when you have a goal like this, like get help from people who know what they’re doing and what they’re talking about, right. And that goes back to my question earlier, if you’re just starting a business, like go find help from a person who you trust and who’s doing the same things you are, no matter what it is you wanna do, like, find a person who’s done it, somebody has done it before you and has made, made all this mistakes before. But with a book, I mean, I have to give credit to Azu Terronez who was my coach on my first book, Will It Fly? and then working with Jeff on this one to be a little bit more hands-on with, with the process with me has been really amazing.

So what is your goal with the book? Like how, and, and tell me how are you marketing it? I’m always curious about that. Maybe I can borrow some strategies from you.

Steve Chou: The goal with the book really it was a bucket list item for me. I’ve always wanted to do one, and then I’ve always wanted to walk my kids through the bookstore and show ’em the book.

But here’s another reason why. I’ve been blogging now for good Lord, like over 12 years. My mom has never read a single post, but now that I told her that I’m traditionally publishing this book, she’s got all excited. I can’t, and she’s excited to read it and and whatnot. I. It doesn’t make any sense to me.

Pat Flynn: Oh my gosh. I, I, I am, that’s just very traditional way of thinking, right? Even though you’ve put out some of the most helpful blog posts that have literally served thousands of people and helped the people make millions of dollars, it’s not real. It’s not, you’re not a real author yet until you have a book.

So, so that’s cool. Doing it for, for family. Walking your kids through the bookstore is an amazing experience. I hope you film that. I, I, I filmed that first experience for me. When Will It Fly was in the stores, and I’ll always remember it. And then let’s talk about the person who has started business, they picked up your book, they, they’ve gotten the motivation to do it, what in the book helps a person after the business does start to grow after those new opportunities arise that have never arisen before. How are you helping a person filter through what might be the next steps so that they still remain a family-first entrepreneur?

Steve Chou: Yeah. So we already kind of talked about one, which was looking at long-term strategies versus short term. I also talk a lot about profit and not revenue. Let just give you an example here. Black Friday, most people launched these killer sales, right? It’s just a thing. People do it, but what most people don’t think about is how much those sales are actually costing.

Let, let’s throw some numbers in the mix. I, I usually don’t like to do public math, but let’s just see if we can do this. Okay, let’s do it. Let’s say you sell a product,

Pat Flynn: You’re Stanford, you’re fine.

Steve Chou: What’s that?

Pat Flynn: I said, you’re from Stanford. You’re fine. If not I’ll say. Cal’s better.

Steve Chou: Let’s say you sell something for a hundred bucks, right?

Okay. Physical product and it costs you $50 to make. So for every item that you sell, you’re making 50 bucks. Let’s say in a typical day, you sell a hundred of these things, so you make $5,000 a day. All right, so now Black Friday rolls around, everyone’s launching sales, and you’re like, okay, let’s issue a 25% off coupon.

Okay? So 25% off coupon, which means that you’re selling it for 75 bucks, cost you 50, so you’re making $25 in profit per sale. All of a sudden, in order to make that same five grand, you now need to sell 200 units, so that 25% off. Now you need to sell double just to break even. So it’s important to note that the numbers are not linear.

Yeah. Wow. 25% off means you need to sell two x the number of items. Most people don’t think like that. And so now whenever I think about running a sale, I run the numbers and if it does, if I can’t double my sales volume, I won’t run the sale.

Pat Flynn: It’s not worth the sale. Just so you can, you know, sell more volume and then you run out of inventory and then you gotta like, add more and, and, and just all the things start to, to go.

So, so, so what’s the lesson here? Know your numbers, essentially.

Steve Chou: Know your numbers and focus on the profit, not the revenue. Here’s another example. Let’s, let’s, let’s flip it a little bit. Typical e-commerce business, let’s just say like, if you look at the stats, it’s like 10% net revenue, right? Let’s say you’re selling something for a hundred bucks.

If you were to raise the price 1%, you’d be selling something for $101, right? Originally, when you were selling it for a hundred bucks, assuming a 10% net profit, you’re making a $10 profit per sale. By increasing your prices by 1% or $1, you are actually increasing your profit by 10%. Oh, yeah. Yeah. So if you increase your prices by 5%, assuming a 10% net margin, That actually means you’re increasing your profit by 50%.

You gotta think about things in terms of profit, not revenue when you’re running a business. And most people chase the vanity number, right? Just like I was, I was trying to get to seven figures no matter what. Cause I wanted to tell everyone that I had a seven figure business without realizing that I was actually destroying my profit at the same time.

Pat Flynn: How do you help the entrepreneur who in order to save time, hires people who’s never worked with people before? I, I know this is a very common thing, especially for family based entrepreneurs. It’s, Hey, I’m gonna hire other people to do that for me so that I can spend more time with family. But what ends up happening often is the management of those people end up taking more time than if you were to do those things yourself, thus you actually even might have even less time with the family because of all these people, things that are now involved. Should you do run it alone? Should you hire people? What? What are your thoughts on this?

Steve Chou: So my philosophies on this have always, always been a little controversial.

I’m a big proponent of robots, not humans. So if I can automate something with a piece of code, and this is a great time to talk about this because ChatGPT four just came out. Which has really helped out content creation. Like I have writers right now for My Wife Quit Her Job, and I’m actually thinking about, you know, not, not using some of them going forward because ChatGPT is that good.

And I just happen to have a technical background, which allows me to write code. But one thing that always bothers me when I go to an event is people always ask me how large your team is. Yeah. Right? Because it’s just like a way to people measure, but. I can just say that you can run a really good business and just have like one person, like, so my wife quit her job makes seven figures in profit.

I only have one VA in the Philippines. That’s it. Wow. It’s all about systems and processes and you know, if you wanna start something really big, then you’re gonna need to hire a large team. But if you wanna hover around like the three to 5 million range, I don’t really think you need a team. A, a large team at least.

Pat Flynn: So you can make three to 5 million a year top line revenue, which, you know, correct profit enough to live on, likely, very much so for a, a nice lifestyle with just one person, one or two people for hired help.

Steve Chou: Absolutely. Here’s how I do it, and you can tell me about your experiences. I always do everything myself in the beginning, I was editing all my YouTube videos, I was editing all my podcasts and everything, and then I got tired of doing it, but I knew exactly how to do it. And so what I did was I just recorded videos of me editing it, and then when it came time to hire someone, I used Loom actually.

And then I just turned over those Loom videos and I got up and running really quick. I never move on to another task until I’ve done that and I mentioned I always do things for at least a year.

Pat Flynn: I would agree with that for most things, for sure, especially a lot of more procedural things that can then be handed off to others.

Same thing for editing and the podcasting. There are just some things that you can’t replicate, like, although that being said, you could argue against us now like your voice on your podcast, which yes, you can actually replicate that now with different tools and it’s getting kind of scary and I have been experimenting with how might I be able to do that one day and how do I feel about it?

I don’t even know exactly yet. So that’s just, again, we, we don’t have to talk about ai, although I know you are interested in it as well, but that, I always advise this, this is actually a question I get from a lot of my podcasting students. Like, Hey, I’m like, can I just hire editor right off the bat? I always say, get your first five to 10 episodes done yourself first, so that you know, hey, how it works. So in case when you do hire somebody and then they leave, you’re not left stranded anymore, right? You could pick up the slack for a period of time until you train somebody else, and if you have videos about how to do that, it’s even easier. But number two, you have an appreciation for that work that that person ends up doing for you as well.

You know how much time it took you. You understand how difficult these things are and when they do them, and they can often do them better than you can or faster. You’re just like more blown away and you have more empathy with for them, and you can take better care of them as well and, and compensate them at the same time.

So the, the reason I partly disagree with you would be because there are just some things that I don’t know how to do or don’t have any inclination to wanna learn how to do, but, but must be done right. And, and, and there’s some obvious things like bookkeeping and financing and taxes and those kinds of things.

But even on the creative side, like mastering thumbnails, for example, for YouTube, there are people out there that you could hire who could do it perfect from the start. And it’s almost an art form in a way that I’d have to dedicate my full-time efforts to be able to master that. And then, and I’m, I don’t want to.

Steve Chou: Yeah, I’m not saying that you have to be a master of it.

You just have to have at least high level knowledge of how it works. Right. You have to know like, approximately what a good thumbnail or title will be. I see. So you can measure it, right? Like I have people that come up to me and say, Hey, I just wanna outsource my marketing. Do you know anyone that can outsource my marketing to?

And if you don’t really understand, let’s just take something simple like seo, right? Search engine optimization. And they wanna hire someone they don’t know anything about it. And when you don’t know anything about it, you don’t even know if the agency’s doing a good job or not. So you have to actually have high level knowledge before you outsource something.

Pat Flynn: That’s true too. And don’t outsource blind is what I’m saying. Yeah, no, that, that, that’s a perfect piece of advice, especially for the, for the beginner. I can imagine a scenario with SEO where a person’s just like, I just want my pages ranking higher go. And that’s the measurement stick. When you know nothing about seo, you know, it’s not that simple and that it might take three to six months to see any movement.

And if you don’t know that, then you have these unreal expectations and, and, and the experiences of hiring are just bad even though they might have been good if you knew something about it. So I, I agree with you for that. Man. We could talk all day about this stuff, Steve, cuz you, you, you and I both are very similar family centric entrepreneurs.

We both have started around the same time. We’ve both run our own events. We’ve both, you know, lived through the ups and downs and, and, and are thriving now, which is really amazing. And I’m just, So proud of you and, and stoked to see you doing so well. And I’m grateful that you wrote this book. It’s one that I feel like I could have written myself, but I, I’m grateful you did it too.

Steve Chou: And so well, you’re in it. So you know I am sharing your experiences too. That is true. Go pick up everyone listening. Pat was very gracious enough to record a session about, you know, his thoughts on family-first entrepreneurship, and that’s actually in the book as well.

Pat Flynn: And speaking of that, where can people go to to grab it?

Steve Chou: I think the best place to go is TheFamilyFirstEntrepreneur.com, because I have a lot of bonuses and you, you asked me like how I’m marketing the book a while back and I always like to over-deliver. So when you sign up, I’m actually giving away a three day workshop. On how to get started in e-commerce with Print on demand.

And the reason why I chose Print on Demand is because it’s a gateway drug to a larger e-commerce business. You’re probably not gonna make life changing money with print on demand, but it’ll get your toes in the water and you’ll make some money without hardly any upfront cost. And if you like it, you can then go on and try other things.

Pat Flynn: TheFamilyFirstEntrepreneur.com, you said?

Steve Chou: TheFamilyFirstEntrepreneur.com. Okay. I wish I’d chose a different domain in retrospect because entrepreneur is kind of hard to spell. I always screwed it up.

Pat Flynn: That’s right. We’ll, we’ll link to it in show notes for you.

Steve Chou: Second bonus is I’m giving out a two-day content workshop on how to make money with YouTube blogging and podcasting.

And again, it just depends on what your timeframe for revenue is. If you have a longer timeframe and you’re more content inclined, it’s a perfect starter. And I’m also doing the six week, what I call the six week Family-First challenge, where in the Facebook group, I’m actually gonna go in and help you figure out what your side hustle is gonna be.

I’ll be in there giving presentations every single week for six weeks, and basically helping you out interactively.

Pat Flynn: Nice man. I like it, dude. That’s cool. You’ve got options for everybody. So go ahead and go there now. TheFamilyFirstEntrepreneur.com. Use your spell checker if you need to. And dude, I appreciate you.

This is so much, so much fun. What’s the YouTube channel, by the way? I know you’re putting a lot of time and effort in there, in case one of Oh yeah. People wanna get some, some dosage.

Steve Chou: The YouTube channel is, it’s the, My Wife Quit Her Job YouTube channel. It’s very creative. I love it. It’s the same name as all my other stuff.

Pat Flynn: Yeah. I, you know, when I first heard about that brand name, I was like, it was so different. And it’s, it’s just, it makes sense. You know? It’s like that’s a weird domain name. That’s a weird business or brand, but it actually does speak to the family-first part of it, right? It’s like, this is why you got into this in the first place and maybe you’ve had forgotten that for a while, and here you are now writing the book of all the things that you’ve learned and, and put into it to get back to the family-first aspect of it and and to help all of us out in the same regards.

So I, I, I appreciate you for that, Steve. Thank you so much for coming on the show today, my friend. And I look forward to hanging out with you soon. Hopefully. And, you know, go Doves.

Steve Chou: Thanks for having me.

Pat Flynn: Hope you enjoyed that episode with Steve Chu. Very personal, very, very well done episode. Steve, thank you for your answers and for just being a prime example of learning from mistakes and, and then actually wanting to help people learn from them as well.

So, I thank you so much for that. So relatable in so many different ways. And I do recommend everybody go and check out TheFamilyFirstEntrepreneur.com and go check out that book if you, again, you are parent, you have kids, or you’re thinking of having kids, or even if you’re not, this is definitely a book that is really, really important.

TheFamilyFirstEntrepreneur.com. Make sure to check out the show notes for all the links to everything we talked about. SmartPassiveIncome.com/session679. That’s where you wanna go. SmartPassiveIncome.com/session679. Thank you to Steve, thank you to your family, and thank you for listening in today.

I appreciate you and I look forward to serving you in next week’s episode. Until then, take care. Peace out. See you in the next one. Cheers.

Thank you so much for listening to the Smart Passive Income podcast at SmartPassiveIncome.com. I’m your host, Pat Flynn. Sound editing by Duncan Brown. Our senior producer is David Grabowski, and our executive producer is Matt Gartland. The Smart Passive Income Podcast is a production of SPI Media, and a proud member of the Entrepreneur Podcast Network. Catch you next week!