J Scott: Absolutely. Let’s do this!

John: J is a serial entrepreneur who gave up a lucrative Silicon Valley tech career so that he could spend more time with his family doing stuff that really matters. So, J, is being a Silicon Valley tech careerman not really something that matters?

J Scott: It’s funny. When I talk to people who find out about my background, and I go into a little bit more detail, the first question they ask is, “Why the hell did you leave that?” And, I’ll be honest; sometimes I ask myself the same question. Silicon Valley is a great place. My wife and I were making a ton of money, and everything was perfect. The problem was we wanted to start a family, and my wife was in a corporate job as well. She was traveling 3.5 weeks a month. I was traveling three weeks a month. And starting a family when two parents are both traveling three quarters of the time just doesn’t make sense.

John: You know, J, I think that I can help you out here. When people ask you that question, there’s a simple phrase I like to say. Sometimes you have to give up the good, even if it’s the really good, to get to the great. And that’s what you were looking to do. You had a good life. You had the golden handcuffs. You were making money. Life was good, but you wanted great in your terms. And you made it happen.

J Scott: You said it much better than I just did.

John: So, J, what would you say, today, your area of expertise is? What is that?

J Scott: So, you’re asking me what my superpower is?

John: What’s your superpower?

J Scott: Okay. So, I have gotten very good at scaling small businesses in a way that doesn’t require me to scale my own time and effort. Let me put that another way. I’m really good at making more money without spending more time doing it, at least that’s what I strive for. In fact, my philosophy is that if you’re doing things right, as your business grows you should be able to spend less time in that business and be even more successful with that business. What

I’ve found is that too many entrepreneurs, too many business owners actually get in their own way. And by spending lots and lots of effort and really trying to be part of every day-to-day detail of that business, all they’re doing is slowing themselves down and stopping themselves from growing.

John: Sometimes, Fire Nation, you are the clog in that wheel. You’re the clog. Now, J, what’s something that we don’t know about your superpower? Like, basically, that we as entrepreneurs really should know, meaning we should learn from what you’ve accomplished and what you know and what that superpower is, that would really just help us as entrepreneurs.

J Scott: Too many entrepreneurs that I talk to think that growing their business and putting their business on autopilot are two completely different things. They think they spend two, three, five, ten years growing their business, getting their revenue to a point where they want it to be, getting their margins to a point where they want them to be, and then after that they say, “Okay, now I’ve gotten to the point where I can go, and I can figure out how to extract myself from the business and how to get this business to run without me.”

What I’ve found is those shouldn’t be two separate things. A good entrepreneur, a good businessperson, should be able to grow their business while keeping themselves, let’s say, on the outside of that business while they’re growing it. You’ve probably heard the phrase, “Working on your business, not in it.” That’s the message that I think a lot more entrepreneurs need to take to heart.

John: So, that’s a good message. That’s something that I want to take to heart as well, but let’s get specific for a second. Like what’s a tactic or a tool or a tip, just one, just something that you’ve found has really helped a lot of entrepreneurs at least start moving in that direction?

J Scott: I don’t think I can give just one. Can I give you five?

John: Go with five, brother.

J Scott: Okay, so here are basically the five – I call them the secrets to scaling businesses. The first one is segmentation. So, you really need to be able to break your business down into its core components and understand what each of those core components is. So, to use an example, the first business I started when I left the corporate world is my wife and I started flipping houses, and the first year we flipped three houses. The second year we flipped 15 houses, and we’ve been doing 30 to 40 a year for the last six or seven years.

And so, when I really wanted to start extracting myself from that business, taking back my time, and really started really working on the business instead of in it, I looked at the business, and I said, “How can I segment this business? What are the natural ways to segment this business into pieces that I can then delegate to other people?” and it turns out in a flipping business there are four of them. There’s the acquisition, so buying houses. There’s the rehabbing of houses. There’s the disbursement, or selling, of houses. And then there’s the whole act of fundraising and being able to finance and buy those houses.

So, the first thing I did is I segmented by business. I said, “We have acquisition. We have rehabbing. We have disbursement. And we have raising money.” And then everything else I did when it came to scaling the business was focused on scaling each of those four segments of the business.

So, the second thing I did was I said, “Okay, now I have four segments of the business. I need to create replication within each area of the business. Within each segment of the business, I need to replicate as many processes, as many functions, as many methodologies as possible. So, for example, on the rehabbing part of the business, we used the same materials in every rehab. We used the same vendors on every rehab. We used the same color paint in every one of the houses that we renovate.

And this allows us to put the onus on the contractors to take our methods and implement them. We don’t have to spend five hours on every project thinking about what kitchen sink we want and what color paint we want and what kind of granite we want. We just use the same thing on everyone. So, that replication allows us to really grow the business efficiently without having to spend a lot of time on day-to-day tasks.

Third piece, documentation. So, once you have these replicable pieces of your business, you need to document them, and this involves creating checklists. This involves creating employee documents. Because the nice thing about documentation is if you’re gonna having employees, if you’re gonna have people doing these aspects of the business for you, 1.) These people need to be interchangeable.

If you have only one person that can do one part of your business – If that person leaves, that person’s a bottleneck, and the time it takes and the effort it takes to get somebody up to speed – You’re training them. You’re working with them. That can take months. So, having all of your processes well documented allows you to basically make your personnel, your employees, interchangeable. And 2.) It reduces the training time when you have to bring somebody new into the role.

Number four, delegation. So, this is the thing that I’ve found most entrepreneurs are really bad at. I know I’m really bad at this because I’m a control freak. But being able to say, “Hey, here’s the stuff that needs to get done. I’m not gonna do it myself.” Maybe it won’t get done as well. Though in reality, generally, if you delegate to someone that’s smart, it’s gonna get done better than if you, as the business owner or entrepreneur, tries to do everything yourself. But basically, trusting your employees and not being scared to hand off tasks.

I like to say that a business owner should work in those tasks that are the highest dollar per hour value to the business. So, for example, in the rehabbing business again, the two things that earn the most money are finding houses – because that’s really hard to do, that’s hard to outsource – and raising money. The more money you can raise, the more houses you can buy, the more houses you can do simultaneously, and the more money you can make.

And so, what I’ve found is finding houses and raising money, those are the tasks that generate $500.00 or $1,000.00 an hour. If I can spend 20 hours to find a house, 20 hours to raise money to buy the house, and I make $40,000.00 on that house, I’ve just spent 40 hours making $40,000.00. That’s $1,000.00 an hour. Or to the contrary, if I spend my time painting a house, I’m taking over the job of a $20.00 per hour painter. So, delegate those tasks that don’t generate a lot of money. Do yourself the tasks that generate a lot of money and can’t easily be delegated.

And then the fifth thing is prioritization. So, what I’ve found is that a lot of entrepreneurs, they prioritize making money over anything else. And what I say is don’t prioritize making money over everything else. Prioritize efficiency and growth over anything else, and the money will follow.

So, a good example of this is if a contractor on one of my jobs calls me, or calls my project manager, and says, “Hey, I need this $10.00 part. Should I run to Home Depot and grab it?” My answer is, “No, call Home Depot, order the part, spend $50.00 to have it delivered.” And while you might be paying $50.00 extra to have a part delivered, the contractor’s not leaving the job. He’s not getting distracted. He’s not gonna make a mistake and buy the wrong piece. So, really, spending extra money to increase the efficiency of your business is often a good tradeoff because in the end it allows you to scale. It allows you to get more efficient.

So, just to recap: segmentation, replication, documentation, delegation, prioritization. Those are my five keys to increasing the scale of your business efficiently.

John: Amazing keys. Just knocked it out of the park, J. In Fire Nation a lot of people are asking me, “Hey, why are some people successful and some people aren’t successful?” Because of what you just heard. What J just broke down for you is absolute gold, and people who are unsuccessful don’t do those five steps or don’t create five steps or three steps or ten steps that work for them. J did. He’s successful. If you’re not a success right now, Fire Nation, you probably don’t have a system like this because this is the key to success. These are the ingredients to the recipe you need to implement in your life.

Now J, you’re awesome, but you’ve struggled too. You’ve had your ups and your downs. Let’s talk about what you consider your worst entrepreneurial moment to date. Take us to that moment, brother. Tell us that story.

J Scott: About three years ago, a friend of mine and I kicked off a tech business. It is a product business where we invented a product. We, basically, got parts manufactured in China shipped to us, assembled it here. When we came up with the name of the product, it was a little bit close to the name of another popular product in the space, and I was a little bit worried.

We consulted a trademark attorney, and he assured us that it was not an issue. It didn’t infringe on the other company’s trademark. My gut told me that he was wrong, but we moved forward. We said, “Hey, he’s the attorney. He’s good. He knows what he’s doing,” so we moved forward.

About two years into developing this product, we got a cease and desist letter from this other company. And I’ll tell you, my stomach dropped. We had spent, literally, six figures on developing this product. We were, literally, weeks from shipping the product, we had just announced it, and we had to go back to the drawing board. We spent about a year retooling the product with all of our marketing, with all of our branding; everything that was related to our trademark, and ultimately it cost us about $150,000.00 and lost a year in time on this product, which was huge.

Anybody in the tech space knows that losing a year-and-a-half on a product could make the difference between success and failure. And while we did finally get things back on track, we rebranded, we spent a lot of money, the take away here was I should have trusted my gut. I trusted an attorney, my partner trusted an attorney, and, looking back, we really should have just trusted our gut.

John: Fire Nation, intuition, your gut, it’s been 80,000 years in the making, since the dawn of homo sapiens. Let’s trust our gut. At least look into it more when that red flag pops up because I’ll tell you, time and time again, it comes out to be a reason that there is that red flag, that there’s that intuition, that there’s that “gut.” Check.

Now, J, let’s just dive into one of the greatest idea that you’ve had to date, brother. Tell us the story of one of those aha moments that you had that you were able to turn into success. Take us there. Tell us that story.

J Scott: So, I’ve had a lot of aha moments. In fact, I try and have one at least every day, and with two little kids, it’s actually not too hard because they challenge me. But the one that comes to mind first is – So, anybody is the real estate flipping space. I don’t want to say anybody, but a lot of people in the real estate flipping space, basically, know me because back in to 2008 when I started my flipping business, I also started a blog where everyday I would blog about my adventures in real estate.

And back then, I couldn’t change a lightbulb. I had never purchased a house before. I had no idea what I was doing, so essentially, most of my blog posts were here’s the mistakes I made today. Here are the mistakes I made today. Here are the mistakes I made today. And I wasn’t doing it for any reason other than I like writing. It kept me accountable in my business. I would say, “Hey, my goal is to flip 10 houses this year.” If I knew people were following me and asking questions about it, I’d really be embarrassed to fail.

So, after about five years of writing this blog, thousands of blog posts, basically putting out every little financial detail of every house I did, every penny we spent, every penny we made, every penny we lost, I decided, “Hey, I’m gonna write a book.” In fact, my wife encouraged me to do it. One day, I came home, and I had been on the phone all day with people who were reading my blog, and I said to my wife, “I can’t scale this time it takes that everybody’s asking me questions about flipping houses,” because this was back in 2013 when flipping houses was getting popular again.

“Everybody just has so much demand on my time, and I want to help everybody, but I can’t do it,” and her response was, “You should go write a book, so that way when people ask you questions instead of having to spend 20 minutes on the phone, you can just say go read the book.” And I thought, “This is actually a great idea.” So, I knew that writing a book wasn’t necessarily a lucrative business opportunity.

Most people that write books don’t sell a lot, don’t make a lot of money, but I saw the opportunity to, basically, take back some of my time by doing this. Instead of talking to people on the phone or by email, I could just say, “Go read this book. Here’s everything I know about flipping houses.” And so, in 2013, I actually wrote two books. It started out as one. It got too long, so I broke it up into two. And I released the books, basically, expecting that when somebody called me, I would point them to the book, and I wouldn’t have to talk to them. And if I made a couple bucks on the side, that would be great.

It turns out that within the first year, my wife and I made $200,000.00 in profit from those two books, and we’re averaging a little over $300,000.00 per year still today on those first two books. And so, the aha moment there was the giving of value often pays off. I spent five years building an audience, getting people to read my blog, basically giving value, and I didn’t realize that there were so many people that were so appreciative of the value I was giving that when I released these books, literally within the first six months, we had sold 20,000 copies. And we’ve sold over 110,000 copies of those books to date, self-published. I’ve written another book recently, and people just keep buying them.

And I like to think that the books are great, but the feedback I get is 1.) “The books are great.” So, I’m glad to hear that, but the other piece of feedback I get is 2.) “You got me started. You provided so much inspiration and information for me to get started in this business. It’s the least I could do to give back by buying your books. Put out more books because I want to buy more.” So, the aha moment for me was there’s value in giving, and if you give freely without any expectations, without it being a business transaction, eventually it will come back to you.

And so, what I’ve found is that blog that I started back in 2008 that I put a lot of time and effort into for many years, that’s been the key to my success in the real estate business. I’ve gotten millions of dollars in financing from people that want to invest with me. I’ve made millions of the books. I’ve made millions flipping houses by people coming to me and saying, “Hey, partner with me, or let me sell you this deal,” or whatever. And so, just the fact that back in 2008 when I was getting started, my thought was, “Hey, how can I help other people with what I’m learning?” It’s all come back to me in spades.

John: Fire Nation, the process, it’s not difficult. Create free, valuable, consistent content. Grow an audience who cares about that content. Then ask them what their problems are, what their struggles are, and create solutions for them in the form of products, services, books, you name it, and make it happen. Now, if you think J Scott has been dropping value bombs, you’re Albert Einstein. You’re a genius because you’re correct, but guess what? More are coming up in the lightning round when we get back from thanking our sponsors.

J, are you ready to rock the lightning rounds?

J Scott: Let’s do it!

John: What was holding you back from becoming an entrepreneur?

J Scott: So, the biggest thing holding me back was I was comfortable. I was working a corporate job. My wife was working a corporate job. We were making a ton of money. We were living the single lifestyle, and it was really tough to make that decision. Hey, we’re gonna give up high six figure jobs and a cushy lifestyle in Silicon Valley. My wife was riding the private jet in the company she was working for, and I was doing well in the company I was working for.

John: So, you guys were officially dinks: dual income, no kids?

J Scott: Absolutely. Absolutely, and to decide, “Hey, we’re gonna give all this up in the hopes, or in the dreams, that one day we’ll make more money and live a better life.” That was scary. That’s the biggest thing that held us back from becoming entrepreneurs for several years, but eventually we decided, for the sake of our family, it was something we had to try. And no regrets.

John: J Scott, what’s the best advice you’ve ever received?

J Scott: Growth comes from discomfort. You get better by doing things outside of your comfort zones, and you need to do something every day that scares you. If you’re never doing anything that scares you, you’re never growing. You’re never gonna get to the next level.

John: What did you do yesterday that scared you?

J Scott: What did I do yesterday that scared me?

John: I only ask the tough questions, J. Come on. I’ve given you enough lay-ups already.

J Scott: Yesterday, so –

John: Or even in the past week. I’ll give you a little slack here.

J Scott: Let’s talk about yesterday. So, yesterday, I made a decision. So, I’m speaking tonight at a real estate investing group, and they asked me to speak on a certain topic, and I decided I’m gonna speak on another topic. I’m not a motivational speaker. I’m the type of guy you bring in to give you the nuts and bolts, tactical information. But I was having some thoughts yesterday of how people in this business do a lot of things wrong, and there’s some motivational stuff I can talk about. And it’s terrified me to think I can walk into a room full of 150 people and try and motivate them because what I’m good at is teaching.

John: Well, you’re motivating a lot more than 100 people right now, J Scott. I can tell you that, and I think that you could have a keynote speech on just those five topics: the segmentation, the replication, the documentation, the delegation, the prioritization. I mean, I’m taking notes over here, brother, and this is my 1879th interview. So, you keep doing what you do. Tell us, Fire Nation, a personal habit that contributes to your success.

J Scott: I attribute my success to my family. My wife and I are business partners, and we like to think that our kids are our partners with us in our business as well, all of our businesses. We don’t make any business decisions that we don’t make as a family. So, if I want to do something new, I talk to my wife. If she wants to do something new, she talks to me. We talk to our kids. If it’s gonna involve taking time away from the family or traveling a lot, we want to know what our 6 and our 8-year-old – what their thoughts are on, “Hey, mommy and daddy are going to be traveling more, or we’re all gonna be traveling more.”

So, every business decision we make is as a family. So, even though the stuff we do may not be the most efficient or the best use of our business time, it’s always the best decision in terms of our family, and that’s really the reason we got into entrepreneurship in the first place. It was to be able to grow our family and have the financial freedom to do what we wanted, but it’s not just about financial freedom. It’s also about everybody being together and everybody making decision together.

John: Recommend one internet resource.

J Scott: I love Kahn Academy. So, there’s so much free stuff out there on the internet. I’m a big fan of knowing a little bit about everything, if not a lot about everything, and so I spend a lot of time utilizing free resources on the internet. Kahn Academy is one of the best out there, so if anybody’s interested in just learning about stuff, just go jump on Kahn Academy and start watching videos.

John: Give a shout out to a couple of your favorite books that you’ve personally written, and then give us one that you haven’t.

J Scott: I’m not here to hype my stuff, but I’ll mention I’ve written three books. The Book on Flipping Houses, The Book on Estimating Rehab Costs, and The Book on Negotiating Real Estate are my three books. But my favorite book out there – Again, I’m a fan of scaling businesses. There’s a book that a lot of entrepreneurs haven’t heard of, which I find really upsetting. I think more people need to read this book. It’s called The Goal, and the subtitle is Theory of Constraints. It’s by an Israeli guy named Eliyahu Goldratt.

John: Goldratt.

J Scott: Okay, so you’re familiar with the book. I found too many entrepreneurs aren’t familiar with this book.

John: It just had its 30th anniversary, actually. It’s been around.

J Scott: It did. It did, and I try to read it at least once a year.

John: Come on, what?

J Scott: It’s all about how you can remove bottlenecks from your business. Every business has bottlenecks, and it’s those bottlenecks that make it difficult to scale and to really optimize businesses. And this book, it’ll teach you how to identify those bottlenecks, how to remove them from your business, and how to keep them from coming back.

John: J, let’s end today on fire, brother, with you giving us a parting piece of guidance, the best way that we can connect with you, and then we’ll say bye-bye.

J Scott: So, the best way to connect with me, feel free to check out my blog at 123flip.com. And if you’re an investor, and you’re looking to learn how to basically leave the rat race behind and gain your own financial independence, I’m getting ready to start a mastermind community at theinvestingmastermind.com. I’m guessing that it will be launched by the time this releases, so check us out 123flip.com or theinvestingmastermind.com.

John: And a quick parting piece of guidance?

J Scott: A quick parting piece of guidance. Go do something today that scares you. Go do it right now. Whatever you’ve been putting off for the last however long because you’ve been scared of whatever’s gonna happen when you do it, go do it right now.

John: Fire Nation, you’re the average of the last five people you’ve spent the most time with, and hello, you’ve been hanging out with J.S. and J.L.D. today. So, keep up the heat and head over to eofire.com. Just type Scott, that’s S-C-O-T-T, in the search bar, and J’s show notes page is going to pop up with everything that we’ve been talking about: his books, his recommended resource, his recommended book. Get over there. It’s the best show notes in the biz: time stamps, links galore.

And of course, head over to 123flip.com or theinvestingmastermind.com to see what he has going on over there. J, thank you for sharing your journey with Fire Nation today. For that, we salute you, and we’ll catch you on the flipside.