Victor Lagos: 0:03 Welcome to the Debt to Financial Freedom Podcast. I'm your host Victor Lagos and the founder of Lagos Financial. I've been in the finance and lending industry for 16 years, and I've personally made financial mistakes and learn from them. I started this podcast to share stories and lessons on my own journey, and to share insights that may help others on their journey. And I interviewed people that I've connected with that share the same values and mission to help others create financial freedom. My goal this podcast is to share raw, honest, transparent and helpful stories that you can relate to and inspires you to take control of your finances and only have debt that brings you closer to financial freedom. Everything on this podcast is general in nature. And for education purposes only. None of your personal objectives, financial situation or needs has been taken into consideration. I highly recommend you seek personal financial, legal taxation and credit advice before you take any action on what has been heard on this podcast. Welcome to episode six of the debt to financial freedom podcast. I'm your host, Victor Lagos. I'm also the founder of loggers financial finance brokerage business, Philip Khao, he's my next guest today. Philip Khao is a chartered accountant, and a director of self accounting. He's also the co host of a new podcast called Solve to Evolve. Phil grew up in a single parent household and quickly learned the value of money and the importance of financial control at a very young age. His mom would always tell him that money doesn't grow on trees. And it still resonates with him to this very day, you could say that was destined to be a business that he was destined to be a business advisor. And after 15 years of working on his craft in the public practice, and for multinational corporations, he now provides business advisory to SMEs to install financial control and help them grow and operate a sustainable business. Welcome, Phil. Philip Khao: 2:09 Thanks, Victor. What an intro. And thanks for the plug, really appreciate it. Victor Lagos: 2:13 Oh, good, man, thanks for have actually been watching your podcast, I really like it. It's very informative. You and your business partners, obviously, you've got quite a bit of experience. And you've focused on different things, which is great. But I wanted to share with the audience about how you and I connected. We connected last year through a networking organization that we're both a part of called BNI. So Phil is actually the president of the chapter that we're in. I'm actually really glad that we met because you actually gave me a lot of inspiration at the beginning when I started my business last year, because I was earning earning decent money at my job. But I knew that I could actually do it on my own. Because I had the support around me. And you helped me because you were able to, you know, look at the numbers and project where I needed to go and what work I needed to get there. So I want to sort of touch on that a little bit. Because I feel like there's a lot of business owners or potential business owners out there that don't get the numbers. And they're good at what they do. But because they don't get the numbers, they might end up creating like a job for themselves and a hard job. So it's actually worse than if they're employed. Do you think that that happens a lot? Philip Khao: 3:24 Yeah, that's right. I think, Well, look, firstly, congratulations on that. And I'm glad we met as well. So look, I remember that conversation we have I was driving down I think it was the end for you called me and you said fuel. I'm thinking about this. And I'm thinking about oh, actually, before you said that you said you were asking me all these questions to set up the right structure, things like that. Oh, yeah, do that. Yeah, exactly. And I was thinking, What is going on? Why is he asking me so many questions, but I had the time to, you know, chat to you just because I was stuck in traffic. Sydney traffic's are always good. And so you know, I think from there, I gave you a lot of information and insight. And I think, from that, the next time we saw each other the next week, you said, You know what, Phil, thanks for the advice. I'm going to jump in and do it myself and pretty happy for you that you've done that. And I feel like a lot of people always think about doing things. But then they don't really action. It's always thinking, thinking thinking, and I don't do anything about it. And you know, inaction leads to nothing, really. So I'm glad that you've jumped in and done that. Now, when you say a lot of people get into business, and they end up working harder than their job. It's true. And I would say generally, in the first year of business, it's always the hardest. Yeah, but he should get easier and easier, right? If you're, if you've got a focus, you've got a plan and you're working towards that. Your focus will become your reality. But a lot of people are fixated in just doing the work, getting it done. What's next, doing it without purpose. And so what they find is in three years time, four years time, they continue loading up on their workload, they don't have the balance, they end up working a lot higher than than they would if they were just doing a job. And so what they need to do is actually ask for help. Some people go, I guess they're pretty narrow minded, they're very good at what they do. So that they just continue doing that without thinking about big picture as to why they got into business. And that's to reach financial freedom, in essence, right? Everyone wants that work life balance. And so, yeah, a lot of people need to, I guess, take a step back, sometimes look at the progress and go, you know, what, how do I actually, instead of working in the business, how do I now work on the business? How can the business, how can I build the business, so he operates without me, because right now, a lot of business owners in the first, second, third, maybe fourth year, the buck stops at them. If they're not in the business, if they get injured, the business is screwed, they're gone. Victor Lagos: 6:12 That's very common. They call that key man dependency. And it's a scary place to be when you hire people, and they're all their payroll, their entire life is based on you working and being available. So if you get sick, if you take a holiday, if you have a kid, you want to travel overseas, and the business doesn't have you? Well, it falls apart. So Philip Khao: 6:36 it's, it's scary. I mean, look, there's insurance for it, but you don't want to be paying insurance for your life. But it is scary. Like if you go out in business on your own, God forbid something happens to on the on the ski slopes or whatever you're doing sporting activity, you know, how are you going to earn that income? And especially those not in a service based business? They're even more screwed, right? So it's having a plan or for thinking forward about? How do I build this business? So it doesn't need me. And that's what a business is. It can operate without you being in otherwise, you're really just an employee or family run owned business. Yeah, and I Victor Lagos: 7:21 think a lot of people don't plan ahead, or don't ask for help. And they think that they can just keep doing what they do, and it will get better. You know, I used to be someone that used to put my head in the sand when it came to the finances. My wife really helped me with that, to just face to face the facts look at and say, What are my numbers look like? And the numbers are literally just money in and money out. Right? And when is when is when a payments due? And where's the money coming from to pay them? It's literally that simple. But what happens is when you're on the tools, and you're doing your job, and you think, Okay, I'm doing a good job, I'm gonna have customers money is gonna come in, I'll be able to pay the bill. But then, you know, invoice doesn't get paid, it's late, customer pulls out, you know, anything can happen, all of a sudden, you don't have enough money to cover the bills. And then you're in a, you know, in a backward spiral at this point, because you're chasing your tail. And, and the whole point of this podcast is to teach people about financial freedom from multiple angles. So I did want to ask you, you did touch on that earlier. But what does financial freedom mean to you? Philip Khao: 8:30 Yeah, okay, financial freedom. So I mean, what it means to me personally, is, is being able to give back to my mom, you know, you mentioned that I was raised in a single mother household, she did quite a lot. For my sister and I growing up, you know, father left us at an early age haven't seen him since. And so he or she sorry, effectively worked two jobs just to get put us into school. And she did a lot for us, just to give us a better life. And I'm sure all parents do that. So it might be a little bit cliche, but financial freedom means giving back to her giving back and being able to now support my family, so that they don't have to go through the hardship that one my mother went through, and two that I had to go through as well. So I think financial freedom just means and I think for most people would mean that they don't have to worry about money. You can make a decision without worrying, knowing that are not thinking about the bills to pay that are coming up going on holidays, thinking about oh, I need to budget for that. So getting to that point. I'd be pretty happy but I guess to take it a step further. Financial freedom, what it looks like for me is actually freedom. Right? So I think all of us talk about financial freedom, but more so we're really craving freedom meaning If I want to be able to do what I want, when I want, and how I want. And at that point, I can retire. And I'm hoping that you know, in a few years, yeah, because retirement for me doesn't, it's not about sitting on the beach sipping on cocktails chilling out, I can't do that, like, after two days, my mind goes numb, I need something to do. Freedom to me is or retirement is not means to me is where I can own there are working different businesses own various businesses and be able to run that and sort of pick and choose when I work in. Victor Lagos: 10:45 Yeah, so it's kind of like, high level involvement. So you don't, businesses don't need you to operate. But you can come in with an oversight of the management and, you know, someone else's handling the operations. And you can come in with strategy. And, you know, just see how everything's going, just get Philip Khao: 11:03 my it's just, it's just to get my brain ticking. And, you know, I guess, for me, I like challenges. Yeah. And that's why I kind of chose to focus on business advisory, or businesses, because a lot of businesses go through a lot of challenges and problems and obstacles. And I like when clients come to me with a particular issue, and they've got no clue what to do, or there might have a clue, but they just need help. And going on that journey with them from point A to point D, and then being able to see the result. And how it makes them feel is amazing. Yeah, it's amazing. Victor Lagos: 11:41 No, no, I really love that. You genuinely care. That's why I invited you to come on the show. Because, you know, there's many people out there that do have a business, and they don't know numbers, and they don't plan ahead and or have someone to guide them through that. But you genuinely do that. And you you help your clients to achieve that, you know, I wouldn't say you hold their hand, but you keep them accountable. You and you create measures to track their progress, because there's a saying that you know, what gets measured, gets managed, or what gets measured gets done, right. But I did actually want to ask you, you touched on your personal story. And thank you for sharing that. Because I think the why is so important in what we do, you know, give back to our family, get back to our parents. And, you know, I just want to acknowledge you because it's not an easy thing to not have a father growing up. I can't personally relate, my dad has been around and he's still around, my parents are married. But I know many people are in similar situations to where they've had to put that hat on and be be the man of the house. And I can imagine it's a tough thing to take on that responsibility at a young age. And then to get to where you are and to be able to give back. I think that's, you know, I commend you for that. So Philip Khao: 12:56 yeah, it's made me who I am. And look, you can't be a tough childhood, I wouldn't change a thing. Because if I, if I did, then maybe I wouldn't be sitting here right now. And one of the things I'm doing right, so yeah, look, Victor Lagos: 13:06 everything happens for a reason. We learn from experiences we we grow from them. And then when we have our own children, we get to, you know, be the parents that we wanted, if that makes sense. Yeah, yeah. And you do have a child. I don't yet my wife right on the journey. But look, I, from what I know of you, I'm sure you're an awesome father to try to. So I wanted to ask a little bit about your professional history, you touched on the fact that you focus more on business advisory, but can you tell us a little bit about your, your professional history? And what led you to be a partner at solve accounting and focus on being business advisory or virtual CFO for businesses? Yeah, so Philip Khao: 13:49 I touched on why I got in, or sorry, why I wanted to get into business and mainly that was motivation for my mom. So you know, with that, in my mind, at the age of 17, we finished high school. At the time, there was a lot of accounting fears, or accounting conventions going on, and I was like, I didn't know what I wanted to do. But I thought accounting was I mean, it's typical Asian, you know, become an accountant become a lawyer, but I thought, Look, it's something that I don't mind doing. I know a little bit about it. So I went to all these accounting fairs then and decided to apply for accounting Cadet ships. You know, the big four the Metis was unsuccessful, you know, failed. I was like, Oh, well, I'll try something else. So then I ended up getting a job at Toys R Us. So this was at Toys R Us paramount. I worked there and thought this is not too bad. You know, making a bit of money first job. And then a few months later before University was going to start so I ended up getting into Bachelor of Business in in UTS. I got a call For a friend named Kathy, and she, she got a cadetship. She called me and she said, Phil, we've got an opening, you should apply, you might get in. And so that opportunity came, I applied. The next week, I got the job, my first job. So I was working full time as an accountant or junior accountant, doing a lot of photocopying, and mailing and admin work, right. But that then, was the stepping stone to my professional career. So I was working in public practice for the next eight years, and now you work like they're working like a dog, you get underpaid. But I think even so, you learn so much. And without that experience, I don't think I'd be the business advisor I am now. Victor Lagos: 15:50 So you got a lot of exposure to a lot of different businesses and large businesses Philip Khao: 15:54 100% 100%, I think my time at BDO was probably the best time in terms of work and professional. There was a lot of, we had a lot of international clients that would come and look to invest into Australia. And we will then act as their outsourced finance function. So set them up and then be their finance team on ground until they will big enough to, I guess hire internally. And so that's where my business advisor experience had come from mainly. And then after the eight years, my wife said to me or not my girlfriend at the time, she's she said, You know, I wanted to move to London. I was like, Shit, I'm pretty comfortable here, you know, hanging out with the boys and doing work focusing on my career. But eventually, after a bit of talking, you know, back and forth, I decided to move. But before I decided to move, so I was 25. At that time, I thought to myself, look, if I move, I want to come back and open my own business and do something, what should I do? So I was thinking about and then when you think about these things, there's just so many ideas, but then there's so many excuses that you make for yourself, like you might work, it's too hard. And then I thought, You know what, why don't I just I've been working in accounting for eight years, why don't I start my own accounting firm. I mentioned this to my mentor at the time. And still now Chris, my business partner. And he said, Dude, just join me. Just join solve. And I've already created, the brand systems are in place, all you need to do is get a laptop, and I'll send you some work. So I moved to London worked a full time job as a financial controller for various companies. enjoyed my time there getting the commercial experience at nighttime. So a couple of hours I work on solve. Chris was feeding me a lot of jobs over the time. I got to a point where I blame him for making me wear glasses because I was always in front of the computer in the daytime, at night. And so I got glasses aware that went away, it went to work. And then 2019 I came back to Australia and I had I was at a crossroads. And a lot of people might be experiencing this. But do I go out? And do I go out and find a full time job back in the city where it will take me an hour to get there an hour back over a week that's 10 hours of travel, make my 150 grand whatever it is, or do I back myself and go full time we've solved I was earning 40 grand at that time, probably less than that a year. I thought about the train ride. And I was like nah, stuff that. And so I backed myself. And that first year was very hard. You just constantly back against the wall thinking about where is the money gonna come from? It was scary. I was looking to also buy a property at the time. So I was like, how am I going to do this. But look, in the end, I was able to succeed, focus. I did a lot of things. I would apply for jobs, full time jobs, but come in with an angle of, hey, why don't you hire me as a contractor or an outsourced accounting firm to do your finance manager role. I did a lot of that. And I eventually land the client, which was about 50 grand II. And that was a big client for me at the time. And so just the perseverance that I've found. Being in the first year on your own, trying to find work, being hungry being motivated, led me to that. I tried a lot of different things. I tried BNI at that time as well. I wasn't good at it. But that job board application or the job board angle was really Successful Victor Lagos: 20:01 actually like that you looked at a different angle you applied for jobs that were, you know, advertised for employees. But you actually went in there with a proposal and said, rather than hire me as an employee, I still stay self employed, you don't have the obligation of payroll tax, superannuation and all these changes, and then you created an opportunity for you so. So I think that's a really powerful thing for people out there that that are hungry, and they do want to go out on their own, there is a way to still have that security of the recurring income, like you're employed, but still have a bit of your freedom because you can have multiple employees, right? Does that? That's exactly right. It's just about balance of time, right? Because when you contract out to them, it's not contracting out for 40 hours a week, it's contracting out for work. Right, right. So as long as you complete the work, they don't care about the hours that you get, it's Philip Khao: 20:53 a bonus to the employees there a soldiers because they wouldn't have to pay for full time staff. And you know, I'd come to them and say, do you really need you know, someone full time This job can be done in three days, per week. So I did have about five interviews or so and was able to get one and that kind of set me up for the rest. And then I was like, Okay, well, I like doing this type of stuff. I like working with businesses, I was doing taxes as well. But I thought, Look, I don't really like tax too much. I enjoy more working with clients and creating value, or adding value forward looking. So that's kind of what motivated me to focus on business advisory over the last few years. Victor Lagos: 21:33 Okay, yeah, that makes sense. And you did mention about wanting to buy a property. So a lot of my listeners, they are property investors are on the journey to to grow their portfolio. Do you own investment properties? And did anyone help you? Or did you do it all yourself? Philip Khao: 21:50 Yeah, good question. I think, for me, I purchased my first property in 2011. I was 21 at the time, and then you know, when we're 21, we're going back to back clubbing nights, Friday, Saturday nights getting wasted having fun, right? But my mum actually pushed me. So thank God for my mum. She said, Well, at the time there was free stamp duty on property purchases, and she said, You need to take advantage of this. You're working full time, go get a property. So she helped me purchase my first property was in Fairfield. Was it a Victor Lagos: 22:25 guarantor loan? Or did she come up with a deposit or you had a deposit she she acted Philip Khao: 22:29 as a guarantor. But I suggest to secure the mortgage, and I made repayments moving forward. So that was in 2011. And it's look, it's very important for people if they're able to get into property, because it's a stepping stone to wealth. That was in 2011, a few years later, I decided this, there was no equity in the property. And I decided, You know what, I'm gonna put some equity out and build a granny flat at the back. Did that and then the property started paying itself off, was so positively geared, didn't have to worry about it 25 of the time, before I left to London, so that was amazing for me not having to think about the repayments, or transferring money over. And so that was amazing. The next or four years after that, I made another purchase in Central Coast. This time it was an apartment, there wasn't a lot of capital growth compared to the land I purchased in Fairfield. So for me for going through that personal experience, I now tell friends and family and sometimes clients when they ask, you need to buy that. Like, that's where you're gonna get the capital growth. There may be some anomalies where apartments may go up a bit more, but majority of the time, it's going to be land. Why do you think that is? I think it's just the demand. Everyone wants, he probably would have seen this with COVID as well, right? Everyone was kind of locked in their houses in their homes, and those that were locked in their apartments, couldn't go out to your backyard. You couldn't get fresh air, you couldn't go to the front yard, couldn't go for some walks. And so that probably, I guess, was the big reason as to why the property market surged just ordering COVID and post COVID Because a lot of people were locked in their homes and I thought I need the perfect home or jail home at time to be able to kind of live freely and not be confined in an apartment. So that's probably the reason Victor Lagos: 24:37 it would make sense the other way. My understanding is that if you think about supply and demand, the more obviously the more supply there is. Its prices are going to drop will be fairly stable, right? But if there's less supply it, it's scarce. And but if there's a lot of demand that will push prices up, land is scarce. You can't just keep making Keep more land, right? You know, you can rezone land, but it's usually further out. Whereas when you're building apartments, you can just keep building up and up. So that airspace Exactly. So you don't actually own the land, right? You're paying council rates for your entitlement of it, but you don't own the land. So you just own the airspace, you don't even own the walls. So you can't even you know, knock it down, or, you know, add another room, you need to get permission from the strata, body corporate. So, yeah, too, I think as well, that helps learn to appreciate more than the unit. Philip Khao: 25:34 Yeah, and as I was saying, you know, land or property purchase is effectively a stepping stone to wealth, when I got back from London in about in 2019. And I was going out my own work and my own and the wife and I and needed to get out of our parents place. But because I had those previous investments, there was equity there for me to then utilize and make a purchase of a main residence in the area we want. Now, at the time, the interest rates were about 2%, I think they will low 2%. And I couldn't get enough funding because the market was surging at the time, and everything was going through auction, so everything was overpriced, whatever it was guided that, add another one 200,000. And so the property we were going for, it was gone at a certain value, and we're like, okay, that's probably going to go over. And I need more money, but the banks wouldn't give it to me. So I decided to go with alternative lending, which I think is might be important to your listeners there. And the reason why I'm mentioning this is because the alternative lending was more expensive. The interest rate was about 5%, I had to pay an application fee of about 20 grand or so I held that property, my main residence for the next 12 months. So really, that property purchase cost me another 50 grand, roughly 4050 grand. But when I decided to go or make that decision, I thought, like it's my main residence, I'm gonna stay here for some time. And 50 grand is nothing when you think about being able to live where you want, in a house that you want. And I thought that's just a small price to pay. And a lot of people overlook that. They go, Oh, interest rates are too high, I can't I don't want to buy that property, or I've got to pay an extra 20 grand, I don't want to buy that that's the I guess they're kind of losing sight of the bigger picture. Because I've made that decision to spend that extra 50 grand before refinance for that, right? You know, that property itself has gone up by 70% in two, three years. And so you know, 50 grand is nothing, it's a drop in the ocean. Really? Victor Lagos: 27:58 Would you say that was a bit of luck in terms of timing, that it went up 70%. Because that's a huge spike in a short amount of time, when you made a decision. When you made that decision, to spend an extra 50 grand pay the higher rate, did you have that in your mind that it's going to grow in value in the short term, or it was more the fact that you're going to live in the property. And that was something that was important to you willing to pay the price for that? Look, I Philip Khao: 28:21 didn't think in the short term had grown by 70%. But I knew over time that I that I'd be holding that you would grow substantially, maybe not 70, but substantially, but because of that now that's going to help me facilitate or facilitate my next purchase of an upgraded main residence. Yeah, but because I, you know, in my mom, thank God for her once again, pushed me into getting that first property purchase land. So much equity was there was so much equity over time that it was able to then I guess, facilitate my next purchases, it keeps going up. And I've been once I get to the ER, once my wife is happy with the home that we live in, then I can start you know, thinking about making other property purchase for investment. Yeah. Victor Lagos: 29:09 No, no, that's, that's really great. Thanks for sharing that because there's a couple of things I wanted to touch on with what you mentioned. A lot of people want to get the home first, and then buy investment properties later. When you want to buy the home first, you're limited with what you can get into because usually the home you want is in the area that you want to live in. It's somewhere you might have grown up. And if it's in Sydney or Melbourne, that price can be unreachable right now. But you went in on the angle of I want to go in at 21 By the way, that's it's very impressive that you're able to buy a property at 21. And, you know, great that your mom really helped you to get in. And I'm sure there's other people that can get that helped them their parents, but you bought it as an owner occupier, but then you moved to the UK, so then it converted to an investment property. So then you went up in value you access the equity and you built granny flats and now became positive cash flow. And then because it went up in value even further, you then extracted that growth, the equity, use that as a deposit to buy your home. So yes, you did buy it initially as an owner occupier, but you were 21. So you weren't buying the dream home, you're buying whatever you can get to get the government stamp duty exemptions. So if you are listening, that's another angle to look at it. Because now Phil has got a couple of properties up his sleeve, he's looking at the next. And he's also a business owner. So this is what I always talked about to people that you've got to have multiple streams of income. And if you want to create a small fortune, you got to do a bit of both two things. One is spend less than you earn and invest the difference. And then use leverage to buy property, which is what you did, and to create, and or provide something of value that other people are willing to pay for. And that's having a business. So accounting, so you're doing that, too. So what I wanted to ask you is, what are some of the things that you're currently applying itself that are helping you create more of this financial freedom, and let you do more of what you enjoy? Philip Khao: 31:12 Good question, I guess more specifically to solve the business and what we're doing, we we currently, we have a lean business model on lean structure. What that means is we don't have fixed rent an office space, we use a co workspace. So that's pretty helpful. The fact that we're a service provider, having zoom allows us to communicate with our clients without having to travel, waste time traveling, or having an office space. We also outsource most of our data entry work and compliance work to the Philippines. And they've been pretty good in terms of getting the work done from start to finish. People over there really hungry, the employee market in Australia it's it's it's pretty dire at the moment you can you probably hear across all industries that it's very hard to find someone good. And if you do find someone good, you're probably going to have to really overpay. So now that we've kind of in a world of I feel like it's globalization is has kind of taken over. And you can actually find really good motivated people in the Philippines or anywhere else in the world. Not a fraction of the price but a better price. And be able to do the same work because they're hungry. And I can relate to that, because I went to the UK, I had to learn a bit of the local legislative tax laws there. And the only takes you if you're willing to you can do it. Alright, so those are the two things. And I think the third thing as well as being able to, I guess, pay your employees differently. So we all were quite, we're quite used to the traditional way of paying them gross wage. This is what you're gonna get, that's your package. But it's now about incentivizing, incentivizing them, giving them a bit of you know, skin in the game so that they're working as hard. And they feel a part of the team and not just the unemployed grinding away. So that might be putting a commission or bonus scheme in place. But that helps to retain as well. So we've got that in place. We also have a different corporate structure to most we, Mr. Business partners. We don't take a wage. So a lot of business. A lot of people that get into business think okay, how do I extract cash out of the business, I've got to pay myself a wage. But for us, we don't do that we issue dividend access shares to the partners. And we extract fully franked dividends from that small tax efficient. And from that we can still get loans, we can still refinance, you know, as a broker, you may have come across those that either earn salary or those that earn dividends. So those are the couple of things that we do specific to solve that allows us more financial freedom to do things that we want to do. Victor Lagos: 34:19 It sounds like you've applied what you teach others to do in your own business, which I think is really powerful because you're sharing real life experience and wisdom that can translate into any business. You know, of course, you know, the way you hire staff and outsource and the way you train them is also another piece to that right. And we can always go deeper and how you do that. When someone's overseas. That's a challenge to someone. How do you train someone to do do the job and you can't even meet them face to face. If you come from a corporate background, which I do as well. I used to work at Macquarie Bank. You get trained And with a buddy system. So someone will show you the ropes face to face, you can ask questions, take notes, and you get to practice on the job kind of like a cadetship. But when you're training someone overseas, you need to be pretty proficient with Zoom or, you know, Google meet or, you know, teams or whatever it is. record that, and then create a process manual as well. Philip Khao: 35:21 Yes, standard way of operating. Yeah, yeah. Like, I guess I'll add a bit more to that, like five other things that we do as well, but would probably apply to most businesses. The first one is to understand their cash flow, or the cash money going in money going out. And you touched on that before. But if you have an understanding of how that all works, you're able to plan ahead for the future. And you can make strategic decisions that won't impact your bottom line, or the business at all, in an adverse way. Having financial controls is another part of that. The second thing is having in we've mentioned that just now, but having a standard way of operating, that's going to bring so much in efficiencies in the business. When you think about training staff, whether that's you know, domestically or overseas, you're going to train them, you investing your time, you might be 234 months that you spend with them. And then another four months later, they decide I'm done with this, I'm gone. Now you just wasted four months training them, now you got to wait another two months or so finding a replacement, then spend another four months training then the new person. And so all that time adds up. And that's a lot of cost, because time equals the money that doesn't show up on your financials that you've just wasted, or that's gone. But if you've got a standard way of operating, you've got procedures in place, if you have the right systems in place, you've got automation as well, that's gonna save you a lot of time, because when that person leaves, the next one can come in, they can you can train them once, it might take them a month, but they've got kind of like a Holy Bible to refer to in terms of how to do their job. So it's very important for growing businesses to have a standard way of operating, so they can save the time. The other thing is the is having a retention plan for the biggest asset of your business, that's your employees. If you have that in place, you know, the good ones will generally leave but you're able to make their life as easy as possible, as fun as possible, and then make good money, they're not going to want to leave you. The fourth one is to understand your business model. So your business grows every year, you as a business owner would know what you were thinking about what you thought about your business two months ago has now changed today, it changes every day as a business owner. So every year you should sit back and go, Okay, what does my business look like now? How am I generating revenue? What am I spending on? What am I investing in. And at that point in time, if you have a really good understanding of your business understanding of where you are now you're able to then set goals and plan for the future, which leads to my fifth point, being able to sit there annually or maybe every half year, set your goals. What do you want to achieve in the next five years? 12 months, six months, three months? a month? The most easiest way to do it is through a 12 month strategic plan. What do you want? What are the four things you want to achieve that year? Put it in quarters, and then break it down. Okay, what do I need to do to achieve that every month? And what you'll find is, and we've done this ourselves, you will progress because you're focusing on one thing, not on many, if you focus on too many, you're just everywhere. You're not gonna make any progress. But if you're consistent, and you follow your plan, you will make the progress. Victor Lagos: 38:58 Yeah, no, that's really powerful. Thanks. Thanks for sharing that. Because there's a lot of people out there that are like that, right? They've got the energy, they've got the enthusiasm, but they spread themselves too thin, right? They go for the shiny object, and they're trying to do a bit of everything everywhere. But they don't really hone in on that one thing that's going to change everything they master that, then everything else becomes easier. Philip Khao: 39:23 Yeah, I'm not gonna lie. I was lucky that I would hear about an ID in the automated look into this. And then we look into that. But then I just thought, when I look back over the last year, I'm like, No way like I achieved nothing, or archieved something but not well wanted to go. Alright, so definitely plan ahead and focusing Victor Lagos: 39:45 and having that target that goal that you're working towards. It keeps you focused on what's important. So if you're doing a lot of things, and then you analyze saying is that actually bringing me closer to that target And that goal, or is it very meat away from it. And if it's bringing you away, then you can call it you can, you know, put it on hold, you know, for your spare time if you have any, and then focus in on what's more important, and get it to that goal. And then by working with someone like yourself, you can sit down in six months time and say, Alright, this was the goal that I said, Where am I now? Did the actions I took bring me closer to it? Did I exceed those goals wanted to raise the bar? Or was I, you know, way off the mark? And if I was, what were the actions I took, that didn't allow me to get there? And what actions can I take for the next six months that will allow me to get there, or reduce that, I guess, at Target write something more realistic, because if it's too far, you don't end up working at all? Because it's like it feels impossible to do. So it's got to be a little bit outside your comfort threshold, but not too far out that you just tell yourself, it's impossible, right? Philip Khao: 41:00 Yeah, that's Ryan. And look, if you have a goal, you need to have a plan. And if you don't have a plan, then you you've got no direction. You just kind of aimlessly trying to do these things to try and get there. And as you say, you need to hold yourself accountable. And if you can't ask for help seek someone else to hold you accountable. Otherwise, you're not going to make the progress. Victor Lagos: 41:20 You mentioned before that your business partner was your mentor. I didn't know that. So would you say that having a mentor early on was a key part of your success? Philip Khao: 41:33 Yeah, what I would say is, I think most of us go through when we're working, especially in corporate, or maybe even as a trainee, or whatever it is, if you're working in a bigger company with a lot of people, you generally do have that senior that mentor that you would always refer to. So I would say, like later, later down the track, when I got out of this, when I got into business by myself, and Chris was there definitely helped make me who I am today. But you know, over the, over a couple of years that over the first two years where I was working with him, and you know, using him as a mentor, I learned a lot from him. But then, you know, I kind of then started doing my own thing. And focus on business advisory and he was more tax, so I couldn't really go back to him on business advisory stuff. So I think it's important as a business owner, if you're operating on your own, it's important to have that mentor. And that's why I decided to sign up with a business coach to work with them. Work with someone that's done it before, and be able to pick their brain. And you know, my first conversation with the business coach was enlightening, because all the things he was saying was what I was thinking. But I couldn't say that to Chris, because Chris wouldn't get it. He just thinks about tax all the time. And so it was it was I was really very happy to have that in place. Just because I can now refer or downside of these and be able to build what I want to do with all the things in my mind thinking I could have done this for myself, but it would have taken me two years because I've got to do all the tests and trials before getting there. But with him in place, it's it's definitely, I'm definitely getting there quicker. So having a mentor in place with you, you're asking for help is important. Victor Lagos: 43:29 Yeah, I think it's for the audience that are listening, I think it's important that you, you really hone in on what Phil just said there, which is having a mentor, but also investing in a business coach, they're two different things. Some people think a mentor, and a coach are interchangeable. But a mentor usually doesn't charge you, right, there's someone that you look up to someone that can give you advice in their particular field, they may not know how to operate and run a business, but they may be good at their particular skill. And that might be the profession that you're trained in a coach a business coach doesn't really have, they may not even know your industry. They may they may not. But what they should know is how to operate a business, and how to look at your business and create a pathway for you. So with business advisory, it's a little bit of coaching, but it's more around the numbers and the strategy on getting there as opposed to what would you say like it's not? Yeah, Philip Khao: 44:31 I guess the difference between a business advisor and a coach is the coach will tell you what to do. But the business advisor will help you do what they tell you. Right. So I'm a bit more I would you would say I'm a bit more hands on. I do. Get stuck in in do a bit of the work with the client, help them implement things, help them, talk to them about you know, their numbers, their performance and then going Okay, well let's implement this and show them and do some work for them. So it's working with that business owner. Whereas the coach is more, I guess, teaching you how to do things. Victor Lagos: 45:08 No, no, you know what I want to share something now that you, you sort of broke down the differences. A lot of people out there, they, and I was in the same position where I started business. And this is not my current company, when I started in 2016, I invested into coaching programs, right courses, and the content is great. They usually put you in a program, whether it's a few months, or sometimes it can be a year, but you're committed to it financially. And you're committed to it, where you, you turn up and you learn the content. And you know, there might be some exercises that you do, but you don't really apply it in your business, because the stuff you're learning may be too advanced compared to where your business is up to. So it's all knowledge. So you're just adding in all this information. But the execution is the most important piece, because they say knowledge is power. But knowledge that isn't applied doesn't do anything. It's really nice action need action. Exactly. So the reason I mentioned that is because this time around, it was more around the action rather than, you know, gaining more knowledge. And by working with a business coach, yes, told me what to do. But it was up to me to do it. So it'll keep me accountable. Working with you, Phil, in the beginning, you did the numbers, you plugged it out for me, like if I had to build that spreadsheet that you put together for me would have taken me hours. And it wouldn't have even been close to what you put together. It's because it's what you do day in day out. So you understand it. So yes, you have to pay for this service. But if it's doing work that you don't know how to do, and it's higher level, and it's going to actually allow you to achieve your goals. Well, that's a good investment. But if you're just investing into courses or knowledge, what that can actually do for a lot of people. And it did that for me as well is it gave me more on my to do list. So it added more mental baggage. So it creates more pressure, it's like, oh, now I gotta do that too. And you still got to do your day to day. So it's always good, I think to use a business advisor that will actually execute, Philip Khao: 47:11 you use the right word investment versus cost. Some people see, you know, coach or a marketing person or an IT person or an accountant as a cost. But they should think about it as an investment in their business, because it's going to free up their time to do other things, and not working the business but you know, work on it, so that they can build it to a point where they can step out. Right? So the right word investment. Victor Lagos: 47:40 Now, I love that you touched on that. Because sometimes people think about business, and they don't realize how powerful it is when you have access to revenue before tax. So give you an example. If you're earning say 200 grand a year, at your job, gross before tax, what would you get after tax 120, maybe or less than, yes, you get 120 grand, then, if you want to invest into professional development, or personal development, things that's gonna, you know, the highest high value skills that are gonna allow you to earn more, or allow you to get time back later, you now need to justify to the tax office that that was required for you to do your job. So you can justify that you're still using the 120 Grand to spend on it. And then you're trying to get the money back after tax right and your tax return. But you've only got access to 120, not 200 You still got to pay your mortgage or your rent and all the other expenses and see Do you have anything left to cover that cost to invest in your future? Well, on the flip side, if you're self employed, you're making 200 grand first. So now you can invest that 80 grand that you would have spent in tax earlier on these expenses. Investments, I should say, that's gonna give you more time it's giving you more development, allow you to, you know, upskill yourself that you can earn more. And all of this is tax free expenses. So it's like people don't see it that way. They're stuck in this, you know, it's a cost or whatever. But that's that's a lot more accessible money that you have, which is a legal tax deduction you're allowed to you're supposed to, because that's gonna allow you to earn more later. And then the taxman gets paid at the end, rather than first. Philip Khao: 49:27 Yeah, that's right. A lot of people don't see the opportunity costs. It's not tangible. But if you really sit down and think about it, you know that $2,000 investment in your business advisor or your marketing team will be worth it because you're not going to see the results now, but that's why it's an investment. You'll see the return later down the track. And if you don't, then you know, try and get your money back. Victor Lagos: 49:51 Exactly. Alright. So for the people out there, you know, business owners, entrepreneurs or even employees with a sign hustle that, you know, things that they don't do straight away. And we touched on the coaching part, but what do you think there's some tips that we can give them that would actually help them succeed? If they did it earlier. Philip Khao: 50:15 Yeah, I mentioned some of these points already. But for those listeners specifically, it's it's understanding their numbers and cashflow. If you have a real understanding of how you're going, you're going to be able to make better decisions. The other thing is having goals. It sounds cliche, but you need to have goals, like you need to set something for yourself to achieve because if you don't, you're just aimlessly doing what you're doing. And you know, as we touched on earlier, you're going to over time, just going to be end up working harder than you were as an employee. And the third thing is asking for help, why that's so important. Like, when I first started business, I had an ego, I thought I knew everyone knew everyone thought I knew everything. But when I decided to, you know, start networking, and start investing in a business coach, I realized that I didn't know that much. And it's always good to be the dumbest in the room, right now, because then you're gonna learn so much, you're gonna get so much out of that and be able to apply that moving forward, I hate being the smartest in the room. Victor Lagos: 51:26 When you say, it's always good to be the dumbest in the room. Like, that's very deflating to the ego. Because you enter a room and you feel dumb, you feel, you know, uncomfortable, but I get the angle you're coming from. Because if you're the dumbest in the room, then you get to learn from your peers. And say that you're the average of the five people you spend the most time with. And that's on, you know, intellectual level, it's on a financial level. So you got to upgrade your, your inner circle, let's Philip Khao: 51:53 remove the ego. And you're right, you got to change your environment, like I was in an environment where I would share my business stories and trials and tribulations and successes, and no one would really care about it. Or they might say, yeah, great work. But there was no feedback or insight back and I just wanted I was yearning for that. Just the same energy that and so that's part of the reason why I joined BNI because then I was able to surround myself with like minded business owners like yourself, and we had this conversation before. But now we can share our stories. And that then creates more motivation for us to then grow our businesses, because you might tell me something. And I might say, You know what, that's actually a good idea. I'm going to use that too. Instead of all great work. Yeah. So that's, that's, that's something that I really enjoyed. Not really had to do. It was hard. But you know, once again, putting yourself in that environment, you're gonna end up achieving great things or doing the same thing that everyone else is doing in their environment. So Victor Lagos: 53:02 yeah, no, I'm glad to share that because that was really powerful. Me too, I reckon, I recognize that being part of that network was so powerful, because I was around like minded people. And when you're an employee, and you spend time with other employees that don't think like this, then it's harder to think bigger. Because everyone else is thinking smaller, even though you want to think bigger, they're just reminding you that they don't think that way. So then when you start talking about your business ideas, or what you want it to do, that the conversation doesn't flow, they don't relate to you, they don't know what you're going through, they can't give you advice or give you motivation. If anything, they'll probably try to bring you back to their level and say, no, no, you know, stick to the job. Like having you around. That's true, you know. So that was one of the questions I wanted to ask about people that are thinking about leaving their job and starting a business, but they're worried about the security for their families, like what advice would you give them? Philip Khao: 53:57 If any, if anyone is thinking about that? I mean, before you dive into it, you have to be smart about it. So you know, start, have a have a have a conversation with your wife or husband first. Yeah, let them know what's happening. They're important. But then it's saying, Okay, well, I'm gonna do this. Let's be smart about let's firstly, take care of our financial budget, the family budget, sit down, do the budget, how much money is coming in without my full time job? Or what money is going out? That will be a hit in the face. They'll slap in the face of reality like, oh, okay, maybe. And they must start thinking, Oh, maybe I shouldn't do this. But I mean, before you start looking at expenses, think about what you can cut down. Look at your insurances. Go get them recorded. Bring the premiums down. Do that exercise for your expenses, have a real conversation about yourself. So that's the starting point. The second then is stop making excuses. I was speaking to a friend who was trying to get into businesses as well, and all I could hear was excuses coming from him, like, Oh, I better go on holidays. Got to wait till I get my 10 year long service leave or go to do this and that. And I was just like, dude, all I hear is excuses, just, you know, get into it. And so he actually got into it now, thanks. He said thanks to me, which is great, I'd love to see that. But yeah, stop thinking about it. And if you've been thinking about for a long time, then stop thinking, start doing start doing right, there's no excuse to stop making excuses. And I said before, like, your first year is going to be the hardest year, but it will put your back against the wall. And you're going to be so hungry and motivated to try and achieve what you need to achieve or generate the revenue you need to survive, to take care of your family. That's important. And that's kind of what led me to then apply for jobs and then spin it so that I could just contract to them. You're gonna find yourself thinking outside the box when when you do and you're kind of thrown into the wall. And then, when you do start it sits, being telling the public about it, no, not the public, but telling your friends and families, whether that's B, whether that be social media, or conversations, but tell everyone in your network, Hey, I've gone in full time, your true friends and family will be the first ones to support you. Whether that's sharing, or letting everyone else know, or being a customer, or client. And that's going to give you a little bit of stability to start. The other thing is then to remove the ego and start networking and start asking for help, because you don't want to be on your own and other people that have done what you're doing right now. And that, you know, five years down the track, they're successful, ask them for help, whether that's just tips and tricks, or how they're structured, how they're generating revenue, connections to people within the same industry, to try and build your business. Those are the main things, but what I would say is if you ultimately fail, in the business idea that you've gone ahead with, just know that you've got a safety net to fall back on, and that's to go back to your job. Right? They're gonna make a lot of money there. But at least if you've planned ahead, you go, Okay, well, I've got six months or 12 months, where I can work by myself or work tomorrow on this business. And if I fail, I won't have money, and I'm going to need money will apply for a job you'll get, you'll probably get a job in two months, especially given the market market conditions now. Victor Lagos: 57:41 That's really, really good advice that you gave, that's probably better advice. And I can think off the top of my head, but not really thank you for sharing that. One thing I do want to just add to that is when you work for someone, and you're good at what you do, people, or your employer will recognize that, and they will give you a pay increase, regular increase, and they may even give you incentives to stay. But no matter what, or how much they pay you, you're helping someone achieve their dreams, not yours. And if you're good at what you do, and they recognize that, then maybe it's time that you recognize that you're good at what you do. And you apply that to achieve your dreams. So I'm gonna leave it at that. I want to ask you, how can people find and connect with you and your team itself? Philip Khao: 58:38 Yeah, so they can find me on LinkedIn, Phillip, Cal, pH i and IP, k h. Au. Otherwise, they can email me at Phillip that solver counting.com.au Or do a Google search. I think it's pretty easy to find people now. Victor Lagos: 58:54 Awesome. Thanks so much for coming on. I really appreciate it. And I'll see you next week. Philip Khao: 58:58 Thanks for having me, Victor. Appreciate you having me on your podcast. You're doing great things here. And I think the long goal, the long term vision for you here is going to be massive just because you're doing great things to help other people try and get to financial freedom. Victor Lagos: 59:17 That's the goal and one episode at a time. Awesome. Thanks. Thank you. Thanks, everyone for listening. Stay tuned for the next episode. See you soon.