Using Cash Flow from Your Business to Expand Your Net Worth

Let's talk cash flow and entrepreneurial growth with our guest, Doug Spurling, founder of Waves and Wilderness and Spurling Fitness. In this episode of "Small Business Big World," Doug takes us through his journey from building Spurling Fitness to venturing into consulting and real estate investment. Learn about some strategies of managing cash flow and increasing net worth, and discover why it’s essential to work on your business rather than just in it. 

Doug shares insights on scaling a business, shifting from a doer to a manager, and the importance of sales, marketing, and team development.  Then, Doug talks about his personal experience of turning a lake house into a successful Airbnb venture, emphasizing planning for the future and using your business cash flow adequately. This episode is packed with practical tips to help you manage and grow your net worth effectively.

Paper Trails was recently ranked on FeedSpot's list of the Top 100 Small Business Podcasts!

Transcript

Chris Cluff: 0:00

This is Small Business Big World, our weekly podcast prepared by the team at Paper Trails. Owning and running a small business is hard. Each week we'll dive into the challenges, headaches, trends, fun and excitement of running a small business. After all, small businesses are the heartbeat of America and our team is here to keep them beating. Welcome to Small Business Big World, our weekly podcast, where we discuss all things small businesses the headaches, the misery, the excitement, the challenges. It's such a fun time being a small business owner and today my guest is Doug Sperling, with Waves and Wilderness the new business.

Doug Spurling: 0:34

You got it.

Chris Cluff: 0:35

New business, but Doug also does some consulting and all sorts of other fun things. So today we want to talk about using the cash flow from your small business to increase your net worth kind of exponentially. Doug's had some experience with that and certainly I think he's got a great story to tell. So welcome Doug. Thanks for joining us.

Doug Spurling: 0:51

Thanks for having me.

Chris Cluff: 0:52

Before we hop in, don't forget like, follow, share rate, review, subscribe. We are everywhere you download your podcasts. We are on all the social media platforms. You want to see the little snippets that we put out there? We're there. Please don't forget to do that. If you have any questions about this episode or any episode, feel free to email us at podcast, at papertrailscom, and we will get back to you. So, Doug, give us a little bit of background on where you've come from and where you are today.

Doug Spurling: 1:16

Sure. So I think, if we start, maybe 2010,. So 14 years ago, that's when I graduated UNE. So from our local listeners, I was a UNE grad 2010,. Majored in exercise science, got into the health and wellness industry. Worked in a nursing home in high school. Wasn't sure what I was going to do. Went to college for exercise science. Thought I was going to be a doc or a PT.

Doug Spurling: 1:37

Ended up in the fitness space opened our local folks will know Sperling Fitness opened that in 2012 and ran that all the way up until this year. As of this recording, where summer 2024, I sold that business in spring of 2024 to Josh Williams, who was an intern of mine from 2012 to a poorly paid employee, to a employee, to a manager, all the way up 12 years with me, and he took that over and bought that for me in 2024. And so I think, 12 years of running a small business. I'm sure we can unpack lots of lessons learned and ways of doing things right, ways of doing things wrong, but I've transitioned to consulting for that industry and using the cash flow to invest in real estate. So that's what I do today.

Chris Cluff: 2:24

So, doug's a little bit like your own little Grant Cardone.

Doug Spurling: 2:27

right, that's right I mean hopefully not that much of a. I mean he's got a, he's got a hopefully stronger personality than me, but so one of the things you know, I think you've run a small business.

Chris Cluff: 2:37

you know you really you built it from just you to you know several employees and clients in a big business and through that process you found some cashflow that you were able to use. And I think we see I see a lot of clients who are struggling to manage that cashflow or even gain that cashflow. How do we get cashflow in our business? When we talk about cashflow, we talk about profit usually. How do you even get to that point? And I always tell people you have to go back to the basics of running the business, right?

Doug Spurling: 3:07

Yeah, for sure. I mean, I think, if we break down probably some of the common problems that I know I faced in the beginning and, to be clear, like all of us as small business owners go through these problems it's not like you know, I wasn't a unicorn by any means. I just finally, at some point I think, fell in love with the business side of things. You know, I think many of us get into whatever business we're in, and we love the thing. So if you're a gym, you love helping clients. If you're a restaurant, you love the serving the food or cooking the food, or you know, you want to be behind behind the grill all day, whatever it is.

Doug Spurling: 3:40

But you really, I think we saw a pivoting, a pivotal moment when we focused on basic business like sales and marketing and team development, some of those core principles that I think you know you can't be running the business and also focusing on growing clientele, marketing the business, building your team. That's kind of working on the business versus working in the business. So you know, we can certainly unpack some of those, but I would say, from a 30,000 foot view, looking at making sure we're working on the business, not just in the business front facing.

Chris Cluff: 4:14

And that's I think you know so many entrepreneurs, so many small businesses have that challenge right. You go from doing the thing to now you need to run the thing. And you know, I saw something on online recently. It was like there are different levels of you know running a business. First is, you know, three, four, $500,000 is that first in revenue is kind of that first pivotal moment where you go from gosh, just me producing that to now I need people to help me produce that, and you know, bringing on your first couple of employees and helping develop that. And then you get to that next level of maybe two or three million dollars where now you're really managing people to do the work. And that's kind of the phase of my business that I'm in is where now I'm having to transition from doing a lot of the day to day work to. You know, I told my team last week, like I'm the you know the maestro, I'm here conducting the orchestra.

Doug Spurling: 5:01

Now I'm not, I'm not conducting the orchestra.

Chris Cluff: 5:02

now I'm not doing the day-to-day stuff as hard as that is for me as a doer because I'm a doer For me to take my fingers off things is hard for sure. But there is that phase of business growth where you have to. That's how you have to transition and I think you said it perfectly working on your development of your people, working on the processes, working on keeping an know, keeping an eye on your numbers, to be able to realize that profit, that cashflow right.

Doug Spurling: 5:28

Yeah, I would say you know some core things that I think were really helpful for us. If we break it down, maybe tactical for the listeners would be proactive monthly marketing. Like most small businesses, don't market. We just, you know, I famously hear, oh, I just grow through word of mouth and referrals and, to be clear, that's awesome, but that will only get you to a certain point, at a certain level.

Doug Spurling: 5:49

Any small business that wants to grow maybe it's, you know, beyond that couple hundred thousand that you spoke about you need a client acquisition channel, such as, whether it's paid advertising, whether it's, you know, direct reach out to your network. There needs to be some type of monthly marketing plan where we're saying, hey, this is what we're going to do this month to go get clients, customers, whatever it may be. So a consistent monthly marketing plan was huge for us. Once we started marketing consistently, the business was able to grow and outpace the you know every business. Whether we're talking you know my gym business or you know any business, there's some level of churn, there's some level of cost that we have to overcome in order to create that cash flow, and marketing is one of the ways to do it.

Doug Spurling: 6:34

The other one that you know it took me a while to understand is knowing your numbers and not just the P&L.

Doug Spurling: 6:42

The P&L is a lagging thing, right, you know this. The month is already over by the time you get your P&L, and so, as an owner operator, I think it's a little bit more important to look at your leading indicators. So, for example, looking at things that and again, just using the first business with the gym, we would always, every week, be checking in on how many people filled out, be checking in on how many people filled out a website form, how many people signed up for membership, how many people canceled their membership. So, looking at your business and trying to understand what are the leading indicators. To sure, we want to have gross revenue, we and then you know, cut out the expenses and we're going to have our profit left over. But by the time we see that on our P&L, out the expenses and we're going to have our profit left over, but by the time we see that on our P&L, the month's already over, so we can't go back and change those things. So the scoreboard, the weekly scoreboard with your numbers, was another huge thing.

Chris Cluff: 7:33

And that's two things, right. You talked about consistency, and that's really important. A lot of folks try something for a few weeks and gosh, it didn't produce anything, so I'm not going to do it anymore, I'm going to try again. Well, a lot of these things take time to produce, right? I mean, there's things we've been doing for 18 months and we're now just starting to see, you know, returns on that. And now, certainly there does have to be a point where you have to. You know, okay, that strategy is not working, let's pivot or change. But sometimes that consistency is in.

Chris Cluff: 7:59

Everything that you do is is really important. I think you know, again, some people are looking for that instant gratification. We're in that society where everyone wants it, and that's really hard for a lot of small business owners, myself included, because I want it now, right, sure, you know I want it done. We're going to move on, we're going to go to the next thing, but sometimes that's, you know, not always possible for sure. And you talked about those kind of leading indicators and that's really relevant to you.

Chris Cluff: 8:25

Know, a restaurant, for example. There are slow weeks and slow times and you know if you have a goal of, you know you need to do $150,000 this month. And guess what? We're two weeks in and we've only done $40,000 this month. Right, we're probably in trouble and you know, guest counts are down or whatever. However, you're measuring that, you know, and you need to adjust, you need to pivot. Maybe you need to do as well, like gosh, we see our, our membership numbers, weren't we have a goal of five new members a month, or whatever? Uh, gosh, we were on day 20 and we've only had one. Right, how do we get through? How do we hit that finish line, uh, and be successful to our goals? And I think setting goals is important too, right? I mean, most people don't even have that.

Doug Spurling: 9:02

Yeah, we would have a uh like a Friday check-in where at the end of the week we would just review how that week went and adjust your plan, adjust what you have on your to-do list for the following week, based on that Friday review.

Doug Spurling: 9:17

So if numbers were off track I mean, I realize every day you're not going to be able to pause and analyze things, but we can certainly mark off a half hour to an hour at the end of the week, review how the week went and then, like you said, if things are off, you know, a half hour to an hour at the end of the week, review how the week went and then, like you said, if things are off, it's not just kind of shrugging your shoulders and you know you got to. You got to kind of make sure we change our strategy and say, hey, this, this is off track for our goal for the month and we're going to increase our marketing next week. Or we're going to go do some direct reach outs, or we're going to run this special, or we're going to do something to change the course.

Chris Cluff: 9:50

I think you know one of the things that I've learned in that is is also share that with your team. Right, you had mentioned having a weekly meeting. We don't do that as much in our business, but I share the performance, I share our goals, right? Here's our strategic plan for the year. Here's what we're going to do this year so that when we're adding staff or, you know, letting staff go or or hopefully doesn't happen often, but you know we're, we're changing strategy, we're doing this, we're taking on new projects People aren't surprised and they can also be rowing in the right direction with you.

Chris Cluff: 10:20

And the same thing, right, we do. We do about a monthly check in on those numbers and say, ok, here's where we are to our goal, this is what's kind of on the docket for this month, this is what we got accomplished last month, this is where we're at. And that's good for my management team, because it keeps us accountable to ourselves and it keeps us accountable to the team to say, okay, our goals are to grow to this point so that we can all share in this wealth. Right, and we do profit sharing and other things, so there's an incentive for them too. So I think we see a lot of business owners and this has been hard for me too but is to let go of some of that information and really enable your team to perform.

Doug Spurling: 10:52

Yeah, there's a great book, if you want to read more about it, called the Great Game of Business, and the Great Game of Business talks about basically teaching the game of business.

Doug Spurling: 11:04

Business is a game, right, and I think the more you can treat it like a game, you can have fun with it. Right, it should be fun to run a business and I know there's stresses just like you know, in a sports game there's stresses and people get mad and people get upset, but it's still the love of the game is what keeps you in there. And the game of the business talks about teaching your team the game of the business, because they don't understand business. I mean, frankly, in the beginning most operators don't understand business. So it's once you understand it then being transparent, being vulnerable, being open, teaching that to your team because otherwise you know they're going to either be completely blind to it or they're going to make their own assumptions of how the business is doing. And as an employee, especially in today's market where you know there's probably other opportunities out there the vision of where you're going, the strategy of what you're doing, how you're doing and how they can play a part in it, I think is huge.

Chris Cluff: 11:59

Absolutely All right. So the game is you're winning, right? We're, we're having the most money in monopoly at this point, and you know things are chugging along. You've got the cash flow. The business is making money where you know. I know you've had some experience with this. Ok, we've got the money, we've invested back in the business. Of course, we're keeping things going. We're, we're sharing the wealth with the team, and so forth. You know things are good, but there's, and I don't need as much. So what? What do I do with that extra money? Right, there's all sorts of different options. What have you done and what have you seen?

Doug Spurling: 12:27

others do. Yeah, I mean just a little bit of my story first and then maybe some strategy. After we kind of rebuilt during COVID so for context that was about year 10 of our business I helped the team rebuild and then, once we stabilized and kind of got back to our normal operations for lack of better terms had this point of reflection that was basically like this is about as big as this business can get, and in our industry the fitness industry because for context I'm still an active consultant in the industry so I have good ideas of what others do. The most common strategy is to open up another location, just like you might see in the food business or other businesses where they decide to okay, this restaurant's kind of at capacity, so I'm going to go open up another location Because you're physically constrained from revenue growth, correct, correct. So we kind of figured, you know that was about the max that location could do.

Doug Spurling: 13:20

And for me as an entrepreneur, that eventually got to a point of frustration and boredom, a combination of both, like frustrated that I couldn't grow it anymore and I like growing businesses, I like building teams, and that it was more about the stability and the efficiency of the business, not so much the growth, and I was also clear that I didn't want multiple locations. The idea of running multiple locations meant more headaches, and everybody that I've seen do it the it's you. You get this kind of running around like a chicken with your head cut off just bouncing around to multiple locations. So I was very clear that I didn't want to do multiple locations. So you had the profit coming in and obviously you want to reinvest.

Doug Spurling: 13:58

I think of understanding is your business a cash flow business or is it a cash out business?

Doug Spurling: 14:04

And for me it was very much a cash flow business.

Doug Spurling: 14:07

What I mean by cash flow is it should be generating monthly cash flow, unlike, say, a software company, where you know a software company might run at a negative or, maybe, you know, break even at best in hopes that they're going to get bought by private equity in three to five years. Most of us are cashflow businesses, not cash out businesses. We're not going to get this big pot of gold at the end and sell to private equity, and so it's my opinion that your strategy should be to take the cashflow from your business and put it into something that is long-term, whether that's investing in index funds. I chose the real estate path. But either way, you're taking the cash flow out of your day to day business and making sure that it's is a long-term asset, because most founder facing businesses meaning the founder is kind of the face of the business there's no big giant pot of gold at the end, and so we want to make sure we're taking the cash from that business and putting it into long-term investments.

Chris Cluff: 15:07

But not that there needs to be a big pot of gold at the end. But I think most small business owners don't think about what the end looks like.

Chris Cluff: 15:14

Right, and just because there's not a giant pot of gold, it doesn't mean there's not a little pot of gold at the end Right, and I read a book recently called Exit Rich and maybe you've read that one and because you've, you've kind of done that. But it really comes down to making your business successful, doing all the things we've just talked about right making it a cash flow business, making sure you have your numbers in order, your books in order, all that fun stuff, so that when it does come time for you to exit your free retire or move on or whatever, there's a buyer out there for it.

Chris Cluff: 15:45

And you're right, you may not get 100x valuation like a software company, but you know, two, three, four, five x, whatever of your cash flow or you know, plus your assets, all that kind of stuff, that's real money, right, and could set you up for retirement or for the next step. And I think a lot of business owners don't think about that. They're like, well, I'm just going to work until I die.

Doug Spurling: 16:03

And who wants to do that. That's not a great strategy. Let's refine that. Yeah, I mean the way I looked at it and, to be clear, I didn't know real estate was going to be my kind of I call it my next act right, like chapters in a book or whatever, you know the next chapter. I bought a lake house, just as a family home and as a business person. I said, well, you know, we got young kids, we're not gonna be able to use this a ton, and so I said, okay, well, let me just throw this up on Airbnb, and it, you know, happened.

Doug Spurling: 16:35

There was some good timing of it, too, where, during it was during the pandemic, where you know to, to run away to a lake house was like the most desirable thing ever, and so it completely took off and obviously snowballed since there since then. But you know, I think it's important, whether it's real estate or, or, you know, simple index funds or whatever, just making sure we're, you know, because a business will eat cash. We all know that right, it will always. There's always something else to spend in your business and you know there's plenty of operators out there myself included at one point where you're not paying yourself or you're not paying yourself enough, and thus you know the business just continues to eat cash. So sucking that cash flow out and putting it somewhere else, not only does it create a long term strategy for you, but it also forces you to run a more efficient business because you're wanting to suck that cash out.

Chris Cluff: 17:25

Yeah, I think that's a good point too is take care of yourself first. Don't sell yourself short. You're working hard. A lot of small business owners we see don't take a salary, or they live above the store or they live a miserable life because they feel like they're beholden to their business. And I think that's one of those stages of business that you have to get out of the business and start working on the business and you know, and that's when you can start to see some of the cashflow and managing things.

Doug Spurling: 17:50

So yeah, one of the most foundational books. I'm a I'm a big reader, I think reader podcasts, all of that consumption. As long as you're actually taking action on the consumption, you know, you can get some just like this, get some tips from people that have maybe done it or have gone through similar struggles. And Michael Gerber's e-myth is like, in my opinion, business 101. And he talks about, you know, the three stages. Most of us start as technicians, right, and so we're the one doing it. And then eventually we hope to get to the manager level where we're still there every day, we're still doing it with them, but we're managing a team, right. And then there's the entrepreneur level where you know you can just be the visionary, you can just be creative and you can just focus on the strategy, kind of the what's next, and there's a manager underneath you that's actually, you know, implementing the day-to-day Quick plug Doug has a book.

Chris Cluff: 18:39

Yes, when can we get?

Doug Spurling: 18:40

it 1% Better. It's on Amazon. There's probably other books named 1% Better, so you probably have to search 1% Better Sperling. But yeah, that was a book that when I had the gym I was sharing daily lessons to our clients and basically saved kind of the top 50 or so lessons that everybody watched, which ones, some of them stuck, some of them didn't, et cetera, and so kind of compiled the top 50 more personal development-based lessons.

Chris Cluff: 19:08

There we go, see, so if you're looking for some summer reading there, we go, that's that All right. So once you finish reading Doug's book, then you're going to kind of start executing the plan. So you've taken that cashflow and used it. You know you bought the lake house first started Airbnb and you kind of liked it.

Doug Spurling: 19:31

Then it grew right. You said, okay, we let's do another one next year, right, yeah, I mean, I think the the business is business, right, that's, that's what I've learned is like whether you're running a gym, you're running rentals, you're running a restaurant, you're running, you know, the mom and pop retail shop, the thing you sell is unique to you. But marketing is marketing, operations is operations and people are people. So there's nuances behind that. But those are the, those are the three big buckets. And so once I could rip that apart and say, okay, marketing and going and finding an Airbnb happens to be, you know, the most dominant, as of today, booking platform marketing channel.

Doug Spurling: 20:09

That's the way I think about it. I think of Airbnb for short-term rentals, which is the asset class, as Airbnb is the marketing platform. Right, it's just like paying a marketing agency to do your marketing for you. I'm paying 3% to Airbnb for them to share our properties all over the place. So, and there's other marketing we do, you know, retargeting guests to come back, et cetera. But, yeah, we took that cashflow. Just continue to snowball it and, you know, still had other income from both the gym and the consulting at that time. So it was able to use the cashflow and continue to snowball. That fell in love with it, continue to scale and grow and now we're at 12 and hopefully more in the future.

Chris Cluff: 20:47

Yeah, so 12 short-term rentals, 12 Airbnbs. You know you've chosen kind of that channel, I know. I think for me, like I'm not quite as aggressive in that, you know I own a couple of rental properties, you know, on a much smaller scale, I prefer commercial because I don't like the Sunday morning. You know I clogged the toilet, the. I prefer commercial because I don't like the Sunday morning. You know I clog the toilets the Sunday morning. I clog the toilet call anymore I've done that.

Chris Cluff: 21:05

But you know I think it's using, you know it could be whatever medium you want and some people don't want to deal with anything. I mean for me, fortunately I have relatively low maintenance properties, don't need a whole lot of, you know, daily interaction, not that they don't require maintenance and all that stuff and customer service for your tenants and all that stuff. But you know it's just not as active daily for me and I think that's my preference because I'm still very involved in my primary business. You know I see a lot of clients that even don't even want to deal with that and they just start piling money with their financial advisor and say, hey, open a brokerage and see what you can do for me. Right, you know, and on average right, we see what 8% or so return in that market and and that's not terrible either.

Chris Cluff: 21:46

So you know, certainly you know we've talked about this in other episodes but use your tax advantaged accounts first, right. Whatever you can, you know manage through that. But then if there's extra, go along with that too, and certainly with any with real estate. There's a lot of advantages in in how you can play that tax game. I know you know you've done cost segregation studies and you know accelerated depreciation and you know there's all sorts of different things that you can do in real estate to help manage. You know the tax implications too, right.

Doug Spurling: 22:11

Yeah, I think you have to like going back to your business. Like the best operators love their business. They just like I. Never for years I have never thought since I really opened the gym. It's hard work, but for 14 years I still don't feel like I work. It's just my life and it's the game I'm playing and it's what I do every day. And I think the best operators they're doing something that they truly love.

Doug Spurling: 22:34

And of course, you have to find what aspects of that you love, what aspects of that you don't love. But with the short-term rentals I just fell in love with that asset class. So do I think it's more work than a multifamily or commercial, or certainly much more than a passive index fund, of course, but it's the same thing as, like to me, putting money in an index fund is is very safe, but it's boring. And if you're in a spot where you do want boring, then by all means do the boring. Boring still works. It's not that it doesn't work, it's just it doesn't get me excited.

Doug Spurling: 23:10

Versus I love the excitement of cleaning up our operations. We have a team now with the short-term rental, so I'm not the one getting the Sunday call for the toilets, cause we still do get those. But you know, like any business, you build it big enough and efficient enough where you can have a team doing the daily operations. And you know it's fulfilling for them that my cleaner, who was a you know cleaning is a is a tough talk about a tough business, a tough business. She was our cleaner for our lake and still still does do that one property. But she was a full-time cleaner and, uh, last couple of years we were able to move her to a full-time position and she runs our daily operations on the short-term rental. So there's fulfillment from a joy standpoint of taking somebody that was, you know, having a tougher job where, yeah, it's work to run the operations but she can do it from her phone anywhere in the country.

Chris Cluff: 23:52

Well, you've turned it into another passion project, I think, because you certainly you know I see all the pictures and all the listings of the things you post and you really put a lot of thought and energy into each of your properties, where they have unique features. Right, you have a movie room, or you have a game room, or, you know, you just did one with, like a mini golf course right.

Chris Cluff: 24:09

Which you know, a lot of Airbnb folks you know. You know paint it and put some new sheets on and, you know, slap it online and run Right. But I think you've really taken that and you know and built something with it and tried to build an attraction.

Doug Spurling: 24:20

Sure, and try to build an attraction? Sure, sure, yeah. I mean, like any other business, you've got to be unique and stand out, and you know there's competition everywhere and I think that's a good thing, forces you to level up and be good at your craft and stand out from the crowd, that's good.

Chris Cluff: 24:33

So, yeah, so it can be done. Right, this can be done building something and starting to see, you know, an increase in cashflow and in your net worth, and so forth. It's just, it's consistency, it's hard work and it's, you know, it's growing and patience, which a lot of us don't have Patience.

Doug Spurling: 24:47

And yes, that's, that's the. The key is patience, and we used to call it with our team at the gym. We would call it nailing the basics right, like you have to. The shiny object is is cool, but oftentimes that's not what works. What works is the boring basics and just nailing those basics of good, consistent marketing, knowing your numbers, taking care of your people. I mean, they're not often the shiny object. I don't know what it is in other industries, but in the gym industry we get all these ads and emails and campaigns for we're going to give you a hundred clients in two weeks, or these gigantic shiny object promises and it's all just a bunch of nothing. But what does work, what does scale, is the boring basics. So just continue to nail the basics.

Chris Cluff: 25:35

So that's the takeaway Keep the boring basics and let it work and watch it pay off. All right, Well, thanks, Doug. So much. Don't forget like, follow, share rate, review everywhere you are following, and you certainly email us at podcast, at papertrailscom, If you have questions. How do people get in touch with you, Doug, if they want to? What's the best way? Instagram?

Doug Spurling: 25:51

Yeah, social is probably the best platform Facebook or Instagram. Just search my name, doug.

Chris Cluff: 25:54

Sperling. There you go, all right. Well, thanks so much, everybody. We will see you next week. Thanks for listening to this week's episode of a small business, big world. This podcast is a production of paper trails. We are a payroll and HR company based in Kennebunk, maine, and we serve small and midsize businesses across new England and the country. If you found this podcast helpful, don't forget to follow us at at paper trails payroll across all social media platforms and check us out at paper trailscom for more information. As a reminder, the views, opinions and thoughts expressed by the hosts and guests alone. The material presented in this podcast is for general information purposes only and should not be considered legal or financial advice. By inviting this guest to our podcast, paper Girls does not imply endorsement of or opposition to any specific individual, organization, product or service.