Codie Sanchez: How to Make Extraordinary Wealth Buying Boring Businesses | E319

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0:01:13 – If I go to college and I become a roofer,
0:01:15 that’s not very cool.
0:01:18 But if I become a marketer or a graphic designer,
0:01:18 that’s cool.
0:01:19 Here’s the problem.
0:01:21 Roofers make way more fucking money.
0:01:24 Ownership actually is a synonym for freedom.
0:01:26 So the more that you own things,
0:01:28 the less other people can tell you what to do.
0:01:31 – How do you see mom and pop boring businesses
0:01:35 really evolving in the next five, 10 years because of AI?
0:01:38 – The first jobs that AI took were artists,
0:01:41 copywriters, because AI lives online.
0:01:43 You know where AI is gonna take longer?
0:01:47 Painting companies, roofing companies, plumbing companies.
0:01:49 The best ways to make money are super simple.
0:01:51 If you wanna make more money, you should look it.
0:01:54 And you will have a hard time being poor.
0:01:57 (thunder rumbling)
0:02:03 (gentle music)
0:02:14 – Young and Profiters, as an entrepreneurship podcast,
0:02:19 we’re often talking about starting new sexy businesses.
0:02:20 I’m an inventor.
0:02:23 And so I always love to talk about inventing and innovating
0:02:26 and tech and AI and all these sexy things.
0:02:30 But sometimes we overlook really great opportunities
0:02:32 when it comes to boring businesses.
0:02:35 Buying existing businesses that are often overlooked.
0:02:39 I’m talking about laundromats, vending machines,
0:02:40 landscaping services.
0:02:42 There’s so many businesses out there
0:02:45 that are ripe for the picking.
0:02:47 My guest today is an investment expert
0:02:48 who has built up her own portfolio
0:02:51 of what she calls boring businesses.
0:02:52 Cody Sanchez is the co-founder
0:02:54 of Contrarian Thinking Newsletter
0:02:57 and Unconventional Acquisitions,
0:03:00 a company that helps people learn how to buy small businesses.
0:03:03 She’s also the author of a brand new book
0:03:06 called Main Street Millionaire.
0:03:07 I read this book, it is totally awesome.
0:03:10 And today we’re gonna dive in on all her strategies
0:03:13 to buy successful boring businesses.
0:03:15 We’re gonna learn how we can pick these businesses,
0:03:17 how we can set up an operator
0:03:18 so that we’re not buying a job,
0:03:20 we’re actually buying a business.
0:03:23 We’re gonna talk about when we should actually sell
0:03:25 this business that we acquired and so much more.
0:03:27 I’m so excited for my guest today.
0:03:30 Welcome to the show, Cody Sanchez.
0:03:34 Cody, welcome to Young and Profiting Podcast.
0:03:35 – I’m thrilled to be here.
0:03:36 – Me too.
0:03:38 So last time you came on the show,
0:03:39 we talked about your background,
0:03:43 we talked about your Contrarian investment views,
0:03:45 and we talked about buying boring businesses,
0:03:47 which I absolutely love.
0:03:49 And now you have a new book out.
0:03:51 It’s called Main Street Millionaire.
0:03:52 So I can’t wait to find out
0:03:55 how we can all become Main Street Millionaires.
0:03:57 So my first question to you
0:04:01 is trying to really understand some misconceptions
0:04:03 that we have about rich people.
0:04:04 When I think about rich people,
0:04:07 I think about billionaires like Elon Musk
0:04:09 and Jeff Bezos and tech entrepreneurs
0:04:13 or celebrities like Oprah and Kim Kardashian.
0:04:17 But tell me why you are challenging this idea.
0:04:20 What stats and facts do you have about rich people?
0:04:21 – Let’s start with a fun one.
0:04:24 Do you wanna know who the richest woman in the world is?
0:04:25 This is as of the end of last year
0:04:27 when the Forbes report came out.
0:04:29 If you thought, maybe it’s T-Swift.
0:04:30 I know she had a big tour.
0:04:32 Wrong, she’s like 34th on the list.
0:04:35 If you thought it was Kim K, you’d also be wrong.
0:04:37 She was like 21st on the list.
0:04:40 If you thought that it was somebody like Oprah,
0:04:42 also wrong, she doesn’t even crack the top 10.
0:04:44 Who is it actually?
0:04:48 It is a woman who grew a roofing company
0:04:51 to more than $15 billion in net worth.
0:04:53 And so my point here is,
0:04:54 I think one of the biggest misconceptions
0:04:56 with the really, really rich
0:04:58 is that they do things that are really, really sexy.
0:05:02 In fact, most of the richest people on the Forbes 100 list,
0:05:06 if they didn’t inherit it from a boring business,
0:05:07 they started a boring business
0:05:10 or they bought businesses, aka finance.
0:05:13 So I think there’s a matrix kind of like this
0:05:16 on the vertical side of the matrix.
0:05:18 You basically have the sexiness of a business
0:05:23 from artists to musicians to actors.
0:05:24 And on the right side,
0:05:26 you have the income or how much money you can make.
0:05:29 And what it turns out is if you correlate the two,
0:05:31 the sexier the industry,
0:05:35 the fewer the people make an obscene amount of money in it.
0:05:37 The more boring the industry,
0:05:41 the more people make consistent high dollars in it.
0:05:43 And so there seems to be a correlation
0:05:46 between boring traditional everyday businesses
0:05:48 that we need nonstop and more of us making money,
0:05:50 which I thought was interesting.
0:05:51 – That’s so interesting.
0:05:52 And we’re gonna find out later
0:05:55 why these boring businesses are so overlooked.
0:05:57 But before we do that,
0:05:59 you open up your book basically saying
0:06:02 that we are programmed to be poor.
0:06:05 Tell us why America basically teaches us
0:06:07 to be poor our whole lives.
0:06:09 – I heard a quote once that just seared its way
0:06:12 into my soul, which was that you are as rich
0:06:14 as you programmed yourself to be.
0:06:15 And if you think about it that way,
0:06:17 there’s a good and a bad side to it.
0:06:20 The good side is, well, you can reprogram yourself.
0:06:22 Just like a computer, you can scrap the software,
0:06:25 keep the hardware and realign what is inside of you.
0:06:28 The bad part is that the foundation
0:06:30 on which you and I have learned money
0:06:35 is actually one that incentivizes us to stay
0:06:40 just sort of tracking to our spend for our entire life,
0:06:43 which is why most people will die alone
0:06:45 and without much in the way of resources,
0:06:47 which is really, really sad.
0:06:48 And so when I started thinking about writing this book,
0:06:52 I was like, we can’t make ourselves smarter very easily.
0:06:54 We can’t make ourselves have more money
0:06:56 than other people do upfront.
0:06:59 So what would be a way to level the playing field?
0:07:02 And because I was in finance for 12 years,
0:07:04 I watched what the really, really rich did.
0:07:06 And they did something completely differently,
0:07:08 which is they didn’t innovate
0:07:10 as often as Silicon Valley did.
0:07:12 They didn’t come up with some crazy startup
0:07:13 and sleep on couches.
0:07:16 In fact, they work Gucci loafers all the way
0:07:18 to the private plane they eventually bought.
0:07:19 And how did they do this?
0:07:22 Because they bought other people’s hard work,
0:07:25 other people’s years of hard work.
0:07:26 And then they did a little bit
0:07:28 of what’s called financial arbitrage,
0:07:31 but basically make expenses a little bit lower,
0:07:35 increase profits here and apply the Wall Street mechanism
0:07:38 for growth to most businesses.
0:07:41 And I was like, why does Wall Street only do this?
0:07:44 I think that we can reprogram ourselves to be rich
0:07:48 by realizing that we just have to copy other people’s homework
0:07:49 from those who have already achieved
0:07:50 the thing we want in life.
0:07:53 And that’s kind of what I started to do.
0:07:55 – So I’d love to understand the difference
0:07:59 between living a life where you have non-ownership
0:08:02 versus living a life where you actually have ownership
0:08:02 in something.
0:08:04 Can you compare and contrast that for us?
0:08:08 – I think ownership actually is a synonym for freedom.
0:08:10 So the more that you own things,
0:08:12 the less other people can tell you what to do.
0:08:14 If your listeners are like you and I,
0:08:18 you and I were probably pretty unemployable, right?
0:08:19 We’re a pain in the ass,
0:08:21 which is why we became entrepreneurs.
0:08:24 We are just on the other side of diva,
0:08:26 which is like, I think we should do it this way.
0:08:27 How come we can’t do this?
0:08:28 Let’s go faster.
0:08:30 What do you mean I can’t make more?
0:08:32 That’s what a good entrepreneur is.
0:08:35 And so I think if you are also like that,
0:08:37 you are set up to succeed in some ways,
0:08:40 which is that you will fail at being an employee
0:08:43 for a long time and the best entrepreneurs
0:08:45 are failed employees.
0:08:48 And so you will eventually get to a path where you realize
0:08:51 that you can own the equity in the business,
0:08:53 that you have distributions in the business
0:08:57 over a long term and it can be on legally binding contracts.
0:09:00 You can take it with you as opposed to your W2.
0:09:01 And the only little caveat there
0:09:03 I like to put out their hollows,
0:09:05 I loved being an employee, actually.
0:09:07 The tail end of my career,
0:09:09 where I was a partner at a few private equity companies,
0:09:10 I really liked what I did.
0:09:11 I could have done that forever
0:09:13 at one company in particular.
0:09:15 I just wanted to do it my way.
0:09:18 And so I was annoyed at their speed.
0:09:19 And because of that,
0:09:21 I ended up going and doing my own thing.
0:09:24 But what I wished I could realize at the time
0:09:28 is that I could have had even my own business on the side
0:09:29 and I could have negotiated
0:09:32 for more equity and distributions in a business
0:09:34 so that you could stay an employee too,
0:09:36 if you want and own a business.
0:09:37 And so I think there’s lots of ways
0:09:39 to get to the end game of ownership.
0:09:43 – I love the fact that you actually had a corporate job
0:09:46 where you were helping people buy businesses.
0:09:48 And I think it’s pretty safe to say
0:09:50 you probably learned so much,
0:09:52 which is why you could then become an entrepreneur
0:09:54 who has a holding company that buys businesses.
0:09:57 So you also learn the ropes on somebody else’s done.
0:09:58 – 100%.
0:10:00 There’s so many people on the internet now,
0:10:01 and you’re not one of them
0:10:02 because you’ve done this game too.
0:10:04 But there’s so many people on the internet
0:10:05 who want to tell you,
0:10:07 go be your own boss, be an entrepreneur.
0:10:08 And that’s fine.
0:10:10 I do think that that’s great for many people.
0:10:14 However, there’s risk associated with pure ownership
0:10:16 where you own the entirety of the business.
0:10:19 And so one, don’t assume that in order to buy a business,
0:10:21 you have to buy the whole thing.
0:10:21 You don’t.
0:10:23 You can actually just own part of it
0:10:25 and you can use other things besides your money to buy it.
0:10:26 That’s really cool.
0:10:28 We talk about that in the book.
0:10:32 But number two is there is no better way
0:10:34 to learn the game of business
0:10:36 than by getting a salary,
0:10:38 learning under somebody else’s tutelage.
0:10:40 And eventually, if you’re a great employee,
0:10:41 getting a percentage of their company
0:10:44 or getting them to invest in your business.
0:10:46 And this is actually fascinating
0:10:48 because people on the internet don’t always love to hear this.
0:10:50 But, you know, in finance,
0:10:53 most of the companies that we start,
0:10:54 so if I left a finance firm,
0:10:56 like when I left Goldman, I was too young,
0:10:57 they wouldn’t have given it to me.
0:11:00 But when I left my last firm, which was EEC,
0:11:01 they asked if they could invest
0:11:03 in whatever my next venture was.
0:11:05 They wanted to give me my first checks.
0:11:07 And I think more often than not,
0:11:09 if we kill it as an employee,
0:11:11 we can actually push that into capital
0:11:13 in our next adventure.
0:11:15 I have somebody named Kate on my team
0:11:18 who started as an intern four years ago.
0:11:19 And now she’s a partner
0:11:21 who’s vesting to get 10% of my business
0:11:24 and helps me manage the whole social side of our team.
0:11:26 So it just goes to show
0:11:29 you really can get equity in a company.
0:11:31 And she’s not really an inventor, right?
0:11:32 I’m always inventing things, creating things.
0:11:34 That’s my skill set.
0:11:35 And she’s really good at managing.
0:11:37 So it’s a way for her to become an entrepreneur
0:11:40 without necessarily inventing anything.
0:11:41 – Oh, yeah, I love that.
0:11:42 I think you’re really smart
0:11:45 because a lot of young entrepreneurs
0:11:48 don’t understand a few words that will change your life
0:11:50 when it comes to making money and ownership,
0:11:52 which is vesting equity,
0:11:55 aka you can give somebody a percentage of your company,
0:11:56 but they don’t take it right away.
0:11:58 They get it over years of work,
0:12:00 a little bit at a time each year,
0:12:02 which is called a cliff.
0:12:04 So nothing earned in the first year
0:12:06 until they make it to the end of the first year.
0:12:08 And if they’re successful, then they earn a portion.
0:12:10 Same thing with year two, year three.
0:12:12 We talk about lots of the lingo in the book.
0:12:13 Another thing that you mentioned
0:12:15 that I think is really important
0:12:16 is she was a high performer.
0:12:17 She kept growing.
0:12:20 And so you were rewarding
0:12:23 what you had already seen as positive behavior,
0:12:26 not trying to incentivize future better behavior.
0:12:28 So I think a lot of times what people don’t realize
0:12:31 is they give a carrot to somebody
0:12:33 who is underperforming or sort of flat.
0:12:36 And they say, you could earn equity in my business
0:12:37 if you do X and Y and Z.
0:12:39 What you really should do instead is say, wow,
0:12:41 you’re the fastest grayhound on the track.
0:12:43 You’re crushing it right now for me.
0:12:46 I wanna reward you for what you’re already doing now
0:12:48 over a multi-year period.
0:12:50 The best predictor of future behavior is past behavior.
0:12:52 So your high performers are more likely
0:12:53 to continue performing
0:12:57 than you changing the mindset of a poor performer.
0:12:58 – So true.
0:13:01 So entrepreneurship is thrown around all the time.
0:13:03 Everybody thinks they’re an entrepreneur.
0:13:05 Can you talk to us about freelancers,
0:13:08 gig workers, solopreneurs?
0:13:10 Do you feel that that’s the same thing
0:13:11 as owning a business?
0:13:12 Why or why not?
0:13:14 – I think we were sold a great lie.
0:13:16 And the great lie was essentially this.
0:13:19 First, we owned our businesses back in the day.
0:13:21 When we first started in this country,
0:13:24 we didn’t pay a ton in taxes and we owned our own businesses.
0:13:25 And then we apprenticed
0:13:27 to eventually take over those businesses.
0:13:29 Then one day, big corporations came around
0:13:32 and they said, instead of you owning these little things,
0:13:33 come work for us.
0:13:35 We have this big, huge opportunity.
0:13:37 You can come work inside of our sphere.
0:13:38 Then we worked in corporations
0:13:40 and realized the only place that padded walls should be
0:13:41 is insane asylums.
0:13:43 And I don’t wanna work in a cubicles anymore
0:13:45 under fluorescent lights.
0:13:48 So we said, wait a second, startups, that’s what it is.
0:13:52 It’s Silicon Valley backed, venture rocket ships.
0:13:54 We’ll go to do those.
0:13:56 So then we went and did that as a society
0:13:57 and that’s what we glamorized.
0:13:59 The problem there is nobody told us
0:14:02 nine out of 10 of those startups would fail miserably
0:14:05 and they would leave a bunch of us with a mess on our hand,
0:14:09 with companies that were failing, with heartache, right?
0:14:11 And the people who would win would be venture capitalists
0:14:14 who got to sprinkle tons of dollars across many companies.
0:14:17 And also fueled a ton of innovation,
0:14:19 but it’s not for everybody, it’s a very hard path.
0:14:22 And then finally we were like, no more venture.
0:14:23 I don’t wanna do that.
0:14:25 So we were like, YOLO into freelance
0:14:27 and I own my own company
0:14:29 or what I’ll call solopreneurship.
0:14:31 Solopreneurship is the way.
0:14:32 Well, you’ve done this before too.
0:14:36 I think the road to hell is paved with individual Zoom meetings
0:14:38 back and forth between yourself and no help.
0:14:41 And so we didn’t realize that all we did actually
0:14:46 was now go work at the behest of an Uber
0:14:49 or at the behest of a sub-stack
0:14:52 where they still own us, Silicon Valley stills owns us.
0:14:55 We just make a smaller percentage of our total profits
0:14:56 as a solopreneur.
0:14:59 And now we’re like, man, we’re not even making enough money
0:15:02 in solopreneurship anymore and we don’t really like this.
0:15:04 So I think the solopreneur movement
0:15:07 is actually not as glamorous as we thought it was.
0:15:09 And so my hope is the next movement
0:15:11 is this main street movement.
0:15:14 Can we go back to the thing we were originally talked out of
0:15:17 which is let’s own a portion of small businesses
0:15:20 all around this country that are already profitable,
0:15:22 that have existed for a long time,
0:15:25 that don’t have crazy volatility of online businesses
0:15:28 and that are simple and that you’re gonna pay
0:15:29 even if it’s in a recession
0:15:30 because you want your plumbing to work
0:15:32 even if it’s a downturn.
0:15:34 And that’s my belief.
0:15:35 – I love that.
0:15:36 You have this quote in your book
0:15:40 and you say your salary will never set you free.
0:15:43 Your financial freedom can only come through ownership
0:15:46 specifically through equity done the right way.
0:15:47 So my question is,
0:15:50 what do you mean by equity done the right way?
0:15:51 – Everybody wants equity, right?
0:15:52 That sounds good.
0:15:55 But the problem with equity is you can’t eat it.
0:15:56 Meaning what are you gonna do?
0:15:58 I can’t take my equity and go pay for something
0:16:00 or put a down payment on a house.
0:16:02 It’s sort of like up in this ether,
0:16:04 this thing that I can’t touch.
0:16:06 And if you went and looked at a bunch of Silicon Valley
0:16:08 startup employees, you’d see, oh man,
0:16:11 most of them thought they were being compensated like this,
0:16:13 very high because they had a lot of equity
0:16:17 and realized, wow, my equity wasn’t worth anything like that.
0:16:19 And so I think there’s a better way
0:16:21 which is equity plus distributions.
0:16:25 So that means, hey, I get a percentage of a company.
0:16:27 You can’t really take that away from me
0:16:29 unless I do something fraudulent or crazy.
0:16:32 I own, I don’t know, 10% of XYZ company that I work at.
0:16:36 But because I need to eat and make money,
0:16:38 there’s something called distributions
0:16:40 which happened for all owners of a business.
0:16:45 If the owner takes $100,000 out of the business,
0:16:48 then that means that I get what’s called my pro rata.
0:16:50 So my percentage that I own of the business,
0:16:52 I get distributed too.
0:16:55 So let’s say the owner is gonna take $100,000.
0:16:58 I might get $5,000 if I own 5% of the business.
0:17:02 And that way we can eat as we move along and get equity.
0:17:03 That is equity done right.
0:17:07 Distributions today, future profits tomorrow.
0:17:09 – So you have this new book that’s out right now.
0:17:11 It’s called Main Street Millionaire.
0:17:15 Can you talk to us about what a Main Street business is?
0:17:17 – So Main Street business is the business
0:17:19 that you pay right now every single month
0:17:20 but you kind of ignore it.
0:17:22 It’s your landscaping business.
0:17:24 It’s your house cleaners.
0:17:26 It’s your roofing companies.
0:17:29 It’s services like your podcast production company
0:17:31 that you pay as a vendor.
0:17:34 These are businesses that are the opposite of Silicon Valley.
0:17:35 They’re not something new and innovative.
0:17:38 They’re continuous and compounding.
0:17:41 And so when I think about Main Street businesses,
0:17:43 I look all around our small community
0:17:47 and I realize, man, it’s not just the local coffee shop
0:17:48 that’s interesting.
0:17:50 It’s also the street sweeping business
0:17:51 that cleans up the streets.
0:17:54 It’s the person who does line painting
0:17:55 in the middle of the streets
0:17:58 to make sure that there are parking spaces.
0:18:00 All of those services are businesses.
0:18:02 But we were taught as a generation,
0:18:06 you’re in my generation that if I own a handyman business
0:18:08 and I’m a handyman, that’s bad.
0:18:10 If I go to college and I become a roofer,
0:18:12 that’s not very cool.
0:18:15 But if I become a marketer or a graphic designer,
0:18:15 that’s cool.
0:18:16 Here’s the problem.
0:18:19 Roofers make way more fucking money.
0:18:23 So I think we were sold a little bit of a bag of goods.
0:18:25 Maybe you don’t wanna stay a roofer forever
0:18:27 ’cause it could be hard on your body,
0:18:30 but you learn the trade, then you learn the business,
0:18:32 then you own part of the business,
0:18:34 then you own the whole business, then you sell it.
0:18:38 And that is how you’re able to pass off your work over time.
0:18:41 – Talk to us about how these businesses are overlooked
0:18:44 and why they’re such steady, reliable businesses.
0:18:46 – I think a lot of reasons why these businesses
0:18:48 are overlooked is really three things.
0:18:51 Main street businesses have a societal belief
0:18:53 they are less than.
0:18:56 We call them blue collar, not white collar, right?
0:18:58 They’re not shiny.
0:19:00 They are something that is done by people
0:19:02 who don’t have university degrees
0:19:03 and somehow that’s a bad thing.
0:19:05 So we have a societal sheen on them.
0:19:07 The second reason people don’t love these businesses
0:19:09 is because we’ve been told,
0:19:11 well, these people don’t make very much money
0:19:13 and these businesses don’t make very much money.
0:19:15 If I’m gonna be a banker or an accountant
0:19:18 or an attorney, I’m gonna make more.
0:19:21 Well, that turns out not to be true over time.
0:19:22 And then the third reason is
0:19:25 because these businesses don’t have what’s called a moat.
0:19:27 So there’s probably, I don’t know,
0:19:30 a couple thousand handyman companies,
0:19:33 maybe 10,000 handyman companies in Texas.
0:19:35 There’s like one Facebook, right?
0:19:37 And so we thought you had to have this new,
0:19:40 sexy, innovative business in order to make money.
0:19:41 You don’t.
0:19:43 In fact, it’d be much easier to compete
0:19:45 with your local handyman company
0:19:47 than Mark Zuckerberg, who’s an animal.
0:19:49 And so those three reasons kept us away
0:19:51 from Main Street businesses.
0:19:52 The other thing that’s interesting
0:19:54 about Main Street businesses is
0:19:57 most of them are recession resistant.
0:20:01 So you’re gonna use a landscaping company
0:20:04 if you need to have your driveway shoveled
0:20:06 during the winter, no matter what.
0:20:07 Most of these small businesses
0:20:10 have some version of subscription revenue,
0:20:13 the thing that SaaS companies, tech companies love.
0:20:14 And most of these businesses
0:20:16 are pretty simple to understand.
0:20:17 Now, I don’t wanna idealize this.
0:20:19 I’m not saying this is like a fast, easy,
0:20:22 30 day to million type thing, it’s not.
0:20:24 But these businesses have been overlooked
0:20:27 and anytime that happens, there’s money to be made.
0:20:28 – Let’s hold that thought
0:20:30 and take a quick break with our sponsors.
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0:25:19 Can you talk to us about the Lindy effect
0:25:21 and why it matters?
0:25:23 – I love it, you have read the book.
0:25:26 You’re gonna own a bunch of these things, by the way.
0:25:28 The Lindy effect is really important.
0:25:30 It’s very simple and I think the best ways
0:25:32 to make money are super simple.
0:25:33 If you wanna make more money,
0:25:36 you should look at how long a business has existed.
0:25:38 The Lindy effect says,
0:25:40 the longer a business has been in existence,
0:25:42 the higher likelihood it will have
0:25:44 to continue to be in business.
0:25:47 So essentially the opposite of what I thought was true.
0:25:49 It was like, this thing’s been around for 30 years,
0:25:52 ah, must be old, outdated, not work.
0:25:54 But in fact, it has a higher likelihood
0:25:55 of continuing to succeed,
0:25:57 as opposed to a brand new startup,
0:26:00 much riskier, much higher likelihood to fail.
0:26:02 And so if you look at businesses
0:26:05 that have survived for over five to seven years,
0:26:10 you have taken away anywhere from 50 to 60% failure rate.
0:26:12 That means you’re left with only 44%.
0:26:15 What if I could tell you today, you could start a startup
0:26:17 and I could decrease your risk of failure by 50%.
0:26:20 You’d be like, that’s cool, yeah, let’s do that.
0:26:22 Well, that’s what you can do with these boring businesses
0:26:24 that have existed for a long time.
0:26:28 – Is there a certain personality type or level
0:26:31 in which we should be before we should actually go
0:26:33 and try to seek out a boring business?
0:26:36 – So the question usually comes to me like,
0:26:38 when am I ready to buy a business?
0:26:39 How would I know?
0:26:42 And my question back to you would be one,
0:26:44 one skill set that I have never regretted
0:26:46 that I wish I had learned earlier was dealmaking,
0:26:49 because it will forever change how you make money.
0:26:51 Even if you never buy a business outright,
0:26:55 if you understand terms, structuring, dealmaking,
0:26:57 and how the world of money works,
0:26:59 you will have a hard time being poor.
0:27:01 And so because of that,
0:27:03 I like to teach people business buying
0:27:05 before they even think they’re ready for it.
0:27:09 So for instance, I gave my cousin this book, who’s 16,
0:27:10 and he’s reading through it
0:27:13 and he’s figuring out ways to do deals right now.
0:27:14 And the way that I think you know you’re ready
0:27:16 is basically this.
0:27:18 If you are in business right now, it is no-brainer.
0:27:20 If you look at the biggest companies in the world,
0:27:22 they grow through acquisitions, Amazon, Facebook,
0:27:25 both of them have done over 200 transactions.
0:27:28 They grow faster through acquisitions
0:27:31 than they do organically, customer by customer.
0:27:32 So if you own a business today,
0:27:35 you need to understand how to do dealmaking.
0:27:37 It’s how you will be harder to compete with.
0:27:40 You can acquire 100 customers at a time,
0:27:43 while most people are acquiring one at a time,
0:27:44 total game changer.
0:27:46 If you don’t have a business yet,
0:27:48 what I’d like to do is turn on
0:27:50 what I call your reticular activating system
0:27:52 of business buying.
0:27:54 So your reticular activating system
0:27:57 is what gets turned on when your brain tells you
0:27:59 that something is important.
0:28:00 And so when you go and buy a car,
0:28:03 for instance, like a Porsche, let’s say,
0:28:04 you go and buy a Porsche,
0:28:05 and before you bought the Porsche,
0:28:07 you’re like, I don’t see these things anywhere.
0:28:08 After what you buy the Porsche,
0:28:10 you’re like, fuck, everybody has a Porsche.
0:28:12 In Austin, Texas, what happened?
0:28:13 Nothing happened.
0:28:15 Your brain just started getting a signal to it,
0:28:17 saying that this is important,
0:28:18 and so you started noticing it.
0:28:21 Right now, we’re walking around sort of in the matrix,
0:28:24 not realizing that all around us are deals,
0:28:25 potential deals.
0:28:27 And what I want to do is turn on your brain
0:28:29 so you start seeing them.
0:28:30 And what this might mean is,
0:28:32 if you work for a small business,
0:28:35 you might not even realize that the owner is ready to retire,
0:28:36 and if you positioned yourself correctly,
0:28:39 you could take over that business using seller financing.
0:28:42 If you’re a solo content creator online,
0:28:46 you might not realize that the $1,000 they want to pay you
0:28:48 to promote XYZ product,
0:28:50 you should actually negotiate a deal instead
0:28:55 to get future distributions and a percentage of the company.
0:28:56 Deals are all around you.
0:28:58 We just want you to turn it on.
0:29:01 I know that it’s a lot of hard work
0:29:02 to have a boring business,
0:29:04 but I think people have the misconception
0:29:05 that it’s like passive income,
0:29:08 like, oh, I’m gonna buy a bunch of vending machines,
0:29:11 plop ’em in stores, and passive income.
0:29:14 Why is that not really the case?
0:29:16 You know, I was joking with one of my favorite CEOs
0:29:17 that I used to work for back in the day.
0:29:20 He runs a company that does, I don’t know,
0:29:22 $300 billion in annual sales.
0:29:23 It’s a huge company.
0:29:26 And when I was talking to him,
0:29:27 he was pretty funny.
0:29:28 I was like, Jim, I’m curious.
0:29:32 He’s older, so he’s probably in his mid-70s.
0:29:34 And I was like, you’ve been around for a long time.
0:29:35 You’ve been an investor all your life.
0:29:36 You own all these companies.
0:29:38 You ever met any passive income?
0:29:40 And he was like, sure, haven’t, but I’m open to it.
0:29:42 So that’s why I look forward to being
0:29:46 that the way you get passive income is years of active work.
0:29:48 And I think we need to be honest
0:29:49 about that with each other.
0:29:52 Now that said, there’s a lot of people
0:29:55 that want to tell you two things.
0:29:58 Either one, you can’t, it’s not possible for you.
0:30:00 Stay in your lane.
0:30:03 It’s much easier to be a hater than a hope giver.
0:30:05 And then the second group wants to tell you,
0:30:07 hey, it’s super easy.
0:30:08 Anybody can do it.
0:30:09 Look at my Lambo, look at my private plane,
0:30:10 look at my Gucci.
0:30:12 And because of that, I’m really successful
0:30:14 you can be too and they want to sell you something.
0:30:16 I think the truth is somewhere in the middle.
0:30:18 And in fact, with small businesses,
0:30:21 I think you should expect for the first year,
0:30:23 you got a lot to learn, man.
0:30:27 It is not complicated, but it is hard.
0:30:29 It’s not easy, but it is simple.
0:30:31 And I think when you realize, oh,
0:30:34 running a laundromat is not complicated,
0:30:36 but it’s hard work.
0:30:37 Running a vending machine business
0:30:39 is actually harder than a laundromat business
0:30:42 because you have these tiny little stores, right?
0:30:44 Machines that have very limited cap
0:30:46 on how much they could make per month.
0:30:48 Let’s call it max.
0:30:50 I mean, if you had a $5,000 a month
0:30:52 producing vending machine, that’d be incredible.
0:30:55 So you have maxed this little $5,000 machine
0:30:57 and then you got to figure out the logistics
0:30:59 to go back and forth to all of them
0:31:02 to accumulate eventually to a business
0:31:04 that does, let’s say a million dollars a year.
0:31:05 It’s a lot of work.
0:31:08 And so I don’t like to talk about passive income.
0:31:10 I like to talk about horizontal income,
0:31:14 which basically means where can you layer your income
0:31:17 like a cake so that at any given time,
0:31:20 your day is split between a few activities
0:31:23 mostly oversight as opposed to execution.
0:31:26 So in my businesses, I run a big portfolio
0:31:27 at Main Street Holding Company.
0:31:30 You can see a bunch of the businesses we own there.
0:31:33 And part of my day is spent with like this company up here,
0:31:34 which is Pinks.
0:31:37 So, you know, I’m talking to the CEO, Steven,
0:31:40 and I’m saying, hey, how is the cash flow looking?
0:31:41 What’s going on?
0:31:43 I’m actually doing nothing in the business,
0:31:44 but I’m at least thinking about it.
0:31:46 So I like to be honest about that.
0:31:48 – It’s not gonna be easy guys,
0:31:50 but it could be very lucrative.
0:31:54 Okay, so let’s talk about prep before we buy these businesses.
0:31:56 We talked about what do we need to get started.
0:31:58 In your book, you have four levels.
0:32:02 So I thought we could do something fun, quick fire style.
0:32:05 I will list the level, say level one, level two,
0:32:07 and then you tell us what is this level about?
0:32:08 Who’s it’s for?
0:32:10 What are some examples of the businesses
0:32:11 that we should be looking for?
0:32:13 What should we expect at this level?
0:32:14 And this is an entrepreneurship show.
0:32:17 So we really have people who are wannabe entrepreneurs.
0:32:20 We’ve got people who have $50 million businesses listening in.
0:32:22 So we’ve got lots of different people on the show.
0:32:24 So I thought this would be fun.
0:32:27 Level one solo venture.
0:32:28 – So a good level one business
0:32:31 might be something like a vending machine.
0:32:34 These are what I call people light businesses.
0:32:35 So it might be something where
0:32:38 you could be the owner operator of the business.
0:32:40 The business is probably not making eight figures.
0:32:42 You’re talking about businesses
0:32:44 that are one to three million and less.
0:32:46 These businesses on average are
0:32:49 what I call gateway drug style businesses.
0:32:53 You can dip your toes into your first small car wash deal,
0:32:56 your first small laundromat, your first vending machine,
0:32:59 your first podcast production company,
0:33:01 but you’re probably not going to get independently wealthy
0:33:03 working on these businesses.
0:33:05 You are in it, it will require some work,
0:33:07 but it doesn’t require as much cash.
0:33:09 – What was your first level one business?
0:33:13 – Well, my very first one was a website
0:33:15 called Selling South back in the day.
0:33:18 And I tried a game that I was really bad at,
0:33:20 which is I think we made money on ads and affiliates.
0:33:22 Back then it was really hard.
0:33:23 – It was hard.
0:33:25 – And I didn’t make very much money at all,
0:33:27 but it was a good entry drug business.
0:33:29 And then I had a laundromat business,
0:33:33 which I would put in this category too, in the beginning.
0:33:36 And then I also had a consulting business,
0:33:39 which was right on the edge of a level one, level two.
0:33:43 – Okay, moving on to level two, hands on CEO.
0:33:45 – This business is one where you’re gonna
0:33:47 potentially have an operator right along with you.
0:33:49 You might have somebody who’s actually in the business.
0:33:52 My first business, I had a GM in the laundromat.
0:33:54 So he’s the one actually running
0:33:56 some of the laundromat specifics.
0:33:59 I invest in it, I track things overall.
0:34:01 I’m still involved in the business,
0:34:02 but I have a little help.
0:34:05 These businesses are slightly bigger in size.
0:34:08 There’s also a slight bigger complexity here.
0:34:10 This could be things like multiple laundromats,
0:34:11 let’s say, for instance.
0:34:16 This could be things like having a media company.
0:34:18 What we have now, I would say most media companies
0:34:19 fall into this category.
0:34:23 They never get to a huge daily wire allowance.
0:34:25 These businesses also, on average,
0:34:28 still have most of your time dedicated to this business
0:34:31 and are gonna have some employees, but not a ton.
0:34:33 – Okay, level three, and this is like,
0:34:34 it gets harder and harder, right?
0:34:37 Or less likely that you fit in the level as we go along.
0:34:40 So level three is on deck operator.
0:34:42 – This means you got an operator
0:34:44 that’s rocking a roll in this business.
0:34:46 You are in oversight mode.
0:34:47 You basically get to do what I do,
0:34:50 which is financial Fridays, you’re reviewing what’s going on.
0:34:53 You have an operator who probably knows more
0:34:54 than you do about the business.
0:34:56 You’ve got employees underneath that operator.
0:35:00 This business is doing millions of dollars in revenue.
0:35:01 And that means, alternatively,
0:35:03 you could be doing a million plus in profit.
0:35:05 And this is a business where you could have
0:35:09 almost any type of business imaginal could be in this amount.
0:35:11 So you could have a small furniture store.
0:35:13 You could also have a roofing
0:35:15 or an HVAC company in this amount.
0:35:17 These start to get to the level
0:35:20 where you’re starting to do rollups in your business.
0:35:22 – And so the idea is that you’re actually not
0:35:24 the operator of this business.
0:35:26 You’ve just invested in this business.
0:35:27 – That’s right.
0:35:28 – Okay.
0:35:30 – And the way that we think about these levels is mainly,
0:35:35 does the revenue support the employees and infrastructure
0:35:37 that allow you to work on the business
0:35:38 as opposed to in the business?
0:35:40 So the first two, not as much.
0:35:43 The third one, you start to get into it.
0:35:44 – I’m gonna dig deeper on that in a second.
0:35:47 Level four, market leader.
0:35:49 – So this means we’re a big business now.
0:35:50 Not only do you have a CEO,
0:35:52 but you probably have a C-suite staff.
0:35:54 You’ve probably got a few other real pros
0:35:56 in there running the business.
0:35:59 Now we’re talking about tens of employees plus,
0:36:02 we’re making real revenue and real profit in this business.
0:36:05 And you’re in a stage where you’re either already at
0:36:08 or getting to a spot where private equity might buy you,
0:36:10 might compete with you.
0:36:12 And these all are still
0:36:15 in what I consider small and medium business.
0:36:19 So this is still sort of micro PE below the level
0:36:20 at which you’re gonna compete
0:36:23 with what’s called middle market and private equity.
0:36:25 – So you have this framework.
0:36:26 Now we know the levels.
0:36:27 We know where we gotta start.
0:36:31 We’re about to go look for our boring business.
0:36:32 We need to have some sort of criteria
0:36:34 to pick a smart move, right?
0:36:37 We can’t just go after any business that we find.
0:36:41 You’ve got this acronym, S-O-W-S, SAWS.
0:36:44 So stale, old, weak, simple.
0:36:46 Can you explain and break that down?
0:36:48 – So when we think about
0:36:50 what is the right type of boring business to buy?
0:36:52 Really depends on who you are.
0:36:54 But if I was to give you a framework, it would be SAWS,
0:36:56 which is when I look for businesses,
0:36:58 I look for a business that is stale.
0:37:02 That means that it’s been around for a long time.
0:37:05 That means that the business probably hasn’t done much
0:37:06 in the way of innovation.
0:37:09 Might have something called the fax machine test,
0:37:11 which is they have a fax machine still.
0:37:12 That’s crazy.
0:37:13 Do they actually use that thing?
0:37:15 They might take invoices on a piece of paper
0:37:18 as opposed to putting it into QuickBooks.
0:37:20 Then we get to the O, which is old.
0:37:22 Has the business been around at least five to seven years?
0:37:25 Is the Lindy effect in effect?
0:37:28 Can this business be one that we think has a lower risk?
0:37:31 Because the likelihood of future success
0:37:33 is probably based on historical success.
0:37:35 Then we have weak.
0:37:37 This one I really like if there are competitors
0:37:39 that are weak in this space,
0:37:41 and also the business itself might be semi-weak.
0:37:44 So can I compete with a bunch of handyman in Austin, Texas?
0:37:47 Maybe, ’cause I don’t know the name of any of them.
0:37:49 Can I compete with Dell computers?
0:37:50 Hard.
0:37:52 That is an entrenched business overall.
0:37:55 I want to see weak competition and weak execution
0:37:57 by the company.
0:38:01 And finally, I want a business that is simple.
0:38:02 So I want a business overall
0:38:04 that is not difficult to understand,
0:38:06 that is straightforward, so easy your grandma could do it.
0:38:08 This is so counterintuitive.
0:38:08 You wouldn’t think like,
0:38:11 oh, I want a weak, stale business.
0:38:12 I want it to be so simple.
0:38:14 This seems so counterintuitive.
0:38:16 So is the idea that you could come in
0:38:19 and make small improvements and then make more money?
0:38:20 Why do you want those things?
0:38:23 The fastest way to lose money in buying a business
0:38:26 is to think that you know more than the owner of the business
0:38:29 and to take on more complexity than you actually should.
0:38:30 So I think about buying a business,
0:38:33 kind of like I think about maybe buying your first house
0:38:35 to fix up and flip.
0:38:36 You don’t really want to buy
0:38:39 a complete disaster on a street.
0:38:39 Why?
0:38:42 Well, you’ve never done a construction project before.
0:38:44 And so I don’t know about you,
0:38:46 but I’ve never heard of a construction project
0:38:49 that comes in under budget and faster than you think.
0:38:51 And so what I really want for your first acquisition
0:38:54 is the first acquisition to go so well that you go,
0:38:56 oh, God, that business was like a little too small,
0:38:58 a little too easy.
0:38:58 We’re going to build it up,
0:38:59 then we’re going to sell it,
0:39:00 then we’re going to do our next one
0:39:03 because your first deal turned out so well.
0:39:05 That’s why I like really simple businesses
0:39:06 for the first one.
0:39:08 Business is complex enough
0:39:11 and we can layer on top of it great marketing.
0:39:13 We can layer great advertising.
0:39:15 We can layer a great team and culture,
0:39:17 but we want to make sure we don’t bite off more
0:39:19 than we can chew with our first acquisition.
0:39:20 Unless you’re a pro,
0:39:22 in which case we teach some different things.
0:39:26 I love that you made this analogy to buying a house,
0:39:28 but actually buying a business
0:39:31 can be a little bit cheaper upfront than buying a house
0:39:34 because you don’t have to lay out all this cash necessarily.
0:39:36 You talk a lot about creative financing.
0:39:38 Can you tell us more about some of the creative ways
0:39:40 that we can actually buy a business?
0:39:42 One of the most beautiful parts about buying a business,
0:39:44 as opposed to buying a house,
0:39:46 is when you go and buy a house,
0:39:48 they want to know how much money you make.
0:39:49 And they want to know how much money you make
0:39:52 so that they can determine how big of a house you can buy.
0:39:54 When you go to buy a business,
0:39:56 they, meaning the lenders or the bank,
0:39:58 they want to know how much money the business makes.
0:40:00 And if the business makes enough
0:40:03 for you to be able to use the revenue and profits
0:40:05 of the business to pay the loan back.
0:40:07 Now there’s going to be some degree of them vetting you
0:40:10 and making sure that you seem trustworthy
0:40:11 and you got to put together a little pitch
0:40:13 to show that you are capable of buying a business
0:40:14 and getting a loan.
0:40:17 But the fascinating part is it’s not on your salary,
0:40:19 it’s on the business’s income.
0:40:20 And because of that,
0:40:24 we have a unique opportunity to out kick our coverage
0:40:26 by buying a business that would be more
0:40:28 than we could actually afford
0:40:30 if we were only to look at the amount of money we have
0:40:31 or our salary.
0:40:34 So that’s one huge differential.
0:40:37 The other is that we teach 21 ways in the book
0:40:40 in order for you to buy a business using creative financing.
0:40:43 But one of my favorites is seller financing.
0:40:47 So you mentioned that 60% of all businesses bought
0:40:50 are bought with some aspect of seller financing.
0:40:52 And if you understand seller financing,
0:40:55 I don’t think you’ll ever buy anything the same way again.
0:40:57 Because what it basically teaches you
0:41:00 is that you want to invest in businesses
0:41:02 and buy them using some portion
0:41:05 of the future revenue and earnings of a business.
0:41:07 Now this isn’t to say you can run around saying,
0:41:09 I’d like to buy your $5 million business owner
0:41:12 for $0 down, how does that sound?
0:41:13 Just like anything in life,
0:41:15 you have to treat a business transaction
0:41:19 kind of like treating a dating transaction with a woman.
0:41:20 You got to get her to trust you.
0:41:21 You got to get her to believe
0:41:23 that she’s going to be better in your hands
0:41:24 than anybody else.
0:41:25 You got to get her to see
0:41:27 that you actually care about this business
0:41:30 and you are going to make sure it succeeds.
0:41:31 And if you do that,
0:41:33 then you can get really creative unfair deals
0:41:35 that somebody running around throwing out offers
0:41:38 left and right isn’t going to get.
0:41:39 – Let’s talk about the people
0:41:41 that we’re buying these businesses from.
0:41:45 They’re often about to enter retirement.
0:41:47 They might be working in their old age.
0:41:49 Why is it in their incentive
0:41:54 to maybe take a seller financing opportunity?
0:41:55 – We have this whole section
0:41:59 where we show three different graphs on seller financing.
0:42:02 And once I understood how to pitch seller financing properly
0:42:04 so that it was a win-win,
0:42:06 our ratio of people taking seller financing
0:42:08 went up about 100%.
0:42:10 And here’s how I think about it.
0:42:11 If I was going to a small business owner,
0:42:12 here’s the conversation that I would say.
0:42:14 I would say, all right, small business owner.
0:42:16 This is after you’ve gotten to know them,
0:42:17 after they like you,
0:42:18 after you really understand the business,
0:42:21 you’ve done all of the early stage of dating.
0:42:23 You’re not asking to take the girl home
0:42:25 on your first coffee date encounter, right?
0:42:27 So after you do that,
0:42:28 you’re going to want to have a conversation
0:42:29 that sounds like this.
0:42:33 Okay, Mr. Owner, you want $2 million for your business.
0:42:34 You think that’s what it’s valued at, right?
0:42:36 There you go, right?
0:42:37 Okay, let me show you.
0:42:39 When I took your business to the bank,
0:42:40 based on what you showed me,
0:42:43 the bank said they would give you about a mil,
0:42:44 whatever the dollar amount is.
0:42:46 Usually businesses are not worth
0:42:47 what the owner thinks it is.
0:42:50 So you want to introduce a third party saying,
0:42:52 sorry, we’re not going to pay you for that.
0:42:54 So we say, okay, the bank says
0:42:57 that it’s worth a million instead of two.
0:43:00 That means that I could give you a million dollars,
0:43:02 plus I got to pay like 8% to the bank
0:43:05 because there’s an interest rate associated with it.
0:43:08 Plus I probably got to wait like 120 days
0:43:09 for the loan to fully go through,
0:43:11 maybe 90 at best.
0:43:14 Plus you’re going to have a higher tax burden
0:43:17 because they’re going to lump some pay you out right now,
0:43:18 as opposed to over time.
0:43:20 We can’t get very creative with your taxes.
0:43:22 You’re going to pay more in taxes.
0:43:27 Also, because we’re going to go with this loan over time,
0:43:29 I can’t pay you any of the interest.
0:43:31 I have to pay the interest to the bank.
0:43:34 Now, that means that I can give you a million dollars,
0:43:35 plus these other negatives,
0:43:37 or there’s another way that we could do this
0:43:38 through seller financing.
0:43:40 Would you want to talk about how we could structure it
0:43:41 that way?
0:43:44 And they’ll probably go, okay, yeah, what do you mean?
0:43:47 And you say, okay, other option.
0:43:50 I pay you 1.5 instead of one.
0:43:52 So you get another $500,000.
0:43:56 Plus I will pay you the interest on the loan
0:43:57 instead of the bank,
0:44:00 except I’ll pay you 4% instead of 8%,
0:44:02 which increases the likelihood the business succeeds
0:44:04 because it’s not as high.
0:44:07 Plus you make another 4% every single month or year,
0:44:09 depending on how you structure the deal.
0:44:12 Plus we could get this deal done in probably 30 days
0:44:14 ’cause we don’t have to go through a traditional bank process
0:44:16 instead of 120 days.
0:44:18 And we will structure the payouts over time,
0:44:20 which means you pay less
0:44:22 because you’re getting long-term capital gains
0:44:23 and distributions as opposed to short-term
0:44:25 capital gains and distributions.
0:44:27 So you’re getting 500K more,
0:44:28 plus you’re getting 4% a year,
0:44:31 plus you’re getting better tax savings.
0:44:33 Would you be interested in at least us discussing
0:44:34 what that would look like?
0:44:37 At which point, the owner’s going to say probably yes.
0:44:39 And so that’s how you nail seller financing.
0:44:42 – Oh my gosh, that was a masterclass right there.
0:44:44 Anybody wanting to buy a boring business,
0:44:47 you could literally just transcribe that script
0:44:49 and get your deal.
0:44:51 So is it realistic to think that there’s actually
0:44:53 a lot of opportunity out there
0:44:54 for these boring businesses?
0:44:56 When I think about this,
0:44:58 I don’t know, like I just feel like how many people
0:45:01 are really willing and ready to sell their business.
0:45:02 – Let me tell you some data.
0:45:05 So how many people actually will sell you a business today
0:45:07 and use some version of seller financing?
0:45:09 Well, one, I bought a boring business
0:45:11 that was a business marketplace called BizScout
0:45:13 and then plowed a couple million dollars into it.
0:45:15 BizScout is now a marketplace where people buy
0:45:17 and sell businesses.
0:45:18 When we first launched,
0:45:20 which was maybe four weeks ago, six weeks ago,
0:45:23 we had 30,000 listings on the platform.
0:45:27 Today we have 45,000 listings on the platform at BizScout.
0:45:30 There are 45,000 people publicly listed
0:45:32 that want to sell their business.
0:45:34 Plus the other interesting part about BizScout
0:45:36 is we have this backend scraper
0:45:39 where we scrape all small businesses.
0:45:43 So you could say, I want to buy a, I don’t know,
0:45:46 sales company in Atlanta, Georgia.
0:45:49 I want to buy a car wash in Piedmont, North Dakota.
0:45:52 And you could go and see all of the listings of those there
0:45:53 and reach out to the owners individually.
0:45:55 So that would be millions and millions
0:45:57 and millions of businesses.
0:45:59 So I know firsthand,
0:46:01 there are tens of thousands of businesses
0:46:03 ready to sell right now today.
0:46:05 The number is growing every single day.
0:46:06 And then there are millions where the owners
0:46:08 don’t even realize they could sell.
0:46:10 So this is happening all over the place.
0:46:12 Now, here’s what you’re going to hear from people
0:46:14 that is great for you and me.
0:46:16 And I love every moment of it.
0:46:17 You’re going to hear people go,
0:46:19 there’s no businesses for sale.
0:46:20 It’s all trash on those sites.
0:46:22 Nobody good would sell a business like that.
0:46:25 And I go, perfect, just stay in your lane.
0:46:28 This is always finance bros who do this, by the way.
0:46:31 And they’ll be like, no way would this business
0:46:32 sell for that?
0:46:34 And I just go scoreboard,
0:46:36 like bought and sold this newsletter business,
0:46:37 bought and sold pinks,
0:46:39 bought and sold that one painter,
0:46:40 bought and sold garage up,
0:46:42 bought and sold a brand new roofing company
0:46:43 we’re going to launch.
0:46:45 There are businesses all around.
0:46:46 We’re doing it every single day.
0:46:49 And our community called Contrarian Community,
0:46:53 people have done $260 million of deals that we’ve tracked.
0:46:55 Hundreds of small businesses transacted.
0:46:59 So while other people always tell you no,
0:47:02 you can be the person that makes the money
0:47:04 while they sit on the sidelines.
0:47:06 Again, always harder than it looks
0:47:08 and is going to take work.
0:47:10 These businesses are all around you guys.
0:47:12 And anybody that’s telling you they aren’t,
0:47:14 either wants to buy them for themselves
0:47:16 or wants to sound sophisticated
0:47:18 because the negative sound smart,
0:47:20 the positive make all the money.
0:47:23 – So when people are thinking about boring businesses,
0:47:24 ’cause you’ve been talking about boring businesses
0:47:25 for a few years,
0:47:27 now I feel like it’s sort of synonymous
0:47:31 with vending machines and laundromats.
0:47:33 But you actually say some of your favorite boring businesses
0:47:36 are digital businesses and professional services.
0:47:38 So talk to us about some of the little known
0:47:39 boring businesses out there
0:47:42 and why they’re so lucrative.
0:47:46 – If you go to MSM book where the book’s gonna be located,
0:47:48 we’ll be giving away a bunch of things with the book.
0:47:50 And one of them is a list of 130 of my favorite businesses
0:47:51 that I love to buy.
0:47:54 So let’s rattle off some of those 130.
0:47:57 One, I use laundromats as an example
0:47:59 because they’re easy to understand.
0:48:00 It opens people’s eyes.
0:48:02 They go, oh, I’ve seen those before.
0:48:04 Oh yeah, there aren’t a ton of employees in there.
0:48:05 That could make sense for me.
0:48:06 So that was rule one.
0:48:08 I wanted to open people’s eyes.
0:48:11 But really what we teach is what’s called deal clarity.
0:48:13 So how do you figure out the right business
0:48:14 for you specifically?
0:48:18 What’s the right business for you or your audience?
0:48:21 And so those might be things like, for instance,
0:48:23 I bought a podcast production company back in the day.
0:48:26 I bought like 49% of one called Strike Fire Productions.
0:48:27 That was a great business.
0:48:32 I think I bought 49% for 10K and we profited five or eight
0:48:34 or 10K a month off of it for about a year
0:48:37 before I sold it back to the owner of the business
0:48:39 ’cause it wasn’t a big enough business for us anymore.
0:48:40 So podcast production.
0:48:43 I’ve bought a video production company before
0:48:44 that’s called Viral Cuts.
0:48:46 That’s another online business.
0:48:50 We’ve invested in a tax and LLC business.
0:48:53 So at school, they take accounting,
0:48:56 old school accounting practices, kind of sex them up,
0:48:59 make it really easy for people to access them.
0:49:00 That’s called Dula.
0:49:02 We invested in a company that’s called Sense.
0:49:05 So it’s software for the laundromat industry.
0:49:07 So everywhere you have a boring business,
0:49:10 you have digital businesses that support them.
0:49:13 You have advertising businesses, marketing vendors,
0:49:16 software providers, sales systems.
0:49:20 And those are businesses you can buy just as simply
0:49:23 as you can buy a brick and mortar mainstream business.
0:49:27 We’ll be right back after a quick break from our sponsors.
0:49:30 – Young Improvers, when I started my podcast,
0:49:32 I had a volunteer team.
0:49:33 I was able to just go on social media,
0:49:35 put up a post, recruit some interns,
0:49:37 and it was no big deal.
0:49:41 But as we scaled as a company, I need real A players.
0:49:45 I need people with experience, but we’re a small company.
0:49:46 And so I don’t have an HR team.
0:49:50 However, I found the secret sauce to hiring effectively
0:49:51 with no HR team.
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0:50:59 Hey, yeah, bam, launching my LinkedIn secrets masterclass
0:51:02 was one of the best things I’ve ever done for my business.
0:51:04 And I didn’t have to figure out all the nuts and bolts
0:51:07 of creating a website for my course.
0:51:09 I needed a lot of different features.
0:51:12 I needed chat capabilities in case anybody had questions.
0:51:15 I needed promo code discounts.
0:51:17 I needed a laundry list of features
0:51:20 to enable what I was envisioning with my course.
0:51:22 But here’s the thing, all I had to do
0:51:25 was literally lift a finger to get it all done.
0:51:28 And that’s because I used Shopify.
0:51:34 Shopify is the easiest way to sell anything,
0:51:36 to sell online or in person.
0:51:39 It’s the home of the number one checkout on the planet.
0:51:41 And Shopify is not so secret secret as Shoppay,
0:51:44 which boosts conversions up to 50%.
0:51:46 That means way fewer cards get abandoned
0:51:48 and way more sales get done.
0:51:53 So when students tell me that they can’t afford my course,
0:51:55 I let them know about payment plans with Shoppay.
0:51:57 It is a game changer.
0:51:59 If you’re into growing your business,
0:52:01 your commerce platform better be ready to sell
0:52:04 wherever your customers are scrolling or strolling
0:52:06 on the web and your store in their feed
0:52:08 and everywhere in between.
0:52:12 Put simply, businesses that sell more sell with Shopify.
0:52:14 Upgrade your business and get the same checkout
0:52:16 we use at YAP Media with Shopify.
0:52:19 Sign up for your $1 per month trial period
0:52:23 at Shopify.com/profiting and that’s all lowercase.
0:52:27 Go to Shopify.com/profiting to upgrade your selling today.
0:52:30 That’s Shopify.com/profiting.
0:52:36 Should we diversify our businesses?
0:52:39 For example, I own several businesses now.
0:52:41 I have my podcast itself, which is a business.
0:52:43 I have my social media agency,
0:52:45 number one LinkedIn marketing agency,
0:52:47 and I have the number one business self-improvement
0:52:48 podcast network.
0:52:50 So I have three businesses.
0:52:52 Should I like stain my lane and go buy podcasts
0:52:54 and social media businesses?
0:52:56 Or is it better to actually diversify
0:52:58 and think about other lanes?
0:53:00 So if you already own businesses today,
0:53:03 there’s two ways to think about acquisition.
0:53:07 Strategic acquisitions or diversified acquisitions.
0:53:09 So strategic acquisitions I think are the easiest
0:53:12 for business owners to buy.
0:53:16 That would be like, can you buy another agency
0:53:19 that has talent that you’re having a hard time hiring?
0:53:22 And can you insert that talent inside of your agency
0:53:24 so you can increase your capacity?
0:53:26 And so you can sell more.
0:53:28 Amazon is notorious for this.
0:53:30 And I would say the great thing
0:53:32 about strategic acquisitions is
0:53:34 you understand the business better.
0:53:36 You’re gonna know if this is a shitty agency or not
0:53:38 because you already run it.
0:53:41 You probably already know them and have target acquisitions
0:53:43 because you know your competitors.
0:53:46 You also have a much higher ability
0:53:47 to increase the revenue of that company
0:53:49 because you’re already doing the thing.
0:53:52 And so I think strategic acquisitions are the best
0:53:54 for current business owners to think about.
0:53:57 If you wanna create a portfolio in a holding company
0:54:00 like I have, because my skill set is finance,
0:54:03 I knew how to create a portfolio in holding company
0:54:05 because I ran a private equity firm.
0:54:09 But if I was a great business operator,
0:54:11 I would do more strategic acquisitions
0:54:13 than I would diversified acquisitions.
0:54:15 And the reason is because you’re gonna have
0:54:17 such a higher likelihood of success
0:54:19 and you’re gonna be able to increase the value
0:54:21 of those businesses so materially.
0:54:23 So far as you, I’d be saying right now,
0:54:24 and you probably have some in your head
0:54:26 even as we’re talking about it.
0:54:28 You’re like, oh, these competitors.
0:54:29 Oh, I hear she’s kind of unhappy.
0:54:31 I think they might shut down their business.
0:54:33 They’re growing really fast,
0:54:37 but man, they don’t have X that we have.
0:54:40 And those are your target acquisitions
0:54:42 where you can even overpay a little bit
0:54:45 or use potential future revenue
0:54:48 that you drive them to pay for those companies
0:54:50 and close a deal faster than you ever could
0:54:53 due diligence in a laundromat, for instance.
0:54:54 – You’ve really opened my eyes.
0:54:56 I never really had thought so much
0:54:57 about acquiring companies,
0:54:58 but now I’m like thinking I’m like,
0:55:02 oh, like we could acquire X team.
0:55:03 So that makes sense.
0:55:04 It’s kind of what I did actually
0:55:05 with my business partner, Jason.
0:55:09 He had a production company originally.
0:55:12 And then I actually brought him on as my business partner
0:55:12 and kind of absorbed him.
0:55:15 So I guess I did do that in a roundabout way.
0:55:16 – It’s called an Aquahire.
0:55:19 And the cool part is if you start using the terminology,
0:55:21 that’s why I like people to learn deal making.
0:55:22 – I didn’t even know that.
0:55:24 – Yeah, you can sweeten the deal.
0:55:25 In this case, you might have been saying,
0:55:27 God, I need better production.
0:55:29 And I want somebody who really cares about it.
0:55:30 So I want a partner.
0:55:31 I want them to be invested in it.
0:55:33 I want them to be a pro.
0:55:35 I don’t want to have to pay pro salary right now
0:55:37 because maybe my business isn’t big enough.
0:55:39 I want them to share my vision longterm
0:55:40 so they take some risk with me.
0:55:42 Okay, that means you want an Aquahire.
0:55:47 So you’re like, huh, I’m gonna buy Aquahire, Jason’s company.
0:55:49 And I’m really just gonna use Jason’s salary,
0:55:50 which I pay over the course of the year,
0:55:53 just like anybody else’s salary to acquire his company.
0:55:55 Jason, congratulations.
0:55:57 You got an exit from your business.
0:55:59 I am going to acquire and integrate you.
0:56:02 You also get to say, I’ve already done one acquisition
0:56:04 because we did it this way.
0:56:06 You did an asset sale, potentially,
0:56:08 if you bought any of his assets,
0:56:10 and you did an Aquahire because you bought him.
0:56:12 And so a lot of the people in Silicon Valley
0:56:14 use this term all the time.
0:56:17 They’ll be like, I sold my sword up to so-and-so.
0:56:18 They got Aquahired.
0:56:22 And we, normal people, don’t use that same terminology.
0:56:24 And so we don’t sound as sophisticated,
0:56:26 but we’re doing the exact same thing.
0:56:28 So I would keep your eyes open.
0:56:29 One of the things I’ve been obsessing on lately
0:56:34 is that rich people do not think the same as poor people
0:56:36 when they think about problem solving.
0:56:37 Poor people, when they have a problem,
0:56:39 they say, how do I fix this problem?
0:56:41 How, how, how, how?
0:56:43 Relatively wealthy people think,
0:56:46 I have a problem, who could fix this problem for me?
0:56:47 Who not how?
0:56:50 Rich people think, I have a problem.
0:56:53 How could I buy an almost guaranteed solution
0:56:54 to this problem?
0:56:56 Buy, who, how?
0:56:58 And you can start when you have a problem
0:57:01 in your business going, all right.
0:57:02 Pause, don’t go to how.
0:57:04 Pause, don’t go to who.
0:57:06 Pause, how could I buy the solution?
0:57:08 I need more revenue in my business.
0:57:09 I need to come up with a brand new product
0:57:11 that I could sell, do you?
0:57:13 Or is there something else out there in the market
0:57:15 that you know your audience would love
0:57:17 and you could acquire part of that company?
0:57:21 Do no fulfillment, not guess what a great product is,
0:57:23 but no, because people are already buying it
0:57:26 and you already use it and just integrate that
0:57:27 into your revenue line.
0:57:29 And the truth of the matter is,
0:57:31 I forget my own homework all the time.
0:57:34 I refer it back to the how constantly
0:57:36 and I should obsess on the buy more often too.
0:57:38 – Oh my gosh, that is so smart.
0:57:40 I love that advice so much.
0:57:42 Okay, so buying a business.
0:57:46 We’re of course gonna be looking at the financials
0:57:47 to some degree, right?
0:57:49 So what are you looking at personally
0:57:51 when you are trying to buy a business?
0:57:55 And then also, if we need to hire people, hire an operator,
0:57:58 what do we need to consider in terms of the financials?
0:57:59 – A couple of things.
0:58:01 We have a framework that we look at
0:58:04 for every time you buy a business,
0:58:05 what does it need to have?
0:58:08 I think about it as two words, an income stream.
0:58:09 You’re buying a business ’cause you wanna make money,
0:58:11 not because you’re doing charity.
0:58:12 And so when it comes to an income stream,
0:58:15 an income stream has to cover a few things.
0:58:18 It has to cover the interest expense on your loan,
0:58:20 so whatever that costs for how you bought the business.
0:58:23 It has to cover your income,
0:58:26 so how much money you wanna make from the business.
0:58:29 It also has to cover some version of an operator’s salary
0:58:31 so you don’t go crazy, you have a manager,
0:58:33 you don’t buy a job, you buy a business,
0:58:35 and it has to cover working capital.
0:58:37 And that means a little bit extra money
0:58:40 in case anything goes sideways or to grow the business.
0:58:42 Those four things, if you remember that,
0:58:44 will help you buy a profitable business.
0:58:46 And we have a structure that breaks that down
0:58:47 a little bit more in the book,
0:58:50 but at a high level, that’s it.
0:58:52 The second thing that I really want you to think about
0:58:54 if you’re thinking about buying a business overall
0:58:57 is very, very high level.
0:58:59 You don’t wanna make acquisitions too complex.
0:59:03 You wanna see what do the financials tell you?
0:59:04 Is the business profitable or not?
0:59:08 We don’t buy unprofitable businesses to start.
0:59:10 That is asking for pay.
0:59:11 So we wanna profitable business according
0:59:14 to its financials, that means it’s P&Ls.
0:59:16 We want the financials and P&L to somehow match
0:59:19 the tax return or decrease the price
0:59:24 so that the tax return is your de-risked price.
0:59:27 And then we also want a breakdown of our due diligence file,
0:59:30 kind of looking at where’s the risk in the business,
0:59:32 how many employees are there,
0:59:34 what kind of assets do we have?
0:59:35 So we have a full due diligence list
0:59:38 that we use for this, which is important,
0:59:40 but you wanna start high level with the financials
0:59:41 and the tax return.
0:59:44 – One of my last questions here,
0:59:47 tweaks to grow the business.
0:59:50 What do you usually see of the small tweaks
0:59:52 that you can do to really just grow the business
0:59:55 when you’re looking at these boring businesses?
0:59:56 – I’ll come back on a different time
0:59:58 and talk to you about the next book I’m writing,
0:59:59 which we’re creating some portions of it.
1:00:01 It’s about an operating system.
1:00:04 How do good companies scale from six to seven
1:00:06 to eight to nine figures? – Ooh, I love that.
1:00:08 – And I came up with something with one of my friends
1:00:10 whose name is Aiman called Nine Steps to Nine Figures.
1:00:12 And don’t take the nine figures literally,
1:00:14 you don’t have to create a nine figure business,
1:00:16 but the idea is a business so big,
1:00:19 it makes profitable money for you,
1:00:22 is fun to run and is trusted
1:00:24 in that it will continue to make more money.
1:00:26 So trust, fund, profitable.
1:00:29 And there’s really a few steps.
1:00:32 First, if you wanna have a profitable, fun to run business,
1:00:34 you gotta know who you’re selling to.
1:00:36 This is what we call persona.
1:00:40 So you need to be able to name and label your target market.
1:00:42 Then you gotta think about what problem are you solving
1:00:43 for that person?
1:00:46 Where is the pain or the nail in the foot we call it
1:00:48 that is the problem you’re solving?
1:00:50 Then you gotta obsess on product.
1:00:52 So what product are you selling this person
1:00:53 in order to fix their pain
1:00:57 that this person in particular really, really wants?
1:00:59 Then I like to talk about performance.
1:01:02 So where in your business are you tracking
1:01:03 if you are winning or losing
1:01:05 and what does winning look like?
1:01:09 Then you wanna have a scoreboard or operational system.
1:01:12 How can I consistently run a business
1:01:14 without a bunch of question marks and games
1:01:17 because I have an operating system I run on.
1:01:19 And then we wanna have people.
1:01:22 So finally, and maybe most importantly in many ways,
1:01:24 who are the people inside the business
1:01:28 that I am hiring, firing, and what does our culture look like?
1:01:31 We have nine steps, but those are like the first seven
1:01:34 that are so important because if you have the persona,
1:01:38 the problem, the product, if you have the performance,
1:01:41 the operating system and the people,
1:01:44 then you can run a sustainable business over time.
1:01:46 And sometimes you don’t even have to have the people
1:01:48 if you have a solo business as well.
1:01:50 So those things are necessary
1:01:53 for scaling a sustainable business.
1:01:55 – So let’s say we’ve got our boring business in place,
1:01:58 things are rocking, we’re making a profit.
1:02:00 Is there any point where we should think
1:02:01 about exiting this business?
1:02:03 What are the criteria to like think
1:02:05 about exiting a business?
1:02:08 – So the end of the book starts talking about the exit.
1:02:11 And the reason why is because the first business
1:02:13 that you buy probably isn’t gonna be the business
1:02:14 that you have forever.
1:02:16 You should do your first deal
1:02:18 thinking like you did your first job.
1:02:20 You didn’t plan on staying your first job forever.
1:02:22 You’re like, I wanna be here for two to five years,
1:02:23 something like that.
1:02:25 I want it to make me money.
1:02:26 I want to learn from it.
1:02:30 And I either wanna scale up or I wanna scale out, right?
1:02:32 I wanna move up to the C-suite position
1:02:33 or I wanna go on to my next job.
1:02:35 And it’s the same with the business.
1:02:37 So the first deal that you do should not be
1:02:39 your last deal in my opinion.
1:02:40 It wasn’t for me.
1:02:42 So since we know that,
1:02:45 we wanna start planning for the exit
1:02:48 and the ability for us to eventually sell our business
1:02:49 to make more money.
1:02:53 The cool part is most of the money in buying businesses
1:02:56 and building businesses is made on the sale.
1:03:01 So, if you have a business that does $100,000 in profit
1:03:02 in small business land,
1:03:05 you can sell that business for three to five acts
1:03:07 on average of the profit.
1:03:10 So $100,000 business sells for $300 to $500,000
1:03:12 to overly simplify.
1:03:17 That means that if I buy a business for $300,000
1:03:19 that makes $100,000 in profit,
1:03:24 but I am able to increase the profit to $200,000,
1:03:25 well, now I’m selling this business
1:03:30 for somewhere between $600,000 and maybe $800,000.
1:03:36 So I have taken multiple years of potential future revenue
1:03:39 and fast-tracked them and I moved them up.
1:03:42 And so when it comes to thinking about exiting your business,
1:03:45 there are really only three levelers that matter.
1:03:47 And the three levers are,
1:03:49 can I increase the profits?
1:03:51 Can I increase the revenue of the business?
1:03:54 Can I decrease the risk in the business?
1:03:58 And can I increase the systems, processes
1:03:59 and people in the business?
1:04:01 And if you can do those four things,
1:04:03 then your business can be worth more
1:04:05 when you sell it than when you bought it.
1:04:07 – As a founder, I feel very emotionally attached
1:04:09 to Yap Media, right?
1:04:11 I really couldn’t imagine selling it,
1:04:12 at least for a really long time, right?
1:04:14 I really couldn’t.
1:04:15 But with these boring businesses,
1:04:18 I feel I could buy one, fix it up
1:04:22 and then have no emotional attachment to just sell it.
1:04:23 So do you feel like there’s something there?
1:04:25 It’s just like easier to just buy and sell
1:04:26 these boring businesses
1:04:29 because there’s less emotional attachment?
1:04:30 – For sure.
1:04:33 Yap, for you and any content creators listening,
1:04:35 that’s your distribution mechanism.
1:04:38 Yap is your ability for the rest of your life
1:04:40 to sell varying things to your audience
1:04:42 without using a ton of capital.
1:04:44 So you might wanna keep Yap forever
1:04:47 and layer on top of it different products to sell,
1:04:50 layer on top of it different services to sell,
1:04:53 layer on top of it owning part of another content creator
1:04:55 who maybe you help distribute,
1:04:57 but you take a percentage of future revenue
1:04:59 from that content creator.
1:05:02 So this is how we build big conglomerates, right?
1:05:04 You could do what most media companies did,
1:05:06 which is they acquire assets.
1:05:08 Back in the day, Ted Turner was famous
1:05:11 at Turner News Network for acquiring assets
1:05:12 and he did it the old fashioned way,
1:05:14 which is acquire radio stations here,
1:05:16 acquire television rights here,
1:05:18 acquire distribution rights here.
1:05:21 And he used to be talent and he worked his way
1:05:23 all the way up to complete ownership and chairman.
1:05:26 And so the way to do that in the 21st century version
1:05:28 is what Alex Cooper’s doing right now
1:05:30 with Call Her Daddy and Unwell.
1:05:33 She acquired part of Alex.
1:05:34 What’s the other Alex’s name?
1:05:35 Do you remember?
1:05:36 I have no idea.
1:05:36 I don’t want to page.
1:05:39 I only page into the business self-improvement world.
1:05:41 I’m so like, Call Her Daddy who?
1:05:42 I know, I know.
1:05:45 I mean, not typically when I talk about her topic,
1:05:47 but brilliant business mind.
1:05:49 She looked at Dave Courtney at Barstool Sports
1:05:51 and said, why doesn’t this exist for women?
1:05:52 I’m going to build it.
1:05:54 Dave sold his company for what?
1:05:55 $600 million or something like that?
1:05:58 She’s like, yeah, I’m gonna do the same thing.
1:06:01 And so she started acquiring up other talent.
1:06:05 She also acquired and built part of a pop-up
1:06:07 and a tour company.
1:06:09 You see her doing tours right now all over the place.
1:06:10 You see Alex.
1:06:12 Alex Earl, that’s the other one’s name,
1:06:13 doing the same thing.
1:06:15 Those are smart business women.
1:06:17 Like don’t let the sex talk fool you.
1:06:20 They are sharks and I’m here for it.
1:06:22 And that could be the way that you do it.
1:06:23 And then at some point,
1:06:25 you might do what Barstool does
1:06:27 or some of these big media companies do,
1:06:30 which is you might say, all right, talent.
1:06:32 You want to buy back your rights?
1:06:32 No problem.
1:06:34 You buy back your rights.
1:06:35 That doesn’t mean you sell yep,
1:06:37 but you sold one of your assets.
1:06:40 And that’s how you delink your personal brand
1:06:41 to your business.
1:06:45 Okay, so people are afraid of failing.
1:06:47 A lot of people don’t actually take the leap
1:06:50 into entrepreneurship because they’re afraid of failing.
1:06:52 I’m sure I have plenty of listeners right now
1:06:53 who want to be entrepreneurs
1:06:55 who listen to an entrepreneurship podcast
1:06:57 who haven’t become an entrepreneur
1:06:58 because they’re scared of failing.
1:06:59 They’ve got golden handcuffs.
1:07:02 They probably work a nice corporate job.
1:07:03 I’ve got smart listeners.
1:07:05 How can Main Street Millionaire
1:07:08 help them overcome their fears
1:07:10 into becoming an entrepreneur?
1:07:12 Well, first of all, Main Street Millionaire
1:07:15 is peppered with stories of people just like me
1:07:17 and just like you,
1:07:19 who worked in corporate for a long time
1:07:21 and leveraged the best form of money there is,
1:07:24 which is a salary somebody else pays
1:07:26 into the future ownership of your business.
1:07:29 So one, you’re exactly where you’re supposed to be.
1:07:31 If you’re already making revenue by a salary,
1:07:32 that’s incredible.
1:07:34 You can use that to acquire your company.
1:07:36 In our community and in Main Street Millionaire,
1:07:38 I would say 40% of the people in our community
1:07:41 where we teach business buying are W2 employees,
1:07:43 well-paid W2 employees that are buying their first
1:07:45 or their second business.
1:07:47 What Main Street Millionaire will teach you how to do
1:07:50 is two things that I think are invaluable.
1:07:52 One, negotiate with the company that you work for
1:07:54 or with vendors that you work for,
1:07:56 for part of businesses you already fully understand,
1:07:59 partial equity, that could be your first tiptoe
1:08:00 into ownership.
1:08:05 Number two, it will teach you how do you layer on acquisitions
1:08:08 using operators, family for instance,
1:08:10 like my husband runs one of our companies,
1:08:12 my mom ran another one of our companies,
1:08:15 my brother and I co-own another one of our companies.
1:08:17 So how can you use the people around you
1:08:20 who maybe don’t have your same salary for ownership?
1:08:23 I think it’s beautiful to do for husbands and wives.
1:08:26 The last thing that a book like Main Street Millionaire
1:08:30 will teach you is when it comes to seeing a deal
1:08:33 in front of you that feels so unfair,
1:08:37 it is an absolute fuck yes, you will be able to jump on it.
1:08:39 Baron Rothschild said by when there’s blood
1:08:41 in the streets, especially and even when the blood
1:08:45 is your own, he was one of the titans of American history,
1:08:47 one of the richest men ever to live.
1:08:49 And what’s interesting, I think,
1:08:52 is if you at all are scared about the economy,
1:08:55 the recession, your job, your future,
1:08:58 there is nothing better than a little shake-up
1:09:00 in the market to get better deals.
1:09:03 And so what I want you guys to be prepared for
1:09:06 is that when that comes, you will already know
1:09:08 and have turned on your particular activating system
1:09:11 in order to see these businesses all around you
1:09:13 and do a smart deal.
1:09:15 – So my last question to you before we close out the show
1:09:17 is really about future predictions.
1:09:20 I just interviewed the CEO of Microsoft AI,
1:09:24 Mustafa Suleiman, he was the founder of DeepMind.
1:09:26 And he told me something mind-blowing.
1:09:28 He’s like, listen, like AI,
1:09:30 everyone’s gonna have their own personal AI.
1:09:33 People are gonna be going to job interviews with their AI
1:09:35 and having to develop their AI.
1:09:39 People are gonna co-found businesses with their AI.
1:09:41 And that just blew my mind.
1:09:45 How do you see these mom and pop boring businesses
1:09:49 really evolving in the next five, 10 years because of AI?
1:09:51 – Let me tell you what I think about AI
1:09:53 and Main Street businesses, which is,
1:09:58 the first jobs that AI took were graphic designers,
1:10:02 artists, copywriters, maybe even singers in some way.
1:10:04 They were online jobs, why?
1:10:07 Because AI lives online because it’s very easy
1:10:10 for quote unquote online digital robots
1:10:12 to take over jobs that are mainly online.
1:10:14 So if right now you have a job
1:10:16 that you can do completely from Zoom
1:10:19 that has a lot of automated processes in it
1:10:21 where sometimes you feel like you do a lot
1:10:24 of automated tasks, be wary of AI
1:10:25 because that will come for you first
1:10:29 as it already has for many people in the digital world.
1:10:32 You know where AI is gonna take longer?
1:10:36 Painting companies, roofing companies, plumbing companies.
1:10:38 The hardware is going to take longer
1:10:39 to catch up than the software will.
1:10:44 And so I feel very strongly that the trades are going to flip
1:10:48 as one of the more powerful industries in the world
1:10:50 just in the same way that people are no longer
1:10:52 paying graphic designers the same amount
1:10:55 because we have AI tools that we can use
1:10:56 to augment their work.
1:11:00 And so think long and hard about AI
1:11:04 in the fact of where can I have a moat built around me
1:11:07 where it is not as easy for a digital component to take over.
1:11:09 And that’s what I think about it.
1:11:10 And the only other thing I’ll say there
1:11:12 is I’m a techno optimist.
1:11:16 I think by and large, our world is better mathematically
1:11:18 because we have more technology today,
1:11:21 not with technology hurting us.
1:11:23 It has helped increase longevity.
1:11:25 It has helped decrease poverty levels.
1:11:27 I think you can make a very hard argument
1:11:30 except perhaps in the US with anxiety and depression rates
1:11:32 that technology is largely good.
1:11:36 So I think AI will continue to be really useful for us.
1:11:38 And with the businesses out there,
1:11:39 man, think about how much we’re gonna be able
1:11:44 to increase our profit margin by using AI right alongside us.
1:11:45 – Yeah, totally.
1:11:46 And Mustafa actually told me something
1:11:49 about that loneliness factor.
1:11:50 A lot of the AI that’s being developed
1:11:53 is actually developing as emotional support.
1:11:55 And so this AI will help you do your work
1:11:57 but also be your therapist.
1:11:59 And something that they said was really interesting
1:12:01 is that he felt like it’s gonna really help
1:12:04 underprivileged kids ’cause he said that
1:12:06 it’s almost like every underprivileged kid
1:12:09 would have a mother or a father who was guiding them.
1:12:12 So I just think it’s gonna be really powerful.
1:12:14 – Interesting, that’s horrifying to me.
1:12:17 It’s horrifying, but it’s also like, who knows?
1:12:20 Hopefully we can steer it in the right direction.
1:12:22 – Yeah, hopefully we don’t have ads
1:12:25 just straight main lining into our brain.
1:12:27 – Most likely that will happen.
1:12:30 Okay, so I end my show with two questions
1:12:31 that I ask all of my guests.
1:12:34 What is one actionable thing our young improfiters
1:12:38 can do today to become more profitable tomorrow?
1:12:40 – One of my favorite mentors, Bill Perkins,
1:12:43 told me why he thought he was so successful.
1:12:45 Where did his billions come from?
1:12:48 And he said that he does one thing differently
1:12:49 than everybody else.
1:12:50 He moves fast.
1:12:53 By the time that other people have thought about an idea,
1:12:54 brought it up to their friends,
1:12:57 considered it, Bill has already taken action,
1:12:59 made three mistakes and found a better way.
1:13:02 I think the faster you move, the more money that you make,
1:13:05 the faster you move, the larger your bank account.
1:13:06 So whatever you’re going to do,
1:13:09 take action more often than you think
1:13:11 and quicker than you think.
1:13:13 – And what is your secret to profiting in life
1:13:16 and this can go beyond business and money?
1:13:18 – I mean, the best deal I’ve ever done
1:13:19 was the one I did with my husband.
1:13:21 It sounds cheesy, except it’s true.
1:13:23 And so I think you are going to spend
1:13:26 the rest of your life with one human.
1:13:28 And I wish I would have known earlier
1:13:30 how important it is to choose somebody
1:13:35 who had a growth mindset, wanted to continue to progress
1:13:40 and that profits come from profitable relationships done well.
1:13:43 And so, especially if you have young women listeners,
1:13:45 obsess about becoming a better human,
1:13:47 so you attract better humans
1:13:51 and two people is so much more powerful than one.
1:13:54 – So Cody, where can everybody learn more about you
1:13:55 and everything that you do?
1:13:57 – I think most important is Main Street Millionaire.
1:13:58 That’s the name of the book.
1:14:01 You can find it at msmbook.com.
1:14:04 The idea is we’re going to put tons of resources and tools
1:14:06 for anybody who picks up the book
1:14:09 so that we can all become a little bit more unemployable
1:14:11 and have control of our life.
1:14:13 That’s the idea anyway.
1:14:13 – I love it.
1:14:14 Guys, I read the book.
1:14:16 I got an advanced copy.
1:14:18 I absolutely devoured it.
1:14:19 So I highly recommend it.
1:14:20 We’ll stick the links in the show notes.
1:14:21 Cody, thank you so much.
1:14:22 – Thank you.
1:14:23 You’ll have to tell me if you buy a business.
1:14:25 I’ll help you anyway you need.
1:14:26 – Thank you.
1:14:30 Yeah, bam.
1:14:33 I loved having Cody Sanchez on the show
1:14:35 because first of all,
1:14:38 I respect her so much as a female entrepreneur
1:14:40 and she always puts things
1:14:42 in such an interesting perspective.
1:14:45 And it’s true what she said about entrepreneurs
1:14:47 and us not being good employees,
1:14:50 the fact that we’re failed employees.
1:14:52 And that means a lot of us may have to suffer
1:14:55 through some difficult experiences in the workplace
1:14:58 before we find our own footing and groove.
1:15:01 But the fact that so many of us are somewhat unemployable
1:15:03 can also be a superpower
1:15:05 when it comes to launching our own endeavors.
1:15:08 And if personal and financial freedom is what you’re after,
1:15:10 then you would do well to listen to Cody
1:15:13 as she preaches the gospel of ownership.
1:15:15 Simply put, the more things that you own,
1:15:18 the less that other people can tell you what to do.
1:15:21 And while being a solopreneur has its appeal, of course,
1:15:24 it also means you’re still likely to work
1:15:25 at the behest of someone else,
1:15:29 whether that’s Uber, Upwork or whatever tech company
1:15:31 or business controls the platform
1:15:33 that you need to be on to get customers.
1:15:37 That’s why Cody thinks that the real ownership opportunity
1:15:39 lies on Main Street with the small businesses
1:15:42 that have been operating and succeeding for decades.
1:15:44 And when you’re looking for businesses,
1:15:46 remember the Lindy effect.
1:15:48 The longer a business has been in existence,
1:15:52 the higher likelihood it will continue to be in business.
1:15:54 Main Street businesses might not be sexy.
1:15:56 They may be boring,
1:15:58 but that just makes them all the more undervalued
1:16:01 as opportunities and they’re all around us,
1:16:05 landscaping businesses, laundromats, car washes,
1:16:06 printing businesses.
1:16:08 There’s tens of thousands of businesses like this,
1:16:11 often with owners who would love nothing more
1:16:14 than to sell their businesses and retire.
1:16:17 It’s a proven path to ownership and financial independence
1:16:19 that’s just waiting for somebody like you,
1:16:22 a young improfitor to snatch it up.
1:16:26 And there’s nothing boring about making a lot of money.
1:16:29 Thanks for listening to this episode of Young Improfiting.
1:16:30 If you listened, learned and profited
1:16:33 from something that the incredible Cody Sanchez said,
1:16:36 then why not share it and the gospel of ownership
1:16:37 with somebody else?
1:16:38 Spread the word.
1:16:41 And if you did enjoy this show and you learned something,
1:16:44 then please drop us a five-star review on Apple Podcasts,
1:16:47 Spotify, Cast Box, wherever you listen to this podcast.
1:16:48 Nothing helps us reach more people
1:16:51 than a good review from you.
1:16:53 If you prefer to watch your podcasts as videos,
1:16:55 all of our episodes are on YouTube.
1:16:58 You can also find me on Instagram or LinkedIn
1:16:59 by searching my name.
1:17:01 It’s Halla Taha.
1:17:04 And finally, thanks to my amazing YAP production team,
1:17:05 you guys are so incredible.
1:17:07 I know everyone’s working so hard.
1:17:09 I couldn’t do without you.
1:17:10 This is your host, Halla Taha,
1:17:13 AKA The Podcast Princess, signing off.
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