Watch these 60+ minutes if you want to be a millionaire investor in 2023

every once in a decade warren buffett says that the economic skies darken and the clouds rain gold and i think that might be what's about to happen in the world around us so when i got asked to come and speak at this conference event in at dallas i thought long and hard about that i thought about what did i wish that i knew in 2007 and 2008 when i was at goldman investing and felt what it felt like to lose money for the first time in the stock markets what would i wish to have known then that would have changed everything for me and so i put together a presentation that talks about the ideas happening in the world around us and how we can actually make money despite the economy i thought about baron rothschild's quote which is that buy when there's blood in the streets especially when the blood is yours and this video i think can teach you how to do that it might be one of the favorite presentations i've ever given so i hope you like it and enjoy oh and if you don't know who i am i'm cody sanchez i run country and capital which is a holding company of a bunch of boring businesses that do about 40 million dollars in revenue and we have a newsletter called contrarian thinking that goes out for free to 1.5 million people across a bunch of different channels so enjoy and stay safe out there [Music] i was gonna say it's good to see your faces but it's basically i'm blind up here so i hope you guys didn't have too heavy of a lunch i'm gonna set this phone down here um i'm excited to be here today for a couple different reasons one man i don't know about you all but can you feel it can you feel the change that has happened in the world just in the last three weeks let's call the last two weeks i mean i love the only this crowd would clap because you guys are ready for it anybody else would be like yeah i felt it in my bank account but you guys are obviously in an abundance mindset um i knew this was coming not because i'm some genius because you'd have to be an idiot to not see this coming um mark knew this was coming we've been talking about this for years uh and yet i probably like many of you i felt it you know when i saw even my portfolio that's pretty protected drop i own now 26 businesses i do have a couple of streams of income or two um but i felt this market change and i felt it because i had some employees that made comments about it i felt it because my parents made some phone calls to me where should we be investing what should we be doing now and so that's why i'm talking about what i'm talking about with you guys today which i think this is going to come up on the stage here yep perfect timing thank you um about how to thrive amidst the struggle because the truth of the matter is is that i don't think it's going to get easier does anybody in here think it's going to get easier over the next year i don't think so i think it's going to get harder and so the entire reason i've built and talk about anything i talk about which we'll hit on in a second is because i have one goal this is the goal creating sovereign humans now this isn't a play on you know the sovereign man and everything that was happening in crypto this was an idea that financial freedom leads to all freedoms you can't be actually free until you can pay your rent then you could maybe have physical freedom okay you get to choose what you do whatever what you do every day maybe then you could have philosophical freedom aka you don't have to listen to the narrative and you could have your own opinion but until you have financial freedom you can't do much because somebody else owns you and that was my second thought is i never wanted to be owned i never wanted somebody else to be the architect of my life i don't know if you've ever felt that too i wanted to write the plans i wanted to draw up the blueprint and then you have to think about the macro what's coming around the corner these are the two things that i think all of us would be crazy if we didn't touch on today but i'm going to spend very little time here because you guys unlike most people i think have already been thinking about this if you're in this room but before we get too far why the listen to cody besides her love of profanity which if you think about it i think four letter words are about the most efficient thing you could do out there it's a noun it's a verb it's an adjective all in one um but besides that i uh i you know i did finance for many years i worked in investment banking at goldman sachs i've built up a private equity company or two i've been in markets in latin america markets here in the u.s and then i've built this portfolio of what i call boring businesses which is what we're going to talk about today in my world this is called micro pe but i spent most of my entire life in financial markets the traditional way did the phd did the mba got all the accolades and realized man i was making a lot of money for other people and i wasn't taking home as much of it especially when i was w2 and didn't have my own business and so we started a company called contouring thinking about two years ago and that grew to 1.5 million followers across social and a couple hundred thousand email subscribers all because the market was so hungry for this idea of how do you not get owned how do you own your own life and so i have a couple things for you here today because i'm a benevolent dictator up here on stage i'm going to ask you do you want the good news or the bad news first bad news perfect because you didn't really have a choice the bad news is we have some things that we just have to accept and the first one is i'm sure you guys saw over the last couple weeks i like to look at leading indicators just like any former economist which was one of my degrees um oh that was a gross humble brag but i did actually study economics um if you haven't seen this i i like going to this site this is layoffs dot fyi and basically what you're looking at here isn't pretty you're seeing some of the really big name uh vc funded companies start layoffs and if you saw in the last slide these layoffs are 25 to 30 percent of their workforce even robin hood nine percent of their workforce one of the most funded companies out there what do you think happens if the companies that have billions and billions of dollars that have been given to them by silicon valley are starting to cut now what do you think happens to the smaller companies that are out there today they probably have some of the downstream effects too it's just next especially when companies have to deal with this inflation is this funny thing you don't say i got a little bit of it i'm a little pregnant you're like no no it's here or it's not because inflation is typically accelerating unless we have a government which i don't know what you guys think that has massive backbone that's going to come in here that's going to fix inflation early is that what's going to happen probably not and so we have to deal with the fact that inflation's here they lie to us about it and we don't know what to do about it because it's really hard to get real numbers as a former economist even economists cannot properly track inflation today given the way cpi is calculated there is not really good metrics around this and so what do we do we have to realize that even though you guys are in this room today and even though i've built up some businesses you haven't done enough and i haven't done enough to prepare for what's coming in my opinion now the glass half full is that we have some opportunities but the glass half empty is we're gonna have to make some moves today so do a little game for me really quick raise your hand for me how many of you guys in here own a business right now nice we got a lot okay how many p keep your hands up for me how many people in here own multiple businesses okay how many people in here own multiple diversified businesses that your cash flow won't get hurt in let's call it a scenario where the market goes down 25 30 percent okay so we actually have some i'd say it looks like 15 of the audience something like that um what i want to prepare you guys for is the only area of the market and i won't talk crypto because that's not my specialty the only area of the market that i think is truly protected in both a recessionary environment and an inflationary environment and i'm i'm not really biased here i buy everything i have crypto i have land i have real estate i have lots of different businesses but when i'm talking to some of my smartest friends or the hedge fund that i sit on the board of this is the only place where i see a safe harbor one good thing about today and i try to sit in this is something called cognitive dissonance which basically means you can hold two ideas in your head at the same time that are conflicting it could be the best time to be an investor and it could be the worst time to be an investor and i do think it's this tale of two cities is what we have right now so all right everybody's depressed needs a whiskey it's only 3 30. but let's get to the good news because i do think there's a lot we can do together to change this so um one thought here too i just want to make sure this thing is working down here right because i can't see the seconds but it's on so i don't keep you guys over okay by the end you're going to get a plan to fix all of this the plan is that this will move you forward and you will be able to take some action this is the goal if i haven't delivered this goal at the end you can yell at me heckle me we can we can have some fun basically what i want to do is i want to have a couple things to protect on the downside but more than anything i want to plan for us to grow while everyone else is shrinking that's the goal today we want to grow and expand because what did we say in the beginning you guys have this more abundance mindset you kind of see what's happening um one of my favorite investors sam zell he did it in real estate do you guys know anything about zamzell do you know who he is apartment yeah exactly so like kind of an og real estate guy did a multi-family it started out in student housing billionaire many times over and what sam zell did is he is actually known for going in when the market gets really rough and his billions are typically made in really bad down markets and so that's what we want to talk about today i want you to do a little game for me really quick i'm going to flash two questions and i want you to write down a word or two i don't know how many how many of you have a plan for what's coming like if you have a business you have a contingency recession plan if you have a business you have a contingency inflation plan your portfolio you know what's in it and you have a model that shows you what happens if it goes down 25 or 30 percent does everybody have that nice we got one person in front um okay if you don't have that i would make a suggestion that should be at the top of your list because those layoffs that happened those are going to ripple across the market and you are going to get people that are scared working for you and you are going to get portfolios that go down so if you don't already have a plan for your financial portfolio and a plan for each of your businesses to not just deal with it when the market goes down but to thrive i probably wouldn't do anything for the next week and i would hit on that because we aren't here to just progress slowly we're here to thrive in these markets i was talking to him about psychology of humans and he had this fascinating story for me where he talked about how um almost within about 30 seconds of meeting a human he can figure out if they're fear or greed driven and he said every human not just in varying scenarios but every human is innately fear driven or greed driven and if you need to know this about yourself it's not necessarily a good or bad thing but every human is one of these two things and as soon as you know what you are and as soon as you know those who work with you what they are you can play off that and you can talk somebody into things that they would never probably do one way or the other but you can talk them into it if you understand their human psychology the interesting part about this is um you know i was talking to a friend the other day and and i told him um that i think stock market gurus will they'll evaporate and they already kind of are have you guys like followed anybody on the internet and kind of seen them like maybe pivoting to somebody else something else maybe not talking as much about the stock markets because stock market gurus can only be with one type of person what type greed based you do not sell stock market disciplines on you know buying action calls off of fear you really can't now you can sell diversified portfolio theory you could sell protection you could sell insurance you could sell our things but that stock market guru thing will go away mark my words in a year if we continue the market that we think we have those won't exist anymore and what that means for each of us is we're going to have to figure out are we playing to fear or greed and are we properly situated the two things that i'm doing that i'll break down for you is i'm going to talk to you about how many and how many people in here have bought a business before has anybody in here bought a business okay let's call it two percent has anybody in here sold a business let's call it another two percent a different two percent okay we're going to talk about how you can buy your profits how i buy businesses because when the streets get bloody and i'll just say it in here to you to a few really close you know my 500 new best friends that the best time to buy a business is when everyone is operating on fear so i started talking about buying businesses publicly in 2020. in 2020 the valuations on one type of business that i was talking about publicly and that were kind of big were 2x so 2x profits is what most of these businesses were at they were laundromats now the multiple on those businesses what do you think they are in 2022 four to seven x so a laundromat that literally cannot change materially over the course of two years like there are only so many levers you can pull on that business the same business in 2020 in 2022 is worth anywhere from two to three times more worth more valued at more that is going to change materially so we're going to talk about how to get you guys ready to not allocate a single dollar today i would tell you to keep all of your pennies in your pocket if anybody is going out right now and telling you that they are allocating aggressively to real estate despite the inflation that's happening i think they're nuts i think that is a tough market move right now i think if anybody is out there allocating aggressively to venture capital right now today i think they're nuts and i think those are two signs that you know that that person doesn't know what they're doing in down markets that they are still building off the hype because you shouldn't be allocating today in my opinion you are going to want to have some dry powder so over the next six and 12 months this is when billionaires are made is when everybody else is panicking all the people that were following those stock market gurus they're out of the market in six to 12 months and who is in the market very few people and that's when you make all your money okay we're going to talk about an idea that i don't know everybody here has talked about much the first thing is called the great retirement the great retirement is basically this graph do you guys see what's happening here this is the acceleration of baby boomers leaving the workforce look at this chart since 2010 we are seeing baby boomers leave the workforce at an accelerating rate that basically 3x during january of 2020 and is continuing today these baby boomers are leaving with them more small businesses than we've ever seen before baby boomers are the greatest generation of business owners and builders that has ever existed and they are leaving the workforce at a time when their valuations are about to become less than maybe they've been in five or ten years look at these numbers 5.1 trillion dollars you know what that number is that is the total amount of assets that baby boomers own in small businesses not just any baby boomers but baby boomers that are in the range of five to seven years from retirement so they are damn close to wanting to be passing on their business the problem with these businesses is uh how many baby boomers have kids that would rather do tick tocks than run their plumbing company how many baby boomers out there that have kids that would rather do a youtube than run a three million dollar hvac company have you seen what's happening to the trades do you see millennials just sprinting over to university of phoenix to get their degree in carpentry not happening that's funny because actually i think the opportunity in the next 10 years will be exactly here we've seen this massive run-up in tech stocks right we've seen everybody valuing i mean what what's that car call that was competing with tesla suv rivian there you go um did you guys see the valuation on rivian absolutely astronomical valuing a company at that hasn't barely produced any cars at more than the entirety of the american auto industry traditionally tell me that makes sense long term it doesn't and the best part about it is that nobody sees it they're starting to feel it but you are going to see vc's squirm and squeal and hold on to their startup numbers as much as possible but the truth is right here and the truth on here is 2.4 million small businesses are listed for sale right now you want to know something crazy do you know how many small businesses sell within a year that get listed let's say there's 12 small businesses to go up for sale how many of them get sold within a year who wants to shout it out who knew one that's that's the answer imagine a house in florida miami a block 12 houses wide all 12 are up for sale and only one sells i don't think we've ever seen anything like that that just doesn't exist in real estate and yet in small business it exists everywhere why because millennials want to be tick-tockers because the market's more disjointed because it is more work to buy and run a business than it is to buy a piece of real estate and because it hasn't been democratized yet so think about it how normal is it for you guys to go out and get a mortgage on a house like i mean you don't really even think about it right you go buy a a piece of property it's no big deal but then somebody tells you you can get a loan to buy a small business but you have to have a personal guarantee on your assets and most people that feels weird right what's the average loan on a mortgage 30 years and you're probably going to need all 30 to be able to pay off your mortgage because mortgage on real estate typically your real estate appreciates by 4 a year now a business on the other hand has some different numbers and i'm going to show you those the difference between the two is that instead of buying an asset mark and i were talking about he's out there somewhere mark and i were talking about buying an asset do you want to know the asset that mark is buying right now do you think he's told you goats who said goats that buying goats and you want to know what's so funny about this to me is is this the biggest part of mark's portfolio absolutely not however this is funny you buy one goat the guy told me today you get anywhere from two to five baby goats out of it so you buy one goat for 75 bucks then you got you know two to five baby goats out of it you sell them each for 75 bucks and they mow your lawn great deal love it now that might not be that scalable unless you're him and you got this big old ranch in texas you could just have your herd of goats and be prancing around with um but for me what that makes me think of is buying businesses you cannot buy a piece of property in miami that positive cash flows you more on traditional short-term i'm on traditional rentals than like 20 goats like maybe that's how it's going to be like how we explain buying real estate now well i could get about you know 75 to 400 bucks so that's about 10 goats actually out of this house that then you put hundreds of thousands or millions of dollars down for that is a terrible risk trade if i had to think about the asymmetric risk meaning my upside to my downside on that property i couldn't have a worse trade right now which is why i've sold a lot of my real estate and i can't wait to buy it back when things get bloody this is how we do it in small business land for those of you who haven't bought a small business before here's some truths that probably people don't tell you about because in my world of private equity we take 2 and 20 and we don't tell you anything because we just want your money and we don't want you in the game but here's the truth you can buy a small business today lots of different types you can diversify that small business you can buy that business with somebody else's money like sba loans or seller financing we'll explain those briefly and we can sort of like have some q a surrounding it and you can take advantage of this massive thing called the great retirement that's happening and you can probably do it at some of the lowest valuations out there and i'm going to break down some deals for you the other interesting part is we've talked about the great retirement but we haven't talked about the great resignation which is you know millennials people like all of us that are tired of working for the man and don't want to go into the office anymore and so we're going to yolo on a bunch of tech stocks right and that trade's about to be done it's not going to work so well anymore um but uh one thing that they do have right is that you know this i talk a lot of crap about my generation the one behind us but actually generations really smart they're very tech savvy um they're very efficient in how they work when they want to work and this generation is going to take over a new realm of businesses that's going to have implications that we can't quite appreciate yet so i'm going to talk to you about a deal i did in 2020 and i'm going to use this deal because it's it's very relatable this is a very small deal now i own a series of laundromats across the western states i own laundromats car washes landscaping businesses plumbing hvac i mean if it's dirty boring and you wouldn't think you'd want to own it i own it and these type of businesses typically pre-2020 had metrics that looked like this i bought a laundromat that did 67 thousand dollars a profit a year with zero dollars well his i'm a woman small detail of my own cash use 100k in seller financing which means that i use future profits of the business to buy the business and then i finance the rest with equipment loans so i'm going to break down how this deal works for you but what i want you to take away from this is this deal does not exist now in 2022 there are some of them out on sites and we can talk about where to find them like biz buy sell empire flippers quiet light brokerage those are the names of some places you can find businesses to buy but what i really want you to do is mark talks about um i'm going to mess it up what's mark's first rule of like wealth it's creation wealth creation right and then you go into wealth something else and then protection skip the one in the middle so um what most people get wrong is when they think about buying a business people like you will leave a conference like this where i talk about doing smb sales small business buying and sales and they'll want to go buy a business tomorrow and what i think you should do first is you should learn about the asset class if you haven't studied micro pe if you haven't done private deals before you spend 30 or 60 days learning about the asset class and then you take action on it as soon as you've kind of gotten your feet wet in the space let me tell you first none of this stuff is rocket science so lots of times when people hear me talk about buying a business it sounds scary or intimidating or maybe like a lot of work like i could instead press this stock on robin hood buy this thing buy this crypto and make a lot of money that is true but i don't think that's how we profit long term so i don't want you to be intimidated by this but i don't want you to go out and buy a business tomorrow i want you to spend 30 days learning about it 20 minutes a day and then take action okay so here's how this deal looked this is a balance sheet i don't know if you guys can read this kind of far away here's the balance sheet like what a balance sheet would look like of the laundromat this was the laundry mat that i bought basically what you can see here like what i would scan if i looked at something like this all of the uh months look pretty similar there's not massive variability there's really no seasonality in the business the gross income overall is 113k then we have expenses right which gets us to about 67 000 in net income now because i own not 11 or so of these laundromats i have a guy run them for me turns out i don't know if you could tell by me but i don't really want to work in a laundromat 24 7. not exactly my cup of tea however i do want to employ somebody that makes like a hundred and something thousand dollars a year who runs this whole portfolio for me he started with a few of them we added on and then each laundromat we try to get bigger now i have one laundry mat that does three million dollars by the way i use laundromats because if you can't understand a business where you wash clothes and you put quarters in to buy the clothes then i don't i can't help you don't buy a business leave the room now but um i'm not saying that you should buy a laundromat this is actually not the best business to buy always it is just the simplest business i think it's like it's like the gateway drug to boring businesses right like everybody's like i want to own a laundromat cody and i'm like god damn it i'm up that's not all i meant to do what i am saying is that this is a really easy business to understand what i actually want you to do afterwards and remind me if we don't get there all the way is i want to talk to you about your personal p l review that is how you're going to figure out what business you like what's your name kate okay that's how kate is gonna figure out the business that she should buy because everybody out there has a business like my laundromat where you get a business that literally you could i mean i just bought a business i just bought a business tuesday of last week that does 120-ish thousand dollars in profit and we bought that business for fifty thousand dollars and this is a business we're going to plug into something else i have in our media company it's like a um it's a it's a human version of a chat bot it's like you know when you go to a website and you wish somebody would answer your question but instead there's like a yes todd wait a minute i'll be right with you and then 14 hours later you're talking with somebody in india except it's actually a bot online okay it's not that it's a human that actually engages with you and so i'm going to plug it into a couple of my boring businesses because wouldn't that be nice if when you needed a locksmith there was something that you could text they would text you back and they would send you out of locksmith cool company right i was able to buy that company at that much of a discount because this was my deal i had an unfair advantage to this deal which is that it's a 26 year old business the guy didn't want to run it anymore and i gave him a percentage of the profits because he really wants to give it to his great-granddaughter he owns a bunch of businesses this one was for her guess what surprise surprise she didn't want to run it so it's going to be just a bond for her but i'm going to grow it so we're going to get to the point where kate figures out which business she needs to buy and tom and brad and everybody but for now we're going to talk about laundromats okay so here's the balance sheet and here's the deal the deal basically looks like this uh i like cleaned up some of the numbers slightly they're not going to be all zeros obviously but revenues for the business 113 000 profit 67k the purchase multiple which means the amount that i'm buying the business for based on its profit is 1.8 x valuation for this business was 125 k business access were a little bit more than that because some of the um businesses is ip intellectual property and some of it are the actual machines that they owned business funds raised zero no outside capital closing payment 25k which i would have had to pay except i got a loan on the equipment which meant that i put zero dollars down for future payments i would pay the seller a hundred thousand dollars over three years so a hundred thousand dollars divided by three and pay them 33 ish thousand dollars a year and then a personal investment like i said upfront with the 25k but then i pay for it with the equipment loans here's what this shakes out with on a comparative basis because nothing is good or bad except by comparison monthly payout to the buyer me about 6k cash on cash return if you calculate it like i put the 25k down otherwise the number doesn't make sense if the number is zero 268 that's how you get goat money out of buying a business that's full circle do you guys like how i came back on that one okay so what i'm trying to say here is you cannot do this with real estate you cannot do this with most things that don't have massive speculation on future prices sure you could get 268 268 on google but are you going to cash flow on google in the meantime i'm sure there are people out here that know about bitcoin mining and maybe how to do it that way or defy but i've been in finance for 15 years i have a phd i have an mba uh i used to do quant trading at goldman sachs i understand derivatives and bonds and i cannot understand half the stuff they're talking about with d5 and so and when i send it to my hedge fund friends who are much smarter than i and some of them went to mit and cambridge and i just went to georgetown like they don't understand either so i have a rule you need to be able to explain it to me like i'm a toddler otherwise i'm out i don't have any ego about being the smartest person in the room because i definitely know i'm not what i do know is that i can figure out how to buy a laundromat and so i'm going to keep doing small boring business deals and i'm going to keep preaching it to the average person and let me tell you why because jobs in the us do you know how many jobs in the u.s are given by small businesses like what percentage so the calculation is anywhere from 60 to two-thirds 60 to 75 percent of small businesses provide most of their i'm sorry 60 to 75 of jobs in the u.s are provided by small businesses small businesses in the us got decimated during covet that's why i get deals like this they're about to get decimated again in this environment if you haven't already seen your loans shrink up if you're a business owner and capital become more constrained it's coming and so when i think about where i want to put capital when i think about the humans i want to invest in let me tell you what it's not it's not a tech worker you know sitting inside of their sleeping pod that i want to give more capital to google for it's like the hard-working men and women that are in my car washes laundromats and at mark's ranch and so when i say that you guys haven't done enough i imagine if you can afford to be in this room there are really two things that you should do today yes you should worry about yourselves you should protect yourselves you should protect your family but also mark also talks about something else he uses the word community a lot so do i and here's the thing we kind of learned over the last two years that most of the people on high do not care about the people down lower and that's all of us none of us are considered high to those people and so if we don't take care of the other owners in this country if we don't take care of the other mainstreamers then who's going to and once you have a certain amount of wealth it's just all options right and you get to choose what kind of world do you want to build yeah you get to be the architect for your life but can you also be the architect of somebody else's life can you make it a little bit better somebody in here was just telling me maybe stand up i can't remember your name you own a car wash storage business shout it out all right and what did you just do with one of your employees that you gave something to so that they could do something else too so he gave away 25 of his business to his operator so that man could become an owner and he could sit back and passively uh get income off of it like tell me that that is not better than throwing money at a price speculative asset tell me at the end of your days when you count up all the zeros at your funeral and they put it on your tombstone because that's what really matters that you're not going to feel better about having made that man's life a little bit better while cash flowing because those are my humans the people who care about stuff like that i want to see when otherwise i don't really care about being on stages like this like i've kind of made what i need to make i got the backup plans like mark's got but these small businesses these people don't have people like you guys they're not able to come in rooms like this and so i think we have a moral prerogative to make a difference on them and that's what i try to do all right let's talk deal structuring here's how a structure like this goes down all right purchase price 125k you put down 25 uh 25k deposit theoretically you get that uh payout over a three year basis you asset finance you can't do this on an sba loan upfront and ask how many people in here known in sba london's right small business association this is called uncle sam finally doing something good for you it is free money not free necessarily because it's a personal guarantee but it is money that the government sets aside so that everyday humans who are us citizens can go and buy businesses up to 90 percent of their purchase price so let's say you go to your local small business association every district has one and you say i want to buy a laundromat for 100k and they value your laundromat at 100k they will give you 90 000. for you to go purchase your laundromat and you will often give them a personal guarantee saying hey if the laundromat goes south all pay off this loan but in the meantime they're going to give you free capital and the rate is something similar to five to six and a half percent right now this happens all around the country every single day in this instance uh the sba loan though wasn't what i used i use seller financing but an sba loan has to be what's called first lien position which basically means the government gets paid before anybody else gets paid so if i screw up my laundromat and lose all 90 thousand dollars i gotta pay them before i have any other loans then there's something called seller financing you guys know what that is yeah used to happen a lot in real estate now they're like that's cute you want me to pay you to buy my house no thanks um but in buying a business 60 of businesses are sold with seller financing 60 that's just the norm because getting credit is difficult and when you have a buyer's market aka 11 houses don't sell when 12 houses go for sale then you get to drive terms so with seller financing i did 90 of the purchase price with future payments and the rest with equipment loans which basically means at the end of this i can get cash out of this deal something to the tune of let's call it 200 to 225 depending on when you're talking about the end close to seller financing then close asset financing this deal is all over the internet if you have uh this would be a small deal like for most people the biggest mistake you can make in buying a business is buying a job right so for most of you guys you already have businesses you already have things that you're passionate about you're probably not dying to go wash cars for lifting i don't know maybe you are but you're probably not and so what you need to make sure you don't do is buy a business like this that doesn't have enough cushion in there for you to have somebody to give a portion of the business to in order to run it for you you want to make sure you're buying a an asset and not a job but these deals are all over the internet in fact there's a company called biz by cell that i checked last week has something like 2.7 million listings on it now of those 2.7 million are a bunch of them garbage definitely but are a bunch of them small businesses that are too small for private equity firms but just about right for normal humans yes they are okay this is kind of how it works to buy a business this is what i call the 10-step business buying process you basically go and we can what i'm going to try to do is leave lots of time for us to try a few little case studies and play around a bit buying a business goes through 10 steps the first step is foundation so that basically means oh this is how small business buying works there's a bunch of them out there check the box i understand that you guys are in that box right now then it goes to deal clarity aka what do you want to buy how much money does the business have to make for you how much money do you want to spend on the business where does it need to be located what kind of business do you want to buy then it goes to origination which basically that's a fancy way of saying sourcing how do i find a business then selling you which means when you stand in front of a business owner getting them to sell their baby to you because this is somebody's baby they've poured 26 years of their lifeblood into it then we've got negotiation how to get them to agree to your terms or price then we've got valuation which is how do you know what it's worth then we've got financing how do you get money for it structuring this is the cool part you know when buying a house like you don't ever really sit down and think well i'm going to do like a you know 10-year note and they're going to give me part of the money for it and then i'm gonna do some here and then a milestone based if i can rent it out on airbnb this much you don't have that kind of option when you buy a business you're the architect there are no rules in business buying you can make up your own there are plenty of people that tell you can't do it that way but they're just telling you they wouldn't do it that way not that you can't and then you have closing how do you close the business all right here's where i want to take a little pause and everybody has with them like a piece of paper and a pen right okay i want to take a pause and i want you to think about something we're going to do something called our personal p l first let me ask how many people in here are interested in potentially buying a business all right cool um if that's the case what i want you to think about here is i'm going to tell you sort of two little stories and then i'm going to i'm going to break you guys into little small groups and you're going to talk amongst yourself for a minute and you're going to think about how you could find your unfair advantage or your unfair deal okay and i might pull like one or two of you up here and we can do this live um so remember i told you about that business that i found that i bought for 50k that's doing 120 30 000 or something like that in revenue the way that i found that business is i looked at all the costs that my business has and i go down the list and i do an exercise where i say okay step one and maybe you write this down or maybe don't step one uh this cost that's associated here and i take it from my biggest costs to my least cost because i don't want to i don't want to deal with the ones up top i want to deal with my biggest pain points can i get to the owner of this company like is it small enough i i can't go by google probably but is this a small enough business that i could get to the owner step one step two is is this meaningful or interesting enough for me to potentially acquire so let's say i'm looking at my p l and i'm like oh man i own a bunch of multi-families and i spend half of my expenses on landscaping yeah i would like to own the landscaping company that makes sense step three is i want you to think about this business could i have the knowledge or could i figure out an operator to run this business for me those are the really the three things i want you to think about and then what i want us to do is i want us to sort of workshop this a little bit my goal is you leave today with a couple of ideas of how you could go approach an owner which is kind of interesting when you think about it because what if you could buy with future profits a business that could cash flow that has an ability to change prices so you can't if you buy bitcoin let's say there's lots of reasons to buy bitcoin i own plenty but let's say you wanted to cash flow off of bitcoin and you wanted to be able to affect the amount that you cash flowed off bitcoin that'd be hard it'd be hard to do but let's say that you owned a service company and you see costs going up in you know to the tune of let's say 10 percent could you charge more for your landscaping business this month than last month and essentially absorb all of that and then blame the government entirely for the increase in prices yeah it's probably happened to you guys whether you know it or not i mean netflix increased their prices by like 33 or something insane so uh i think we could probably do the same thing with businesses in fact we're already doing it so those are the three things i want you to think about i want you can you guys do you have in your head or a way to think about what are your biggest costs and can you get to those people and can you workshop that with each other do you guys feel like you have enough information to play this game yeah okay then what i want you to do because it's kind of a waste you guys could sit here and listen to me talk about buying boring businesses until you're blue in the face but unless you actually take some action now there's something called decreasing marginal utility which basically means like the closer you are to something the more likely you are to take action on it i want you guys to actually leave here having some action items okay so i want you to sit amongst yourself and you're gonna talk about in my business okay so you can start talking i'm going to talk over you write down right now what are some businesses where i know the owners what are some businesses where i spend money on them right now what are some businesses where i think that i could add some growth to them some oversight that i could operate and i want you to write down these businesses for me because what we're going to do next is we're going to talk about how you can approach them all right start writing i'm going to give you guys like uh two minutes or something like that maybe three all right and i'm just going to talk over you but don't stop the only other thing i want you to think about is i want you to think about what of these businesses could i get to within the next 30 days what of these businesses could i get into within the next 30 days oh hey i hear this worked out kind of well for coinbase during the super bowl you know totally crashed their sites millions of people downloading it i think the same thing's gonna happen with you guys today minor item about crypto now being a fire sale so we partnered with somebody that hasn't lost i don't know 26 of its value in the last six months and like half of that yesterday you want to see it oh see this qr code there it is yeah you guys see it again you get it you get it if you're into real estate check out the sponsor of this here video it's fundrise drop in the comments what you think i actually started investing with them in april of 2018. so it's kind of wild that now a company that i invested in for a long time sponsors this video how cool is that check it out uh okay cool was that interesting did you get your juices flowing a little bit is everybody thinking more yes okay good now um i want to do a couple case studies so i'm going to call in some people so be prepared um because i think the best way to learn is not through theory but through case study it's the socratic method right it's what they teach at all the fancy schools where they don't teach anything anymore um okay let's call on who has an idea for a business that they want to buy from this last conversation does anybody want to be brave yes my friend tell me your name and what's what do you do and what's the business you want to buy sorry stand up and then yells i know yes okay let's give him a round of applause look at this guy jonathan [Applause] oh there you go and yell jonathan real estate the business that i'm looking into i like it now tell me why thank you so i don't have to keep paying so much for my car breaking down all the time but the other thing is is i've been going there for probably the last four years i constantly see there's cars there they're constantly busy they've had some changes the father passed away the mother's kind of hands off the sons run it they i mean there's potential there they just got to be able to hire people and that's one of the main things we were talking about is the lack of people wanting to work yeah oh that's a good one we'll get to that okay let me ask you one more question what do you do in real estate um my main thing is to i have half a portfolio of rentals half a portfolio of owner finance oh great okay so i want to push back on two things maybe the automotive company is the right thing it could be but there's a difference between a deal for the street and an unfair advantage deal i am lazy and i am not that smart and i always want you know i'm the the highest hardest working unsmart person you'll meet and so the over here i want unfair deals why do you think i play in boring businesses why did i build a multi-billion dollar in la in business in latin america because it wasn't very crowded you know nobody i go around and try to talk to people about buying laundromats and up until two years ago people are like i literally couldn't want to talk to you less couldn't want to talk to me less right now the thing about an unfair advantage deal is that automotive company do you know a lot about cars a lot no do you have a business plan for them that you think is completely differentiated do you have an in with them that you think is completely differentiated the end yes as far as have i sat down and worked out a plan for it no not yet okay so here's where i would push back that would be an interesting one it's just good to chase deals because then you get something that i call your deal maker lens which is basically you know when you guys buy a new car you know this good example you know when you buy a new car and you're like you're thinking about that porsche all the time you're going to buy the porsche and then you buy the porsche and before you bought the porsche you didn't see it anywhere and then you buy the portion you're like oh there's porsches all over this place they're everywhere right this is what happens when you start learning about deal making you will drive all of your friends crazy because everywhere you go you're gonna be like you know what i bet this business is up for sale that guy in the back they don't have a website look at these yelp reviews it's just gonna happen so it's good to just check test out your muscle but here's where your unfair advantage deal with your unfair advantage deal would be i own a real estate portfolio that's very large i don't want to buy any more real estate right now because with interest rates going up those deals are becoming much much less attractive for me so what do i want to do i want to go to the ancillary satellite companies surrounding my real estate portfolio and i want to acquire them why because day one i could turn my liabilities into an asset right so your biggest expense expenses on your real estate portfolio i don't know maybe it's property management that'd be an easy one maybe it's landscaping maybe it's marketing for you know tenants to come into your real estate portfolio maybe it's a sas company that you use to put up all those like videos realtors do that they send them out to people your unfair advantage deal would be if you can take that deal and you already decrease it by the amount that you pay and then your second unfair advantage deal would be i bet you have a bigger network of people that would be buyers of one of those companies than users of an automotive firm right you probably know people who own hundreds or thousands of rental units let's say that could use your product so this is why i like you guys to think about your personal p l because the way you get deals for less than they're worth is that they are worth more to you than they are to anybody else on the street cool is that useful yes okay thank you for sharing let's give them a round of applause that's awesome all right um i want to do another one of these who has another business and here's what i want you guys to think when i'm doing these i hope you're sort of writing down like if i'm um we're going to talk to colin he's somewhere around here in a second but if i own a business where i'm a marketing genius i want to think about businesses that need my marketing genius so that my price for buying that business is less than what it would be on the street if i am a coding and tech genius i want to think about a business where my coding and tech genius makes the business worth more to me than anybody else on the street and so when you're listening to other people talk about their businesses that's what i want you to ponder is where can i be an unfair lever to this business this is called value add in in private equity and it's what every pe firm out there tries to do we buy a company we typically buy a company in what's called a turnaround i do not think you guys should do that for your first deal you know how like um people will typically say to me oh this business isn't doing that well so i want to buy it i'm like awesome you're buying a business you're buying a problem you're literally buying somebody else's problem and then you who's never run an hvac company you're gonna go in there and solve it all of a sudden day one you're gonna increase the operational efficiency of a bunch of guys fixing things you don't understand no it's not gonna happen it's not gonna happen but we humans are funny we apply this real estate lens of like i wanna buy the house and i'm gonna flip it let me ask you guys a question how many times have you done a construction project and it is under budget and early delivered has that ever happened one one get your hand down nobody does that um all right let's do that guy um so uh that doesn't happen right and it's the same with businesses except typically a little bit larger risk so you don't want to buy somebody else's problem why don't you want to do that because there's 11 non-problems to buy on every street all you're looking for is somebody that already wants what you're selling the reason that people buy or the reason people sell businesses a lot of people say to me well cody what idiot what idiot sold you that laundromat for a hundred thousand dollars when i was doing sixty seven thousand dollars in profit idiot and then i'll say the guy was 75 years old he had cancer and his wife had passed away and he wanted to retire but he didn't want all the money up front because guess what taxes he wanted an annuity over the long term and he wanted me to keep the name on that laundromat because it was his wife's name yeah i was an idiot people don't realize that the reasons people sell businesses are varied you get divorced hell i sell businesses all the time i sold the business not two weeks ago why did i sell a business i don't i don't need the cash for it because i don't want to run it anymore the business is doing well it makes something like i don't know 300 000 a year profit i own 40 of that business you guys do the public math so i don't have to i sold that business for something like 2x because it was too small for me to run it wasn't a net positive to any of my businesses it was a satellite and the guy who run it would just call me too much i just didn't want to deal with it so i sold him the shares of that business is that a bad deal for him is that a bad deal for me no it's just a deal think about marriage 50 of marriages end in divorce right probably more and of those 50 of marriages that end in divorce think about businesses how many business partners stay together for life how many people run one business for their entire life that's weird actually but somehow we think it's bizarre that businesses are for sale at massive discounts and it's not okay so i want to do one more case study who here and then we're going to move on to talking about how do you talk to sellers about this who here has another business that they think they want to buy yes in the back and give me your name what you do oh i i well which whichever one i saw this guy okay all right rock and roll um tell me your name what you do and what kind of business so my name is chris i own several companies but i utilize online content creation to basically drive leads for all of them great love it and so the business i was looking at is in a photo and video studio a photo video studio correct cool and give me some characteristics why do you want to buy this business um so i've been wanting to up the level of the content creation i've been wanting to i also run a marketing and media company so it's a a way to up the level of products and services that i'm offering it's uh it just it's 10 minutes it's so funny because i started looking at that website and i literally found the business 10 minutes from my house dude i love you so it's crazy you actually it feels like destiny it's super cool yeah so this is the crazy part um well first of all totally i like this business a lot obviously who knows could be a nightmare underneath the scenes sure dyod which means do your own due diligence but um what i like about it is from a trajectory standpoint that's the exact type of business i want you to find for your first business you need something that's almost a win-win like you want the business anyway you take a liability off your balance sheet and you buy profits that's awesome then what i think could be interesting about this and some questions you'd want to ask yourself is um do you know anything so this is one you found online you don't know anything about this business no i literally just found it perfect you're gonna lead us in the next section nicely done okay so now we're going to talk about what do you do now so you found this business what do you do let me tell you what not to do first so when you're going to reach out to this owner a lot what a lot of people do is say i want to buy your business you know for this price or they start talking price right away it's actually the exact opposite of what you want to do you never want to bring up price you never want to bring up terms what you have to remember about these small business owners especially if they're publicly listed they have a lot of lookie-loos that are wasting their time has anybody a few of you guys told me you bought you've sold a business do you know how hard it is to keep your eye on the ball and your business running once you've even thought about selling it is so hard and then you have some some guy or gal saying well what about your p l here well what about this can you give me this document sending 42 different emails requesting your financials is very distracting and so i think the first thing that you want to do i'm going to give you some words to say and then i want you guys to talk amongst yourself about how you think you would approach some of these owners and then we'll workshop it so here's what i would do i would reach out to this owner and i would say something like this and i would be very deliberate with my words i would say uh i don't know you're going to go to the business broker if it's on biz by cell but you're going to say to whoever the person that's listed on the account um hi there my name's blah blah i'm located in this industry i'm a business buyer and i'm interested in your company i know what a demand it is on your time in order to vet you know have people vet your deal so i just want you to know i'm a serious buyer i already understand the industry i usually close a business like this in something like 30 days pending you can give me all the materials that i need and i'm not looking to waste either of our time i don't have a lot of it and i know you don't either are you interested in having a phone call at which point you're going to have the broker call you immediately and the broker then is going to ask you a bunch of questions and you're going to proceed with due diligence but the way that most deals die is from incompetence on the buyer's side not even the seller side remember if you're buying a photo studio company where you're buying a car wash or buying a laundromat do you think that the owner of that business is super sophisticated you know do you think they have like beautifully clean p l's located on quickbooks color coded for the past 15 years probably not so you're gonna have to be the one that's a little bit more organized okay so that was awesome what i'd love you to do is it'd be fun if you wanted to play a game sure of trying to reach out to that uh broker right now and see what he says write them something like that ping them something in the buy box and see what happens and how quickly they get back to you maybe we'll have something by the end of the next you know call it 30 minutes so hit the contact button on here you're going to hit the contact all right should he hit the contact button should we have him do that okay we should buy a business right now we're going to do it live so you feel a little naughty now yeah it's cool um so there's a contact form here just fill that out you're gonna fill that out all right and you're gonna put something exactly like what i said this is awesome okay so here's what i want you guys to do now if you haven't already currently available funds what do you want what what's the advice to put in there for what for the there's a box currently available funds like i'm filling out a form oh like whatever you need to have okay so if the business is for a million bucks you say a million bucks plus perfect you're basically just checking off that you're not like i would like to buy your business for a million dollars i have 50 bucks is that cool it's not cool um so you can sit down fill it out okay and then we'll come back to you okay so submitted nicely done okay now i know a little hand clap but before we get too excited for him uh just know that very rarely do you get your first deal uh that you apply so that would be awesome it would be pretty crazy if that happened but you're probably going to have to kiss a few frogs none of this stuff is as easy as clicking a button to buy a trade on robin hood okay so now here's what i want you guys to do you've thought of a few businesses that you might want to buy and maybe you don't have any businesses that you want to buy at this moment but what i want you to be prepared for is remember how i told you that poor porsche analogy i want you to be ready for when you find the porsche right i want you to be ready for when it stumbles across your path because i can guarantee you i've given this talk a lot of times now in various ways and every single time after this within the next 24 hours one of you will hit me up on instagram twitter email and you'll basically say oh my god i just put in an offer on a business within 24 hours i swear to god it's the weirdest thing i've ever seen it happens all the time and so the thing is you have to be ready for those conversations when they come across your plate so what i want you guys to spend the next let's call it five minutes is thinking about how am i going to communicate with these people and what i want you to do workshop across the group is basically you're going to talk amongst yourself and say okay here's what i think i would say to a business buyer here's how i think i might reach out to a few of them what do you guys think about pinging them this way what do you think about pinging them this way this has worked for me in the past i don't think that's a good idea bob no don't say that that's what i want you guys to do in your small group because i want you to be ready to actually take some action all right the last thing i have before i'm going to send you on your merry way for a few moments here is this um when you're thinking about how to find people to buy businesses do you want to know one of the best ways to find a business to have it fall in your lap any crazy ideas what that's a good one what else customers good one what's that help people yep ask in the community love it one where your customer good okay all of those are good you want to know a really good way masterminds this room i can guarantee you that in this room let's play a game how many people in here have a business maybe it's not your main business that you might be willing to sell raise your hand oh there's a couple businesses for sale did you guys have to go far and that's not to mention all the people in here who are lying and keeping it close to their vests like i don't see you but i see you the one of the best places to buy businesses from is concentrated areas like this these are people that by and large you're here because you have multiple streams of income or you want to build them or you're transitioning into something else or you want a new opportunity somebody over here said uh almost every business has a price and that's true so what you should be doing is in every conversation you know what i tell people like cody what do you do i'm like i buy businesses they're like what kind of business and i'm like yes every time yes and the reason i say that is because then what happens they go oh would you uh would you think about a business that looks like this i said oh yeah how am i thinking about a business like that and then i go oh good because i own one and i'd like to sell it to you that happens continuously so you're in a room full of a bunch of people that you could probably buy businesses with so while you're speaking amongst your group and while you're speaking at cocktail hour maybe throw that in there or any of you guys at the table like if you're not comfortable asking this of a table of people that are directly around you right now are you going to pick up the phone and cold call like we might have this kind of later probably not so when you're thinking about ways you're going to reach out to people i'm going to come back to you afterwards and i'm going to ask who has the most creative ways to reach out to people to buy businesses and i want and maybe we could give a little prize to somebody who is actually sharing a business selling a business or might want to buy from each other at the table so now your homework is next couple minutes you're going to share with each other how you could potentially reach out to buyers or sellers where you could find them and does anybody around you have a business you could buy okay everybody get it yes there's like three people that said yes is this is this that i mean if you can't understand these directions i don't know if you could buy a business okay ready go okay cool all right i want to hear your brilliant ideas anybody have a brilliant idea about how to reach out to businesses how they're going to reach out to businesses anybody want to be our guinea pig yes um stand up and yell for me thank you do you have a problem yeah i actually love that because you know one of the best things to do this is like a little super sneaky squirrel stuff for you is uh you want to talk to owners um and you want them to feel certain things when you're talking to them you're trying to trigger a buying a selling response right you're trying to trigger their feeling to want to get rid of this baby that they've spent their life building because you think it's best for them and for you and so what you want to do is you want to say things to them like hey i'm so sorry i gotta escalate this to you you know what i'm a business owner too i totally get it um but like you know this hap i'd want to know in my business don't wouldn't you want to know in your business yeah yeah yeah you bond with them exactly well yeah and then you say how many times has this happened does it happen often oh man how many late nights have you pulled dealing with this man employees are tough huh hiring these days oh you're answering the customer service still wow yeah do you feel good at the end of the day because i always feel drained oh you feel drained uh huh and what you're basically doing is you're leading them to this point of remembering how kind of miserable it is to often run a small business for an extended period of time and there you are shoving them right into your open arms as a buyer of this business so i think that's brilliant thank you for shouting that one and one other quick example tell me is it's fascinating how domino's turn something a coupon who who cares if you get three dollars off of pizza into you get a tip to go pick up your own pizza and they don't even give you the money they give you a coupon for next time yeah there you go i like it now one thing i will say a couple businesses i don't ever buy restaurants terrible businesses to buy losing money i can tell you how to do it quickly by a restaurant second type of business i don't buy hotels why it's a real estate play disguised as a business another type of business i don't buy i personally do not like franchises i like to invest in them fractionalized i do not like to run a business because i am what we call unemployable i do not want to work for somebody else i don't want somebody else's rules i don't want mcdonald's to tell me i got to put up a new sign that's going to cost 100k and i got to do it otherwise i'm going to breach a contract no thank you i also do not want businesses that are dominant on one platform fba fulfilled by amazon jeff bezos thinks it'd be nice to go ahead and get right into your business and all of a sudden that business that you bought gets decimated because the algorithm changes you can make a lot of money on those businesses i just don't like to buy them because i am i am anticipating at least three to five years of consistent performance for what the business is doing right now in order for me to recoup my returns and so if jeff turns off my algorithm he decimates my business purchase i'm not into that so those are just two quick caveats uh give me one more example another idea for reaching out to a business and getting them to sell to you hands yes a lot of times we go after uh businesses that are under duress and usually things like disability divorce or death and so you can go through the bankruptcy attorneys or you can go through the estate attorneys and also there's lists available of people that are that you can directly approach and you can correlate it with the businesses i love it so this is called the 3ds death disability divorce those are great reasons to buy a business one you're doing them a solid because they need to have this item remedied two this is not for beginners the only way that i would buy this type of business if it was a super healthy business and probably like divorce or death is in the mix but you have a good attorney and you make sure that your all your eyes are dotted and your teaser crossed but for most people you don't want to buy a turnaround but you do want to buy a trigger that's the good type of tea this is a trigger so this i have a friend lisa song she only buys businesses based on trustee sales because she used to be a bankruptcy attorney and so she has a great story where we were in vegas together and she's this like five foot one crazy little former miss nevada asian wears stilettos everywhere prances around and she owns a male pack and ship center and uh frequents bankruptcy sales like just you know you wouldn't know um but she uh she went to a bankruptcy sale and um she looked around for you know what the assets were online they didn't really list a ton of assets um but when she got to the sale they had 150 golf carts that were up for purchase and everybody that was at the bankruptcy sale because usually who goes to bankruptcy sales are like big asset purchasers they want to buy the entire golf course they want to buy all the condominiums on the golf course 550 golf carts like they don't know what to do with that so what did lisa do lisa googled the golf carts and what an average price for a golf cart was and said um i'd like to take all 150 golf carts and a bunch of other people were there that could have done it and they were like god i couldn't i can't get the golf carts out of here i don't know how i'm going to sell them whatever and lisa just you know prances up to the guy and is like oh can i pick these up tomorrow and what does she do she spends the night going on craigslist lists a bunch of those bad boys all over any internet site she can find and has them come pick up for purchase tomorrow for half price so there are so many ways to buy businesses that you could never imagine and that's just one of them uh each state city county has different bankruptcy or trustee sales so that's a that's like a master class you're ready for the 202 version uh we're at the 101 today but that is a little bit of a sneak peek okay so i have 24 minutes here so i think what i'm going to do is i'm going to talk about this next stage so as you can tell there's 10 different parts of the business buying journey we've talked about a few of them i could hold you hostage here for another six hours and we could go through the rest but i'm not going to do that to you what i am going to do is i'm going to talk to you about my version of the 202. there's something else happening in small business that last time i gave this speech with mark's group i didn't think about yet i wasn't ready for this play and neither was the market and then something happened over the last couple of months that made me change my mind and this is i think the 202 version of what is happening in small business acquisitions so if i've wet your lips and made you think about small business acquisition as an interesting target let's talk about how to layer on what i call vc like returns to small businesses this is a thesis i have i've applied it a few times but i haven't applied it 65 times like i have with small businesses but let's play this out see what you guys think so how am i investing today i already own 26 of these small businesses what i'm doing right now is i'm consolidating the bigger ones and i'm selling off the smaller ones and the reason that i'm doing that is because i want a higher roi for every dollar that i invest beyond what i can get in just laundromats and car washes might surprise you but i have to own a lot of car washes to make tens of millions of dollars a year which is what my goal is i now want businesses i do not want a business that doesn't make me at least a million dollars ebitda needs to make me a million dollars profit in order for me to be interested in a business when i first started out it was like a thousand bucks a month yep let's get that now you climb up the ladder just like you do in real estate you start with a studio then you get your townhouse then you get your multifamily then you buy your industrial building right so i did the same thing in business buying for many years i think the next stage of the ladder is fascinating and i didn't anticipate this happening here's what it is the idea is we don't just own the laundromat we also own the infrastructure that underlies the laundromat this is what i call tech enabled businesses i want to start buying businesses that take businesses from a hey i forgot to tell you that your automobile has been ready for 24 hours and i don't give you a subscription to it and oh by the way i don't answer my phone i want to turn those old school businesses into a business that says here's a text when your car is ready here's a text when your oil change and maintenance should be done here's a text for you as a woman because i don't know anything about cars stereotypical kill me internet that tells you hey here's what the average price across a bunch of these different services that you need in the industry is i want businesses that are smart and boring the fascinating part this is what i think is going to happen here's my thesis great retirement happens right we see five trillion dollars in assets come down the pipe out of businesses and where do they go they either go away or millennials buy them from the great resignation right so we're having a transfer of wealth from the older generations to the younger generations how many of the younger generations are going to use paper ledgers how many of the younger generations are even going to use quick quick books no they're going to use bench how many of the younger generations are going to use old school financing from community banks as opposed to pipe that does factoring online ai automated what's going to happen is these boring businesses that we own are going to come into the 21st century and for those type of businesses we're going to make not just the cash flow i already talked about but venture capital style returns i think most venture capitalists are too busy right now if you look where is all the money going from like andreessen horowitz sequoia all the big venture capitalists what are the two things they care about right now crypto web 3 and the metaverse those guys will not shut up about it they won't stop hiring new general partners that are head of the metaverse whatever i see more newsletters every day on nfts and crypto it's fine i'm not smart enough to play in the game where it is incredibly crowded and early on the end of the curve i want to play in a game where there's something happening that nobody else is thinking about i call this ignoring the noise and finding the numbers the truth of the matter is unprofitable businesses like the businesses that we're seeing create all these layoffs are not going to have the same multiples they do in the future what will boring profitable businesses that all of us use every day i'm not going to because we have a recession i'm not going to stop paying for somebody to cut my lawn i'm at a certain level income wise where that's just not going to happen but i might get rid of hulu netflix hbo mother how many of these things do we need i might do that and in fact i definitely am going to do that and so are all of you because we've already seen netflix earnings come down right and so this is my thesis so here's the idea we want to invest in companies that are like this so here's three examples anybody know jobber pipe deal these sound familiar these are so boring that i love them so what jobber does is basically they take um a company like somebody was talking about storage over here i don't like storage right now it's way too expensive it's way too crowded have you guys ever been down a highway and not seen at least 52 and a half storage companies on them i know i haven't storage companies are everywhere it's become a crowded market because it is the highest performing real estate asset class that's generally measurable besides maybe airbnbs which is i think the next bubble and i own some airbnbs so i don't want to own storage but you know what i would like to own i would like to own the software that all the guys who bought storage run on yeah all on that business why because these people are going to continue to have to be more and more efficient and they're going to have to do things like offer systems and processes in order to compete it's no longer enough to be the only storage company you're going to have to offer better services as more of them come that's what jobber does so they essentially go out and for any service business they make service calls really easy they make systems and processes for hiring a bunch of manual labor really easy or we've got pipe pipe is the fastest company to ever hit a billion dollars pipe is owned by a friend of mine harry hurst he's out of miami and harry all he does is he does something called factoring you guys know what that is yeah so you basically somebody's going to give me money in the future i'm an e-commerce company they only pay me net 90 right which is like i give you this shiny bracelet and you pay me as the whole as the wholesaler 90 days later so i got to float you for 90 days and pipe says that doesn't seem fair so we're going to actually take the fact that you have invoice is and orders outstanding with walmart and we're going to pay you now so that you can continue to grow your business that's pipe now pipe has api integrations everywhere but when harry talked about this idea nobody cared ordeal deal is a company i wish i got into i didn't get into that one and deal essentially takes anybody have international uh people that they work with contractors like graphic designers et cetera that you work with okay wow fascinating see this is why this is gonna happen there's like five of you in here that rolls your hand that is going to change because in the future increasingly what do we not have to do anymore postcovid go to the office what does that mean we don't have to hire locally for anything that could be outsourced or automated we don't need american talent and guess what that means we get to buy talent at pennies on the dollar but what's a problem about that there's actually a ton of liability when you have international contractors because i have contractors for my companies and like i don't know all the countries imaginable and every time i have one of those i open myself up to liability because you have a separate tax system and a separate hiring system that you have to track deal handles all of it i outsource my liability to deal they pay my designer in pakistan and bangladesh in india appropriately with u.s regulation and local regulation and they do it like this and they do it every single week these companies are not what the focus of silicon valley is because they're not sexy there's no metaversion over here there's no board apes nobody's got cartoons on these companies and yet this one has a 5.5 billion dollar evaluation and this is i want you guys to start thinking this way because i just turned on for the first time ever in two years so i've raised billions of dollars over my career you know how do you know somebody worked at goldman they usually tell you in the first five minutes i waited an hour so i deserve a round of applause for that yeah um but i worked at goldman back in the day and you know i raised billions of dollars for them state street vanguard this other company called first trust that i built their latin american business and i have not taken a penny from anybody in two years why the market was insanity like anybody who was raising and deploying massive amounts of capital in the last two years to startups definitely and probably to real estate and i've allocated some but i haven't allocated other people's money to it there's going to be some pain that will happen here i'm not saying everybody but for a lot of people now we're already seeing this in silicon valley we're seeing our first down rounds ever right so that means i gave you money at a hundred million dollar evaluation you need more money for me and now i'm gonna say hmm give it to a sixty million dollar evaluation and they say yeah i need it i don't know what else to do fine that's going to happen everywhere i didn't do that i didn't raise money because i thought that was coming and so it's interesting this is closed already but um this is what we look at so we raised five million dollars this is wild the power of the internet for anybody who here markets on the internet or has a community on the internet okay cool this will be interesting for all four of you that are in here so basically um i usually talk about there's four types of leverage the type of leverage that we began with was uh labor right so faculty i was slaves then it became employees then it became uh so then it was serfs then it was employees uh that's the first type of labor it's the least efficient but it was the first the second was capital right when did the rothschilds and the big titans of the u.s come into their money do you know what the actual trigger was for those guys becoming massive billionaires the advent of the banking industry that's when the first banks were established in the us capital is what allowed them to become tycoons the third type of leverage was code now that's how we got jeff bezos and bill gates and elon musk they have armies in the form of leverage of robots online basically right and then the fourth type of leverage is the type of leverage that i've i've never seen one more powerful actually and that is the power of audience uh community whatever you want to call it attention um and one thing that's interesting just for you to put in the back of your brain as you're thinking about all the tools in your tool kit to go out and buy businesses and create wealth we have an audience of 1.5 million we now have something like 50 to 60 million views uh every single month that country and thinking and what's wild about that is all throughout all my life when i'm raising billions of dollars what do i have to go do like okay great nice to meet you yep let's sit down let's have a stake then i go do it again then i got an airplane then i go on 452 roadshows then i'm in every conference room imaginable everybody's having coffee every day i'm smiling a lot it's miserable raising capital is miserable and if anybody doesn't believe that they haven't raised a lot of money and then what happened then let's see that was thursday of last week we sent out one email to our audience a newsletter and within one email and one day we had two million dollars raised and then the next day we had four million dollars raised and then by the end of the period that we had a fund open we had 5 million raised and i cut it off because i didn't want to raise any more capital and that is the power of having community in this fourth type of leverage so for those people in the audience that have communities i think you should be playing a bigger game there a lot of people try to sell their audience members um products you know we have info products too we sell courses on how to buy businesses for sure um but actually the most powerful thing your audience can do is three things one in my case they can give me deals so the reason that i'm out here talking about all this all the time is i heard a few of you saying it i was going to save it for later what's the best way to find a business cody what's the best way to do a business and somebody goes you cody and i go exactly that's right that's what i want everybody to remember i'm out here talking about doing deals and buying businesses because if you have a business i bet you might call me because you know that i have 50 million dollars deployed into small businesses and i just for the first time ever allowed my retail investors to invest five million dollars at a cap of nobody was allowed to invest more than a hundred dollars a hundred thousand dollars um into this thesis and so this is a really interesting way for you to get more deal flow so that's the first reason i talk about this publicly the second reason is investors i want more people to give me money easily because i hate going and begging for it and having stakes with a bunch of people that i don't really want to have stakes with it's not that fun and the third reason that i do it is because there are reciprocal effects for my portfolio companies so i could stand up here for you right now and which companies you're going to remember that i talked about do you guys remember any of the three companies i talked about shout out their names oh that's so great because i'm an investor so you might go and you might do something with one of those companies you might become a client you might tell somebody else about it and what does that mean you're building up one of my portfolio companies while we're doing this the cool thing about all of this is it's a triple sided win you don't have to buy something from me the future isn't the metaverse and it's not nfts where you know xyz ticket gets sold whatever the future of learning is you'll get paid to learn the people who invested in contrarian thinking capital which is what our fund is called the people who invest in that fund they're going to get paid to learn because they'll get a return theoretically if i'm not terrible at my job the people will get paid to learn that give me deals and deal flow because they'll be in our community how interesting is that in the past you paid harvard to learn now in the future you can get paid to learn there's a fascinating difference that i don't think people realize and if any of this is interesting you by the way we have a free newsletter called contrarianthinking.com it's not com because i was cheap and that was expensive and i don't want to buy it um so contouringthinking.com you can go to the free newsletter and on there are the details about the fund so if you like any of this you know you like i'm going to show you guys a bunch of like our investment memos or deal memos or whatever you can click on that and see all of it for yourself you can also see we just invested in a company today called here which is cool i'll explain to you what it is okay you can take a screenshot of this but these are the type of companies that i invest in in what i'm calling the 2.0 of boring businesses and the reason i think you should take a screenshot of this is because if i was going to invest in startup capital it would be this way and no other way than this the interesting part is i think we're going to be able to invest in these types of companies at levels we've never been able to invest in before because we're going to have down rounds that's my thesis i could be horribly wrong that's what i think now here's a couple just resources for you before i'm going to spend the last 10 minutes walking through this if you're going to invest in businesses if you're going to buy businesses you can take a screenshot for this oh actually at the end there should be a qr code you can get the whole presentation um how to rank a company i have something this is our investment memo every single deal i do goes through this investment memo process makes perfect you need one it doesn't have to be mine you also have to have a ranking mechanism every business i look at to buy every company i look at to invest in gets ranked on these specific metrics they get a score from 0 to 45 45 being perfect those don't usually exist zero being atrocities and that way when i go back i can see if i thought a business was good or bad and i can see if i was right or wrong here's how we rank each business you can basically see it's things like entry and exit analysis that basically means hey i really like this company but they want me to invest in 100 million valuation so the score that they get as a company is awesome but their valuation is a one and that's going to because it's going to decrease my likelihood of getting a good return right so you need some sort of ranking like this then i like to try to predict the future this is basically what's called an exit prediction model and so here you're trying to figure out if these things happen what value will each company have what is the multiple that i think they're going to have and what's the irr i.e the return to me what's the worst case scenario what's the best case scenario and every company should have something like this at least this is the way that i think about investing and how we do it in contrary and thinking capital then i like to think about things in a portfolio so if you're like me and you have 26 businesses and if in this you know small fund that we have only five million bucks we have to invest our capital and we're going to do something like 25 to 100k max checks what happened what do i have to do as a portfolio in order to get my return most people don't think about their investments holistically like an asset manager does they say is this deal good is this deal good i did this trade but they don't think what does it all look like together and that's actually the only thing that matters the only thing that matters is how you perform overall right most people are like gamblers they'll tell you about that time in vegas they made twenty five thousand dollars playing blackjack but they don't tell you about their losses and they don't actually know what their entire portfolio did and that's really really crucial and something you should ask if you're ever going to invest in a fund or invest in a group of securities all right last thing i'll say here is this nothing this is just one way this is just one way the first way that i talked about doing it is a do-it-yourself model go out buy businesses optimize for your unique skill set execute the second way is it done for you invest in something like contrary in thinking capital or another fund and have it done for you neither of these are the right way and you have to do your due diligence on anything you do this is a be a adult section i am not telling you that you should buy a business i'm telling you should learn about it and you should figure out if you can apply it to how you do things that's the difference okay last little thing um i'm just going to ask permission i want to read y'all a little bit something would that be okay just for a second all right um i want to come full circle because in the beginning we talked about uncertainty and where we're going i hope i've given you two tools that i think could be really useful for you to actually execute on and thrive or win huge when everyone else is pulling back if the market craters and the price of businesses go down and you are a net buyer you will win you will be really thankful to mark moss that you came here you will be really glad you learned about buying businesses if the market craters and businesses all go down and i get to buy them at pennies on the dollar in the fund and you whatever people invest in it then you are going to be really thankful that you were here now that said this is going to be kind of brutal i think over the next year so i don't want you to have your greed hat on i want you to have a little bit of fear and a little bit of greed strategic fear strategic greed because if you guys haven't read this this is what i read when things go tough are you guys familiar with the man in the arena so my husband's a former navy seal and um he graduated from the naval academy and do you know the one thing they have to memorize when they leave the naval academy this the man in the in the arena this is from theodore roosevelt teddy roosevelt i'm not going to read the the whole thing but it starts with something you might remember which says um it's not the critic who counts not the man who points out how the strong man stumbles or where the doer of deeds could have done them better the credit belongs to the man who is actually in the arena whose face is marred by blood and sweat and dust who strives valiantly who heirs who come short again and again because there is no effort without air i think when you have those moments where it's scary where the market's too much where you feel like you might lose it all i want you to come back to this and i want you to remember that you are in the arena thank you guys so much for having me today all right if anybody wants the presentation you can take a screenshot on this and it should send it to you i'm about 90 positive on that um we have approximately three minutes because i liked a microphone i guess to talk about uh questions unless mark or anybody else tells me we need to wrap which i'm cool with too three minutes okay um so does anybody have questions out there i don't know is there a mic are there people that want to go to one okay if no questions oh yeah you want to just shout it out okay yeah you're scared that you'll buy a business and the employees or management will flee yeah okay so if you um we have a group called unconventional acquisitions.com i apparently like val's so you guys can hopefully figure out how to spell that but if you go to unconventional acquisitions.com there's a bunch of articles and segments on the details of buying a business now that would go into the last part i believe it's part eight or nine which is structuring so when you buy a small business what's really important is you think about how to mitigate downside risk and what i mean by that is you're going to want to check on two things when it comes to people and buying a business one's called the key man provision which basically means you notice a few key men or women in the business where if this person leaves the business you have a clog back provision or a better way than client back which means you take your money back from somebody guess what if you give somebody money it's kind of hard to take it back spoiler alert if you're surprised by that um so what i would actually do is an earn out or milestone so what that means is if you have key men where if this person leaves the business is screwed you're going to put into your deal these key men cannot leave for 12 to 24 months if they leave in that period then if they don't leave in that period i will increase your valuation if they leave in that period then you don't get paid more than x so you're going to only give people money based on that provision so you could say i'll buy your business right now for 100k no problem but if you want more then these two people have to stay for two years and then i'll give you the additional capital that's how i would do it when it comes to employees you want to do some due diligence you want to put in your due diligence packet something like i need to talk to the employees of this business i want to have enough redundancy where they don't all leave now spoiler alert there's no such thing as a risk-free transaction in life in general so you're always going to have some sort of risk this is just two ways that you mitigate it mitigate it great question by the way okay do we have another question yeah bitcoin mining rigs and uh i'm curious what your thoughts are on that business i got no idea i'm smart enough to tell you when i don't know something i'm just not smart enough to win at that asset class and so i haven't played in it but i hope you crush it any other questions all right if not oh colin what's up yeah great question he said you have a ton of people in your business how do you hire good people um first of all it's never it's it's always a pain point in any business um the things you can do to lessen the pain one you get great operators and you incentivize them you make your pain their pain you take a little bit of cash off the table by saying i'm gonna give you a percentage of the business and you get to get out there and be the ceo you know what being a ceo means it means you hire these people otherwise you don't get this pay um so that's one you put a layer between yourself and the pain the bigger that you get the second thing that i typically do is i am all about audience building i've told you guys this again and again when i go to hire i don't you'll never find a job posting of mine on a general job site ever i post to my audience almost always and i teach the businesses to do the same now is there a giant business is there a giant audience for like grass trimming for one of our companies no but i would have them be involved in as a center of influence in their industry so if there's a landscaping association they're going to be on it if there's an event every year that goes for landscaping people they're going to be in it and so even for the small businesses i make sure that they're a nexus for their industry so that they can get the best people for whatever industry there is then the last thing i'd say is you know i remember i sat down with one of my mentors many years ago and he worked at kkr a big private equity firm and he said to me um you know cody uh i already know it was when i was starting my very first business he said i already know what your biggest pain point's gonna be he's like i'm gonna write it on this piece of paper you're going to keep it i'm going to seal it we're going to write the date on it you're going to come back to me when you have your first problem we're going to open it and see if i'm right so i come back like i don't know three minutes later basically and now i was six months or something later and i hand him the envelope and i'm like let's open it what's the problem and i open it no so i say to him first i say um you know i'm having some hiring issues and he said okay open the piece of thing and he said it's always about the people and so the hardest thing you're going to have in any business isn't the market isn't the marketing it's your people as soon as you realize that you're going to spend more focus on people on building them up on keeping them on incentive aligning them and i'm making sure you don't up on hiring and the best companies do that really well and so for somebody like you you know you're you're young and you've built an empire but you probably haven't led people for 10 years plus so that's where you're going to want to spend a ton of time learning it it sucks when you're young because you don't realize how important that learning is and it feels kind of squishy like i'm gonna go learn about leadership you know but actually that money is probably some of the best money i've ever spent so that's what i would say get your circle together find the people who you think have the best people and then spend a ton of time with them you don't you have a network big enough you don't have to read books you just get to go steal the ten thousand hours okay cool thank you everybody so much i hope this was useful thank you all of you

Channel: Codie Sanchez

Views: 455,331

Keywords: codie sanchez, economic depression, boring businesses

Id: wWNc76dr_cQ

Length: 96min 6sec (5766 seconds)

Published: Wed Aug 03 2022