Speaker 1: Welcome to How the Money. I'm Joel and I am Matt,
Speaker 1: and today we're talking buying existing businesses to make millions
Speaker 1: with Cody Sanchez. That's right. We are pumped to be
Speaker 1: talking with baller entrepreneur Cody Sanchez today. But the truth
Speaker 1: is that it took a while for Cody to get
Speaker 1: here because years ago, right out of right out of college,
Speaker 1: Cody was working like seventy hour work weeks for a paycheck,
Speaker 1: and even though she had a she had a graded education,
Speaker 1: she had an elite job, she felt like her life
Speaker 1: was out of control. But now things are different. Cody
Speaker 1: is financially independent. She owns something like twenty six small businesses,
Speaker 1: and she's the founder and CEO of Contrarian Thinking, where
Speaker 1: she basically she's on a mission to free the minds
Speaker 1: of individuals who are hanging on to traditional careers and
Speaker 1: they're also hanging onto the common narrative of what it
Speaker 1: means to be successful, and oftentimes that can be via
Speaker 1: buying existing businesses. This is more feasible than you might
Speaker 1: think to achieve. So Cody, we are excited to talk
Speaker 1: with you today. Thank you so much for joining us.
Speaker 1: We're excited to talk about all of the things that
Speaker 1: we just mentioned, plus a whole lot more. I'm thrilled
Speaker 1: to be here. Thanks for having me, guys. Yeah, we're
Speaker 1: glad to have you. And I think Matt was actually wrong.
Speaker 1: I think Cody bought two businesses while you're doing the introduction, Matt,
Speaker 1: So maybe she's at twenty right now. I don't know
Speaker 1: who can con who can count anymore? Well, uh, Cody.
Speaker 1: The first question we ask anybody who comes on the
Speaker 1: show is what they like to splore John. It helps
Speaker 1: us learn a little more about them. But Matt and
Speaker 1: I were being smart with our money, saving and investing
Speaker 1: for our futures, but we still like to spend a
Speaker 1: lot of money on a good craft beer. What's your
Speaker 1: what's something you spoor? John, what's your craft beer equivalent?
Speaker 1: I got a weird thing, maybe not so weird these
Speaker 1: days for crystals Texas? Okay, Yeah, very hippy letting that
Speaker 1: very hippie. You know, if there's like some overpriced gift
Speaker 1: shops somewhere with some shiny amethysts something or other, I'm
Speaker 1: gonna probably buy it for two bucks, and my husband's
Speaker 1: gonna ridicule me mercilessly. So you know, a little bit finance,
Speaker 1: a little bit uh hippie. Okay. So it makes me
Speaker 1: think of Hank from Breaking Bad when he was at
Speaker 1: one point like laid up in bed. He was like,
Speaker 1: buying all those crystals and stones off the internet. Is
Speaker 1: that is that you? Yeah, it's basically me. It's like,
Speaker 1: you know that saw a great me and it was like, God,
Speaker 1: look at those idiot kids with their light up shoes
Speaker 1: thinking that they're running faster with them on. And then
Speaker 1: it's like me buying a crystal and putting it outside
Speaker 1: so that I, you know, have a healthier week this week.
Speaker 1: It's that's where we're basically in life. So I did
Speaker 1: not even know this entirely like this, it's an entire subculture.
Speaker 1: And recently our family we we hiked up a local
Speaker 1: mountain and up on top of the mountains were on
Speaker 1: some of these rocks. There were some crystals set out
Speaker 1: and I was like, what in the world are these are?
Speaker 1: Our kids are wanting to play with them. They're like,
Speaker 1: can we have these? I was like I don't, no,
Speaker 1: no, no no, no, I think you should leave those alone.
Speaker 1: I think those are somebody else's. And my wife she
Speaker 1: filled me in and she's like, actually, we had there
Speaker 1: was like a special moon recently, and she's like, I
Speaker 1: think somebody left him out to essentially like recharge overnight.
Speaker 1: Like wow, that sounds familiar. I don't know, you know,
Speaker 1: I believe it. I don't know anything about horoscopes or
Speaker 1: like what crystals actually do. It's just a weird quirk
Speaker 1: of mine. Um so yes, but I think you know,
Speaker 1: I was actually reading that the crystal business because that's
Speaker 1: where I always go to. But basically, crystals, tarot cards,
Speaker 1: all that nonsense. I had one of the fastest growth
Speaker 1: rates ever in And in fact, there was in l
Speaker 1: A this weekend is perfect l A story. And I
Speaker 1: was walking down um like Venice, the main street whatever
Speaker 1: that's called Abbot Kenny and there was this crystal store
Speaker 1: and the crystals were crazily pry all over the place,
Speaker 1: and there was a sign that said closing sale or whatever,
Speaker 1: and I'm like, crystal business tough, like, oh no, actually
Speaker 1: we're opening up three new larger stores street. Yeah, you
Speaker 1: can imagine. Abbot Kenney is the most expensive, I believe
Speaker 1: rent per square foot street in the country besides now
Speaker 1: South Congress in Austin. Holy yeah, I was gonna say
Speaker 1: other than like Fifth Avenue up in New York or
Speaker 1: something like that, but I think it's higher. I thought
Speaker 1: you're gonna make a inflation crystals joke with the business,
Speaker 1: but no, it seems like they're doing just fine. At
Speaker 1: the very least, they are pretty uh, And I'm glad
Speaker 1: that that's something that you that you like to splore. John.
Speaker 1: We are not going to hate on that at all. Cody,
Speaker 1: let's talk, okay, because before you were a serial business owner,
Speaker 1: you were a journalist. You reported from the US Mexico border,
Speaker 1: and it seemed like that that actually motivated you to
Speaker 1: pursue a career in finances. Is that right? Um? I
Speaker 1: would love for you to connect the dots for us
Speaker 1: for our listeners. Yeah, so, Um. Like lots of young
Speaker 1: college students, I think I had grandiose plans about changing
Speaker 1: the world, and I thought that one of the best
Speaker 1: ways to do that might be to be a journalist,
Speaker 1: and specifically I wanted to be a conflict journalist along
Speaker 1: the US Mexico border, dealing with things like human trafficking
Speaker 1: and drugs smuggling. This was like two thousand voters in
Speaker 1: six seven eight something like that, and I was writing
Speaker 1: stories about some some of the horrible things that were
Speaker 1: happening along the US Mexico border. And I had a
Speaker 1: grant from the Howard Buffett Foundation, which is Warren Buffett's
Speaker 1: a kid, actually, and I wrote a couple of stories
Speaker 1: that were I thought were pretty decent. They got picked up,
Speaker 1: we want a couple awards me and some of the
Speaker 1: other journalists that worked on them. And oddly enough, what
Speaker 1: I realized is that, you know, I had this opportunity
Speaker 1: to drum up a bunch of awareness about an issue,
Speaker 1: but nothing actually changed. So all the awareness in the
Speaker 1: world couldn't change the fact that these terrible things were
Speaker 1: happening on self. And so I had my little like
Speaker 1: quarter life crisis at twenty one years old or whatever,
Speaker 1: and realized, you know, my last name is Sanche's. These
Speaker 1: people's last name is Sanche's. What's the difference. It's this
Speaker 1: one thing green and uh. And I wanted to understand
Speaker 1: the language of money. And that's why I end up
Speaker 1: going into finance, because I think money is the thing
Speaker 1: that changes lives. It's not just where you're born, it's
Speaker 1: not the country that you're in, you know, it's can
Speaker 1: you understand this language of money. Well, and you're a
Speaker 1: you're a second generation immigrant, is that correct? That's right?
Speaker 1: I am. Uh. So, you know, my family is from Spain,
Speaker 1: and then I have family that's that's from Latin America
Speaker 1: as well, and so I suppose that seeing my family
Speaker 1: sort of come over and struggle and strive and grow
Speaker 1: was a big influence on me getting into where I
Speaker 1: am today. Also, there's really cool stats for Hispanic heritage. Months.
Speaker 1: I'm just like how Latino's work in the US and
Speaker 1: the percentage of workforce that they are. I'm not into um,
Speaker 1: you know, I think all means are more like than not,
Speaker 1: but uh, it is cool to look at you know
Speaker 1: where your heritage is, and I love anybody who loves
Speaker 1: to labor. Yeah, there's I mean, there's something to the
Speaker 1: reality that the numbers bear out that second generation immigrants
Speaker 1: are more successful than the rest of the American population. Right,
Speaker 1: even if your third, fourth, fifth generation, you've been here
Speaker 1: a long time, it seems like maybe you have all
Speaker 1: of the inherent privilege of someone maybe who has you know,
Speaker 1: deep family connections to this country. But second generation immigrants
Speaker 1: end up being they make up end up being most
Speaker 1: successful in business and making more money. Like, why do
Speaker 1: you think that is? I think you can't teach desire.
Speaker 1: That's something that my father always said to me. And
Speaker 1: so a lot of times, what I've found in hiring gosh, now,
Speaker 1: hundreds of SMO I don't know, maybe thousands, tan gently
Speaker 1: of people across my career is that there's nothing that
Speaker 1: you can substitute for desire and curiosity. I will take
Speaker 1: somebody who wants it and somebody who is curious to
Speaker 1: learn and iterate and change over somebody who has innate
Speaker 1: ability or intellect nine times out of ten for the
Speaker 1: type of businesses that I do. And I found that
Speaker 1: they say that what makes most people succeed. I think
Speaker 1: it was Angela Duckworth study from the University of Pennsylvania
Speaker 1: about grit being the number one, number one indicator for
Speaker 1: whether somebody would succeed long term and whether it was
Speaker 1: startups or business in general, I'm not sure, but that
Speaker 1: I think is the difference is, you know, the desire
Speaker 1: is really innate in immigrants, because if lack is that
Speaker 1: close to you, you know, if if you've ever spent time,
Speaker 1: like really spent time. I'm not talking about going to Cancun,
Speaker 1: and Alcapulco and going to you know, Meta Gene and Bogata.
Speaker 1: But if you've spent time in Latin American second and
Speaker 1: third and fourth tier cities and seeing the just difficulty
Speaker 1: that is living, then when you're presented with an opportunity
Speaker 1: to actually really grow something here in the US, you
Speaker 1: want it badly because you know what the alternative is
Speaker 1: and you're willing to do a lot to get to it.
Speaker 1: So I wish I could give everybody a second gen
Speaker 1: immigrant mentality. Yeah, I mean, and it's true, it's there
Speaker 1: is something weird too about second gend, because it's not
Speaker 1: only the fact that second gender are more successful than
Speaker 1: like maybe say first gend, but even third generation. Right, Like,
Speaker 1: there's something about It's like there's a scene in Your
Speaker 1: Parents of seeing your parents sacrifice and the steps that
Speaker 1: they had to take and probably work two or three
Speaker 1: jobs in many cases. I think there's, Yeah, there's something
Speaker 1: really cool, There's something really powerful. Can I harass you
Speaker 1: on one other point there? Think about they talk about
Speaker 1: wealth transference with the really really wealthy, So they say,
Speaker 1: you know, the first generation makes the money, the second
Speaker 1: generation retains and grows the money, and the third generation
Speaker 1: loses it, and so I think it's similar with an
Speaker 1: immigrant mentality. If you're talking about generational wealth, there's a
Speaker 1: reason why I don't anticipate leaving a ton of our
Speaker 1: cash to our kids, because I think that's a huge disservice.
Speaker 1: Typically they need to imagine this, like you graduate from
Speaker 1: high school and you're given BMW or Mercedes spends, and
Speaker 1: then you go get a job that is the annual
Speaker 1: equivalent salary to that car that you were given when
Speaker 1: you were sixteen years old. Now that car breaks down
Speaker 1: in the first car that you can buy as a
Speaker 1: Miata for five thousand dollars like it, just it doesn't
Speaker 1: make you want to work more when you've started so high,
Speaker 1: you've got a reverse and then grow again. So I
Speaker 1: think you're exactly right second gen immigrants, and then you
Speaker 1: know wealth transferred its being with the first or second generation.
Speaker 1: It definitely makes you think twice about passing on wealth
Speaker 1: to future generations, makes you want to think long and
Speaker 1: hard before you even start hinting at what you might
Speaker 1: leave to your kids. Purposefully imposing hardships on your kids,
Speaker 1: not you know, not making them necessarily like army crawl
Speaker 1: through the mud, but not giving them everything that you know,
Speaker 1: you wish maybe you would have had, even like I
Speaker 1: don't know, I see I see it as building up
Speaker 1: an ethic in my kids by not giving them the
Speaker 1: things maybe that we could give them totally. So do
Speaker 1: you You ended up working on Wall Street. While you
Speaker 1: were there, you had a couple of you know, like
Speaker 1: fancy shmancy jobs. You even worked for one of our
Speaker 1: favorite companies, Vanguard actually um and you know, we're kind
Speaker 1: of talking smack about some of these big banks, some
Speaker 1: of these big companies, but like, it wasn't all that bad,
Speaker 1: wasn't where there's some some pros to being there on
Speaker 1: Wall Street and learning and working. Of course, if you
Speaker 1: want to start out and get a free almost free
Speaker 1: sort of MBA training without having to go get an
Speaker 1: m b A, I think getting into a training program
Speaker 1: at a company like Van Vanguard, Deloitte, you know, Goldman,
Speaker 1: any of the consulting companies like BCG is probably one
Speaker 1: of the fastest accelerants to your career. Out there, you're
Speaker 1: learning on somebody else's dime. The interesting part for these
Speaker 1: big companies is they spend a ton of money on
Speaker 1: their higher level new hires. So I learned a lot
Speaker 1: on Vanguard's dime. I learned a lot on Goldman's dime
Speaker 1: and State Streets dime, and they have a ton of
Speaker 1: resources for you. I don't think you want to end
Speaker 1: your career buying large at a huge corporation. I really
Speaker 1: like the idea of you starting it there. If you're
Speaker 1: the type of person who's going to take advantage of
Speaker 1: all of the resources surrounding them. Then the second thing
Speaker 1: is you know less for Vanguard and more for let's
Speaker 1: say gold Men. Being around people who are incredibly intelligent,
Speaker 1: smarter than I was, you know, pretty pedigreed, helped soften
Speaker 1: some of my edges, given I didn't know much about
Speaker 1: money coming into this industry at all, and I didn't
Speaker 1: know about doing deals, and I didn't know, you know,
Speaker 1: what it was like to be with a bunch of
Speaker 1: kids that went to Harvard and Stanford and Yale, etcetera,
Speaker 1: you know, as a public school kid, and so being
Speaker 1: in these big corporations where they require a lot of
Speaker 1: edge softening I think has helped me later on. And
Speaker 1: now I can say, you know, if I want to
Speaker 1: wear cut off shorts and crop tops, I'll do it.
Speaker 1: But I know how to dance, you know, in cuff
Speaker 1: links and suits too. So was that what made you leave?
Speaker 1: Was it, hey, I want to be able to wear
Speaker 1: whatever I want? Or what made you leave a place
Speaker 1: where you feel like you got a good education? The
Speaker 1: salary was pretty meaningful. What made you say, now it's
Speaker 1: time to get out and go do my own thing?
Speaker 1: A wild thing happens once you've had a taste of
Speaker 1: freedom and work, which is at a certain point, you
Speaker 1: become unemployable. And that's what happened to me. I became unemployable. Really.
Speaker 1: I had run a couple of business divisions inside of
Speaker 1: one of these big companies, and I was doing really
Speaker 1: well and the business was growing like crazy, and then
Speaker 1: because of some bureaucracy inside of the business, they basically said, oh,
Speaker 1: we gotta change it this way, we gotta do it
Speaker 1: this way. And I said, that makes no sense whatsoever.
Speaker 1: If our goal is to grow the business and make
Speaker 1: money in an ethical way that aligns with our company mission,
Speaker 1: so four parameters that hits all of them, why would
Speaker 1: we do this asinine thing? And they said, because that's
Speaker 1: what the company wants to do. They did just have
Speaker 1: a bunch of consultants come in and so we're actually
Speaker 1: going to realign this business. And that's when I realized
Speaker 1: I couldn't really shut up about it. I pushed back
Speaker 1: about that idea, and I said, I want to go
Speaker 1: build this myself. And I do think that's what happens
Speaker 1: after a period. If you're really sort of type A
Speaker 1: you're meant to run and build businesses, you're going to
Speaker 1: be at a certain point really hard for somebody else
Speaker 1: to employ. You became unemployable. I just like that phrase.
Speaker 1: I think I'm at now that we've been working for
Speaker 1: ourselves for like a few years, and like how do
Speaker 1: I go back and work for the man? Like once
Speaker 1: you get a taste, I mean, this is this is
Speaker 1: gonna kind of date us a little. We're all kind
Speaker 1: of old millennials here, but like it makes me think
Speaker 1: of the matrix. And once you have a taste of
Speaker 1: what it's actually like outside of the doesn't matter how
Speaker 1: good the steak taste inside the matrix, you can't go back.
Speaker 1: You want to be able to fly, But like not
Speaker 1: everybody can see it that way, you know, Like I'm
Speaker 1: guessing a lot of folks assume that you're crazy. Once
Speaker 1: you were like yeah, I'm not gonna do this anymore. Instead,
Speaker 1: I'm gonna go by this business like a laundromat. Laundromat,
Speaker 1: and that's what I do now, where people are like, Cody,
Speaker 1: you're nuts, What are you doing? Why are you throwing
Speaker 1: it all the way. Oh absolutely, I'm sure you all
Speaker 1: can relate. But throughout my career, I think I've known
Speaker 1: I've made the right decision, typically because each time I
Speaker 1: made a move, somebody said that I was out of
Speaker 1: my mind. And so you know, when I aft journalism,
Speaker 1: got some offers from great newspapers that a bunch of
Speaker 1: other people wanted and said no, I'm going to go
Speaker 1: into Vanguard's training program, people thought I was nuts. Then
Speaker 1: when I left Vanguard, good paying job, I was being
Speaker 1: promoted in all these ways. My mom was basically crying.
Speaker 1: Then when I left Goldman, you know, cream of the crop,
Speaker 1: it's the top of the industry. To go to State
Speaker 1: Street and run a business in Latin America, again, I
Speaker 1: was crazy. Then when I did it to go to
Speaker 1: First Trust, and when I went into private equity. I mean,
Speaker 1: every single time people have basically said the grass is
Speaker 1: not always greener, be careful, And what I've realized is that,
Speaker 1: at least for me, the point of life is an
Speaker 1: accumulation of experiences and skills that build me a really
Speaker 1: fun life resume that I'm glad to have read at
Speaker 1: some point in which I go underground. And so I
Speaker 1: never really worried about if I was making the wrong decision,
Speaker 1: because I thought the experience on the skill set was
Speaker 1: really interesting in and of itself, and if the thing
Speaker 1: that I was going to go do work out awesome.
Speaker 1: That said, I have never been the type to be
Speaker 1: able to rip off the band aid and just quit easily.
Speaker 1: You know. I always had to mentally really ponder it
Speaker 1: for some time and ensure that that was the right
Speaker 1: move and how could I d risk it? So sure,
Speaker 1: everybody thought I was crazy just about every single time.
Speaker 1: And um, even when I, you know, finally finally left
Speaker 1: to go build a media company and I rescinded, you know,
Speaker 1: my partner position and at at a private equity firm
Speaker 1: of which I was one of the main members, they
Speaker 1: really thought I was crazy for going to start a
Speaker 1: quote unquote blog. And doesn't sound great when you put
Speaker 1: it like that, but oh no, don't. Now people are
Speaker 1: sort of getting it. But I'm sure like all of
Speaker 1: us who are creators, they're like, wait, you're gonna you're
Speaker 1: gonna leave to go talk with your buddy on zoom
Speaker 1: calls and people are going to listen to that ak
Speaker 1: A podcast, right, So, yes, every time they thought I
Speaker 1: was nuts, And I think that's when you know you're
Speaker 1: doing something interesting. Yeah, for sure. Well, I like how
Speaker 1: you you've mentioned the word d risk in there, because
Speaker 1: there's a way you can do it with zero dollars
Speaker 1: in the bank, and you can make it a really
Speaker 1: risky endeavor where you might have to go hat in
Speaker 1: hand back to your old boss two weeks later. But
Speaker 1: there's a way that you can do it with some runway,
Speaker 1: some financial runway, so that you actually have a chance
Speaker 1: to succeed and build that business. But I want to
Speaker 1: know too, one of the things you've done that you've
Speaker 1: become very successful doing is buying other people's businesses. So
Speaker 1: we want to talk about that a lot today. What
Speaker 1: made you decide that it made sense to start buying
Speaker 1: other people's businesses that they had created, and when you
Speaker 1: could have like just started some of these businesses yourself.
Speaker 1: I'm curious to know, like the value proposition there. I'm
Speaker 1: a numbers person, and so when I looked at my goal,
Speaker 1: I want to be a billionaire. I want to create
Speaker 1: billion dollar empires. Money to me as a game, it's
Speaker 1: kind of like a scoreboard, and then you can take,
Speaker 1: you know, the outcome of that game, the money that
Speaker 1: you've won, and use it as a tool to arcts
Speaker 1: text the world that you want to see. I like
Speaker 1: that idea, and so when I thought, Okay, if I
Speaker 1: want to play billion dollar games, I don't want to
Speaker 1: play small guy games. I want to play billion dollar
Speaker 1: games because at the end of the day, they're all
Speaker 1: the same ones just a level ten activity and one's
Speaker 1: a level one activity. And so if that's the truth,
Speaker 1: and then where is more wealth created then anywhere else?
Speaker 1: And what I would argue is that more wealth is
Speaker 1: created in private equity than in any other industry. It's
Speaker 1: created more Forbes billionaires in the other industry. And I
Speaker 1: mean that loosely defined by people who actually run private
Speaker 1: equity firms, people who do hold codes Allah Warren Buffettum,
Speaker 1: people who do acquisition strategies in order to grow their business. Alla.
Speaker 1: Most of the large companies in the SMP five, including
Speaker 1: Amazon and Apple and Google and et cetera. And so
Speaker 1: I realized, wait a second, why are all of the smartest,
Speaker 1: wealthiest people out there buying businesses? Because the numbers they work.
Speaker 1: And so I thought, if the game is the same,
Speaker 1: if they're buying a billion dollar business or a multibillion
Speaker 1: dollar business, why can't I apply the strategies that I
Speaker 1: learned in private equity to a small business. Then I
Speaker 1: don't want to go bankrupt on my first deal. So
Speaker 1: what business could I buy that I could understand? Probably
Speaker 1: a hundred percent of the time. That would be what
Speaker 1: I call a gateway drug business, uh business that's easy
Speaker 1: to start with that then I could replicate and buy
Speaker 1: more and more of them and cash full off those
Speaker 1: businesses and they would act like assets for anything else.
Speaker 1: And so that's why it's a billion dollar game that's
Speaker 1: created more billionaires than any other industry. And if you're
Speaker 1: going to play a game, you might as well pick
Speaker 1: one that's a level ten. I like it. And that's
Speaker 1: what we're going to spend the rest of this episode
Speaker 1: talking about. Specifically, we're gonna dive into how to go
Speaker 1: about buying somebody else's business, because Cody, we've got a
Speaker 1: lot of folks listening, and they are looking for more
Speaker 1: that gateway business, that gateway drug of businesses. Uh. And
Speaker 1: so we're gonna ask you a bunch of questions pertaining
Speaker 1: to how exact it to go about that. Right after
Speaker 1: this break, all right, let's keep rolling. We're talking with
Speaker 1: Cody Sanchez about buying other people's businesses in order to
Speaker 1: make serious money. And the one of the coolest things
Speaker 1: about the strategy, I think Cody, is that it's endlessly replicable.
Speaker 1: It's not like they're our listeners are competing against you,
Speaker 1: right unless they live in your neighborhood. Typically there are
Speaker 1: there are millions and millions of small businesses. So I
Speaker 1: guess I want to know about demographics for a second.
Speaker 1: It certainly seems like we're in a time of abundant
Speaker 1: opportunity for people to more than ever be looking into
Speaker 1: the strategy of buying other people's businesses in order to
Speaker 1: make money. Would you say that we're in like a
Speaker 1: demographic windfall for a lot of people to really think
Speaker 1: about the strategy. Yes, I am writing a book right
Speaker 1: now that I'm loosely titling The Three Waves, which basically
Speaker 1: talks about this idea that there are three corresponding waves
Speaker 1: that are happening that I think together create a bit
Speaker 1: of a tsunami. First wave, great resignation. We've all heard this,
Speaker 1: people our age. They want meaning they don't want to
Speaker 1: work for the man anymore. They want something to matter
Speaker 1: after going through a pandemic and a lot of proximity
Speaker 1: to death. Then we've got the great retirement. Boomers are
Speaker 1: aging out, and boomers happen to own more small businesses
Speaker 1: than any other segment. And then simultaneously we've got this
Speaker 1: great corporatization which I sort of made this term up,
Speaker 1: which I think means we have big businesses becoming a
Speaker 1: bigger and bigger portion of our lives and the SMP.
Speaker 1: And yet we now have this pushback. We don't want
Speaker 1: to live in these big urban cities anymore. We don't
Speaker 1: want to really go to McDonald's in Starbucks anymore. We
Speaker 1: have this feeling of localness and community were more interested
Speaker 1: in because lots of people are moving to smaller communities.
Speaker 1: And so the idea that I have is, what if
Speaker 1: by buying small businesses, what you can do is you
Speaker 1: can actually take advant edge of these three waves. You
Speaker 1: can have an immediate impact upon your community, and you
Speaker 1: can have more corner stores than Walmart's. Wouldn't that be
Speaker 1: an incredible trend? And I think that's what's happening right now,
Speaker 1: an ability to buy businesses because they're being transitioned out
Speaker 1: do good while you're doing it, become an owner and
Speaker 1: cash flow, and there's obviously something incredibly fulfilling and gratifying
Speaker 1: about supporting these mainstream businesses and not only funneling your
Speaker 1: dollars towards towards Wall Street. I'm sure that's a huge
Speaker 1: part of like I guess, like the lifestyle side of
Speaker 1: it that makes you feel really good about what it
Speaker 1: is that you're doing as well. Right, that's exactly right.
Speaker 1: I don't think it serves anybody by having such a
Speaker 1: small percentage of the population owned so much of the
Speaker 1: business that we touch every day, the businesses that we
Speaker 1: touch every day, And that is increasingly what happens, and
Speaker 1: it's a skill and knowledge deficit, and so you know,
Speaker 1: we're seeing right now, I think commoditization or easy access
Speaker 1: to buying businesses in a way that we saw twenty
Speaker 1: years ago with real estate, you know, before Zillo, Red Finn,
Speaker 1: before MLS, it wasn't so easy to go and buy
Speaker 1: single family homes and understand what the market was for that.
Speaker 1: I think in the future it will be perhaps not
Speaker 1: as easy, but it will be much easier to buy businesses.
Speaker 1: And we're already seeing a bunch of technology that supports
Speaker 1: that thesis. Well, yeah, I talk to us about you
Speaker 1: know what it takes to find a business that makes
Speaker 1: sense to buy? Like, where should listeners be looking if
Speaker 1: they are interested in buying a business? Like you said,
Speaker 1: everybody knows to go to Zillo if you're looking to
Speaker 1: buy a home or red fin something like that. Where
Speaker 1: do you go if you're looking looking to buy a business?
Speaker 1: The best place to buy a business right now is
Speaker 1: not on the internet similar to a hip pocket listing
Speaker 1: or you know, an off market deal. That is the
Speaker 1: best place to buy a business. And the way that
Speaker 1: I teach people to buy a business is all about proximity.
Speaker 1: So let's say that we are going to buy a
Speaker 1: business for Joel and Matt. What would Joel and Matt's
Speaker 1: perfect business be. It's going to be different than Cody exactly.
Speaker 1: It's going to be different than Cody's business. And I'll
Speaker 1: use an example of this guy named j K who's
Speaker 1: relatively public. He's kind of like a Twitter growth guy.
Speaker 1: He was tweeting about stuff on the internet frequently and
Speaker 1: doing consulting right, so it's making you know, a couple
Speaker 1: of thousand bucks a month off each client telling them
Speaker 1: how to grow on Twitter. Well, he started using this
Speaker 1: tool that I'll leave the name off of it, but
Speaker 1: a Twitter growth tool, and that Twitter growth tool, he realized,
Speaker 1: what's growing so fast? But he really liked it, and
Speaker 1: he thought that his suggestions could make the tool better.
Speaker 1: So he reached down to the owner of the business
Speaker 1: and said, Hey, I think I could grow your business
Speaker 1: because I know about Twitter growth. I could get you
Speaker 1: a bunch of other people, but I want part equity
Speaker 1: in the business. Can I give you some cash matched
Speaker 1: with the growth that I will give you through new
Speaker 1: clients and own a meaningful percentage of the business and
Speaker 1: we could do it together. That I think is a
Speaker 1: there's like sort of four tiers to business. Mind. That
Speaker 1: is a level for or a tier four way to
Speaker 1: buy a business, which is you're using your unfair advantage
Speaker 1: unique in an area in which you have some personal expertise.
Speaker 1: And then there's the tier one way to do it,
Speaker 1: which would be the lowest, most entry level way to
Speaker 1: do it. Then that would be by going to sites
Speaker 1: like bis By, cell Loop, net Flip, e commerce, Flippers,
Speaker 1: Quietlight Brokerage, all of which would be the equivalent to
Speaker 1: a red fin or Zillo for buying a business, just
Speaker 1: not as good because none of these sites are are
Speaker 1: great at this stage. And that's just straight up dollars
Speaker 1: for a business that is showing a certain amount of income,
Speaker 1: and so you have to kind of take what you
Speaker 1: can get. You're looking at pickings that are publicly available,
Speaker 1: and whereas you're talking about the level four is it
Speaker 1: seems like there's more of a network effect involved there,
Speaker 1: right that, So I guess, like my question is how
Speaker 1: important is networking in this process? And maybe I don't
Speaker 1: know what suggestions do you have for folks to grow
Speaker 1: their network to increase their chances of success as they're
Speaker 1: like interested in buying a business and you said proximity
Speaker 1: so likely local to where they live, right, So it's
Speaker 1: up to you. The bigger your network has and the
Speaker 1: more you are willing to specialize in your search, probably
Speaker 1: the better deal you'll get with the higher return. If
Speaker 1: you want to just buy something that's on market, like,
Speaker 1: let's say a laundromat in your local area. I think
Speaker 1: it's pretty easy to do the thing that most people
Speaker 1: don't do, which is go around to local laundromats and
Speaker 1: try to get in touch with the owners and start
Speaker 1: talking to them about their business and tell them that
Speaker 1: you're looking to buy one. And I would pretty much
Speaker 1: guarantee you that after you talk to twenty of them,
Speaker 1: you're gonna find one to five that are interested in selling.
Speaker 1: Someone's tired of owning a laundromat out there, you know, Yes,
Speaker 1: there's a lot of people who have, you know, think
Speaker 1: about it this way. Most people like, why would somebody
Speaker 1: sell a business for two to three x profit that
Speaker 1: you know is kind of passive and making them a
Speaker 1: hundred K a year. Nobody's ever going to sell that.
Speaker 1: And then I ask them, are you going to keep
Speaker 1: your job for forty years, the same job that you
Speaker 1: have today. You will not be promoted, you will not
Speaker 1: change positions, your title remain the exact same. Will you
Speaker 1: keep it for forty years? And the answer is no.
Speaker 1: We've seen as a society two to five years, increasingly
Speaker 1: more like three to four, and so it's the same
Speaker 1: for business owners. At some point you're like, all right
Speaker 1: around the laundromat. It was cool. I added a few
Speaker 1: on that was cool. Now I'm gonna sell it to
Speaker 1: somebody else. I got this other business that I want
Speaker 1: to start. It's a progression, just like you don't stay
Speaker 1: in the same house your entire life either, And so
Speaker 1: there's plenty of people that want to sell for what
Speaker 1: are called the five d s, So you know, death, divorce, disaster, despair,
Speaker 1: just meaning like something going wrong in the business, et cetera.
Speaker 1: Or the fifth D is something goes sideways in the business,
Speaker 1: but I can't remember what the exact D is, so like, um,
Speaker 1: your business has a disgruntled partnership issue or something like that.
Speaker 1: So for all those reasons, people are constantly wanting to
Speaker 1: sell their business. It's just are you finding the right
Speaker 1: person at the right time. Makes a ton of sense. Also,
Speaker 1: side tangent oodie, did you happen to watch everything everywhere,
Speaker 1: all at once takes place within a laundro matte? It
Speaker 1: kind of gives you an inside look how soul sucking
Speaker 1: that my that industry might actually be. But well, as
Speaker 1: an entrepreneur, you can make money running on it was
Speaker 1: the Yeah, the basis of the entire movie kind of
Speaker 1: surrounded this laundroy mate, that this family, and also just
Speaker 1: a fantastic movie. It's a really trippy, out there kind
Speaker 1: of movie. I think you might like it's one of
Speaker 1: those films. Um sorry, but uh okay. So, once you
Speaker 1: found a business that you think could make you some money,
Speaker 1: that that might run well, Like, how do you know
Speaker 1: that is a good one? Like, how do you know
Speaker 1: that it's gonna make sense? Is there a is there
Speaker 1: an easy way to crunch the numbers for folks who
Speaker 1: might be used to running their own books right, Like
Speaker 1: they're good at running you know, Joel lars Guard LLC.
Speaker 1: Joel is really good at his own money, but it
Speaker 1: takes a little extra when it comes to running a business.
Speaker 1: What are some things folks should be looking at? First
Speaker 1: of all, I think you should really spend the first
Speaker 1: thirty to sixty days learning how to do act positions
Speaker 1: before you do them. It's not necessary. But the last
Speaker 1: thing that you want to have happened is have your
Speaker 1: first deal be a bad deal, because then you're gonna
Speaker 1: think buying businesses is a bad idea and you're not
Speaker 1: going to realize no, no no, no, you just made a
Speaker 1: mistake and how you did it the first time. So
Speaker 1: my caveat would be it really should be for anything
Speaker 1: in life. But it's very easy to go in place
Speaker 1: a trade on Robinhood right. You don't really have to
Speaker 1: learn too much about it. You can go read a
Speaker 1: couple analysts reports. No problem with buying a business. There's
Speaker 1: more complexity, which means that there's more opportunity because there's
Speaker 1: a barrier to entry with that same thought, though, like
Speaker 1: you can go to Unconventional Acquisitions dot com. We have
Speaker 1: a blog of a bunch of free tools on how
Speaker 1: do you analyze a business? How do you break down
Speaker 1: if a business is worth it or not? How do
Speaker 1: you hire an operator? All the things that you would
Speaker 1: probably think of as objections or reasons why you wouldn't
Speaker 1: do it, we try to talk about in our free blog,
Speaker 1: and there's a weekly newsletter that comes out. You can
Speaker 1: get on the list. But quick, down and dirty. If
Speaker 1: you only do three things, it would be this one.
Speaker 1: You want to look at historical tax return in tandem
Speaker 1: with their P and L, so you just want to
Speaker 1: make sure that what they're telling you in their profit
Speaker 1: and law statement is what's on their tax return. So
Speaker 1: are the numbers real? To businesses? In my opinion sub
Speaker 1: five million dollars in revenue typically trade at a profit
Speaker 1: multiple of two to let's give it like six x.
Speaker 1: So if I make it a hundred k in profit
Speaker 1: in my pocket in a business, I should be selling
Speaker 1: that business for anywhere from let's call it two hundred
Speaker 1: six hundred thousand dollars. So now you've got kind of
Speaker 1: a rough valuation. And then the third thing is you
Speaker 1: have to understand there's usually in every business, like of
Speaker 1: the numbers drive of the return. Meaning if I have
Speaker 1: a laundromat, I really want to understand what the leases
Speaker 1: and how long I'm locked in because it's expensive to
Speaker 1: put in the pipe being and all the washing machines
Speaker 1: or whatever. You need a long waist if I'm a laundromat, Also,
Speaker 1: what are going to be my biggest expenses my equipment certainly,
Speaker 1: and then you till the water and electricity for washing
Speaker 1: and drying. So like you need to get to the
Speaker 1: meat of whatever it is that you're buying, and that's
Speaker 1: where you can do risk the most. There's probably like
Speaker 1: twenty or thirty other main things you should be looking at,
Speaker 1: but these top three will get you quite far. It's
Speaker 1: kind of like you don't want to be buying the
Speaker 1: expensive baseball team when all of the contracts of the
Speaker 1: biggest stars are set to expire, and you're like, you
Speaker 1: might have just bought the crappiest baseball team now that
Speaker 1: they're all like set the walk or or set to
Speaker 1: get paid a lot more. Right, Um, I guess let's
Speaker 1: talk about negotiating, because yeah, you said there's this sweet
Speaker 1: spot somewhere between two x or six x the earnings.
Speaker 1: But yeah, how do you go about negotiating a fair
Speaker 1: price and figuring out what that is? I'm sure a
Speaker 1: lot of that is relational, but there have to be
Speaker 1: like standards to that you can point to in order
Speaker 1: to kind of push for a better price for you
Speaker 1: for the business. You want to buy a lot of
Speaker 1: meat here. So I think one of the most important
Speaker 1: things or valuable things for your career you could do
Speaker 1: is learned to negotiate. If you can learn to negotiate,
Speaker 1: it will be aplical on everything you do in life,
Speaker 1: and you'll just make more money period. If you spend
Speaker 1: time learning how to do what I call deal making,
Speaker 1: or of the people called negotiation. So let's just say
Speaker 1: that first, if you needed to spend some time on that,
Speaker 1: I would read, like you know, Chris Voss never split
Speaker 1: the difference. I would actually read some of Trump's books.
Speaker 1: He has that one book that I can't remember what
Speaker 1: the name of his. I know people don't like him
Speaker 1: as human, but what he's really good at is that, uh,
Speaker 1: he's really good at dealing with discomfort and negotiation, which
Speaker 1: is an incredibly important part of it. And then I
Speaker 1: would also go and read as many case studies as
Speaker 1: I could about negotiation. So if you've done those three things,
Speaker 1: then I think beyond that. The next step is basically
Speaker 1: where most people screw up in negotiating businesses is don't
Speaker 1: don't get caught up on the price in the beginning.
Speaker 1: In any negotiation for buying a business, there's two main
Speaker 1: factors price. In turn, everybody focuses on price. What you
Speaker 1: should really focus on is terms. Think about it this way,
Speaker 1: Joel and Matt. I'm going to buy your podcast for
Speaker 1: a billion dollars. Do you want Yes, I'll take it.
Speaker 1: You'd say yes. What if I changed it and said okay, great,
Speaker 1: You've said yes, we signed the paperwork, but the terms
Speaker 1: are I'm gonna pay you a billion dollars five cents
Speaker 1: a day over the lifetime of that billion dollars. I'm
Speaker 1: never going to get this money coding. Just focus on
Speaker 1: the price turns right. So now Joel has done a
Speaker 1: bad deal. Bad job, Joel. And so what you really
Speaker 1: have to focus on is you can say in the beginning.
Speaker 1: I usually set the tone so that the seller doesn't
Speaker 1: get crazy with their expectations of saying, Hey, businesses that
Speaker 1: do what you do typically sell for around two to
Speaker 1: six x, depending on how clean the balance sheet is,
Speaker 1: what the s ops are inside the business, how much
Speaker 1: revenue you guys do. I just want to set the
Speaker 1: tone that's typically what businesses like this sell for now.
Speaker 1: I don't really want to talk about price in the beginning,
Speaker 1: because I want to get into a partnership with whoever
Speaker 1: selling me this business. You know this is this will
Speaker 1: be a relationship that we will have for at least
Speaker 1: a few months, if not years. So we need to
Speaker 1: make sure that we do this in a way that
Speaker 1: makes sense. So I kind of set the tone, which
Speaker 1: is called primings. You're gonna prime them that they're not
Speaker 1: going to get ten x their revenue for a business,
Speaker 1: it's just not gonna happen simultaneously. And you're setting the range.
Speaker 1: So maybe the range you even says two to three
Speaker 1: acts instead of two to six sex. You've now allowed,
Speaker 1: You've you've narrowed their aperture. But the next thing you're
Speaker 1: gonna do is say, but, but, but but I don't
Speaker 1: want to talk about price. No, no no, no, no, I
Speaker 1: don't want to talk about price. I want to talk
Speaker 1: about you and your business. We'll get to all that
Speaker 1: stuff later. And so the big thing you should do
Speaker 1: up front is not over index on what is the cost?
Speaker 1: It's totally different than real estate, and which cost is
Speaker 1: the only question. Okay, so you're telling us to downplay costs,
Speaker 1: focus on the terms. What about folks said? There might
Speaker 1: be a lot of folks listening who are thinking, all right,
Speaker 1: this this all sounds awesome. I don't have the cash
Speaker 1: on hand. Uh that does regardless of what a business
Speaker 1: might be selling their business for, how can I actually
Speaker 1: go about making that purchase happen? Like, what are some
Speaker 1: of the different creative ways I guess that that folks
Speaker 1: can think about purchasing some of the different businesses that
Speaker 1: are out there. I use something called the get rich tripod,
Speaker 1: which is an awful name that I came up with,
Speaker 1: but you know, clickbait. But basically the idea is, there's
Speaker 1: three legs to a tripod, right. The way to do
Speaker 1: a deal and get financing is to use one of
Speaker 1: the three legs, if not all three. So the legs
Speaker 1: are time, expertise, money. So let's say somebody listening and
Speaker 1: wanted to go and buy a car wash, and they
Speaker 1: have time, but they have no experience on car washes,
Speaker 1: and they have no money. How do you get that
Speaker 1: deal done? Well? You? If if I was you, I'd
Speaker 1: say you focus on the time factor. So you do
Speaker 1: the due diligence on the deal. You understand the industry,
Speaker 1: You put together a business plan on why to buy it.
Speaker 1: Then you go find somebody who has cash. That somebody
Speaker 1: could be the sp A Small Businesses Association would get
Speaker 1: through scales loans to small business buyers. Because you have
Speaker 1: a business plan and a valuation that you think is
Speaker 1: reasonable for the business, You're going to take it to
Speaker 1: basically the s b A and say will you give
Speaker 1: me money? Will you loan me money for this? You
Speaker 1: can also do what's called seller financing, which is put
Speaker 1: together that same thing and say to the owner, hey,
Speaker 1: I'm going to run this business. I will put up
Speaker 1: some percentage of the total purchase price, let's say tenent,
Speaker 1: but the other X percent I want you to carry
Speaker 1: in a seller's financing note over a two to three
Speaker 1: to five year period, which basically means, if I'm going
Speaker 1: to buy your business for two K, I might put
Speaker 1: down a hundred K, let's say, and then tell you
Speaker 1: I'm going to pay you back the next hundred kt
Speaker 1: kt dollars a year over a two year period from
Speaker 1: the profits of the business. And the way to do
Speaker 1: those two is interesting because six small businesses are sold
Speaker 1: with some type of seller financing, meaning that the sellers
Speaker 1: are relatively used to the ask that, Hey, if I'm
Speaker 1: gonna buy your business, I expect you to carry some
Speaker 1: of my risk in the purchase price. It's pretty normal.
Speaker 1: And so that's one leg of the tripod. The other
Speaker 1: two you just flip it. If you have money, you
Speaker 1: use that, use somebody else's time and expertise. If you
Speaker 1: have expertise, you find somebody else with time and money,
Speaker 1: and so that business owner it is kind of actually
Speaker 1: expecting you to not have all the cash and to
Speaker 1: maybe have to to wait to get back to get
Speaker 1: some of your investments. Um as you take over and
Speaker 1: round the company for a certain period of time. I
Speaker 1: guess too. We're talking about we've talked about some physical
Speaker 1: businesses yere, We've talked about laundromats, you mentioned car washes.
Speaker 1: Are are there like non physical businesses that you can
Speaker 1: do this sort of things thing with that maybe might
Speaker 1: even cost less. I mean you mentioned the Twitter growth tool,
Speaker 1: are like, what about websites or blogs or buying other
Speaker 1: people's online businesses? Is that something that you've worked in
Speaker 1: or that you encourage other people to check out? Absolutely?
Speaker 1: I buy a lot of online businesses. Is so, Um,
Speaker 1: no real difference between online and brick and mortar businesses.
Speaker 1: The only difference is they're a little bit more competitive
Speaker 1: to buy because people can buy them anywhere. Um. They
Speaker 1: also are typically a little bit more de risked in
Speaker 1: some ways because the API right into their financials. So
Speaker 1: you know, if you guys tell me we have a website,
Speaker 1: it does a hundred thousand views a month and it
Speaker 1: makes teno dollars. I can literally look in the history
Speaker 1: of your website and your stripe account and see that
Speaker 1: all rolling right in right. Small businesses typically have a
Speaker 1: percentage that's cash. They don't have very clean books. You
Speaker 1: don't know where the actual moneys come from, so you
Speaker 1: have to do more what's called due diligence on on
Speaker 1: hard asset businesses. Then you do these online businesses, but
Speaker 1: the process is relatively similar. The way they value online
Speaker 1: businesses is by month, not years. So you'll say, while
Speaker 1: this is selling for you know, uh, twenty four x,
Speaker 1: and what they mean is like four months of revenue.
Speaker 1: And so there's some differences between the two. But I
Speaker 1: would say the most competitive sites sell pretty quickly because
Speaker 1: smart buyers really know what they're doing. And again that
Speaker 1: industry has been a little bit more commoditized. Although a
Speaker 1: business to you and Joel could be a lot different
Speaker 1: than a business to me. And you could say, hey,
Speaker 1: we have this podcast, and look there's this tool that
Speaker 1: helps podcasters I don't know reach out to guests. That
Speaker 1: business only makes ten dollars a year, so it's probably
Speaker 1: only worth let's call it thirty two fifty K or
Speaker 1: something like that, but to us it's actually worth a
Speaker 1: hundred K because we're paying somebody to do that right now,
Speaker 1: and this tool would save me for that too. And
Speaker 1: so that's where you want to get a little bit
Speaker 1: more into what's your unfair advantage? Got Yeah, yeah, we've talked.
Speaker 1: We didn't talk about that, but that's one of the
Speaker 1: things you've discussed too. So maybe I don't know. Could
Speaker 1: you give us a quick take on on what you
Speaker 1: mean by unfair advantage and how how do we figure
Speaker 1: out what are unfair advantages? There is a rate quote
Speaker 1: from one of the partners at KKR and he says,
Speaker 1: no conflict, no interest, And I loved that quote because
Speaker 1: it's how smart, smart dealmakers do deals. KKR is a
Speaker 1: multi multi multibillion dollar private equity firm, and what he's
Speaker 1: basically saying is if I don't have a conflict, I
Speaker 1: don't have an interest. And what he means by conflict
Speaker 1: is if I don't have an unfair advantage and unfair
Speaker 1: insight into this industry, deal, entrepreneur, sector, whatever, I'm not
Speaker 1: going to do it because I want outsized returns. So
Speaker 1: let me give you an example. Let's say that Warren
Speaker 1: Buffett was going to go and buy his railroad company,
Speaker 1: which was BNSF. When he went to go buy BNSF,
Speaker 1: a lot of people thought he was nuts for buying
Speaker 1: that railroad. But what did Warren Buffett probably know that
Speaker 1: is allowed in public deals Before he purchased that company.
Speaker 1: He knew that pipelines were going to start shipping energy
Speaker 1: or oil around the country, and b n S stuff
Speaker 1: was going to get some contracts for that deal. So
Speaker 1: he did that deal because he had a conflict. He
Speaker 1: had an unfair insight into the industry in the same
Speaker 1: way that you, Joel and Matt might know. Man, podcasters
Speaker 1: over the next ex period of time are going to
Speaker 1: do this thing that nobody else realizes. So I'm going
Speaker 1: to buy this business in advance. Or I'm an accountant
Speaker 1: and I know that it's really brutal for other accountants
Speaker 1: to hire X type of person, So I'm going to
Speaker 1: buy this outsourcing accountant firm. You want to use whatever
Speaker 1: the industry is that you have unique insight into, and say, Man,
Speaker 1: I want to leverage my expertise for an unfair deal.
Speaker 1: The last thing I'll say is, like a good example
Speaker 1: of this right now would be if I was a
Speaker 1: realtor and I saw that last month open door lost
Speaker 1: forty lost money on of all deals that they did,
Speaker 1: and that generally across the ecosystem, real estate is coming
Speaker 1: down in cost. I would probably be thinking, huh, I
Speaker 1: bet I'm not to do as well this year in
Speaker 1: real estate as I did last year. How could I
Speaker 1: offset the return that I'm making on real estate this
Speaker 1: year through an acquisition? So I might say I'm going
Speaker 1: to buy a property management company because people will still
Speaker 1: have to have their property managed during a downturn, even
Speaker 1: if they're not buying or selling. I make money no
Speaker 1: matter who owns it. Great, that is your unfair advantage. Yeah, yeah,
Speaker 1: I like it. You've got to find out what that
Speaker 1: is so that you can exploit it and that edge.
Speaker 1: You can't succeed in everything, Right, You've got to kind
Speaker 1: of pick your niche, and that's how you're going to
Speaker 1: be able to kind of get those abnormal returns you're
Speaker 1: talking about. All right, Cody, We've got We've got a
Speaker 1: couple more questions we want to get to, including the
Speaker 1: power of people and and also like where you're doing business,
Speaker 1: how you might need to move in order to get
Speaker 1: a better advantage. We'll discuss a couple of those things, right,
Speaker 1: after this all right, we are back from the break
Speaker 1: talking with Cody Sanchez and Cody. Essentially, what we're talking
Speaker 1: about here is passive income, right, and so I'm curious
Speaker 1: if you have like an overarching philosophy when it comes
Speaker 1: to passive income, because I feel like that phrase, it
Speaker 1: gets thrown around a lot, certainly sounds amazing, but it's
Speaker 1: also not nearly as easy, you know, as the phrase
Speaker 1: might make it sound. I would love to hear you
Speaker 1: talk about just your general take on passive income. One
Speaker 1: of my favorite mentors, David Osborne, said a word to
Speaker 1: me that I think makes all the difference. He calls
Speaker 1: it horizontal income instead of passive income. Basically, what this
Speaker 1: means is that this is these aren't types of income
Speaker 1: streams like investment stocks, differentiated businesses from your main salary
Speaker 1: that keep making you money regardless of your day to
Speaker 1: day income and your main vein which so I almost
Speaker 1: see it like a chart, like vertical income goes up
Speaker 1: and down, that's your earned salary. Horizontal income gets layered
Speaker 1: over whatever it is you're doing on a day to
Speaker 1: day basis. You only have so many hours in a
Speaker 1: day vertically, right, and you could maybe take up eight
Speaker 1: of those hours with something, but horizontally, you could add
Speaker 1: as many as you want, right because they just continue
Speaker 1: to stack. I like that because passive income is a misnomer.
Speaker 1: Unless you're investing in funds, you know, some sort of
Speaker 1: commingled vehicle, the stock market, somebody else's deal, you're going
Speaker 1: to be involved in some way, shape or form. And
Speaker 1: even for those deals, you're going to be involved in
Speaker 1: the beginning by at least making sure that the due
Speaker 1: diligence is right or that you should do this deal.
Speaker 1: But it's a good deal. So I don't love that
Speaker 1: term passive income. What I like to think about is
Speaker 1: having horizontal income streams that stack, and that is something
Speaker 1: that these businesses can do over time. You know, I
Speaker 1: always debate people about this because some people say you
Speaker 1: should go all in on your main thing, and I
Speaker 1: think that is true for some people. I do not
Speaker 1: think that is true for everybody. There are just some
Speaker 1: outliers out there who should, no matter what the gets
Speaker 1: hard on the one thing that they're supposed to do
Speaker 1: because they're going to be the one to ten percent
Speaker 1: that survives in business. But most people numerically categorically are
Speaker 1: not that and they should have diversified income streams because
Speaker 1: you need something to fall back on. And I do
Speaker 1: not think that we should proselytize or make it seem
Speaker 1: amazing that we're sleeping on floors to achieve our dreams.
Speaker 1: I don't think that's necessary, And I think you could
Speaker 1: do it away. That causes a lot less stress for
Speaker 1: you and your families and your bodies through having horizontal
Speaker 1: income streams. Yeah, I like that. And like you said,
Speaker 1: over the years, it doesn't happen over and over the overnight.
Speaker 1: But as you're stacking up some of those horizontal income streams,
Speaker 1: they can start to look close to the vertical income
Speaker 1: stream and eventually replace it, which which is really cool.
Speaker 1: But yeah, take take some time, take some intentionality. I
Speaker 1: guess one of my questions too, when you're talking about
Speaker 1: maybe some of the physical busines this is that you've
Speaker 1: bought they don't run themselves, right, So you buy a laundromat,
Speaker 1: but Cody Sanchez isn't going in there and unlocking the
Speaker 1: doors at six am to make sure people can come
Speaker 1: in and wash their clothes, like and and some of
Speaker 1: these businesses are more labor dependent than others, So how
Speaker 1: do folks need to think through the putting the right
Speaker 1: people in place part of the equation when they're purchasing
Speaker 1: a business so that they're not stuck being the person
Speaker 1: who now just got a new job that requires forty
Speaker 1: hours a week of their time. It's the difference between
Speaker 1: operators and investor owners. An investor owner is somebody who
Speaker 1: takes money, or structures a deal, or does something that
Speaker 1: has infinite return on time. Ak, my dollars do not
Speaker 1: have a time construction and invest that in a business
Speaker 1: where then your operator is the person who day to
Speaker 1: day runs it. So I don't want to turn this
Speaker 1: into a Cinderella fantasy land. For your first deal, you
Speaker 1: probably are not qualified to be an investor owner. You know,
Speaker 1: you need to get some reps under your belt. You
Speaker 1: might have to open the door on your first long
Speaker 1: termat because you've never done this type of deal before.
Speaker 1: You might have to get in the back end of
Speaker 1: your website for the first website that you buy. But
Speaker 1: the goal is is that you do bigger and bigger
Speaker 1: deals which have more and more free cash flow in
Speaker 1: them that allows you to hire people with that free
Speaker 1: cash flow. So your first deal, you're probably kind of
Speaker 1: you know, you're probably really involved, or at least kind
Speaker 1: of involved. And then the more deals you do, the
Speaker 1: more infrastructure you can build so you don't have to
Speaker 1: be involved. And that's how Warren Buffett runs businesses that
Speaker 1: do tens or hundreds of billions of dollars in revenue
Speaker 1: with a team of thirty five people, because they are
Speaker 1: overseeing all of their operators inside of those businesses they
Speaker 1: are they have a early Monger has an amazing quote,
Speaker 1: which is or it might have been Tarling Mungiger's mentor.
Speaker 1: He says, when you get a dog, you let it
Speaker 1: do the barking, and so it's the same with hiring.
Speaker 1: You know, you hire an operator, you let them do
Speaker 1: the operating. And that's the difference between the two. I
Speaker 1: like it too well. Matt and I were mom and
Speaker 1: pop landlords, right, and it just makes me think that
Speaker 1: the first property that I bought, I was I was
Speaker 1: fixing everything. I was mowing the lawn, I was self managing.
Speaker 1: I was doing all the above in order to make
Speaker 1: sure that my bottom line was solid so that I
Speaker 1: could have more money to invest in the next deal.
Speaker 1: And I just for the first time, hired someone to
Speaker 1: manage some of my properties, and it's it's like, I'm
Speaker 1: I feel like I'm fine at that point, and now
Speaker 1: that I'm eight doors into real estate investing, like as
Speaker 1: it grows, you have more opportunity to be able to
Speaker 1: hire those things out. Whereas the first deal you're gonna
Speaker 1: need to be more involved, but every successive deal you
Speaker 1: can be just a little more, a little further away
Speaker 1: from the operating of of that business. Yeah, and Coudy,
Speaker 1: it seems like that you're not buying and holding forever
Speaker 1: when it comes to these different businesses that you have.
Speaker 1: What is it that makes you want to sell a
Speaker 1: business that you currently own? Are you just kind of
Speaker 1: taking advantage of a business that's not valued exactly where
Speaker 1: it should be? Right? Like so the arbitrage you quoted
Speaker 1: Warm Buffet a bunch that he calls those the cigar butts.
Speaker 1: Are you doing that or are you looking for some
Speaker 1: different businesses that can provide you that cash flow over time?
Speaker 1: I think the cigar Butts strategy, which basically was like
Speaker 1: can you take the last polls off of business that
Speaker 1: people aren't thinking about? Like is there something left in
Speaker 1: something that people think is dead? Is actually a really
Speaker 1: tough strategy to do if you are not super skilled.
Speaker 1: An analogy to this is there's something called a turnaround company,
Speaker 1: which is basically you buy a company that's not doing
Speaker 1: well right now and you're like, I'm the white Night,
Speaker 1: I'm the savior. I'm coming in and turn this bad
Speaker 1: boy around and we're going to make it profitable again.
Speaker 1: Those I think are not great for new beats. And
Speaker 1: here's why because whenever, and you guys know this is
Speaker 1: property managers. Have you bought a house that's a fixer upper,
Speaker 1: gone into construction for it, fixed up the fixer upper,
Speaker 1: and on it under budget and faster than you value
Speaker 1: would right? Doesn't happen? Doesn't happen? Right? The same thing
Speaker 1: for a business. It's just going to take longer and
Speaker 1: be more expensive than you anticipate. So start with buying
Speaker 1: the nice house on a great street that you understand
Speaker 1: and think you can help appreciate or cash flow off
Speaker 1: of as is as opposed to a turnaround. The main
Speaker 1: you know, strategy that I use to decide if I
Speaker 1: want to buy keep a business or if I want
Speaker 1: to sell a business is just is the business worth it?
Speaker 1: From a an R O I perspective? So you know,
Speaker 1: for my businesses, if the business will do at least
Speaker 1: a hundred thousand dollars in free cash flow to me
Speaker 1: and I don't have to spend time on the business,
Speaker 1: I'll keep it. But that number keeps creeping up, and
Speaker 1: the more they ask of me and the more I
Speaker 1: have to do within the business. If it's not one
Speaker 1: of my main ones, I'll probably divest or I'll sell
Speaker 1: it and I'll let somebody else go take that perfectly
Speaker 1: sized business for them and run it. And then I'll
Speaker 1: take that money and I'll put it into a bigger deal,
Speaker 1: just like you would tend thirty want to exchange a
Speaker 1: piece of real estate. Yeah, it makes sense that the
Speaker 1: fundamentals need to be solid. You can't just decide to
Speaker 1: come in there and just your magic touch, Like you're
Speaker 1: not gonna have the Mnus touch and be able to
Speaker 1: necessarily turn something around, especially as a nube. Yeah, exactly. Well,
Speaker 1: I plays chuckle too with like the year olds. They're like,
Speaker 1: I'm gonna buy this plumbing company. I'm going to take
Speaker 1: it to ten million dollars dollars right now. I'm like,
Speaker 1: have you ever managed plumbers? Have you ever been in
Speaker 1: a plumbing job. Do you know anything about the industry?
Speaker 1: And it's okay to not know all that stuff, but
Speaker 1: come in with no hubrist be like, this business is
Speaker 1: doing X, I think I believe X, and I can
Speaker 1: continue X if we can add more to it. Awesome.
Speaker 1: Well let's just make sure that we understand it as
Speaker 1: is first. Yeah, that's a good point, or else you
Speaker 1: could lose a lot of money if you if you're
Speaker 1: shooting for the moon when in all likelihood that plumbing
Speaker 1: company you're not going to be able to like fifty X.
Speaker 1: That's that's a tough endeavor. But Cody, this has been
Speaker 1: an awesome conversation. Thanks so much for joining us. And
Speaker 1: where can our listeners find out more about you and
Speaker 1: what you're up to? I think the best place for
Speaker 1: that is probably contrain Thinking dot com. We have a
Speaker 1: free newsletter on there all about different ways to cash
Speaker 1: flow and interesting um industries, et cetera. Same with unconventional
Speaker 1: acquisitions dot com. Apparently we like vowels and then uh
Speaker 1: anywhere on the social's Cody Sanchez, I'm all over them,
Speaker 1: you know, TikTok in Instagram and whatever we do on
Speaker 1: the internet. I love it awesome. Thank you and yeah,
Speaker 1: your newsletter is a must read for anybody who wants
Speaker 1: to like deep dive even further into these topics and
Speaker 1: get specific examples on a weekly basis of cool stuff
Speaker 1: you could be doing that increase your income. So yeah,
Speaker 1: I love the space your end, the ability that you
Speaker 1: have to open folks minds as to what's possible. I
Speaker 1: think that's the biggest takeaway as folks are hopefully considering
Speaker 1: what owning their own business might look like, it doesn't
Speaker 1: necessarily have to look like the the job that they've
Speaker 1: had for the past five to fifteen years. I think
Speaker 1: you're doing a great job with that. Cody, thank you
Speaker 1: so much for joining us, saying on the on the podcast,
Speaker 1: this is a blast. As you me, it's super easy.
Speaker 1: Thanks for having me, all right, Matt, I love that conversation.
Speaker 1: I feel like I'm totally picking up what Cody's putting down.
Speaker 1: I think she is. She is one of the only
Speaker 1: people that I know of in this space talking about
Speaker 1: how people can change their lives by buying other people's businesses.
Speaker 1: And like we talked about for just a second, demographically,
Speaker 1: there is there is more opportunity than ever to take
Speaker 1: part in this bonanza that is buying other businesses and
Speaker 1: being able to yeah, pay your bills and and eventually
Speaker 1: leave your job. Specifically, there are three ways that are
Speaker 1: leading to this being a fantastic time to to consider this.
Speaker 1: For sure. I can't wait to read that book when
Speaker 1: it comes out. But what was your big takeaway from
Speaker 1: this combo? Yeah, so, as we were just kind of
Speaker 1: talking through a lot, I mean, we we kind of
Speaker 1: dug into a lot of good meat, which I really appreciate, um,
Speaker 1: but I think there might be some folks who are thinking,
Speaker 1: holy cow, I feel so incredibly overwhelmed, And how how
Speaker 1: am I supposed to know if me buying somebody else's
Speaker 1: business or even being a business owner myself, if that's
Speaker 1: something that I want to do. And earlier on in
Speaker 1: the conversation, I can't remember what we were talking about,
Speaker 1: but she I didn't like someone out or anything. But
Speaker 1: I can't remember what she was responding to specifically, but
Speaker 1: she was talking about how of all the people that
Speaker 1: she's hired, like hundreds, if not thousands, she hires people
Speaker 1: based on desire. I think that was when we were
Speaker 1: talking about second generation immigrant? Was that? Yeah? Okay? So
Speaker 1: like and she said you can't teach that. You can't
Speaker 1: teach desire, you can't teach curiosity. And so if you
Speaker 1: have an innate curiosity, if you have a desire to
Speaker 1: be your own boss, to run your own business, to
Speaker 1: figure out what it takes to own a business right
Speaker 1: now in the moment, I wouldn't worry so much about
Speaker 1: all the specifics of what it takes to find and locate,
Speaker 1: uh and hone in on a successful business, because those
Speaker 1: are all things that you can figure out if you
Speaker 1: have that desire. Though I don't see that as a
Speaker 1: litmus test that, Okay, you are likely going to be
Speaker 1: a good candidate for somebody to to purchase the business
Speaker 1: or to own your own business. But if you're listening
Speaker 1: to this and maybe you are like, okay, yeah, thinking
Speaker 1: about all the different things you know, matching up their
Speaker 1: historical tax returns to the current profit and lost it.
Speaker 1: Maybe you're thinking through all the nuts and bolts and
Speaker 1: you're thinking, I got all that, that's that's no big deal.
Speaker 1: But if you have no desire, if you have no curiosity,
Speaker 1: you might have all the fundamentals down. But if you
Speaker 1: don't truly want to do this, then I don't know
Speaker 1: if this is gonna be good a good opportunity, I
Speaker 1: don't think this is going to be a good path
Speaker 1: for you to take. I will say too, I think
Speaker 1: you can foster some of that curiosity. I don't think.
Speaker 1: I think sometimes it's innate. There's a lot of that
Speaker 1: that that is just kind of instinctual. But that is
Speaker 1: also something that you can prod in yourself if you're
Speaker 1: if you're interested, if you can personal development, that might
Speaker 1: lead to you taking some steps and you otherwise wouldn't.
Speaker 1: If you get an ink to go in that direction,
Speaker 1: there is work that you can do to kind of
Speaker 1: push yourself to Like, I've become interested in all sorts
Speaker 1: of things I never thought I would be interested in.
Speaker 1: And as I kind of give into that desire and
Speaker 1: I listen to content or I'm I'm following other people
Speaker 1: who are doing cool stuff in that space, it gets
Speaker 1: me excited about maybe participating. So yeah, I think that
Speaker 1: that that you can find maybe that desire even if
Speaker 1: you're like I don't know if I see it now,
Speaker 1: but don't push it. You don't have to go get
Speaker 1: at it right now even though you don't feel it,
Speaker 1: but you can foster it along the way and then
Speaker 1: maybe protect later on down the road. Yeah. I do
Speaker 1: think there's a difference though, between interest and something and
Speaker 1: a desire to learn, because I feel like you've always
Speaker 1: probably had a desire or that curiosity, even though you
Speaker 1: might stay to yourself, well I've never cared about World
Speaker 1: War two. But then all of a sudden, because you
Speaker 1: have that desire because you are curious, you realize, oh, man,
Speaker 1: this is now something that interests me. I did not
Speaker 1: used to be interested in this, but now I am.
Speaker 1: I do hear what you're saying that. I think there
Speaker 1: are ways for us to kind of cultivate that within ourselves.
Speaker 1: And I think what Cody was saying is that second
Speaker 1: generation immigrants kind of naturally have some of this. It's
Speaker 1: instinctual based on what these kids have seen their parents
Speaker 1: go through, which makes sense to me. I think my
Speaker 1: big takeaway was when she said more complexity equals more opportunity,
Speaker 1: and I think that's completely true. There is there is
Speaker 1: the potential for outsize returns when you're endeavoring to get
Speaker 1: into a space that fewer people are interested in getting
Speaker 1: into at all, Like how many people are talking about
Speaker 1: buying car washes and laundromats, Like not many people, right,
Speaker 1: Cody is one of the few people out there talking
Speaker 1: about this as a viable business strategy. But because there's
Speaker 1: not a lot of attention there, not everybody is trying
Speaker 1: to There's not like shows on h G TV endless
Speaker 1: ones about house there are endless ones about houselping, but
Speaker 1: there's not endless ones about buying laundromatics, you know what
Speaker 1: I'm saying. And so because of that, because of the
Speaker 1: fact that they're more complex or more boring, there is
Speaker 1: the ability for people to make more money getting into
Speaker 1: that business. So the numbers can be better, they can
Speaker 1: work out more to your advantage if you're getting into
Speaker 1: something that that you have to have a little bit
Speaker 1: of extra knowledge and a little bit of extra gumption
Speaker 1: to get into. Totally. Yeah, I love it, man. All right,
Speaker 1: let's get to the beer. You and I enjoyed an
Speaker 1: open Space Haze. This is not surprisingly a hazy I
Speaker 1: p a another beer by Boss Brewing Company. What were
Speaker 1: your thoughts on this one? Yeah, man, I'm gonna say
Speaker 1: this one was kind of a classic hazy style here.
Speaker 1: I feel like it's solid. If it was a six
Speaker 1: pack version, I could have this semi fridge all the time.
Speaker 1: It was just very drinkable, but also like nice, sweet, delicious.
Speaker 1: I p A. Yeah, I couldn't agree more. Man, it
Speaker 1: didn't have like one of those overly complex, hoppy backbones. Uh.
Speaker 1: It drank fairly clean for a hazy I p A.
Speaker 1: Really delicious. I'm glad you and I were able to
Speaker 1: enjoy this one on the show. We will make sure
Speaker 1: to link to some of the different resources that Cody
Speaker 1: mentioned during our interview up in our show notes for
Speaker 1: this episode up at how the Money dot Com. That's right,
Speaker 1: but Matt, that's gonna do it. So until next time,
Speaker 1: best Friends Out, Best Friends Out,