How to Build Wealth Buying Boring Businesses | Codie Sanchez

[00:00:07] Everybody who is wondering how the heck do I make money? How the heck do I build wealth? Should listen to this episode with Cody Sanchez. She talks about how buying small boring businesses is basically The key to wealth and I believe this I 150% believe this strategy and

[00:00:32] She's done it. She's shown other people how to do it if you go to her site contrarian thinking.co You can learn a lot more she has her newsletter. She has courses, but she's been in the trenches. She's done the work she knows how to do it and

[00:00:47] has loads of great advice on Everything from business to relationships we talk about all of it in this episode such a fun episode here it is This isn't your average business podcast and he's not your average host. This is the James Altucher show

[00:01:09] So Cody you've been a huge inspiration to me because I agree with everything you say about business and And particularly the path if someone just simply wants to get wealthy There's two words you have to know

[00:01:35] Buying a healthy business and buying a boring business so healthy and boring equals wealth Yep, I agree. Tell me how like did you start out like buying like a laundromat or like what did or a car wash?

[00:01:49] Or like I started looking at some of the sites that you recommended one of your newsletters and I'm gonna get back to your origin in a second But I just want to ask you like I saw this one company right near where I live right now

[00:02:01] It's a solid dry clean operation in an affluent area cash flow $126,000 asking price $249,000 so less than two times cash flow and they've never done any advertising So that's just you could do advertising. They claim to boost revenues. Yep. How would you buy that business?

[00:02:22] Yeah, well a couple things one I don't want you to buy a dry cleaning business because they have a bunch of issues with remediation big word But but basically for anybody listening it just means that dry cleaning usually comes with a bunch of toxins

[00:02:34] so if you buy a dry cleaners you have to do a Environmental study on it to make sure that no topic sins have seeped into the soil and you're responsible for that liability They do say that they pry themselves are an environmentally friendly non-toxic cleaning operation

[00:02:50] So of course I would have to do diligence on that to make sure it's true But if that's true, they should have no toxins around Yeah, typically it's kind of like how people say free range chickens and what they actually mean is like free range inside a cage

[00:03:01] You know the free range is two by four, but You're right So how I would do diligence a company like that is one I'd go one of the main risks in an industry and that one one of the main risks is is it really toxic or not?

[00:03:15] I would do a land study and I would talk to an industry expert The second thing that I would do for a business like that is it's so straightforward You're a hedge fund manager and you know chess master, so you're much smarter than me. I did that but

[00:03:29] It's very easy to analyze the financials of a company in the way that I like to do it Which is basically you look at their tax returns So for this company they say they make 240 and a hundred thousand dollars in profit

[00:03:42] But I'd go okay. I want to see your P&L, which is probably really messy I think five to ten percent of businesses run a clean profit and loss statement So I would go to their tax returns and I'd say well

[00:03:53] What did you pay the government because you're probably not overpaying the government? And then we would negotiate somewhere between the tax returns and their P&L for the real purchase price and

[00:04:03] And then the other thing you'd want to do because you probably don't want to manage and operate a dry cleaning facility Actually, it's my passion Yeah, mine too

[00:04:17] No, I think that the part that I'm always careful about and I want to make sure I don't say it the wrong way is There's some belief that when I say you can bring an operator into business It means like free money no work passive income

[00:04:29] And that's not the case the case is you can have an operator or a manager of the business And you can supervise them just like anybody else And so you just want to make sure there's enough cash flow in there where if right now

[00:04:39] It's cash flow in 120k with an operator already in it and you get to take home that 120 or you know Put a little bit more in advertising etc and allow them to do the day-to-day that might be a cool

[00:04:50] Acquisition or for somebody like you you might have you know like me. I had my mom run a business I've had my dad run a business. I've had my brother run a business before

[00:04:59] It's an interesting way to get other people in your life involved in businesses without the startup You know failure porn let me ask you just as like a side question

[00:05:07] Did you ever find a point in your life where suddenly realize all your friends and family were working for you? Yes, actually a few times To me and I don't know if it's a good thing or a bad thing like I ultimately probably I lost 75% of those friends

[00:05:24] Really interesting so my mom definitely never wants to work for me again It was not her cup of tea my dad and I still work together. He likes it My brother and I still own assets together, but I gave him his first job out of college

[00:05:35] And he ran a business that I had for a number of years So but I've also had two friendships implode You know pretty aggressively from doing business together one incompetence and one fraud

[00:05:48] So it's definitely doesn't come without its issues, you know so again like how did you get your start? Like what's the Cody Sanchez origin story? What was the first business you bought?

[00:05:58] I know there was a story before that too like you were a journalist you really you went down to Mexico You really did amazing things, you know Researching human trafficking and all that stuff, but I'm interested in business right now. Yeah

[00:06:11] Well the very first business as I bought were Marketplaces or consulting agencies so I bought a company called selling south where basically I was working in US Latin at the time selling investment products and I was like oh there's this little consulting business

[00:06:27] What if I bought that did it the side and I think I'm just rather Unemployable so I basically started this almost the second that I became employed after I left Vanguard I started doing what could be called side hustles or buying businesses and

[00:06:41] Then I bought another one called threads refined that one didn't work out very well either It was like a stylist marketplace. So wait the first the very first one was was what what was it selling?

[00:06:49] It was called selling south and it was a consulting service for US companies US financial firms that wanted to sell into Latin America Because that was a specialty of mine

[00:07:00] But like if you if you bought that did you lose the consultants or who I would think the founder of that was the main consultant Yeah It was more like actually not that dissimilar to some of the stuff that you've done

[00:07:10] So there were newsletters at the time so they I don't we didn't call it that was like industry emails basically and these industry Emails people would pay access for and then those there weren't individual consultants

[00:07:22] There was like a subject matter expert behind the scenes that was writing a bunch of this stuff This person stayed on but the idea was I'm young and good at growing businesses Maybe I can grow this one and so they didn't want to leave

[00:07:34] They just wanted to get bigger and so I could be be that for them. So so you how did you buy it? Like what was the deal so for that very first company? I ended up buying up to 75% of the company. It was a tiny transaction

[00:07:45] We're talking less than 50k But the the idea was I'm gonna buy 50k into a company that does a couple hundred thousand dollars in revenue The guy's entire take-home pay was something like 110 120 and that business

[00:07:58] The idea was he would continue to make a portion of that and I would scale up to 75% equity ownership That was also distributing equity. So, you know, it would pay me out cash on

[00:08:08] I can't remember if we did it on a monthly or quarterly basis back then but it started at 25% So I was like in the beginning I'm just gonna take 25% of top line revenue of this company We're gonna distribute it on a quarterly and monthly basis

[00:08:22] But I'm gonna help you grow this business at the time I had all of these big companies in Latin America that came to us and you know I would tell them different things to invest in they were called the afores the pensions in Latin America

[00:08:35] And so I was like I can get us into all these people. I can get us contracts And so now I call these sweat equity deals at the time I don't even know if I thought about it as traditional business buying

[00:08:45] I was like, I'm just gonna do this little deal over here and So that was the very first transaction that I did and how did it go? Not very well, but I mean, you know fine

[00:08:56] We did okay. We made a little bit of money and then at a certain point the The guy that I reported into at the time shout-out Barry found out that I you know had this business and it was It was reported you're in finance

[00:09:12] So you have to report any business that you have it could be a conflict of interest your licenses And so I had reported it but it just hadn't gotten to him And so the company was fine with it Barry wasn't fine with it

[00:09:21] And so finally Barry was like the thing is we think you could move the financial markets I'm like Barry this company makes like 120 like nobody nobody's moving anything with this

[00:09:30] And he was like he got a pick one or the other and I made a lot of money in finance So I was like, all right, I'll bow out So I ended up actually getting rid of the company giving it back to the guy in bailing

[00:09:40] so that didn't work out great and Then I did threads refined that also did not work out great And then the only thing that ended up working out well for me was once I started buying what I now term boring businesses

[00:09:54] So I bought a laundromat. It was one of my very very first boring business transactions with an operator that had run one before and I was traveling a lot to Chile at the time so I couldn't be in a business very much

[00:10:07] I was like what business could you run without being there every single day? And I could trust an operator and not not fuck it up candidly and So I decided on that one and then we owned a couple of different laundromats together

[00:10:18] Before finally selling so so a couple questions on that so laundromats are great because the I mean everybody needs to do laundry even in even in COVID laundromats were open and There's all sorts of services like you could deliver or you could

[00:10:34] You know when you own multiple laundromats You get you can get bulk deals on buying the washing machines and detergent and so on And location is key But if they already if you're buying an existing laundromat, they've already taken care of finding the location

[00:10:48] And you and that's proven out by the profits and so on other than By buying more and then doing you know back end, you know reducing back-end costs How can you kind of enhance the services or enhance the revenues of a laundromat?

[00:11:01] Yeah, I mean here's the downside with laundromats The downside is you know the biggest laundromat we've ever owned was one that did about three million dollars and that was with a company called the fold and I was an investor I didn't own the whole thing and

[00:11:13] That company got that big with one laundromat. It was a mega laundromat So not the ones like in New York City you go in there's like, you know 15 to 20 machines this one is huge and

[00:11:24] That got so big because wash and fold the real margin is in wash and fold where You go and you pick up and you drop off laundry for people who don't want to do it themselves

[00:11:34] And so that business got got pretty big through wash and fold which is how you could do that There's lots of little fun things we do in our laundromats or or we've done over the years like One of the most important things for any small business is reviews

[00:11:47] And so the biggest reason why somebody comes and uses my laundromat versus another is obviously not brand It's like is it really close to me? Is it trusted and safe? You know are the machines going to operate and do I even know it exists?

[00:12:00] and so the easiest one to solve for is do I know it exists and So we have a huge process around reviews everything from you know tech services There are all these sass tools that can help you without like service titan or jobber

[00:12:14] And then we kind of have fun in the community So since this wasn't my full-time job and we could we had a little bit of cash to play around with it We would do lots of things like we did book drive

[00:12:25] So we would have like books out for people if they came in we would do like free coffee and partnerships with the other Small businesses next to us would do a taco Tuesday if we were next to a Mexican store

[00:12:34] And so if you came into the Mexican store and did this and then you brought off laundry You got some sort of discount and so you could do those small things But the problem is you're not going to make a $50 million laundromat unless you own

[00:12:45] Hundreds of them. And so I think it's a good gateway drug business to business Let's say they had a hundred thousand dollars in profits, okay? And yeah, what would you typically buy it for like two times cash flow like $200,000? Maybe some seller financing in there meaning, you know

[00:13:00] You would pay off the original owners over time because their only other choice would be to just shut it down If they were if they wanted to move on to something else, so they'll take your deal

[00:13:08] So maybe you would put a hundred thousand dollars down for a hundred thousand dollar cash flow business and then pay them the other hundred thousand over three years or something like that and And

[00:13:18] So it's still you could still make a living like someone who does this could make a living 100% well, that's one of the biggest reasons I talk about it Because I think we've gotten obsessed with this idea that we have to be so it can value multi multi millionaires

[00:13:31] And the average person doesn't even want that, you know They want to have enough cash to go to their kids baseball game Have a business that they get to run that they like and not have a ton of volatility or risk

[00:13:40] Like you and I have had in our careers. And so yeah, I think a laundromat is a very Straightforward way to do that, you know my first laundromat transaction was like a hundred K

[00:13:50] We bought it for but if like I don't know but it was doing a 60 to 80 thousand dollars and in cashflow and We got it for that amount because there's we had to renegotiate the lease. It was old equipment and

[00:14:04] But then you know, we got that business up to you know, maybe mid Mid 150 180 thousand dollars an annual profit But the beautiful part there is you know this then when you go to sell if you can buy a laundromat

[00:14:17] That's only doing 67 K in profit and you could get it to two hundred thousand dollars in profit or 150 thousand dollars in profit Then you can go and sell it for more like two to three to four X and

[00:14:28] So you can also make more money on the exit. Yes, see this is this is a very important concept that people don't realize You're the business value doesn't go up Linearly with the profits it go you just you bought something for one and a half times cash flow

[00:14:43] But if it gets bigger you could sell it for like you say three four times cash flow So you get you get the profit expansion and the multiple expansion and then if you buy multiple laundromats

[00:14:52] It could go up to five to ten times cash flow at some point So this is this is like a great this is like everybody says nine out of ten businesses fail

[00:15:02] Laundromats don't really fail like if or a good existing laundromat or in a community doesn't really fail So if you buy five to ten of them like you use the cash flow from the first couple businesses to buy

[00:15:13] Other laundromats, you're gonna probably make let's call it a million dollars Like that could be your first million just a very clear path to that a hundred percent Like I mean one of the first how long would it take as an employee to do that?

[00:15:26] Well Mike who ran some of our first laundromats, you know inside of three years That was a business doing nine hundred fifty nine hundred and seventy thousand dollars in revenue because we bought a bunch of laundromats

[00:15:36] And that was when before somebody opened their big mouth me and started talking about this publicly laundromats actually had us Lower evaluation and so we back there's like there's a little bit of a laundromat bubble, which is funny

[00:15:48] But back then nobody like if you had a business that only made sixty seven thousand dollars in profit Nobody wanted to buy that business because that's a shitty job, right?

[00:15:57] And so if you don't understand multiple expansion and if you don't understand ability to do value add and ability to do rollups You're not gonna buy that business And so we got some great transactions and then grew them slightly and all it is is private equity 101

[00:16:12] Done at the micro level done is that the tiny level? No, this is totally true like I will I will tell you back I think was about 13 14 years ago. I looked into buying laundromats I was seriously looking at laundromats in the Bronx in New York like that

[00:16:27] We're I know I should have but you know, there's a lot of should have a lot of things I always try to do but but it's really great because there are our websites to tell you which laundromats are for sale

[00:16:38] You can go visit with each one to see, you know What locations are good and what kind of work you need to do to improve them? And it's just a solid business and and like you say

[00:16:48] There's various ways to make sure that the exit is much higher than you would have thought initially So it's a good way to get started. So what other boring businesses did you did you buy like what did you do next?

[00:17:01] Car washes I still own a lot of those The car washes industry too because there's a company called Mr. Carwash. I don't know if you saw that public IPO but it IPO'd for I don't know somebody can check my homework on the internet billions and

[00:17:14] The interesting part is all it is is this same process a little bit More sophistication but basically buying multiple car washes Cleaning them up branding them under one name adding subscriptions aka reoccurring revenue adding some tech to them increasing prices and

[00:17:31] Adding a few more higher level services so in a laundromat that might be in wash and fold for a car wash It might mean like most of my car washes that I owned originally are what's called like single-bay their self-serve Maybe they're double-bay, but they're also self-serve

[00:17:44] And that means you go and you wash your own car with the you know with the host and And so these guys would take those and they would convert them to tunnels where you have to drive through it

[00:17:53] And so those that costs more money for a user so they make more money or They would be hand car washes and they would actually have had varying services And so one of the cool things you could do is you can go and basically look at mr.

[00:18:06] Mr. Carwash's financials and you can see what are they doing acquisitions at where are they buying them at at what valuation? What's their value add strategy because all you know It's not all but a lot of it is public and they report in their own earnings

[00:18:19] And so that's what I did now with car washes like is to cove it kind of add the to the risk factor because Car washers probably didn't do too well during that year or two

[00:18:29] Car washes were an essential service really how about that maples? Yeah, long-distance to but people didn't probably need this Well, I guess a lot of people are still driving but not as many

[00:18:39] So do people still need to what like there weren't as many cabs cabs are the biggest customers of car washes so like Well, well, so you have a more of an east coast mentality there most of everything

[00:18:53] I've owned in this space has been West Coast so cabs don't come into my equation typically what comes into my equation for car washes depending on what what type is Like is there some sort of outdoor activity nearby and holidays

[00:19:08] So on the West Coast you want to buy a car wash that's maybe located close to like the dunes or the beach or lakes or something like that Also, if you're located next like public fields

[00:19:18] Stuff where like moms go and drop off their kids or whatever and then they go get car washed simultaneously But during COVID we didn't actually have an issue obviously those at first month was mayhem

[00:19:28] Like I thought every single business I owned was gonna go bankrupt and I was gonna lose everything I was really invested in cannabis then to own a bunch of cannabis companies with our my partners

[00:19:37] And so I was like pretty convinced we were gonna be broke and that was a paranoia coming from the cannabis itself or It had nothing to do with the copious amounts I was using at the time um Yeah, it could be and uh and also

[00:19:54] You know at that time in California. I was living in San Diego at that time Um It was extra crazy because it was you know, california was obviously aggressively locked down Were you in new york for that or did you go to florida?

[00:20:06] I was in new york for a part of it and then florida because they didn't really lock down. So I made that switch Yeah So I actually didn't hurt us at all and the other thing that I thought

[00:20:19] That was one of my concerns. I was I don't own any car washes in california anymore But I was concerned that they were going to cut off our water access Because you know, they're they're very water conscious in california

[00:20:31] And so we had to do all these studies as an industry to basically show in fact When you use a car wash, um You have to have this process to recycle the water and so they're more environmentally friendly than you're using hose outside your house And so

[00:20:45] So how like what it was the first one like cash flow positive. Like what was the what was the first deal on that? Yeah, the first one was a single bay car wash. So, um cash flow positive Came with real estate small transaction

[00:21:00] I don't buy businesses typically that aren't cash flow positive in that portfolio And I just I don't really like to fund businesses I've never actually fund a business at a deficit for an extended period of time

[00:21:12] So all of those were cash flow positive typically those are businesses that I don't have to have an operator day to day Functioning because at the time I was still working in latin america or traveling around a lot in finance

[00:21:21] And so I just needed my one operator who could run a bunch of these businesses I always tell people the most important like having a good idea is like 1 of the process

[00:21:46] And then the rest is how do you de-risk the business because you just don't want to lose money Like you want to make money and and it's so easy to lose money and it's already hard work. Yeah, you have to

[00:21:57] So buying a profitable business already is one way to de-risk And of course buying multiple businesses ones that you don't have to spend as much time operating And all sorts of stuff. So do you still own the car washes? Are you still buying car washes?

[00:22:11] I'm still buying them. I still own a bunch of them Most of them are located in texas or the southwest now The other thing that's interesting about these businesses is, you know, when I when I buy a business

[00:22:23] One you typically buy them and they're already profitable. You want to have like a pretty quick cash repayment period Um, and so, you know, if I'm investing in venture It's going to take me seven to ten years to see if I made any awful decisions or not

[00:22:36] And in this I really want to pay back period That's like three to five years on my initial money down And so that's actually doable because there's not that many people who know how to do these types of transactions and that are buying them

[00:22:48] So that's interesting and I saw the stat the other day. We should verify it But 39 of all small businesses is that are startups brand new they don't fail I thought they would fail most of them would fail because they go out of cat

[00:22:59] They run out of cash, but it's actually just product market fit like they spend a bunch of time and money On something that nobody actually wants which I've certainly done that before and felt that before

[00:23:09] And so if you're the biggest reason why startups fail is they never hit product market fit The second biggest reason is They run out of cash then if you already find a company that's has product market fit people want it

[00:23:22] It's positive cash flowing. You've de-risked your business by like 40 to 50 So to me, I could never make the math not work On buying businesses for starting them unless like this business can turn thinking the media business

[00:23:35] I just like it like it's not where I make all my money But it's fun. So I don't mind the good thing with a media business is that Like you don't really need any money to start it. You just need to write like an email newsletter

[00:23:49] That's the beauty of the internet. It's there's no you're not mailing anything You know, there's no stamps or paper Totally Yeah, totally. I mean So choose yourself media which was how how I named it when I started my newsletter business around 2015

[00:24:04] We literally spent zero dollars starting it up. I already had a free email list from my writing And now I was just going to start charging for like a higher end version dealing with just like stocks and finance and

[00:24:17] Just the first year it was millions in revenue and not not not that much in expenses I totally agree. It's a and the cool part is it's actually just a funnel for everything else that you want to do

[00:24:27] So you're an investor you've invested a ton of stuff me too And now, you know, if I want to raise capital which I usually just raise from my own stuff except we have a small venture fund but

[00:24:38] I can do it from my audience which is really cool if I want deals I get them all from my audience if I want to sell a company the last laundromats we sold Came from somebody in my audience that ended up wanting to buy them

[00:24:48] So it becomes this virtuous circle that just makes a lot of sense to me Have you considered doing like like you said, you know rolling up uh laundromats is private equity one-on-one Are you considered doing like a small private equity fund focusing on roll-ups of boring businesses?

[00:25:05] Yeah, I mean we have our it's called main street holding company And that's my family office holding company that owns a bunch of these businesses Individually, I just you know, you remember what it's like to have investors

[00:25:16] I played that game for like 13 years and I ran a business and grew it to a billion dollars in assets under management at first trust um It's like having a thousand bosses, you know, yeah, it's unpleasant and they're all nasty

[00:25:30] Oh, and if if the market's tough you don't sleep, you know um And yeah investors aren't nice by trade because Contrary to what people think about people people on the internet You could say whatever you want and make a ton of money and you cannot be right

[00:25:43] And you can make a ton of money if you're not right in investing you go to the fuck of business like it doesn't You know, so you have to be right and you have to be mean

[00:25:51] And at a certain point I was just like oh god. I don't want to raise another fund. I've had like five different uh fund families that I've either run myself or run with partners and so maybe one day but

[00:26:05] But no right now I just say no to money which is also some how painful But I'd rather do smaller amounts myself, which is also why I like boring businesses Because you know, we have a SaaS company. We're working on

[00:26:18] It's going to cost me a lot of money To to build but when I go buy some of these laundromats I mean I use a line of credit on the cash we have or the businesses that we run

[00:26:26] Uh plus seller financing plus someone out down and you're like off to the races So what's another what's another example of like a boring industry that you would like to that you either Played around in or you would like to Play around in

[00:26:38] Yeah, well now I kind of have two I have two portfolios that I think are interesting So I always like to play this game. We should play it with you one is what I call media accelerated companies

[00:26:47] So those are like hi, I'm James Altucher. I have all these books I have you know my email newsletter I have This podcast and so one of the other early acquisitions I did Was a podcast production company at the time

[00:27:01] I was running a private equity fund with some partners and a bunch of our companies had podcasts So I ended up getting to know this guy through in this thing called strike fire productions And I was like dude, I could 10x your business right now

[00:27:13] Why don't you let me invest some de minimis amount in your company? And I want to own part of it and you can service all of our vendors And so I basically removed a liability and turned it into an asset

[00:27:22] So I am increasingly doing more of those like we own car washes. So I invested in a car wash software business Same with like auto mechanics and auto mechanic service business And then in the boring business side, which are the ones that we own like 100% outright

[00:27:41] I really like mobile home parks and RV parks. I'm trying to own more of those Oh, you know, it's very funny because I just um I invested in a roll up fg communities which uh is Rolling up mobile home communities and it's it's a great business, you know

[00:28:00] The biggest investor in that industry is A young man named Warren Buffett. So And and he he loved because that's a recession proof industry because of anything it benefits from a recession

[00:28:12] And a lot of people just in general after that, you know, baby boomers are getting older when they retire They they downsize and uh, so you're getting it from all directions and It's it's a very captive industry like once you move into your mobile home

[00:28:26] It's not like you can't you can't drive it away really. It's not really mobile And it's it's a it's a great roll-up business Yeah, I love I really like mobile home parks for all those reasons and also because

[00:28:38] Like the world is full of a lot of nimbies, you know, like not in my backyard And so it's actually hard to create new mobile home parks. There's a bunch of licenses They don't want a lot of them to be created. So it's a constrained market

[00:28:48] Plus they're um, they're usually not very big, you know, they're not efficient like New York City, you can have a high rise. That's what 50 100 floors and you can have thousands of units Having thousands of units in a mobile home park would be giant

[00:29:03] They're just not efficient that way And so because of that it's a little bit harder for the really big companies To go and buy the smaller ones and get scale There's not even a great

[00:29:14] Mobile home park property management company because again, you can't have the scale of thousands of units in like such density So I like that business When I do those deals I do it with a couple friends of mine because I'm not a mobile home park expert

[00:29:28] But I want to own more of those and the same thing with with our v parks too I also think our v parks are interesting because they're like a land hold So if it awesome, texas for instance If we want to own land somewhere

[00:29:41] But we want it to cash flow in the interim, but we don't want to spend that much money on building something out It's not that expensive to build out an rv park infrastructure And then we might just own that for like five or ten years

[00:29:54] And we know that it's going to appreciate at some point and the use case will be something better than our v parks I've looked into the rv park businesses as well and Those are great because there's a lot of

[00:30:06] A lot of just homes will say hey use my backyard We'll set up like something for one or two rvs and those aren't even businesses and you could buy The small rv parks for like zero, but the multiple expansion goes up very quickly

[00:30:21] rv park with like 50 60 or 100 rvs the multiple becomes incredible and it gets really worth it You know one thing have you ever considered like not campgrounds but glamp grounds so that high-end camping in a kind of uh, you know near near a national park something like that

[00:30:39] Those are great businesses because you could buy the land and or you could you know, whatever it is buy the land and then those go You could rent those out like 150 dollars a night hundred dollars a night

[00:30:51] For for a tent that costs you nothing like you don't have to build a house I know i have this friend rob built he's on the

[00:30:59] Interwebs and youtube and i keep trying to talk him into we own a couple of plots of lands and varying places with rv parks and And not but i'm like such a financed art at some point that i realize i'm actually not that good at

[00:31:10] Branding and coming up with cool ideas and you know somebody else decorated the office all nice I have an idea and here it looks awful out here when i do it And so

[00:31:19] My rv parks are like pretty standard. They're nice. They're up kept well, but they're nothing super fancy That might be something we do in the future But rob for instance will build like a crazy tree house

[00:31:29] That charges like 500 dollars a night. Yeah, and you see those there's like um There's like an air bnb for glam grounds or for out what it's called But like the tree houses are are people go crazy for but i i like your philosophy too

[00:31:42] Like the great thing about an rv park as well is you need an operator But you don't have you could maybe pay the operator nothing because if you just let them live there for free That's the wild part

[00:31:51] I always think it's so interesting because people on the internet always love to tell you the reasons why This stuff won't work. I'm like, well fine. You keep telling me why and i'm going to keep profiting off of it um, but the

[00:32:02] The thing about mobile home parks and rv parks is You're exactly right. There's like three reasons why the operators come in one They don't pay rent so you give them free rent to they make a de minimis amount of money depending on size of the location

[00:32:16] Typically now as you get bigger this changes and then three they actually want to pick their neighbors So like one of the big benefits is they they they screen everybody who comes in

[00:32:25] So, you know, they're like no you can have this location. You can have that we're going to do this You know and they basically use us to sort of Add value adds to their land where all their buddies live

[00:32:36] And the other thing is you don't have to you don't have to build their house for them They just pull up in their rv and and park and then that's it like I compare that to like all the people who go tens of millions of dollars in debt

[00:32:48] By land to do housing development without knowing they're not going to know for years if there's a really a market for these houses and It just that seems like you've taken on maximum risk now real estate as an industry has de-risked itself in a variety ways

[00:33:02] But the rv park thing there's like almost zero risk Particularly if you're buying under an existing business that already has rvs on it Yeah, I think you're right. I mean you have to I don't really like debt a ton

[00:33:15] Which doesn't make sense for a private equity investor, but like when it's for me Myself I don't want any investment to be able to take me out at any point that that keeps me up at night

[00:33:24] And so what I like about these kind of investments is they're not very cat-backed heavy You're right Like you don't have to build out hundreds of millions of dollars in order to do this and raise hundreds of millions of dollars in order to

[00:33:34] Do it and I like your approach of building ancillary Maybe slightly riskier Let's say software businesses around the industries that you're rolling up. So for instance, you could imagine um with rv parks there's a variety of services you could uh provide to your

[00:33:53] The rvs on your land that that could turn into businesses whether it's laundromats or car washes or whatever Then there's software of for rv parks in general like scheduling and and booking and so on that you could that you could provide

[00:34:06] That's exactly right. Yeah, we bought a company called Approachment And the company all it basically does is have 24 7 Uh available chat with real humans also augmented by ai and then a like a little bit of a data back end about

[00:34:20] What's happening with your chats how the conversion is looking whatever because our small businesses we realized You know, what's the difference between one handyman and another handyman? It's just whoever responds to you faster that has good reviews, right?

[00:34:31] Like that's who you're going to go with you're not going to do a lot of due diligence on who your handyman is So the biggest likelihood of you to close business that is a small business owner is just respond faster It's literally like the number one hack

[00:34:43] To do more sales in your small business And so I was like, well, how can we just easily? Oversee all of our small businesses and how fast they respond and do it with you know Kind of cheaper labor and that was this company

[00:34:55] And so we bought that company because we want to plug it into all of our underlying companies so that they can respond immediately To leads Now is was that a more expensive purchase because they probably viewed themselves as a tech company and they wanted like a tech valuation

[00:35:09] And and so on Yeah, that one wasn't but it was it's such a small business. So we bought that business for 75 thousand dollars I think it was 60 thousand dollars down and then another 15 thousand dollars after he transitioned some of the software to my operators

[00:35:23] But the reason that was so cheap is one we kept the operator on I think he still has five percent of the company his name is mike We kept him on he owns a bunch of businesses

[00:35:32] So this was just one small one of his and again common thread I suppose is we were like we're going to grow this so much bigger

[00:35:39] So originally if you could imagine when you got in the back end of an approach meant it's kind of a clusterfuck there was like Everything was manual. It was a software company, but not really and You know, there was a ton of processes that weren't right

[00:35:54] And so, you know, we have this guy willard who sort of focuses on tech for us And so he got in there with rod the operator that we inserted and basically took out 60 percent of the manual processes

[00:36:04] And inserted technology into it and so because of that we can now handle a lot of scale now. Don't get me wrong I actually don't love One i'm not an expert on buying sass and figuring that out now as we go and two

[00:36:17] I don't love buying companies that are that small that um need You know what you and I know is called a turnaround Because the problem with that is turnarounds take a lot of work And so I wouldn't recommend somebody does that for their first deal

[00:36:31] But let's say you own like a bunch of laundromats a bunch of car washes a bunch of rv parks And now you buy this business and suddenly all of your businesses Pay that business a thousand bucks a month for their services

[00:36:45] And so now you have a tech company with all these revenues and now you can go out to Silicon Valley and raise money Hey, we have this ai customer service company And it's got 50 clients of small businesses. We want to take it to the next level and

[00:36:59] It seems like you can get real multiple expansion there just by throwing in all of your Companies as clients to that 100 percent plus audience. That's why it's so powerful I mean we bought part of another company called viral cuts and that company just does video production

[00:37:14] It's a service-based businesses business. And so it's just an agency, right? But um We have too many clients for them to be able to take so we wait listed it But our businesses get priority. So I think Most small businesses

[00:37:30] Like again, we already talked about one thing that they don't have which is they don't respond fast enough The second thing that they don't have is social proof

[00:37:36] And so one of the best ways to get social proof is actually video because it's now searchable on google in a way that it wasn't And there's ways to go viral with you know

[00:37:45] I have a friend who went viral with just counting the coins out of his laundromat and And car wash and so there's all these ways to go viral And then you can use that to get more reviews. And so

[00:37:57] We'll see if these are smart strategies. We've only started the media accelerated business in like the last year and a half I I really like this idea though because you have a built-in client base with your bread and butter businesses

[00:38:09] So and it's just moving money from one business to another. It's not like the you know, you're not really losing the money So, yeah, I mean we stole the strategy from amazon, right? That's all they do

[00:38:21] They just go down their vendor list and they go they go down their vendor list and their competitor list And they basically say which of these should we own or buy?

[00:38:30] And uh, and so I said, why don't we do the same thing? Let's just look at our pnl See what we spend money on and which of these should we buy and I can't buy amazon But maybe I could buy some other smaller ones

[00:38:40] So so that's interesting. So what does am what does amazon bought that was you know something they spent money on I guess like aws they spent money on storage. So they built that Yeah, I mean we could go look there's like they've done like uh close to 200 transactions

[00:38:54] Oh diapers.com they bought back in the day like 2008 Totally they also bought obviously Whole Foods, which would be a competitor in some way shape or form Um, I always thought they bought Whole Foods for the to turn them into warehouses

[00:39:08] But that actually doesn't seem that smart. So they probably use it for the grocery Oh interesting. Yeah, I don't know. I mean look at these like um egghead software I'm assuming they needed some of that for their the back of their tech stack

[00:39:22] Um, what else did they make custom flicks small parts.com? So that was probably a competitor to them shop bop competitor also text pay me, which why I would assume Oh, yeah, that probably added functionality to their payment system um

[00:39:37] So, you know, I think look it looks like they've done 200 I don't 116 transactions that are public Uh, but I bet if we looked at a diagram of like Horizontal transactions vertical transactions. So competitive transactions or you know increase in each client's ltv It's probably a mixture of both

[00:40:12] Where have you found like your biggest risks in buying these businesses? Like let's say the laundry mats or the car wash is like when have you been afraid? Yeah, it looks like what have I been afraid in my businesses one I don't like one business that I bought

[00:40:28] It was one of the ones that I was friends with the guy, you know, I got defrat it on So like where the risk in the businesses? I was gonna say I was going to even prompt you was that

[00:40:38] The time you were because the people is is the whole risk really It's it's always you're right. It's always people or maybe government regulation Those are the two like again if they stopped my ability to run my car washes because of water or because of coveted

[00:40:54] those are the two times where I was like, oh my god, we might go out of business and Uh, same thing in cannabis. Like I was like, oh my gosh, they're gonna, you know, outlaw this

[00:41:02] So I think I have a lot of government fear. Were you buying like cannabis stores or like retail outlets? All everything across the the sector. So we owned like packaging companies. We owned product companies. We owned distribution. We owned software Um, how'd that go?

[00:41:18] Well, the first two funds went awesome and then thankfully the third fund I was like, I just feel like this market's so frappe You remember that I was like 2019 and cannabis was like

[00:41:27] It was huge. Yeah, and but then it kind of fell apart all of a sudden in terms of valuation Massive fall apart. So thankfully we our very first fund was in like 2014 I think that the guy who started the company started at then I was an investor

[00:41:41] And so the first two funds did great and then thankfully I didn't participate in the third I left the company and started doing my own thing. Um, so I think cannabis is hard right now I still think the asset class makes sense

[00:41:52] But it's hard to make money when the government taxes you to the level that they do I think there's just too much government regulation there. Like you're completely reliant on government regulation Yeah, and you're competing against people who have zero taxation and zero regulation. So that's super hard

[00:42:06] Plus I've changed my stance a little bit on it. I used to think that um There was nothing wrong with cannabis that it was like, why wouldn't we leal it just like alcohol legalized it just like alcohol Now

[00:42:17] I'm a little worried about how high the thc levels are in some of the products. I don't love that. I'm not sure that's good for society But what about services businesses? Like again, if the business is the people like let's say you buy a company that does plumbing

[00:42:31] Is there a risk that the people leave after you buy the company For sure So typically a lot of this all the risk comes down to doing the due diligence up front

[00:42:40] It's kind of not that dissimilar to real estate and that like you make your money on the deal So like here's how people screw up and buying businesses one They take on too much debt like a big sba loan or something like that and they don't realize

[00:42:52] Things like debt service like interest rates What the variability on that could do to the business and they run out of cash And that's how things can go really sideways in buying businesses So I'm super thoughtful on how I finance the deal and making sure

[00:43:05] You know every time you buy a business you're at an information disadvantage The owner of the business has run the damn thing for 10 years plus and they've run it largely in here It's not written down. It's not processized

[00:43:16] And so no matter what they know more than you and so you have to negotiate to a level where you go The thing is you know way more than me I'd like to believe that everything you say is true

[00:43:25] But I don't know and so because I don't know I have to do the deal differently You have to give me more cash In seller financing or I have to have hold backs. So you say that you do 300k

[00:43:37] I think you only do 100k, but I'll pay you your amount if it shows that we do 300k And so debt is really really risky And the other thing that's risky in the business is time. It gets it's straightforward money and time just like everything else, right?

[00:43:50] and so if you take over a business and You don't have in your contract that people need to stay on board Otherwise x happens or the operator has to say for a certain amount of time

[00:44:03] Otherwise you pay less money for it. Then that can certainly be an issue And so like like walk through your process. So where do you where do you first find the business?

[00:44:14] Are you like scouring the the websites like, uh, you know, like I was just looking at one of the websites You recommend biz buy sell dot com. Yeah Do you like to scour those for looking for good solid businesses or what's the start?

[00:44:27] I typically don't do on market deals like that. So the way that I like to buy businesses is a couple things that are easy There's so many ways to do this, but let's just take like a super easy way one

[00:44:39] I think is your personal p&l review. So like What do you already spend money on where you could get to the owner that you might be interested in buying that business? And can you start a conversation so that for somebody listening could be as easy as

[00:44:50] Oh, I pay my cleaning lady by Venmo every week or I pay my landscaper by vending Venmo every single week. Um, I know they're the owner of it

[00:45:01] I wonder if I started talking about how much money they make and is it a business or is it just a job? Could I buy something really tiny like that? Um, and then the next level would be run due to the same thing for your credit card

[00:45:13] Like what else do I spend on that? I don't realize that I could get to the owner And then the third level from that is usually

[00:45:20] Every time like if you were with me, it would probably annoy you at some point every time I go into a small business anywhere it's kind of like it's just You know a habit now, but I'm always like oh, this is so great. Are you the owner?

[00:45:32] Who's the owner of this place like tell me your story? What's going on? And so everywhere I am I kind of can't help it and so You should try this sometime if you're ever in a group of owners ask a group of owners

[00:45:44] Raise your hand if you own a business they'll raise your hand and then go okay. Keep your hand raised if you um Would sell your business at the right price in the right terms

[00:45:54] And what do you think the answer is like everybody's like yeah for sure hands still up Um, and so business is painful And so a lot of these business owners have been doing it for 10 15 20 years and they're just ready to sell

[00:46:06] So everywhere I go and really important that most people don't know the statistic But something like 70 of businesses Don't sell when the owners are done. They just shut down

[00:46:17] It's wild. I've really tried hard to find a statistic that I felt super comfortable with but I think you're right I think it is something like 50 to 70 percent of businesses just shut down and that's like

[00:46:29] My little story about one of the reasons I even started doing this is because my uncle up I mean You could look it up ebb homes plum in and he had this company For decades and when he got cancer and he started getting sick

[00:46:41] The company did millions of dollars in revenue five to six million dollars in revenue probably one to three million dollars in profit and uh He shut the business down. He had no idea. He had a sellable asset

[00:46:53] It actually cost him money to shut the business down as opposed to being able to sell for millions Which would have set his wife up for life. And so it happens all the time

[00:47:03] Yeah, so so it makes it easy to begin the negotiation when their alternative is zero Yeah 100 percent. I mean Let's say you didn't you know, you said the guy who runs your podcast is the same jay Yeah

[00:47:16] Okay, so let's say like how I bought that first podcast production company Is I was on a podcast like this was somebody listening to one of our portfolio companies and I knew the guy um, and so I was like hey man, uh

[00:47:28] You run this company. What is this? You have a podcast production company. That's cool Like how much money does that make and oddly people answer that question like all the time especially if you go first like Oh, yeah, like I run a small business

[00:47:39] You know we do less than a million dollars in revenue But it's really interesting sometimes hard sometimes not and then you ask them they'll tell you and he was like

[00:47:45] Yeah, but I I hate sales and marketing. I hate I'm so good at production and running this by hate selling it I was like I would hate running it but I like selling things and so

[00:47:55] That was how I got that first deal and I particularly if you have again built-in client base So you have you have two built-in client bases You have the or three you have companies that you own you have companies that you're invested in

[00:48:06] And you have your your newsletter audience, right? So you're able to I should probably do this more with my newsletters like it is a good idea Jay you could probably start your own podcast production company. Yeah, there you go jay and give james half of it um

[00:48:23] Jay's so greedy. He won't give me even one percent of it. No, I will I will give you 0.5 percent Thank you jay. I would appreciate that Um, you'd have to be meaner james and negotiate for more. I'm too nice. I'm like jay do this

[00:48:38] Spend less time on my pocket. I make a ton of money and don't give me any of it. Yeah, that's not good I don't like that for you, but I do think that

[00:48:47] I think there's so many ways people could do this continuously and in fact, I hope they do because The funny part is like all the big boys do it This is how so they end up buying all the little things and aggregate thing aggregating them and uh

[00:49:00] And I don't think the process is that different for those of us that could do it one-on-one No, I always think the the best and safest business model to get wealthy is the roll-up strategy The idea of picking an industry

[00:49:12] That's already profitable and just buying up as many things as possible without screwing it up somehow and then Flipping it just taking advantage of that bigger multiple as you grow and flipping it

[00:49:23] Like there are so many private equity funds that have made billions this way as opposed to taking like massive risk in In VC style investments, which is very very difficult and like you say you don't know for like eight to

[00:49:37] Sometimes 15 years whether it's going to pay off or not and it's very it could be a very lucrative way to make money But it's it's much more difficult and you have to wait a lot longer to see before you see cash flow

[00:49:47] Yeah, and I was never like an idea machine like you so I was kind of like I worked in corporate I worked in finance for a long time I never had something that I thought this thing needs to exist in the world

[00:49:58] And I was too big of a wuss to do it I liked my paycheck. I didn't want to sleep on a couch. I wanted a nice house Like I just didn't have that risk

[00:50:07] Thing in me and my parents, you know immigrants. They're like who talking about leave goldman. You an idiot and so Um, I like what are you doing for golden? Uh, well when I left gold men, I was working on pep

[00:50:20] I don't remember if you remember that the private equity product that they had Um, and I was trying to figure out that was 2009 And I was a little peon. I was an analyst at the time

[00:50:32] And I was trying to figure out what do I want to do like there's no deals happening because Goldmans like we're on we're getting trials every single day That was when they were going to testify before congress

[00:50:44] And I was trying to figure out well, what do I want to do? Do I want to go and do I want to build out and go be more of this private equity side?

[00:50:53] Do I want to stay in investment banking? Do I want to go into the asset management division? Do I want to go into institutional sales and so Eventually, I only ended up staying at goldman for two years just shy because

[00:51:05] One it's just a hard place to work for sure. So I was a little bit over that after a while and two I was worried the firm, you know, wasn't going to make it and they were they're cutting off everybody

[00:51:14] I mean, I think they they fire 20 percent every year But that year they accelerated all so a bunch of my colleagues got, you know fired with the boxes and security Tured a real time and you know, all this sort sort of brings into question like

[00:51:27] What should one do with one's life? Like Everybody thinks oh, I want to I love baseball So I should do something with baseball or you know and make a living with it I should pursue my passion and monetize it. But you could be passionate about

[00:51:41] Rolling up boring businesses making them successful You don't have to operate the laundromat like you say you can find operators or people to help you with that And so you could really kind of focus on the parts of business that are enjoyable and

[00:51:54] It doesn't have to not every you don't have to check the box on. Oh, yeah, I love laundromats I love finding the right detergent for things and like it doesn't have to satisfy every It had not all that has to be joyful

[00:52:09] No, but I mean, I don't know how you feel about this, but I think every business Is the same every business is a widget business at the end of the day. You have marketing and sales you have Finance you have operations you have product you have customer service

[00:52:27] And so every business like has these five components to it And so a laundromat is actually not that dissimilar from a media business It's just they have a different widget that they sell

[00:52:37] And so if you like the game of business, which is really just problem solving in a way that makes you more money And hopefully gives you a better reputation and helps the people that you serve

[00:52:46] Then I don't think it actually matters if you like the game of business. Who cares? I have just as much fun running some of our super boring businesses. In fact I have way more fun running our boring businesses than I do our sass companies

[00:52:57] The sass companies are like For me because you can't really see what's happening because I'm not a back-end engineer until they get there I'm not smart enough to understand all the intricacies of of that business I can't like really get my fingers in it

[00:53:10] But like I can see what we do with the laundromat. I can see the changes that we make if we buy an RV park Also, this sass business you're taking a risk on product market fit. So you might Buy this thing that people just don't want

[00:53:24] And then you're screwed now you might say they want it because your businesses want it So that's that's a good indicator, but you just don't know if it's like a hundred million dollar business or a nothing business

[00:53:34] Yeah, I agree. Well plus, you know, I've met so many billionaires by now just from being on the internet it's like a weird thing that I never would have thought of as a kid and

[00:53:46] Man not very many of them are very happy or what I want to change places with them And a lot of them got there from sass companies the ones that I've met or from doing these giant huge transactions

[00:53:57] I don't know. I like I like money. I want more of it I'll play the game of seeing what it feels like to get to a billion dollars, but I think most of us actually just want businesses that we can have some ownership in and

[00:54:08] That we can actually see and touch and feel in some way and have some measure of success So I've always associated with that a little bit more. Well, I think I think you know, they look at the kind of

[00:54:20] Three components of what makes up well-being. I mean this is from In the field of positive psychology and one of those components is freedom And so if you think about it money doesn't necessarily get you freedom like you could have a billion dollars and and still be

[00:54:34] trapped in a loveless marriage or By all these big houses and jets so you're still in debt and your your your businesses are always on the brink of

[00:54:43] Losing money because of the debt even though you they're worth over a billion. So or you can have all these cash flow positive businesses Live in a nice place going vacations Not have to operate as much as you thought you were going to have to and that's freedom

[00:54:58] Yeah, yeah, I totally agree. Yeah, and then you get to build from a place of simplicity I also think you know in life everything just becomes more and more and more complex And one of the joys in life to me has been making things slightly more simple

[00:55:12] And so I really somebody says like oh this is like some patent pending technology. We have intellectual property I'm like the thing is I'm not your lady, you know find somebody else for that I want it to be so easy. I can explain to my grandmother

[00:55:25] And if it's not that then there's already enough risk in business and execution and humans And so I'd rather take the risk on that than Innovation risk. I'm glad other people take innovation risk though although the media business is interesting because

[00:55:40] It's somewhere in between like a boring business and a too risky like software business So the media business you You you could be profitable right away. It's just every news you start your newsletter and or a course or whatever and if it if it sells

[00:55:56] you're making money right away and There's something extra about it Which is that you're building this personal connection with your readership or your listeners and I find that to be very pleasurable

[00:56:07] Like that so another component of well-being is community and it builds this community of like-minded people they Subscribe to what you believe in and and and they're willing to communicate about that and talk about that and you learn from them

[00:56:21] And they learn from you and that's a very pleasurable thing as well. I think Yeah, well when I was in finance I looked around at the other mds and partners and their lives and I could not see myself in any of them I wanted no part of

[00:56:34] five to seven divorces multiple fast cars nights out at tau it just was not interesting to me and Then when I look at the the you know people that I work with now in the media and the people we get to serve in media

[00:56:47] It's just for my ego at least it's more satisfying. It's really cool. I'm sure it's the same for you You get these emails from people that tell you how amazing you are that you did this and this and you change their lives

[00:56:58] Let me tell you your lps never tell you that you changed their lives I will tell you one time in when I was running my I was running a fund of headshones for several years and uh

[00:57:11] One time I was up 13 months in a row and I never heard from anybody which was great I didn't expect to hear from anybody but 13 months in a row. I was I had positive returns And then one month the 14th month. I had a negative month

[00:57:24] I got a call from every single one of my investors like what is going on You know, is is this are you a fraud? Is uh, is is the market collapsing? Uh, I could have told you that this was going to be negative this month

[00:57:37] Like why you should have like listened to you should have called me and I was down a half a percent that month So and I got a call from everybody So that's actually the month I decided to

[00:57:48] Unwind things and shut that particular fund down because it was just so obviously like Not a friendly business, but you're right. Like I love when something I produce Like helps helps somebody like people always say to me like

[00:58:02] Well, I started writing about stocks in 2002 and people would say well, why are you writing about this? Why don't you just do it and I was I was doing it also but

[00:58:10] But I just loved writing about it and I was making money from the writing and it was a good diversification for me at the time And I was building that skill set and and I was meeting people

[00:58:20] I built a community around it like a lot of my friends now are from that that period Yeah, well, I think you probably know this already, but like for a lot of us in finance

[00:58:31] Um, it was super looked down upon to even ever talk publicly about what you were doing And I remember when you were writing that stuff originally. I was still in finance at the time and

[00:58:41] You know, like I think we had to we had to run our tweets and linked in posts past Compliance, you know, like we couldn't post anything anywhere And this idea that we would share our homework was so frowned upon

[00:58:55] And people kind of thought oh god if you talk about it publicly, you must not be very good at doing it And so I internalized that And then at some point I got over it, but it took a long time for me to think no

[00:59:08] It's okay to tell other people about the secrets that we kind of learned in finance or the practices we have or however you want to Say it And I've always I need to do a math model on this but

[00:59:18] If I like you're smarter than I am at this so you could do this quickly, but I again, I doubt that You're you already I I'm gonna stop you right there because you've already used words like de minimis Which I have to look up later

[00:59:29] So I don't I don't necessarily think I'm smarter than you Okay, well, you'll have to teach me chess later. I'm incompetent. So, you know, when I look at the returns that you could make How much more money would you make?

[00:59:42] if you were taking two and 20 percent of the things that you did And or if I was taking two and 20 percent of all of the people that I raised money for um to buy the boring businesses

[00:59:53] As opposed to uh, if I teach some people or talk to some people about how to buy boring businesses Well, if I teach some people how to do it, I don't know max I could probably get them to pay as like 10 000 a year which maybe is a lot

[01:00:06] But if they then go and execute on that business and they make 100 000 a million 10 million dollars I would actually much rather monetarily have the two and 20 on the roi And they would much rather learn it and keep all of that

[01:00:18] Then on the fund model average return and private equity is eight to 10 per year would be would be great And maybe you could have some funds that are averaging 15 to 20 percent That fund model is going to make you the gp the fund manager rich

[01:00:34] But it's never going to make the investor rich You already have to have money and it just grows your pot. And so I think that's why it's so It's hard. I think for me that was what the hard part about raising money for funds

[01:00:46] Is because when you're raising money for a company, you could say look I'm raising money at a three million dollar valuation But eventually this is going to be worth this could be worth a billion dollars. So that's an easier sell

[01:00:56] Then oh, I'm raising money for a hedge fund I think I'll do better than the average hedge fund so the average hedge fund does seven or eight percent a year Maybe I'll do nine percent a year. No one's getting excited about that

[01:01:08] I can never really figure out how people raise like billions of dollars in a hedge fund And then you look at the big hedge funds. What do they own? They own Microsoft amazon

[01:01:17] Exxon it's like and then they're charging two and twenty on something that everybody could just do by themselves Like I just think it's a whole scam industry So every time I look at the k1s. I always get a little chuckle But you know, and I also think

[01:01:31] You know as investing so much of the world pre-covid or now I'm going to sound like it's conspiracy theorists but like pre the pandemic I sort of believed everything everywhere I think and then when that all started going sideways

[01:01:43] I started looking at things differently and that was right about the time that I started talking about stuff online because I thought Well, this is ridiculous I could make all the money and make generational wealth or we could talk to other people about it

[01:01:54] I could have more fun They could make the money and then I don't have to have a bunch of LPs again. That'd be kind of fun And then uh, and then I realized oh no, of course

[01:02:03] Wall Street isn't incentivized to do that because they want you to keep making two and 20 plus They don't want to teach you ways to do seller financing because the bank wants to get the interest rate

[01:02:12] They don't want you the seller to get the interest rate and they want to be the middleman Plus they want to IPO you eventually And then the same thing I mean everywhere you look at institutions. You can just get disenfranchised really easily

[01:02:22] Yeah, look at look at the typical bank, right? They want to manage all your money and put There's the whole model like to for for conservative investing put 60 percent in stocks 40 percent in bonds

[01:02:31] That means a hundred that means they get to manage 100 of your money and take a fee on it as opposed to like a smarter way to invest in stocks is Keep 80 in cash and For for stocks that you think could go up 10 x 20 x

[01:02:47] Put one percent of your portfolio each in that and then you'll you'll probably do Much better than putting 60 percent in stock eight 40 percent in bonds being subject to the winds winds of the market every year and

[01:02:59] Paying, you know a huge amount in fees to the bank, but of course that's what the banks want you to do They make transaction fees they make fees on on how much money you have with them It's it's just insane way every you have to basically

[01:03:10] Shut down all the institutions to kind of think independently You really do and even you know, then they want to actually go use your money to do the thing that you should be doing

[01:03:18] Which is let me go lend to small businesses because I'll take a percentage of that revenue and oh by the way I'll also take that capital and I'll invest in impuled securities that'll go and buy the small businesses

[01:03:29] And so yeah, I got really disenfranchised with the whole model. I mean not to mention when you go deeper You're like fuck so the average employee gets an increase of three to five percent per year if they're lucky

[01:03:38] Let's say you're exceptional you get eight to ten percent per year Okay, but you have the highest tax bracket with no ability for deductions as a w2 employee unless you have

[01:03:48] Outside activities and then you compare that to like well, maybe I go and I put my money in funds Okay, you're going to make eight to if we're really being generous 20 per cent per year

[01:03:57] Or what if instead you just bet on yourself and your whole bulk was about that, you know It's like, why don't you instead invest some money? Maybe you keep 80 percent of it in cash and that 20 percent

[01:04:08] Go buy a business go build a business and bet on yourself with that cash instead Exactly. So let's use your what your course is as an example What what's what's the course called that allows teach you how to buy a business? It's called contra and thinking

[01:04:22] so okay, so what How much does that cost course cost? costs uh $2,000 So you could basically invest $2,000 in yourself by taking this course and then try to buy one business for $50,000 which Has let's say $40,000 in cash flow

[01:04:41] You run that for a couple years are going to make much more than the $2,000 you invest you can make hundreds of percent more You know in a kind of a worst-case scenario you're gonna make hundreds of percent more than you invested and Why not invest in yourself?

[01:04:53] So there's a time aspect but not as much time as you think once you get used to doing things like that What once you get used to invest like if you buy a camera for a thousand dollars and have one friend with a wedding

[01:05:04] Who wants you to shoot the photos? You just made 100 on your money. So again, it's it's If you could properly invest in yourself and understand that you know How to do it so it doesn't take as much time as you think It's gonna be much more successful

[01:05:19] I keep trying to tell my kids this but they don't understand the concept yet. So they become Waitresses and other things that they're just working by the hour and it's it's brutal And I keep telling them there's so many other ways to do it

[01:05:33] I think they just don't kind of hear it from me yet And I'm not I'm not very pushy about it like I say look whenever you want to hear about it Now I just direct them to other things

[01:05:41] So like I direct them to your newsletter where they could maybe See someone like them who's who does it and they could learn from that Yeah, I mean I think especially for kids that age what they should be doing

[01:05:53] They should definitely go and bet on themselves because the worst thing's gonna have that's gonna happen As long as you make sure that you use debt carefully debt is like the only thing that is the

[01:06:01] Astrix to buy in anything which is just you have to be careful how you finance it But as long as you make sure that you're careful with that astrix What's the worst it's gonna happen? You're gonna go you're gonna buy something You're gonna do it intelligently

[01:06:14] You're gonna learn a shit ton and it might take up more time and energy and it might not work But by the end of that transaction I can pretty much guarantee that you're going to walk away a totally different person

[01:06:24] And I certainly did those first two businesses that I had that didn't work out Um, then I knew how to do deals And like that ability to do deals has taxed what I ever would have made if I just kept doing it for other people

[01:06:37] It's very it's very valuable like to use the phrase the art of the deal is is very difficult And it takes a couple to understand The the language of doing a deal and I don't mean like the vocabulary of it

[01:06:48] But just kind of like the flow and rhythm of a deal and and the psychology of it Like all these things come into play you have to be a better a better version of yourself to get better at deal making Yeah

[01:07:00] You know and it's interesting because then like take your newsletter so The great thing about like I said, you have to become a better version of yourself. You're able to then now Contribute what that means like you have an article about or a newsletter issue about, you know

[01:07:18] 12 steps to a good marriage because obviously when when two people are living like alternative lifestyle You're buying businesses. You're you have to work really hard. You have to you know do all these things You know Just every marriage in general has its complexity

[01:07:31] But then a more offbeat kind of lifestyle leads to a more offbeat kind of marriage You're going to have issues and understand and and now You're not just the business person that nobody knows about you have a newsletter with a community where you're able to express

[01:07:44] this is what I've learned from The ups and the downs from the failures and and by the way, you have a very good way A very good style like in that article you mentioned how first you got a divorce from somebody

[01:07:57] And broke their heart and it was very difficult for you and your mom's crying And so it's a good way to begin it every you draw everybody in and then you give very good advice on

[01:08:07] You know your how your current marriage, you know stays afloat even during tough times like I really like those ideas I like the idea of like If you're watching tv together sit next to each other and touch each other

[01:08:21] Even if you're just watching tv, it's a very good advice. Most couples don't do that And and you know you have your whole team acronym Um, what's what's the e again? But what are the what's what's the whole acronym?

[01:08:30] Yeah, so team actually I stole it from my therapist. So I can't take full credit for it But by the way, half my newsletter is I steal from therapy. So don't give your therapist credit

[01:08:39] Like she's never going to read your newsletter. So you're okay. That's true and I do pay her but um, It is so it's uh touch. So at the end of the day basically team is this

[01:08:49] Uh, the idea is I fucked up a marriage before takes two to tango, but it didn't work out It was super painful. It's really expensive. I don't want to do it again

[01:08:57] And I think like people should be more honest about that. I'm not saying I'm some sort of therapy rock star I'm not this just works for us. But um, it starts with touch

[01:09:05] So basically at the end of every day we get together my husband and I for a few minutes Maybe we have a glass of wine or whatever we hang out Maybe we're holding hands or I'm kind of sitting next to him

[01:09:13] And that's important because you got to remember you're not roommates And then second is e for education, which means instead of just going how's your day honey? Great I was here. Okay, cool. You're like, what's one interesting thing that I learned today

[01:09:25] And we actually think about it. So it'd be like, huh, you know, james told me this today And isn't that interesting and he we would share and then it's appreciation So even if I'm super mad at him I might be like

[01:09:36] I really appreciate that you took out the trash today You can't repeat appreciation because then it becomes meaningless You have to keep coming up with new ones But one thing you appreciate about the other person

[01:09:47] And then lastly is metrics. So we try and I'm not saying we do this all the time But we try to not do those little nags throughout the day like God Your coffee cup you're this you're that you're whatever if it's not catastrophic

[01:10:01] Then we write it down or save it for later and at the end of the day we go Really is kind of bothering me that lately you leave your underwear everywhere And when you're not aggravated and heightened by it and when you're not getting nagged all day

[01:10:14] It's just easier than at that point by the end of the day. You're like, you know what that is kind of annoying Okay, cool. I'll work on that and

[01:10:21] So that's team and we try to do that at least I would say we're pretty good at doing it about 60% of the time and see Not only is that great advice, but it's great that you have found a vehicle to express it

[01:10:34] And readers who will listen to it like that's really the benefit of the media business You've built this expertise on business, but now you're able to Basically share your life with people who want to hear about it. They don't want to just hear about

[01:10:46] Okay, I want to buy the which linger mats today should I buy They want to hear about cody sanchez and that's the reason to build a newsletter business is to take all of your skills and all the things you're learning

[01:10:56] And because it's all linked you can't you can't run a successful business unless other areas of your life are As performing as best as they can so and that's not always true like with with every business

[01:11:08] I'm sure there's like billionaires out there who treat everyone like shit and And somehow succeeded but in general like the easiest way to success is if all parts of your life are humming along smoothly and

[01:11:20] And you're able to express that with the media business. I'm I'm sure you you That's the one thing you'll probably do the longest is my guess is You know your contrarian thinking and the newsletter and and the courses and so on because you get real

[01:11:35] Other other benefits from that other than just the the money 100% well, also I think in this in this world today attention is our most precious commodity and the the weird part about attention I was talking to my

[01:11:49] My hairstylist the other day about this and um and I was saying gosh so bizarre how Styles come and go we're talking about plastic surgeon or whatever And uh, and I thought about it, you know, I don't have a problem with the Kardashians

[01:12:00] I actually think that from a business perspective they're genius and there's so much I would want to learn from that From an ethical moral standpoint standpoint, I happen to have like a different set of things that are important to me Not better or worse just my own version

[01:12:13] But think about the trickle down effects of their attention So their trickle down effects are so intense that when a member of that family gets a certain type of surgery or in this specific instance when they go from being

[01:12:27] Bigger and curvier and brazilian butt lifts to now super skinny ozempic What does society do well a bunch of the other people right underneath them go and kind of follow their homework And so then society actually starts changing the way they look

[01:12:40] Uh because of one person's ability to capture our attention And so once I started seeing that I thought one the universe hates a vacuum So it's good There are people like you in this world that are creating content that

[01:12:51] In my opinion is maybe more morally useful or ethically useful for a cohesive society and then two If you are a business person and you see that you go wow The you can't even measure actually what the impact you could have from a business perspective of attention

[01:13:08] In the way that we used to measure ppc with ads and so I think you're right That's that's interesting. I You know, I haven't been I have been writing as much lately as I used to I used to write like every single day

[01:13:19] And now it's it's much less frequently, but I've been thinking of scaling that up again So we'll see maybe you just convinced me you should do you still do your 10 daily ideas? I want to james Oh, yeah, that idea notepad That that that I always do so

[01:13:35] Now you need one on boring businesses like which ones are you going to buy for your ecosystem? I I've done I've done the boring business list before actually several times And particularly when I was looking into the laundromats and campgrounds and things like that

[01:13:49] It's would you do a restaurant? I'm a little bit of The answer is no, I hate restaurants. I don't think that those are good businesses just from a numerical standpoint They fail a lot They have spillage. They're hard to run You know, they they have uh in my

[01:14:06] In my belief one of the hardest, uh, you know employee bases to manage That said I do own a percentage of a couple restaurants So I'm a I'm a hypocrite, but they're not my favorite business and I would not do it as a brand new business for sure

[01:14:20] I think also probably the multiples are are too high because they're a little bit more fashionable than a laundromat Right. Well and the build-out costs like I invest in this

[01:14:29] It's a restaurant here called the well that I own part of and you know, the build-out costs for that Location like that's a million dollar build out And so and then the problem with it is they're kind of like hotels like every what three to seven years

[01:14:41] You've got to redo the whole thing. I don't have to redo my whole car wash in three to seven years That'd be crazy. And so It's just a level to operations that I don't want because I'm not the world's best operator

[01:14:51] If I was who's the guy that owns like shake shack and all that dandy meyer if I was dandy Yeah, go into restaurants because he's an animal out of you so good

[01:14:58] But you and I are probably better at investing and media there. I think it's hard to compete with me I'm pretty good at both of those things, but definitely not operating

[01:15:08] yeah, I am I have never been able to to operate the first thing I've ever done in any business that I've either bought or started to find someone to run it so right

[01:15:18] Yeah, it's you because I don't really like um returning phone calls and you need to be able to do that in order to operate a business It's true. Do you still do that thing where you don't respond to emails? Yeah, I don't but then I

[01:15:31] You either have to respond to emails right away Or you have to respond to emails a really long time in the future Because then people forget that they were upset at you for not responding

[01:15:40] And then it's like such a pleasure then they have to hear from you like oh my gosh, it's been so long So that's so my biggest technique is I respond On average like seven years later so

[01:15:53] Because then and I and I'll respond as if they wrote to me yesterday. So I'll like sure let's have lunch and Uh, and then they usually get a kick out of that and they respond and and the relationships Starts fresh again I actually got to look at when

[01:16:09] We first DM'd on twitter because I feel like that might have it wasn't seven years because I've been doing this long enough But I gotta I gotta go see if I have a famous james seven-year response Um, but I kind of like it because I don't

[01:16:21] Honestly, I'm not it's not that I'm a jerk If I get distracted enough to respond to all the emails and text messages. I will get nothing done I'm not capable of responding to everything well

[01:16:31] Yeah, and if you feel obligated to respond you just feel bad about yourself at the end of every day So I do feel bad that I don't respond to people but I've kind of just built it into my personal ecosystem that

[01:16:43] It's going to be fine. I'm going to respond later At some point and it'll be all good Like I'm going through a situation now where I didn't respond to some guy For a long time and I could tell he got upset and I just

[01:16:57] I felt bad about it But I just didn't want to respond while he was upset at me. So I waited and now it's all good So now I responded and it's all it's all great. It's like my best friend now. So Very cool

[01:17:09] So so Cody Sanchez, where could people Subscribe to your stuff this is so great. I hope you come on the podcast again, but where can people find you? Contrarian thinking uh, dot co is where all of our free newsletters

[01:17:22] We have two one on boring businesses one on just money and financial freedom in general Um, and then any of our courses and stuff is in there and then I'm Cody Sanchez and all the interwebs

[01:17:30] Plenty of like free stuff and all of that too for people want to dabble their toes, but this is a blast I love your tweets like people should definitely follow you on twitter

[01:17:38] People should definitely follow your newsletter and and on and on so so yeah, thanks again, Cody I really appreciate it. I've been following your stuff for a long time and i'm so glad we had a chance to do this I'm so glad I responded to you

[01:17:50] Well, I've been a fan for years I'm glad you were one of the first people in finance to break out from not just doing but also teaching So thank you for that Thank you