Legacy Capital - Profiting from American Small Businesses with Scott Hauck - Episode 528

That's why we're called Legacy Capital, is because we want to help these businesses maintain their legacy into the future, maintain their employees, and grow them and make more jobs, create more jobs, create more wealth for the employees, for the management team.

Welcome to Streams to Impact and be inspired to engage passionately in the work of your calling while achieving financial prosperity through multiple streams of high-yield returns on investment to bring your dream of making a meaningful impact Welcome back to Reality. I'm your host, Dr. Allen, and I am delighted that you are joining us today. If you haven't yet, get a complimentary copy of our exclusive guide, High Yield Investment Blueprint: Secure 18%+ Returns in 60 Days. Go to our website, highyieldblueprint.com. That is www.highyieldblueprint.com. Just provide your email address and we'll send you a copy today. Welcome to Streams to Impact. I'm your host, Dr. Allen, a professor of psychology, investor, and founder of Streams to Impact. After surviving financial ruin, discovering self-worth through the wisdom of horses, and mastering the art of passive investing, I made it my mission to empower high-achieving professionals and entrepreneurs like you to build true financial freedom through secure, high-yield alternative investments. This podcast is your invitation to go deeper and more passionately into your calling, your wealth, and your legacy. Each week we bring you real conversations with thought leaders, visionaries, and everyday professionals and entrepreneurs who are turning income streams into impact streams. Because financial wealth isn't the endgame, it's the impact that we leave. Let's build a life of meaning, momentum, and massive contribution. So welcome to Streams to Impact with inspiration from Main Street to Legacy, building prosperity with purpose. Today's guest is a true business warrior with over 20 years of building, scaling, and exiting companies. Scott Hawk has helped generate more than $2.5 billion in revenue and led 6 successful exits along the way. Now, as the managing partner at Legacy Capital, Scott is on a mission to acquire, grow, and empower small American businesses, not just for profit, but for purpose-driven prosperity that transforms lives and communities. If you've ever dreamed of building something bigger than yourselves, of turning hard work into a life lasting legacy, this is the conversation that you've been waiting for. So get ready to ignite your vision and walk the path where impact meets income. Welcome to the show, Scott. And Scott, like most of our guests, your journey, much like Equus and the spirit animal and inspiration for our company and this podcast, has been a journey of transcending boundaries and inspiring others to scale, think bigger than, than ourselves and leave an impactful legacy. So can you share with us the moment or the experience that first sparked your passion and set you on the path to creating streams to impact in your life that have led to the founding of Legacy Capital?

Yeah, absolutely. So for my— for the past 20 years, I've all I've done is build up businesses. And so, I've worked as a partner at different digital marketing firms as a strategist and really leading these companies to much higher valuations, to exits. Most of the time, we're seeing 3 to 4x, 5x on the return of these companies that we're selling, building up and selling. And I saw that there was this huge opportunity, really a historic opportunity that was taking place in the US market. Currently, we're seeing about 500,000 businesses go on the market to be sold every year, and they will be for the next 10 to 15 years, primarily because the older generation, the boomers and others, are exiting the market and trying to retire. So, there's going to be this huge transfer of wealth that's going to take place over the next 10 to 15 years within the US market. $84 trillion of overall wealth will be transferred to younger generations by 2045. There's about 10,000 boomers retiring every day, close to 500,000 a year. 40% of the small businesses in the US are owned by boomers. And so, there's millions of businesses that will need to exchange hands over the next 10 to 15 years. And when I saw this opportunity and coupled it with my, with my business experience, with my experience of building and growing and selling businesses, it was just the perfect opportunity. So, we essentially jumped on board and built out this fund, Legacy Capital Fund, to really take advantage of this opportunity. And we provide our investors with a few different things that they can't get on their own. Number one is if they go out and try to acquire one of these businesses themselves, they have to operate it. So, we take away all of the operational headaches that come with owning a small business. But we also are acquiring more than one business. We're looking to acquire upwards of 25 businesses with our fund. And so that spreads out the investor risk across the board. So you don't have one single business handling all of the risk or taking on all the risk. And so that lessens the risk on investors and all of the operational headaches or all of the trials that come with operating a business just land on us as the fund because we're the ones that are the operational partners for the businesses that we acquire. So when I saw this opportunity and, you know, it worked well with my experience as an operational partner for so many different businesses and through so many different exits, it was just really just a dream come true. And I had to jump on the opportunity.

Well, that is quite a legacy there in terms of Your business background and your business expertise that brings you to this point. What has it been actually, what aspects of your personal life, your personal growth and development actually brought you to this point where you could essentially leave the corporate world of working for someone else and starting your own endeavor?

Oh, that's a good question. Um, I mean, I, I worked as a partner at a digital marketing agency up, up through January of this year, so I've, I've only been doing Legacy Capital, um, by itself for the just the last few months. And so, you know, I had— I was essentially managing 2 different companies, managing the digital marketing agency that I worked at Um, as well as Legacy Capital, getting that up and running. We've been raising funds for almost a year now. Uh, I have a small team that assists me in raising these funds. Um, so they, they've been extremely helpful, uh, in, in getting this fund up and running and building our, our investor platform out, um, helping us win or raise capital in a very rapid manner while I was managing both companies. And now that I've left the digital marketing agency that I was working at, that I was a partner at, I have all the time in the world to focus just on Legacy, finish raising our capital. You know, I have a family. I'm married with 4 kids and You know, it's, it's been good to just be able to focus on my family and Legacy Capital versus managing 2 different companies.

Well, what have been, um, in making this transition, um, what has been, I guess, some of the, the huger challenges that you've had to face, uh, throughout this transitional period?

What was the hardest part of raising capital? That's a great question. You know, raising capital is never easy. That's, that's always a hurdle for, for anybody, whether you're on fund number 5 or fund number 1. You know, it's, it's not an easy game. You run into all sorts of people that, that are like, come back to me when you're on fund 3. Well, in order to get to fund 3, we have to, you know, complete funds 1 and 2. A lot of people tell us, you know, like, With the market uncertainties, like, I just don't know if, you know, if I can risk it right now with an alternative investment. And really, we overcome a lot of those concerns by saying, hey, you know, we know that we're an alternative investment, we're private equity. Um, but it's unlike VC where in the venture capitalist game, you're— they're investing in, you know, 25 businesses, mostly startups that don't have any profits yet or any revenue really. And they're hoping that 1 or 2 of those will be a huge hit in the market, will become the next Facebook, for instance. Whereas we're going to be acquiring 25 businesses that are all extremely profitable, have been around for years. And so the risk is much lower. And we're able to provide higher returns, like I said, at less risk. We're not tied to the public markets, so any uncertainty with public markets due to tariffs or any political, um, political things happening in, in the economy or within the country at the moment, we're not, we're not really tied to that. I mean, sure, small and medium-sized businesses will be impacted in some form or fashion. But really, since we're not connected to public markets, the risk is really diversified. And we provide a great alternative to these public markets, to real estate, to hedge funds, and everything else. So, really overcoming people's fears of risk and overcoming You know, their fears of us being an emerging fund have been difficult, but, you know, we're more than happy to have conversations with every potential investor, with every investor, and in time we help overcome those concerns.

Well, certainly with any endeavor, but certainly with capital raising, Trust is an enormous concern, and I think once you can gain people's trust, from that point in time, it makes a huge difference. You have talked about some of the ways and means that you are reducing risk, and the fact that, I mean, first of all, you're a non-correlating asset. to the public markets. And the other thing that you're doing is that you are investing in established companies. This isn't venture capital. It's investing in not only established companies but very profitable companies. And you're also then diversifying this fund across different businesses. Your goal here is 20 to 25 within the next year, year and a half, I believe, is what you're aiming for. So what types of businesses are going to be in this fund?

So with this particular fund, we're targeting primarily technology and transportation-based So, that's where I have a lot of my experience. I also have a lot of experience in healthcare and financial services, but that's part of the technology sector, right? So, we, within technology, we're focusing on fintech, we're focusing on healthtech-based companies. We're also looking at SaaS, e-commerce, anything that falls into the technology world. AI is huge. We see fewer you know, boomer businesses that are AI-based, but we're willing to invest in those companies as well. Within the transportation arena, we're looking at freight companies, freight technology, third-party logistics companies. And most of these businesses that we're looking to acquire, they make anywhere from $3 to $25 million in revenue each year. So they're truly small businesses, but they're extremely profitable. A lot of them, you know, just, just with the EBITDA alone, have payback periods of like 1 to 2 years. So based off the selling price, so we can pick up a business, you know, for let's say $5 million and it's making $2.5 million in EBITDA. So we're getting our money back in 2 years. That's how profitable a lot of these businesses are. And since the market's, you know, so saturated, these businesses are extremely undervalued and we're able come in and pick them up for, you know, pennies on the dollar. And a lot of them are awesome businesses. We only focus on the top 5% of the businesses that are going on the market. Like I said, about 10,000 boomers are retiring every day and a lot of them own businesses. And so we're coming in and we essentially have our pick of the litter. And yeah.

Well, you're talking about some terms and terminology. I mean, you're familiar with the transportation market. And the various different aspects of tech, techfin, techhealth, you've talked about those various different things.

Yeah.

Could you break that down and be a little bit more specific in terms of transportation? I think of transportation and I think of trucking, but I'm suspecting that this is a broad— Broader, and then also at the same point in time, I think you're probably looking at really more specific aspects of that than just, uh, 18-wheelers getting out on the highway. So can you take us into the, the, the business operations just a tad bit of some of these companies you're looking at?

Yeah, so a lot of them are really third-party logistics companies, and so there is some form of freight, you know, 18-wheelers involved in that. I mean, that That's where, you know, that's where transportation ends within the, you know, within any, within any product being transported, whether it's by sea, train, it's always going to— it's typically going to end up on an 18-wheeler somewhere and then be delivered by, you know, a smaller van or a truck. But what we're looking at primarily are these third-party logistics companies that have technology that allows small businesses to complete their shipping in a more sophisticated manner. So the 2 industries that we're looking at, technology and transportation, they work extremely well together because if we're— if we buy a large e-commerce company that needs transportation expertise or transportation— has transportation needs, Then, you know, those 2 industries, those 2 businesses complement each other. If we're able to pick up, you know, the transportation company that works hand in hand with that e-commerce company or the technology company that provides all of the transportation logistics or know-how for that particular company that sells those goods via e-commerce, then, you know, it's a win-win for us. Because not only are we controlling or have, you know, control of the company that's selling the products online, we have control of how they're transported as well.

Mm-hmm.

So hopefully that spreads a little bit more light on what we're looking at from a transportation perspective. I mean, we're also looking at freight companies. There's a ton of freight companies out there owned by boomers, people looking to retire, and they're extremely profitable. I mean, transportation is, is a huge industry right now. It's looking to grow a ton over the next 10 years because ease of convenience. People want things delivered to their door. People are shopping online more than ever before, and I don't see that going away anytime soon. I only see it trending upwards. And so transportation as a, as a whole is going to be, you know, growing and going to be in more demand than ever before now and in the years to come. So they both work hand in hand.

Yeah, well, thank you for explaining that. That makes a bit more sense there. So you were also talking about terminology that's probably unfamiliar to many of us, and that is the EBIT, which you said is where a good bit of the profit is. So What is EBIT?

So EBITDA is really just earnings before interest, taxes, and depreciation. So it's essentially your net income of the business. Some people call it the STE, the seller's discretionary earnings. That's typically the term that they use for smaller businesses. But EBITDA at the end of the day is really just the net income of the business. balance before all of those other things are taken out. And that's one of the ways that you evaluate a business or value a business based on the costs, how it should be sold, what it should be sold for. It's not the only driver. I mean, you also have to look at the intellectual properties. You have to look at the assets that the business owns. But EBITDA and SDE, they play a huge part in how you evaluate that business and come up with a selling price. So that's the main thing we negotiate on as we're looking to buy a business. I mean, we also negotiate how long the management team is going to stay on board, what type of equity we're going to provide them in the new business, what type of equity we're going to provide their employees because— We're not just the type of private equity firm that comes in and just strips the business for all it's worth financially. We come in as operating partners, strategic visionaries that can help build this company, help build these companies up, and help maintain the legacy that previous owners have left and want to continue on. That's why we're called Legacy Capital, is because we want to help these businesses maintain their legacy. into the future, maintain their employees, um, and grow them and make more jobs, create more jobs, create more wealth, uh, for the employees, for the, the management team that is, you know, staying on for 6 months to a year, whatever it is, and for the new management team that we put in place. And so it's, it's not just a financial, um, you know, flip model. It's a let's come in and let's Let's build a true operating partnership and build these companies up and help maintain their legacy.

So what is specifically in it for investors other than unusually high returns? What else is there for investors?

Well, as I mentioned before, I mean, there's millions of businesses that want to exchange hands, and if people want to take advantage of what the market is calling this the silver tsunami, this great generational wealth transfer. A lot of it's going to have to come through business transactions. So purchasing these businesses, and I don't know a lot of investors that really have the know-how to come in and buy, you know, whether it be a home services business like plumbing, construction, whatever, we're a technology-based company, transportation, whatever. I don't know a lot of investors that have the know-how to come in and operate a business like that. So we take on all of the operational issues and challenges ourselves. We build the businesses up, we have, you know, the know-how there, and then we're also spreading out the risk. So if an investor wanted to buy a single business, then all of their risk is in that one business. But, you know, we're purchasing upwards 25 or so businesses with this particular fund and spreading the risk out across all 25 of those businesses. And of course, you know, the returns are great. We're, you know, we're looking at average annual returns of 92% on a 56% IRR during the life of the fund. And so the ability to earn, you know, amazing dividends on your initial investment is huge. And then, of course, the ability to not have to come in and run those businesses themselves and just let us manage it, build them and grow them, sell them, is really a huge opportunity for investors too.

Yeah, I know many investors out there are not looking for a second job. And what they're looking for is, you know, high-yield investments where they can do it on a passive basis there. Well, in looking at that, and you've been raising capital, you said, I think about 18 months or so, what are you finding is your ideal investor profile?

So we're a 506, that's how we're registered with the SEC. And that means that we, we have to take on investors that are at least accredited investors. And accredited investor in the US is anyone that has, you know, $1 million in net worth, either themselves or combined with a spouse, not including their primary residence, or they are making $200,000 a year and have for the last 2 years individually or $300,000 jointly. with their spouse over the last 2 years. And so they have to be accredited. We have to verify that. It's a pretty simple process. We essentially just send a DocuSign to their lawyer or to their CPA and they, they say, yes, this person's accredited. And then we, you know, they, you know, then we can move forward. So a lot of the accredited investors that we're looking at right now or that have invested They typically, age-wise, you know, ranges from 45 to 65. And, you know, a lot of them have, you know, more than $5 million in net worth. But we also target a lot of family offices. We've received a lot of capital from family offices. And, you know, they'll usually write checks of $1 million or $2 million. And they understand the private equity or the alternative investment game. And so, to them, they just need to see that the general partners have solid experience and a solid plan, and they understand the risk involved, which for us is really not that high since we're targeting highly profitable businesses. But those have been the 2 primary groups that we're receiving capital from right now. I think we might be a little too small for some institutional investors, but we are looking at some of those as well. But yeah, that's, that's the typical demographics of people that we're looking at right now— family offices, accredited investors ages 45 to 65. But really anybody that's an accredited investor on Well, Scott is with Legacy Capital.

He's the founder and manager of Legacy Capital. You can find him at www.legacycap.pro. So that's L-E-G-A-C-Y-C-A-P dot P-R. So Scott, as we go into As we move into our last segment here, share with us one of your most challenging times or setbacks in life and how did you come through that and what did you learn from that?

Oh, that's a, that's a great question. I'm going to get a little real here for a little bit. I hope that's okay.

Sure, that's what we want, Ginger.

That's what you want, okay. Yeah, I've, um, I've struggled with OCD, obsessive-compulsive behavior, um, my entire life, you know, and it's, it's, it shows itself in the form of perfectionism, you know. So it, whether it's, you know, body dysmorphia or, um, just feeling like I need to have everything buttoned up and perfect before I even attempt something. Um, it's really, it really comes down to a failure to, uh, well, not a failure, but like a, um, an unwillingness to try because of fear of failure. And so 3 years ago, I, um, I almost lost my family because of, of my OCD tendencies and, and primarily because I was projecting Unrealistic expectations onto my wife and onto my children, and it was causing all sorts of problems within my home. And a lot of it had to do with, you know, intrusive thoughts, rumination, fear of failure, all of those things. And, you know, I finally hit rock bottom and I knew that I needed to seek out some help, and so I sought counseling. I sought help from friends and family, even, you know, got on medication, did a lot of things to help improve my mental wellness and well-being. And 3 years, 3 and a half years later, you know, I'm, I'm the best possible version of myself, at least in my mind. Like, I I've stopped with the intrusive thoughts, the rumination, the unrealistic expectations of myself, my spouse, and my family and others. I don't care what people think about me. You know, I don't care if it's not perfect. And I don't think I ever would have started this, you know, this business if I hadn't sought the help that I did. Because I had that fear of failure. I've had that fear that Everything had to be absolutely perfect before I started, before I even tried. And that's not the case. You know, sometimes starting a business, you're running the gauntlet. You got to get bruised and cut up, and you have to, you know, you just have to put yourself out there. It's vulnerable, it's difficult, but there's tremendous opportunity in the market right now. And I wanted to take advantage of it. I I'm hoping that investors will see the opportunity and take advantage of it because it's absolutely huge. And so, that's probably the biggest hurdle that I've overcome in my life and it's opened up new opportunities for me. I've started this business. I have expanded my network. We're raising capital. We have an amazing portfolio of properties. of investors that we're working with and continue to work with. I have awesome partners throughout the world that we're working with. And it's been an amazing journey. So, overcoming struggles and hurdles in our lives help produce great rewards. And that's where I'm sitting right now is In a spot where I've overcome some, some major difficulties and hurdles and, uh, I'm really enjoying what I'm doing right now. So, and my, my family relationship has never been stronger. My, my relationship with my wife and my children, um, now that I feel like I'm the best possible version of myself, you know, that those relationships have healed and, uh, we, we have way more love and kindness and things in our house. So it's been a wonderful journey. I'm grateful for the struggles because they make us who we are, and if we're willing to put ourselves out there and overcome them, then like I said, there's huge rewards at the end of that.

Well, Scott, I appreciate you sharing that, and that brings to mind one thing you haven't mentioned is that you have a nonprofit associated Uh, with, uh, with your company. Uh, why don't you share what that is and how essentially that came to be as well?

Sure. Well, since mental health is something that I'm very passionate about, we, we launched, um, towards the middle of last year a nonprofit called Legacy Lifeline, and it's, it's the sister company to Legacy Legacy Capital. And essentially what Legacy Lifeline does is it provides, um, it provides mental healthcare solutions to people that, that can't afford them. So it, it helps with diagnosis, it helps with prescriptions, it helps with regular counseling and any, any help that people need but can't afford themselves. We, we provide that through the nonprofit, through the foundation, really to help people become the best versions of themselves. And Legacy Lifeline is— can be funded and is funded by private donors, individual donors, but it's mostly funded through the GP profits of Legacy Capital. So, and this doesn't impact investors at all. It doesn't touch any of the LP or investor returns, but 20% of the GP earnings go directly to Legacy Lifeline. And like I said, it's there to help people with, with their mental wellness. And it's something that we're extremely excited about. We're very passionate about it. I have 2 amazing partners. Jennifer Hutchinson and Randall White that helped me manage that, that business and that foundation. And we're going to help a lot of people. We've already helped a lot of people, a lot of families with mental health struggles that they, that they have in their homes. And so not only are we looking to, you know, do something about the silver tsunami situation that currently have going on in the US, buying up these businesses and making sure that the wealth transfer happens smoothly. But we're looking to help people that need mental healthcare and don't have access to it. So, it's— we're going to change the world. It's a huge opportunity, something that we're very excited about. And—

Well, it's a It's an excellent organization and often a very underfunded area of our healthcare, so I'm glad that you're doing that. Well, Scott, imagine that you have come to the end of your life, and as you lay on your deathbed, what will you look back on with your greatest sense of joy and fulfillment?

That's a great question. It's pretty simple. My family. I have a beautiful wife. I have 4 beautiful children, a daughter and 3 boys. And, you know, they're the greatest joy in my life. And nothing is more important than family. And so as I, as I lay on my deathbed someday, I'm going to look back with joy in my heart for my family members that I love and cherish. And I'm not going to have any regrets at all. I don't regret anything that I've done in my life, and I don't regret having any of those struggles or weaknesses that have brought me to this point because, you know, it's made me stronger. So I'm grateful to the family members, especially my wife, that has stood by me through ups and downs, mental illnesses. And, uh, you know, she's my rock, and, um, she brings me— and my children bring me an immense amount of joy.

So, Scott, thank you so much for being with us today, and thank you for your vulnerability and, uh, your genuineness. Uh, I've enjoyed having you, and, uh, Enlightened Investors, I'm sure that you have enjoyed Being with Scott here today. So I'd appreciate it if you would take just a moment to like, share, and subscribe. It costs you nothing, but it does help our podcast get to other listeners who can also benefit from this content. So, Enlightened Investors, thank you once again for being with us, and live abundantly in all areas of your life. We'll see you in the next episode. Thank you.

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