#85 Why Playing Small Is Keeping You Broke

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Is to do what we call a deal welcome back to the big deal podcast i'm cody sanchez this week i.

Sat down and talked with a thousand creators about how to make their first.

Million dollars the business needs to be so simple i can explain it to grandma these people flew all the way.

Out to la to listen to this.

People say find your profit from your pain no thanks and some of them told me it was the best talk.

That they had heard that entire weekend.

Terms control the price and so if we understand dealmaking it's like we speak a language of finance that most people don't so i thought let's give to you my podcast fam for free ninety nine without a plane ticket and let's teach all of you how to make your millions i'm going to make so much money that i can buy whatever i want whenever i want no matter what this is only for those people who want to grow on social who.

Care about attention who want to figure.

Out how do i do deals and how do i do it when i.

Am maybe my own little solopreneur or business owner here is how to turn.

Attention into cash if i was you i would say learn about the language of business so deeply that it becomes a fluency my rules for this are.

Give it up for cody.

Thanks guys.

We know that women currently only make up two percent of the business acquisition buyers in america despite forty percent of women actually owning businesses so i wanted to kick off understanding what your opinion of why that is and how you think we can change that number if.

I was like the big sister who's maybe made a few more bills than you have and has the wrinkle to prove it i would say this women on average if we don't play victim mode we're super super powerful i think the problem often is we tell ourselves really negative stories so we tell ourselves that we shouldn't negotiate that it's some guy's fault that we're not getting what we want that the boys have it better than we do and so when you say all that stuff into the universe it comes back and so one of my biggest push points for women in general is we gotta stop that we got to start saying that it's super powerful to be a woman that actually men are on our side that we are going to all grow together that you're going to make a massive amount of wealth and it starts with like kind of the touchy feely nonsense that is actually true and then the second part of it is if i was your you know big big sister in business i would say we play a little small women often we pick that and i see it because you guys i probably see five six thousand businesses across our investment firm a year we have a venture capital firm and a holding company so i have a bunch of people that pitch me nonstop their businesses i actively look for women to invest in and i have a really hard time finding women who are building big enough businesses a lot of us build lifestyle businesses right we build businesses that we think are safe and small and i don't really know why except that maybe people told us that that was the only thing that we could do and so i think that ten x is often easier than two x that actually if you try to build a really big you are going to bumble fuck your way at least into a lifestyle business but if all you try to do is build a lifestyle business you're going to end up building either a business that is a job or not make enough money and have to work for somebody else and so if i was to give us really hard feedback sure there's historical precedent sure of course we've had voting later there are all these realities about being a woman that are real and i don't want to push those to the side but we can't fucking change them i can't go back in history i can't change that stuff so let's focus on the two things we can control the first thing we can control is our input which is what are we thinking how are we talking about ourselves what do we think will happen in our lives and the second thing that we can control is how big of a business are we shooting for and you know i fall into it all the time yesterday i was with this guy amjad massan who runs replit do you guys know what replit is okay a few if you don't and if you're not this can be like a whole different subject but if you're not playing around with ai and you don't know what replit is like i would jump all the fuck over that i think there is a world before i understood what ai could do for us and there's a world after and my world has completely changed and amjad wants to create one billion coders one billion and when he said that to me i was like nah that sounds like tech bro speak right i'm like yeah yeah sure one billion coders but then he goes why are you only trying to create one million owners and i was like what do you mean that seems like a fuck ton and he's like why is it not one hundred million why are you not actually thinking bigger and so you need a buddy maybe one of your buddies can be here and that buddy needs to be able to be the person that says to you you're playing too small that's not big enough go big or go.

Harder you've identified something you see there's like a spark there's a business that you like what actually turns that into a like yes i'm going to actually make an offer and buy this business what's your decision making framework the only.

Thing that really matters in due diligence is two things if you're buying a company are the numbers real because we buy we don't buy hopes and dreams we buy realities and cash flow and two does it seem like the numbers that they gave me will continue so like do i believe what they're telling me and is what they're telling me today going to continue in the future because we want to buy predictable enduring long standing profitable businesses and if we do that then it won't matter if we're not influential on the internet because laundromats don't care they just pay you.

Cash flow anyway sign me up i'm going to be doing that due diligence course whoa i feel like a lot of people probably ask you about like what you're buying what you're interested in you know i was just doing that backstage that was kind of the natural instinct to ask you that but i want to ask the flip side of how do you know when to walk away from a deal and when something actually is a no and specifically you know maybe it looks good in a spreadsheet or maybe like you've got a bit of a gut instinct that it is good but something made you just hard no what is the no criteria.

Well for your first deal you never want to buy the beat up house on a really nice block and try to turn it around because how many times have you guys if anybody's done construction or done a house flip or renovated something how many times you renovate something and it is on time and under budget that doesn't happen doesn't happen with men either right you're like i'll fix him no you won't and so it's the same thing with deals so we don't buy we don't buy beat up houses we don't buy beat up boyfriends we just we buy people who are already sort of going to continue to cash flow these are profitable businesses so my rules for this are the business has to be in existence for more than five years that decreases the likelihood of failure by more than fifty percent the business has to be profitable cash flowing day one the business has to have a leverage component to it meaning i don't want to use all my own money i want to use some seller financing i want to use some bank loans on top of it the business needs to be so simple i can explain it to grandma i don't want a complicated business that's not in my expertise for my first deal and the last thing is i want to make sure that my business is something that i'm going to be curious enough about to get kind of obsessed about for at least a few years i don't want to buy a business like people say find your profit from your pain no fucking thanks like i don't want to i want to find a business that i'm curious about and i'm interested in growing and i think that's totally fine feasible so that is what i would look for in a business the anti signal would be hey this business doesn't make me any money right now but it's going to grow a ton i promise hey there's proprietary patent pending technology on this business but i can't really understand it hey this business is something that like i really don't want to do like i'm going to buy an accounting firm because i hate accounting and numbers no don't do that so those would be the things that i would not do on a deal and then the only thing i'll add is like the best way to do deals is to do what we call a fuck yes deal which means because you are so good at deal making and you understand terms you can manipulate the price in almost any deal and let's play a game who here owns a business raise your hand if you own a business okay keep your hand up who here would sell your business at the right price and the right terms every hand stays up one in the back she's new every business owner has this because you know if i catch you on the right day like monday tuesday wednesday thursday friday like you could be like fucking take it yeah if it's a big enough check and if the terms are right fine and so when we know that we know that we can manipulate price because we control the terms and let me give you an example like do you own a business you look like you do she looks great okay how big of a business is it give me some metric just starting okay so let's say that your business right now makes a million dollars a year i'm just gonna put out a number so we don't we're not the irs here okay so your business makes a million dollars a year and if i came to you and said hey i want to buy your business for one hundred million dollars what would you say she'd say yes she goes fuck yeah now i just i barely started it but take this thing off my hands right okay so i get her to sign the deal we're good to go great small problem the fine print the terms say i'm going to buy your business for one hundred million dollars by paying you one dollar a day for the life of the one hundred million dollar offer do you still take the deal of course not so what we don't realize as women is that terms control the price pros obsess on terms amateurs obsess on price and so if we understand deal making it's like we speak a language of finance that most people don't and so that is a really fun part of a deal you can have a person you don't trust a shitty deal you don't really like something that doesn't make any money but if you control the terms you almost control the entire deal i love that.

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You if you've ever thought about buying.

A business we've built what i think is the best acquisitions and business buying community and education curriculum in the world if you've ever thought about wanting to buy or own a business or if.

You want to add more businesses to.

The mix it's called the contrarian community and what this is is the goal is we give you the three things that the best business buyers your own advisory team your own investment committee and a deal team we get together each week to review deals live and beat up all the deals that you're currently looking at while you simultaneously learn the best way possible which is called modeling by seeing other people put together deals.

This is how private equity buys businesses.

This is how investment teams work and we're stealing the methods from wall street and giving them to you if this is interesting to you go to click the link and you can actually talk to my team direct about if this.

Is a fit or not we can.

Help guide you the link is in.

The show description is there a story.

That you can tell us about a business or acquisition where it didn't go the way that you planned either for.

Good or for bad yeah i mean there's a saying in asset management i remember one of my first mentors back in the day in private equity said you never want to invest with somebody that hasn't invested at least a couple hundred thousand dollars his line was really a million bucks he's like i never want to be somebody's first million bucks that they invest because the first million bucks is for losing and learning and i was like that doesn't sound that great and so the truth of the matter is that most people will lose money when you do deals it's just natural it's the game of business so if that's the case i want to make sure that every deal i do is a non bankruptible deal so i don't want to go through bankruptcy although it's not the biggest deal if you do plenty of people go through that actually and i want to make sure that my first deal is not my worst deal if your first deal is your worst deal you'll never do a deal again because it'll scar you and you'll think that deal making is bad not just that you had stuff to learn and so you know i've had so many instances but i'll tell you one right here in the state of california i invested in a cannabis business which i highly don't recommend by the way and this cannabis business we had just given them twenty five million dollars and it was me and some partners and this business was like rocking and rolling they were making maybe sixty eighty million dollars that year in revenue and about three weeks later i get a phone call from the founder and the founder says that they're out of cash we had just given them twenty five million dollars like i think we had given them fifteen million of the tranched investment that we were going to give i was like wow that was like a pretty quick turnaround on my fifteen mil you know what happened and essentially they had completely financially cooked the books the guy had like not one but two mistresses which is like kind of impressive i was like jesus you got time i don't i can't imagine having more than one husband anyway and they had blown through this cash and this happens like very rarely where there's this level of fraud so the accountants were in on it the regional banking partner was in on it we were able to pull back some of the capital we ended up turning the business around but what i realized in this transaction was that and i've never done it again since that whenever i do a deal i make sure three things are true one that there is no personal relation between the people on the cap table the bank and the accounting firm from my founders we got to make it turned out he had like forty seven cousins they were all involved in the deal and they were all defrauding us and so i want to make sure like i believe in doing business with my family but not yours i don't know yours and so that's one two is i only do tranched milestone based investing i don't ever give that big of a a chunk up front again because i want to see what you do with my first couple of million and then three you want what's called you want what's called financial oversight so basically i want when i do a deal to make sure that in my deal it lists like if you're going to do a big purchase you have to check with me i have daily bank account access and so because of this it's very easy money's a cruel mistress she'll leave you if you don't pay attention to her and so i want to have access to into that bank every single day and make sure that if i'm investing in a third party that i can watch my capital but the truth of the matter is your first deal there's gonna be something that goes wrong many many somethings that go wrong and so all you wanna do is protect your ability to persevere you wanna make sure that none of them are killers you can have mosquito bites that's okay but we wanna make sure there aren't great white bites and it'll happen eventually to you but then you can get really big and at that point you figure it out.

Did this guy go to jail that's.

What i'm thinking no he didn't go hectic but he did get he did get sued into oblivion but you know this this happens a lot you know like if you think about it yourselves you all have been online and you know the the dark side of charisma which is all often there could be a little bit of narcissism in there right and we all have it inside of us too like i don't profess to be a perfect person at all and so i think you know when you do deals you can often find really charismatic founders really charismatic partners and you have to be careful that you don't get carried away my dad always says don't fall in love with something that can't love you back and so i never fall in love with a deal and i think that's really important.

Obviously not everyone here is probably ready to buy a laundromat or kind of take that jump but i think everyone is always ready to learn how to think differently when it comes to spending or saving and so for women who are sitting here and they want that kind of practical next step that they can take tomorrow this week this month what would you recommend to start thinking differently and to take those smaller actions.

Yeah i mean listen you can only save your way to zero there is a bottom on it and you and you got to eat and you got to look cute like you guys all do and you got to like go out and enjoy life and so i don't like the obsessive focus on savings culture because i actually think it's much easier to earn than it is to save and if you get better at becoming a deal maker at doing better deals and at figuring out revenue you will never have to focus on savings again and i remember that because i didn't come from money so like i remember what it sounds like when you go to the grocery store and you're like oh yeah put it on the debit card that one definitely works and you're like and you hear the beep that comes from it it's like no it doesn't fucking work i'm like oh no that one's old give me that one and i fill it in with another one right like i remember that feeling and my promise to myself was always i would never want to have to check my bank account every single day to see if i can afford something again i don't even want to care about prices that's what i wanted because my entire youth was spent not being able to buy anything and being worried all the time that my bank account would go dry and then i have like a little i have a little ptsd from that and so at some point i said fuck it i'm gonna make so much money that i can buy whatever i want whenever i want no matter what right i wanted that anybody here want like fuck you private plane people hate you kind of money yeah me too yeah me too and i don't actually want it because i'm that fancy like i'm not really that fancy of a person i want it because i think it translates to freedom and so if i could impress upon you one thing it would be have the fucking coffee buy the matcha that's not going to that's not going to stop you from being rich and it sure as fuck not going to make you rich to drink the nice coffee so ignore that advice i think you guys are actually pretty capable and competent and you have access to resources here in the us that like i wouldn't say the same thing in a lot of other countries but in this country the only reason you guys cannot succeed and make a ton of money is because you're not willing to do what it takes you only want to do what you want and so if i was you i would say learn about the language of business so deeply that it becomes a fluency learn about deal making so deeply that you're schooling other people on what the financial metrics mean because it's actually not common complicated this stuff is not hard it's just not taught that's kind of why it's my entire mission and so i would skip like do yourself a favor spend thirty days becoming so obsessed with deal making and financial literacy and doing business deals that you set up the next thirty years it's literally that simple let's.

Say there's a woman in this audience who actually has fifty grand she's got some savings she wants to buy a small business she wants to start that process what are the questions that she's asking herself what are the questions she's answering to herself and what is that.

Next step well step one go get the book get it from the library if you want to borrow it from a friend get it on a discount rack i don't care about that but the answer's in the book if you want to buy a business and here is the truth about buying businesses you can lose money this is not risk free right it is risk free to post a video on the internet by and large it is not risk free to do financial transactions and so that is why i create all this infrastructure around it because that would be pretty shitty if i was like you can buy a business you can buy a business how watch my youtube like that's not enough you have to go a step farther than that so i would say one get the book if you want to go deeper take the course if you want to go even deeper get in a community whether it's mine or somebody else's you know this to be true already and it's with everything in life are you going to be more fit if you hang out with crossfitters all day or if you hang out with your friends that want to go to the club and want to go to brunch and want to do whatever right probably the crossfitters are you going to make more money if you're in a group with a bunch of other people who are obsessed with making money who already have what you would consider your dream day to be their tuesday it's just it's so common sense and yet we don't do it and so there's actually real studies that show that almost everything with humanity is contagious negativity contagious actual fat contagious which is fascinating so you are more likely to gain weight if your friend group is larger you are more likely to lose weight if your friend group is smaller you are more likely i don't know what that means one minute hi great thanks he's like i'm like hi.

Hey.

You are also more likely to make more money if your friend group has more money and it doesn't mean we should leave people behind that aren't our aspiration i'm not saying that bring them with you but get a couple rich bitches in your group because it helps all right that's it.

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Woo i.

Love that thank you so much i read something recently that said women are the fastest growing cohort of millionaires and i absolutely believe it's because of women like you out there on the internet teaching us the stuff and telling us the terms so thank you so much give it up for cody sanchez thank.

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