How to Make Money During a Recession (The BRRT Method)

All right, we're coming into a recession when it comes to stocks, cost and stagnant wages across the country. And if I wanted to make money in a downturn, here's what I do. It's called the BRRT method. I made it up, but basically it's how I would make, I don't know, anywhere from $10,000 to, if you've got cash behind you, a million bucks during a downturn. Lots of people talk about the BRRRR method, right? This is not that. This. This BRRT method is all about you using other people's money and buying businesses to increase your income. We gotta talk about it. Huge big red flag disclaimer. It's hard to run businesses. It's not rocket science. I think most of you out there can do it. But yeah, it's a lot easier to go on Zillow Press buy or go on Redfin press buy. Fill out the mortgage paperwork, get a traditional loan structure and hold a house and maybe put it up on a, you know, I a rentalunit.com for somebody to rent out for you. Yeah, that's super easy. You can't add technology. You can maybe raise prices, but not all the time. And you certainly can't take a house that nets you $50,000 a year to $150,000. So there's pros and cons. Is there more risk in buying businesses? I guess it depends. Yeah. If you do the deal wrong, certainly. But is there more risk in real estate because you're putting a ton of money down? I don't know, maybe two. Here's the BRRT method. All right. I have a method I've done for years in investing that I never named or thought was unique until I started speaking publicly about it. It's basically how I first started replacing my six and then seven figure income in finance. I guess you could say it's how I became financially free. Although, spoiler, I've still found I always search for more. And enough is the most elusive effing minx I've ever hunted. Maybe it's just me. I bore easily. I've always wondered why everyone, you know shares so many secrets about real estate investing, and yet the world of private equity investing is so secret. I've done hundreds of deals with this model. I've lost money, to be sure, but I've certainly made a lot more, and I think it's more relevant today than ever. So like I told you guys, it's called the BRRT method. All right. What does that stand for? Stands for buy businesses, the cash flow resist in recession resistant sectors raise with an ability to raise your prices Tech add technology to their offerings. We often talk about how to buy businesses at contrarian thinking whether you do it at the stock market by following some of the Motley Fool's recommendation because you know things are on sale. The idea is that you get into acquisition mode. So here's an example of how you can earn using BRRT based on a deal I just did. Let's break this down first and foremost, if I haven't met you guys, hey, what's up? I'm Cody. I own a bunch of these boring businesses. I've done hundreds of transactions across private equity. And when I say boring businesses, I mean companies that you use every day but you don't think about landscaping, car washing, plumbing, et cetera. Here's the method that I use. All right, step one. Buy but make a cash flow. You buy an inexpensive, profitable business that is underperforming perhaps and rehab it. You make sure that the purchase price and cash flow, including legal, etc. Can cover your expenses. To fix it up, we want a little tiny Fixer up or 2. We don't want a nightmare case. You use seller financing or SBA loans. We'll talk about that later. Small Business association loans. Actually we got a ton of other videos about that too. So you should check those out to buy. Which is very similar to mortgages, but on the value of the business as opposed to your assets or income. So if you want to go get a mortgage, they're like, hey man, how much money you do make? I'm going to give you a loan based on the future amount of money that I think you will make, AKA your income. So it's not a loan on the house really, it's a loan on your income. Sure, the house has to appraise, but if you don't have income and the house appraises, doesn't matter right now. When it comes to buying a business, they actually look at the business as the income as opposed to you. So that's why this is kind of cool. So here's an idea in action. Basically, I was scouting around the Internet and I found an online education business that I guessed was making about $100,000 in revenue and 20k profit a year. But it was neglected. I figured out that it was neglected by checking their site traffic on a site like this similar web semrush. This one's free. Basically, I saw the traffic wasn't very heavy and it looked like their product Set. They were only selling a few templates for 29 bucks. So I was like, man, if I can get the traffic numbers up and the average conversion on sites being 2 to 4% of the total revenue, I could increase the value of this company a lot. So I reached out to the owner and asked if he'd be willing to sell. You know, embarrassing side note, but I've done this with hundreds of deals and you can too. Early on in my career, I did this to Biz by sell, which is funny because they're owned by a $37 billion company and I do not have that level of fu money at least yet. So I found this small business direct. These are all over the place. Here's a listing from Flippa. I reach out to the owner in the contacts at the bottom of the page. Usually they're listed and I asked if he'd be willing to sell for the right price. The template kind of goes something like this and you can see what it looks like. So we go back and forth a bit on emails and calls. Specifically 12 emails, two to three phone calls, one video call. FaceTime takes about six weeks. And then we close the deal for $62,000. And a little upside. If he stays on for three months, I transition it to my team. And sales don't plummet. We just want to keep sales static. So I bought a business that does $100,000 in revenue and what we ascertained to be about $50,000 in profit for $62,000 because the owner wasn't into it anymore. He had lots of them. Okay, so we have our business to buy. And if you want to see more examples of businesses you can buy and how to buy them, check these out. This basically talks about, you know, pandemic businesses, power watching businesses, how you can do it too. We have a course on it too. But quite honestly, you could just read all the blog posts for free. Totally up to you. Step number two, you find your business. Now we are resisting. We want to make sure that business is in recession resistant sectors. So you look for businesses that weather storms. These are businesses like consumer staples, grocery, discount retail, alcohol, mobile, home parks, plumbing, H vac, healthcare, DIY financial services, budget travel. Basically anywhere people can save money or continue their needed everyday activities. Like my toilet's broken, I'm probably going to fix that. To make sure your area is continuing to grow despite a downturn, how you do this really quick, you can search their historical sector returns. You could do that with an S and P. I like to look at ETFs in those particular sectors. See how do they do during the downturn. And then you definitely look at the performance of the actual business during that downturn. And the way you do that is by looking at their taxes. And okay, I need your last 10 years of taxes. What happened 2007, 2008? What happened in 2020 to 2021? All right. We're looking for businesses that stay flat when others die or maybe even grow a little bit. And it's kind of interesting to see which products do well in a downturn. Some of these surprised me. A lot of this is stuff that you can do diy. When things start to get expensive, people start to stay home more. Here's also a list of 130 businesses I like to invest in throughout all these markets. Okay, idea in action. While everyone is still reeling from a market, you can make moves to the right areas. Most people don't even realize their portfolios aren't focused on recession resistant asset classes. So in this instance, I went to a financial services company because finance does well in downturns when everyone's concerned about money. The business I bought focuses on financial freedom and protection. That's a type of business that does well in downturns. So when people get laid off, they need new skills. We filled that need. Choose your poison here. This company essentially is an online education company that teaches people how to reskill, how to re up into a new industry. You could think about it like investing in a trade college or a trade university. Those often do well during downturns too because if people can't get a job, they say, okay, whatever, I'll go back to school. And that way I'm more marketable. All right, step three. Now you're going to raise your prices. You've found a business you want to buy. You've made sure it's recession resistant. Now we're going to raise the price. Now, most businesses forget to raise prices with inflation. Some small businesses never raise their prices. Look how rare it is to raise prices. Just like in real estate, you invest with the goal of raising prices for underpriced services. It's that simple. Typically you can do a Double digit increase, 10 to 30%. It kind of depends. The online business that I bought for Rid in Action. I was charging $29 a month for an access of library of content. This is the same business I talked to you about in the first one. I thought this financial services business, I thought the content was worth more like $99 a month or $1,000 a year. They didn't have any recurring options on it and they were too cheap. So I redesigned the materials, took it out of the 80s, super quick fix, fixed the funnels, increase the prices, and we've only had 3% churn. So clients that used to pay us $29 are re upping to invest at $99 for the individual products or $1,000 a year for the whole library. Think about that. I'm basically tripling the price with this one move. The biggest mistake you can make here is not raising your prices soon enough to handle the inevitable inflation across sectors. And you can raise incrementally, but raise. I did a very rough analysis of if I increased to $99 but lost 3 to 10% of my customers and I wanted to see was it still pretty. And here's what it looks like. You can basically see I'm turning a company from a company that does, you know, low six digits to mid six digits without selling any additional new companies. This means I am not even having to advertise or market or grow the list. I just am using the traffic that's already coming to me, increasing the prices and giving them a way to continue to pay. All right, now, step four. Adding technology to their offerings. Small businesses are notoriously not tech savvy. This is our entire thesis for why we launch the Contrarian Thinking Capital Fund to invest in the tech that will support the future of small businesses. I was amazed at this. Do you know how very tech backward these companies are? Something like 36% of them don't have a website. Isn't that wild? 89% of them use a fax machine in some way. 40% of these businesses do not have a social media strategy. And most of these businesses do not focus on the two most important things in my mind, which is reviews and their Google searches. So that's what we do. We add technology to the business. Now you can take a business that's doing okay or that's doing $100,000 in revenue like I did and buy it for something like $62,000. And then you can take this business like I plan to and turn it into a business that does $350,000 in the same year. What I've done then is I've taken my $62,000 purchase price and I've basically found a way for me to pay it back entirely to myself within the first year. Because now I'm not going to have $50,000 in profits to work with. I'm going to have something like $150,000 so profits to work with. This is the part where people start to say, who would be so stupid to sell this business? And you have to realize something. There are more boomers retiring now than there ever have been before. There are more people switching out of one career, which also includes working for yourself, to another career, than ever before. People are looking for change. People want to retire. Covid was hard for a lot of these business owners. Have you guys ever tried to teach your mom or your dad technology? Do you think it's easy? I mean, when I try to teach my mom how to use a new app on the iPhone, I hope to God she's not watching this right now. She about has a hernia and so do I because my patience level is this big for it. So imagine that the person that I bought this business from is 68 years old. This business has been selling these financial products and models since the 80s. So I was just chugging along making him some money while he was a financial advisor on the side. He doesn't have the savvy to go out and add things to it, like these automated tools that I talk about all the time, like Bench, that'll do all of the bookkeeping for him for nothing. Whereas he's spending a ton of time on it, like Seam Rush. That's going to help him bring in more SEO traffic and write content like creating a strategy using Hype Fury. That'll sell schedule all of the social media that I'm going to push out about it. It'll only be testimonials. I'm not trying to go viral with these financial products. So whatever you do, think about where is there a boomer who wants to sell a business that you can buy? It's in a recession resistant asset class. Raise the prices and add technology. Forget the BRRRR method. The BRRT method is where the real returns are. Especially because if you guys didn't know this, the average single family home makes somebody $462. Check my math there. You can Google that on the Internet. $462 a month in profit. My business is going to make $150,000 a year. We're talking a mountain of difference. And I only have to put down $62,000. How much would you have to put down to buy a real estate piece of property that drove you $150,000 in profit in a year? I mean, we're talking about millions of dollars, not hundreds of thousands of of dollars. Hey, holler at me in the comments if you like this? We might do more of these for you. Really? Broken down specifically? You tell me. Is this something you want to learn?