The Ultimate Guide to Buying and Running Boring Businesses with Codie Sanchez

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.

Most people don't know this statistic, but something like 70% of businesses don't sell when the owners are done. They just shut down.

It's wild. And that's my little story about one of the reasons I even started doing this is 'cause my Uncle Eb, you could look it up, Eb Holmes Plumbing, and he had this company for decades and when he got cancer and he started getting sick, the company did millions of dollars in revenue. $5 to $6 million in revenue, probably $1 to $3 million in profit, and he shut the business down. He had no idea he had a sellable asset. It actually cost him money to shut the business down as opposed to being able to sell for millions, which would've set his wife up for life. And so it happens all the time.

This isn't your average business podcast, and he's not your average host. This is the James Altucher Show. Codie, where are you? Where are you sitting right now? Like, what, what's your town?

I'm in Austin, Texas.

Oh, you're the fourth podcast this week I've had in Austin, Texas.

Yeah, it is. I feel like it's sort of like a new mecca for, for media, maybe business media people, business, fitness. Um, there's a ton of people here. Um, so yeah, I don't know, we like it. We came like the rest of the people, like, you know, refugees from California. Uh, we came in 2020 and, uh, been here ever since. Then we go back to San Diego for the summer, but I really like Austin. It's got a good vibe.

Yeah, Austin's nice. A lot of my friends live there. I, I like to visit there.

Um, did I hear that you live in like Atlanta or something now?

Yeah. I mean, I, I lived all my life in New York City and now I live in Atlanta. So the reality is, how did that happen? Well, I mean, it's a long, it's a long story, but the reality is like all these cities are, are falling to shit. Like, yeah, they're, the taxes are too high. New York City, I mean, there's like these crazy, just crazy things always going on there that are getting worse and worse. And, uh, they're, New York City's gonna go broke. Like what happens when every commercial real estate, you know, like every office building in Midtown's gonna go bankrupt?

Oh yeah. Then they're gonna come after anybody with cash for sure.

San Diego, I think survives because of the Navy. That's, that's, but San Francisco and San Francisco is dead already.

Yeah, I agree. I think New York rebounded, you know, much more. I used to live in San Francisco a million years ago, but, and San Diego's great, but San Diego's still got a lot of those problems. You know, like the homeless issue is still rampant there. Obviously taxes, regulation. So it's, yeah, it's not ideal. I was with this guy Balaji, do you know who that is?

Yeah. Yeah. Sri Lankan.

Um, yes.

Yeah.

And, and I went to this crazy network state, which actually you would know more about because you, you knew a ton about crypto or know a ton about crypto too. But he, uh, he was telling, trying to sell me on Singapore and, uh, and I was kind of giggling because I always thought of Singapore just as having really difficult cannabis laws.

Um, well, that's why Jay fled from Malaysia to here. 'Cause he didn't wanna go to Singapore. Yeah, it's all the weed, the weather. Yeah, and the weed. And you know, and you can chew gum here. You can't do it in Singapore. Well, you could chew gum in Singapore, you just can't spit it on the ground, right?

I kind of agree with that. I think I might be on board with that actually, especially after seeing how, like, what people do. And I lived in DC and New York. People have no respect. They just would— in DC at least, they would throw stuff everywhere. Then you're, you know, picking up somebody's McDonald's bags.

I, I don't know if this is true, but like on the sidewalks in New York, someone told me like there's all these spots everywhere, and someone told me every one of those spots is chewing gum that's been thrown, thrown down over the years. It's like every block, every, there's hundreds of these spots.

So, yeah, I heard that too. I don't know if that's true, but seems reasonable.

So, so Codie, 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. Buying a healthy business and buying a boring business. So healthy and boring equals wealth.

Yep. And so I agree.

Tell me how, like, did you start out like buying like a laundromat or like what did, or a car wash or like, I, I started looking at some of the sites that you recommended in one of your newsletters and, um, I'm gonna get back to your origin in a second, but I just wanna ask you, like, I saw this one company like right near where I live right now. It's a solid dry clean operation in an affluent area. Cash flow, $126,000. Asking price, $249,000. So less than 2 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 start? Like, how would you buy that business?

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. So if you buy a dry cleaners, you have to do an environmental study on it to make sure that no toxins have seeped into the soil and you're responsible for that liability. Well, I don't do dry.

They do say, they do say that they're, they pride themselves, they're an environmental, environmentally friendly, non-toxic cleaning operation. So of course I would have to do due 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, you know? It's like, uh, the free-range is 2x4. But, um, you're right. So how I would due diligence a company like that is one, I'd go, what are the main risks in an industry? And that one, one of the main risks is, is it really toxic or not? I would do a land study and I would, uh, talk to an industry expert. Um, the second thing that I would do for a business like that is it's so straightforward. You're a hedge fund manager and, and a, you know, chess master, so you're much smarter than me.

I doubt that, but it's very easy.

It's very easy to analyze the financials of the, 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 $240,000 and $100,000 in profit, but I'd go, okay, I wanna see your P&L, which is probably really messy. I think 5 to 10% of businesses run a clean profit and loss statement. Um, so I would go to their tax returns and I'd say, well, what did you pay the government? 'Cause 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. Mm-hmm. And, um, and then the other thing you'd wanna do, because you probably don't want to manage and operate a, a dry cleaning facility.

Actually, it's my passion.

That's, you said oddly. Yeah. Mine too. Um, no, I think that the part that I'm always careful about, and I wanna 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. And that's not the case.

Mm-hmm.

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 wanna make sure there's enough cash flow in there. Where if right now it's cash flow at $120K with an operator already in it, and you get to take home that $120K or, you know, put a little bit more in advertising, et cetera, and allow them to do the day-to-day, that might be a cool 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. It's an interesting way to get other people in your life involved in businesses without the startup. You know, failure porn.

Well, let, let, let, let me ask you just as like a side question. Did you ever find a point in your life where suddenly realized all your friends and family were working for you?

Yes, actually a few times.

Whether they liked it or not. That's happened 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.

Real interest. 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. Uh, my brother and I still own assets together, but I gave him his first job outta college. Um, and he ran a business that I had for a number of years. Um, so, but I've also had two friendships implode, you know, pretty aggressively from doing business together. One incompetence and one fraud. So it's definitely doesn't come without its issues, you know?

So, so again, like how did you get your start? Like what's, what's the, the Codie Sanchez origin story? What was the, what was the first business you bought? I, I know there's a story before that too. Like you were a journalist, you, 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. Uh, well, the very first businesses I bought were, um, marketplaces or consulting agencies. So I bought a company called Selling South where basically I was working in US LATAM. At the time selling investment products. And I was like, oh, there's this little consulting business. What if I bought that, did it at 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, um, and 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 fir— the very first one was, was what, what was it selling?

It was called Selling South and it was a consulting service for US companies, US financial firms that wanted to sell into Latin America. So that was a specialty of mine.

But, but like if you, you, if you bought that, like did you, 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. So there were newsletters. At the time, so they, I don't, we didn't call it that. It was like industry emails basically. And these industry emails, people would pay access for. And then those, there weren't individual consultants. 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 wanna leave, they just wanted to get bigger. And so I could be, be that for them.

So, so you, how, how did you buy it? Like what, what was the, 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. We're talking less than $50K. And, 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 $110,000, $120,000. And that business, 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, 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, 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. 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. I was like, oh, 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. The business, I mean, you know, fine. 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, uh, found out that I, you know, had this business and it was, um, it was reported. You, you were in finance, so you have to report any business that you have.

Sure.

There 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. And so finally Barry was like, the thing is, we think you could move the financial markets.. And I'm like, Barry, this company makes like $120,000. Like nobody, nobody's moving anything with this. And he was like, you gotta pick one or the other. And I made a lot of money in finance, so I was like, all right, I'll, I'll bow out. So I ended up actually getting rid of the company, giving it back to the guy and bailing.

Yeah.

So that didn't work out great. And then I did Threads Refined. That also did not work out great. Um, and then the only thing that ended up working out well for me was once I started buying what I now term boring businesses. 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. And I was like, what business could you run without being there every single day? And I could trust an operator to not, not fuck it up, candidly. And so I decided on that one. And then we owned a couple of different laundromats together., 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, you, you know, you, when you own multiple laundromats, you get, you can get bulk deals on buying the washing machines and detergent and so on. Yeah. Uh, and location is key, but if they already, if you're buying an existing laundromat, they've already taken care of finding the location and you, and that's proven out by the profits and so on. Other than by buying more and then doing, you know, backend, you know, reducing backend costs, how can you kind of enhance the services or enhance the, the revenues of a laundromat?

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 $3 million, and that was with a company called The Fold. And I was an investor, I didn't own the whole thing. And, um, 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, um, that got so big because wash and fold, the, 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 wanna do it themselves. And so that business got, got pretty big through wash and fold, which is how you could do that. Um, there's lots of little fun things we do in our laundromats or, or we've done over the years. Like, uh, one of the most important things for any small business is reviews. 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 gonna operate and do I even know it exists? 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 SaaS tools that can help you with that, like ServiceTitan or Jobber. And then, uh, 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 drives. So we would have like books out for people if they came in. We would do like free coffee and partnerships with the other, uh, small businesses next to us. We would do a Taco Tuesday if we were next to a Mexican store. And so if you came into the Mexican store and did this and then you brought up laundry, you You got some sort of discount. And so you could do those small things, but the problem is you're not gonna make a $50 million laundromat unless you own hundreds of them. And so I think it's a good gateway drug business to, to business.

But like, let's say, but I don't think it, let's say they had $100,000 in profits. Okay.

And then yeah.

What would you typically buy it for? Like 2 times cash flow, like $200,000, maybe some seller financing in there, meaning, you know, yes, 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. So maybe you would put $100,000 down for a $100,000 cash flow business and then pay them the other $100,000 over 3 years or something like that. And 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, cuz I think we've gotten obsessed with this idea that we have to be Silicon Valley multi, multi-millionaires. And the average person doesn't even want that, you know? They wanna have enough cash to go to their kids' baseball game, have a business that they get to run that they like, um, and not have a ton of volatility or risk like you and I have had in our careers. And so I think, I think a laundromat is a very straightforward way to do that. You know, my first laundromat transaction was like $100K. We bought it for, bought it for like, I don't know, bought it, it was doing $60,000 to $80,000 in, in, uh, cash flow. And we got it for that amount because there was, we had to renegotiate the lease. It was old equipment. And, um, but then, you know, we got that business up to, you know, maybe mid, mid $150,000, $180,000 in annual profit. But the, the beautiful part there is, you know this, then when you go to sell, if you can buy a laundromat that's only doing $67K in profit and you could get it to $200,000 in profit or $150,000 in profit, then you can go and sell it for more like 2 to 3 to 4x. And so you can also make more money on the exit.

Yeah. See, this is, this is a very important concept that people don't realize. You're the, the business value doesn't go up linearly with the profits. It go, you, you know, you just, you bought something for 1.5 times cash flow, but if it gets bigger, you could sell it for, like you say, 3, 4 times cash flow. So you, you get, you get the profit expansion and the multiple expansion. And then if you buy multiple laundromats, it could go up to 5 to 10 times cash flow at some point. So this is, this is like a great, this is like everybody says 9 out of 10 businesses fail. Laundromats don't really fail. Like if, or a good existing laundromat or in a community doesn't really fail. So if you buy 5 to 10 of them, like you use the cash flow from the first couple of businesses to buy other laundromats, you're going to probably make, let's call it a million dollars. Like that could be your first million, just a very clear path to that.

Like 100%.

How long would it take as an employee to, to do that?

Well, Mike, who ran some of our first laundromats, you know, inside of 3 years, that was a business doing $950,000, $970,000 in revenue because we bought a bunch of laundromats. And that was when, before somebody opened their big mouth, me, and started talking about this publicly, laundromats actually had a, had a, a lower valuation. And so we've actually, there's like, there's a, there's a little bit of a laundromat bubble, which is funny. But, um, back then nobody, like if you had a business that only made $67,000 in profit, nobody wanted to buy that business because that's a shitty job, right? 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, uh, 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 done at the micro level. On a, a tiny level.

No, this is totally true. Like I will, I will tell you back, I think it 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 were so—

you should have done it.

I know I, I should have, but you know, there's a lot of should haves, a lot of things I always try to do. But, but it's really great because there are, are websites that tell you which laundromats are for sale. You can go visit with each one to see you know, what locations are good and, and what kind of work you need to do to improve them. And it's just a solid business. And, and, and like you say, uh, there's various ways to make sure that the exit is, is, is much higher than, you know, what you would've thought initially. So it's, it's a good way to get started. So what other boring businesses did you, did you buy? Like, what did you do next?

Car washes. I still own a lot of those. Um, the car washes industry too, because there's a company called Mr. Car Wash. I don't know if you saw that public IPO. Um, but it IPO'd for, I don't know, somebody can check my homework on the internet, billions. And the interesting part is all it is is this same process. Um, a little bit more sophistication, but basically buying multiple car washes, cleaning them up, branding them under one name, adding subscriptions, aka recurring revenue, adding some tech to them, uh, increasing prices and adding a few more higher level services. So on a, a laundromat, that might mean 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. They're self-serve, maybe they're double bay, but they're also self-serve. And that means you go and you wash your own car with the, you know, with the hose. And, uh, and so these guys would take those and they would convert them to tunnels where you have to drive through it. And so those, that costs more money for a user, so they make more money. Or, um, they would be hand car washes and they would actually have, have varying services. And so it, one of the cool things you could do is you can go and basically look at Mr., uh, Mr. Car Wash'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 it's all, you know, it's not all, but a lot of it is public and they report in their own earnings. And so that's what I did.

Now with car washes, uh, like is, did COVID kind of add the, the, to the risk factor? Because car washes probably didn't do too well during that year or two?

Car washes were an essential service.

Really?

How about them apples? Yeah. Laundromats too.

But people didn't probably need to, well, I guess a lot of people were still driving, but not as many. So did people still need to, like, there weren't as many cabs. Cabs are the biggest customers of car washes. So like, oh, that's a good point. They still do as well.

Well, so you have a more of an East Coast mentality there. Most of everything 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, um, um, like, is there some sort of outdoor activity nearby and holidays? So on the West Coast, do you wanna 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 to like public fields, um, stuff where like moms go and, 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, that first month was mayhem. Like I thought every single business I owned was gonna go bankrupt and I was gonna lose everything. Um, I was really invested in cannabis then too, owned a bunch of cannabis companies with our, my partners. And so I was like pretty convinced we were gonna be broke.

And, uh, now was that paranoia coming from the cannabis itself or?

Probably, probably it had nothing to do with the copious amounts I was using. At the time. Um, yeah, it could be. And, uh, and also, you know, at that time in California, I was living in San Diego at that time. Um, it was extra crazy cuz it was, you know, California was obviously aggressively locked down. Were you in New York for that or did you go to Florida?

Uh, I was in New York for a part of it and then Florida because they didn't really lock down. So yeah, I made that switch.

Yeah. Um, so it actually didn't hurt us at all. And the other thing that I thought that was one of my concerns, I was, I was, I don't own any car washes in California anymore, but I was concerned that they were gonna cut off, uh, our water access because, you know, they're, they're very water conscious in California. 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 using a hose outside your house.

And so, so how did, like, what did, 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 cash flow positive came with real estate, small transaction. 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 funded a business at a deficit for an extended period of time. Um, so all of those were cashflow positive. Typically those are businesses that I don't have to have an operator day-to-day functioning, cuz at the time I was still working in Latin America or traveling around a lot in finance. And so I just needed my one operator who could run a bunch of these businesses.

Yeah, it's, it's, it's interesting because again, one of the ways to de-risk, I always tell people the most important, like having a good idea is like 1% of the process and then the rest is how do you de-risk the business? 'Cause you just don't wanna lose money. Like you wanna make money and, and it's so easy to lose money. And there's some, it's already hard work. Yeah. You have to, so buying a profitable business already is one way to de-risk. And of course buying multiple, uh, uh, businesses, ones that you don't have to spend as much time operating and, and all sorts of stuff. So do you still own the car washes? Are you still buying car washes?

I'm still buying them. I still own a bunch of them. Most of them are located in Texas or the Southwest now. Um, the, the other thing that's interesting about these businesses is, you know, when I, when I buy a business, one, you, you typically buy them and they're already profitable. You wanna have like a pretty quick cash repayment period. Um, and so, you know, if I'm investing in venture, it's gonna take me 7 to 10 years to see if I made any awful decisions or not. And in this, I really want a payback period. It's like 3 to 5K, I'm sorry, 3 to 5 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. So that's interesting. And I, I saw this stat the other day, we should verify it, but that 39% of all small businesses that are startups, brand new, they don't fail. I thought they would fail. Most of them would fail 'cause they go out of ca— they run outta 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.. 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 outta cash. Then if you already find a company that's has product market fit, people want it, 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 versus starting them unless like this business, Contrarian Thinking, the media business, I just like it, like it's not where I make all my money, but it's fun. So I love it.

But the good thing, 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. 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. Like I, yeah, totally.

I mean, so Choose Yourself Media, which was how, how I named it when I started my newsletter business around 2015. We literally spent $0 starting it up. I already had a free email list from my writing, and now I was just gonna start charging for like a higher-end version dealing with just like stocks and finance. And just the first year it was millions in revenue and not that, not that much in expenses.

So I totally agree. It's a, and the cool part is it's actually just a funnel for everything else that you wanna do. So you're an investor, you've invested in a ton of stuff. Me too. And now, you know, if I wanna raise capital, which I usually just raise from my own stuff, except we have a small venture fund, but, um, I can do it from my audience, which is really cool. If I want deals, I get them all from my audience. If I wanna sell a company, the last laundromats we sold, uh, came from somebody in my audience that ended up wanting to buy them. So it becomes this virtuous circle that just makes a lot of sense, uh, to me.

Have you considered doing like, like you said, eh, you know, rolling up laundromats is private equity 101. Are you considered doing like a small private equity fund focusing on roll-ups of boring businesses?

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. I, I played that game for like 13 years and I ran a business and grew it to $1 billion in assets under management at First Trust., it's like having 1,000 bosses, you know?

Yeah. It's unpleasant. You gotta, and they're all nasty.

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 can say whatever you want and make a ton of money and you cannot be right and you can make a ton of money. If you're not right in investing, you gotta fuck a business. Like it doesn't, you know? Yeah. So you have to be right. You have to be mean. And at a certain point I was just like, oh God, I don't wanna raise another fund. I've, I've had like 5 different, uh, fund families that I've either run myself or run with partners. And so maybe one day, but, but no, right now I just say no to money, which is also somehow painful. Uh, 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. It's gonna 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, uh, plus seller financing, plus some amount 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, uh, play around in?

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. 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 I was running a private equity fund with some partners and a bunch of our companies had podcasts. And so I ended up getting to know this guy who ran this thing called Strike Fire Productions.. I was like, dude, I could 10x your business right now. Why don't you let me invest some de minimis amount in your company and I wanna 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. 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, uh, service business. And then in the boring business side, which are the ones that we own like 100% outright, I really like mobile home parks and RV parks. I'm trying to own more of those.

Oh, you know, it, it's very funny because I just, um, I invested in a roll-up, FG Communities, which, uh, is, uh, rolling up mobile home communities and it's, it's a great business. You know, the, the, the biggest investor in that industry is a young man named Warren Buffett. So, yeah, exactly. And, and he, he, he loved, because that's a, it's a recession-proof industry because if anything, it, it benefits from a recession. And a lot of people just in general after they, you know, baby boomers are getting older, they, when they retire, they, they downsize. And, uh, so, so it's, you're getting it from all directions and it's, it's a very captive industry. Like once you move into your mobile home, it's not like you can't, you can't drive it away really. It's not really mobile. And, uh, it's true. 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 like the world is full of a lot of NIMBYs, 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. 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. 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. And you, you, you know, even there's not even a great mobile home park property management company because again, you can't have the scale of thousands of units and 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, but I wanna own more of those. And the same thing with RV parks too. I also think RV parks are interesting because they're like a landhold. So if in Austin, Texas, for instance, if we wanna own land somewhere, but we want it to cash flow in the interim, but we don't wanna 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 5 or 10 years and we know that it's gonna appreciate at some point and the use case will be something better than RV parks.

And those are, are, I, I've looked into the RV park, uh, businesses as well. And those are great because there's a lot of, a lot of just homes will say, hey, use my backyard. We'll set up like something for 1 or 2 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. Like with just, if you have a, a, a, a RV park with like 50, 60, or 100 RVs, the multiple becomes incredible and it, it gets really worth it. You know, one thing, have you ever considered like not campgrounds but glampgrounds so that high-end camping in a, in a kind of a, You know, near a, near a national park, something like that. 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 a night, $100 a night for, for a tent that costs you nothing. Like you don't have to build a house. Yeah.

I know I have this friend Rob Built, he's on the interwebs and YouTube and I keep trying to talk him into, we own a couple of plots of lands in varying places with RV parks and and not, but I'm like such a finance nerd at some point that I realize I'm actually not that good at, at branding and coming up with cool ideas. And you know, somebody else decorated the office all nice. I have an idea in here, it looks awful out here when I do it. And so my RV parks are like pretty standard. They're nice, they're upkept 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 treehouse that charges like $500 a night.

Yeah. And you see those, there's like, um, there's like an Airbnb for glampgrounds. I forgot what it's called, but like the treehouses are, are, are, people go crazy for. But I, I like your philosophy too. 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. And I always think it's so interesting 'cause people on the internet always love to tell you the reasons why this stuff won't work. And I'm like, well, fine, you keep telling me why and I'm gonna keep profiting off of it. But the, the thing about mobile home parks and RV parks is you're exactly right. There's like 3 reasons why the operators come in. One, they don't pay rent, so you give them free rent. Two, they make a de minimis amount of money depending on size of the location. Typically now as you get bigger, this changes. And then three, they actually wanna pick their neighbors. So like one of the big benefits is they, they, they screen everybody who comes in. So, you know, they're like, no, you can have this location, you can have that, we're gonna do this. You know, and they basically use us to sort of, you know, add, uh, value adds to their, to their land where all their buddies live.

And so, 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, buy land to do housing development without knowing they're not gonna know for years if there's 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 of ways, but the RV park thing, there's like almost zero risk, particularly if you're buying 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, 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's, that keeps me up at night. And so what I like about these kind of investments is they're not very CapEx heavy. 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 do it.

And I, I like your approach of, uh, 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, a variety of services you could, uh, provide to your, 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.

That's exactly right. Yeah. We bought a company called ApproachNet and the company, all it basically does is have 24/7, uh, available chat with real humans, also augmented by AI. And then like a little bit of a data backend about 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? Like that's who you're gonna go with. You're not gonna 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 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 Approachment. 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, was that a more expensive purchase? Because they probably viewed themselves as a tech company and they wanted like a tech valuation and, and so on.

Yeah, that one wasn't, but it was, it's such a small business. So we bought that business for $75,000. I think it was $60,000 down and then another $15,000 after he transitioned some of the software to my operators. But the reason that was so cheap is one, we kept the operator on. I think he still has 5% of the company. His name's Mike. We kept him on. He owns a bunch of businesses, so this was just one small one of his. And again, common thread I suppose is we were like, we're gonna grow this so much bigger. So originally, if you could imagine, if when you got into the backend of Approachement, it's kind of a clusterfuck. There was like, everything was manual. It was a software company, but not really. And, um, you know, there was a, a ton of processes that weren't right. 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% of the manual processes 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 SaaS. I'm figuring that out now as we go. And two, 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.

But let's say you own like,, a bunch of laundromats, a bunch of car washes, a bunch of, uh, RV parks. And now you buy this business and suddenly all of your businesses pay that business $1,000 a month for their services. And so now you have a, 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. It seems like you can get real multiple expansion there just by throwing in all of your companies as clients to that.

Oh, 100% 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. It's a service-based business, business. And so it's just an agency, right? But, um, we have too many clients for them to be able to, to take, so we waitlisted it., but our businesses get priority. So I think most small businesses, 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. 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, I, I have a friend who went viral with just counting the coins out of his laundromat and, uh, and car wash. And so there's all these ways to go viral and then, uh, you can use that to get more reviews. And so we'll see if these are smart sta— 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. 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. 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? And, uh, and so I said, why don't we do the same thing? Let's just look at our P&L, 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.

So, so that's interesting. So what does Am— what has 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.

Oh, diapers.com they bought way back in the day.

Yeah.

Like 2008.

And then 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, but that, that actually doesn't seem that smart. So they, they probably use it for the grocery.

How 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, uh, tech stack. Um, what else did they pick? Customflix, smallparts.com. So that was probably a competitor to them. ShopBot, competitor also. TextPayMe, which I would assume, oh yeah, that probably added functionality to their payment system. Um, So, you know, I think, look, it looks like they've done 200, they've done 116 transactions that are public. But I bet if we looked at a diagram of like, you know, horizontal transactions, vertical transactions, so, you know, competitive transactions or vendor or like, you know, increase in each client's LTV, it's probably a mixture of both.

So, so It, it, it's so interesting. So where, where have you found like your biggest risks in buying these businesses? Like let's say the laundromats or the car washes. Like when have you been afraid?

Yeah, let's think, what have I been afraid in my businesses? One, I don't like one business that I bought. I, it was one of the ones that I was friends with the guy, you know, I got defrauded on. So like where the risk in the business is.

I, I was gonna say, I was gonna even prompt you, was that the time you were, 'cause with 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, if they stopped my ability to run my car washes because of water or because of COVID those are the two times where I was like, oh my God, we might go outta business. And, uh, same thing in cannabis. Like, I was like, oh my gosh, they're gonna, you know, outlaw this. 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?

Well, the first two funds went awesome. And then thankfully the third fund, I was like, I just feel like this market's so frothy. Remember that? That was like 2019 and cannabis was like, it was huge. Yeah.

And, but then it kind of fell apart all of a sudden in terms of valuation. Oh.

Massive fall apart. So thankfully we, our very first fund was in like 2014. I think that the guy who started the company started it then and I was an investor. 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. So I think cannabis is hard right now. I, I still think the asset class makes sense, 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. Plus I've, 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 legalize it just like alcohol? Legalize it just like alcohol. Now I'm a little worried about how high the THC levels are in some of the products. I don't, I'm, I don't love that.

I'm not sure that's good for society, but, um, particularly in the government regulated stuff, they're like, they, they like tell themselves this is THC for cancer patients. So they have, it's like every, even like a drop, you go completely like you're, you're knocked out for 3 days. So, uh, yeah, you gotta be careful.

But yeah, I agree.

You know, what about service businesses? Like, again, if, if the business is the people, like let's say you buy a, a company that does plumbing, uh, 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 upfront. It's kind of not that dissimilar to real estate in that like you, you make your money on the deal. So like here's how people screw up in buying businesses. One, they take on too much debt, like an, a big SBA loan or something like that, and they don't realize things like debt service, like interest rates, what the variability on that could do to the business, and they run outta 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, 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. 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, 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, uh, in seller financing, or I have to have holdbacks. So you say that you do $300K, 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. Yeah, I guess it's straightforward money and time, just like everything else, right? 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 stay for a certain amount of time, 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? Are you like scouring the, the websites? Like, uh, you know, like I was just looking at One of the websites you recommend, bizbuysell.com.

Yep.

Uh, do you like just scour those for looking for good solid businesses or what, what's the start?

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 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, oh, I pay my cleaning lady by Venmo every week, or I pay my landscaper by Venmo every single week. Um, I know they're the owner of it. 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— you do the same thing for your credit card. 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 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? 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, you should try this sometime if you're ever in a group of owners. Ask a group of owners, raise your hand if you own a business, they'll raise their hand and they go, okay, keep your hand raised if you, um, would sell your business at the right price and the right terms. And what do you think the answer is? Like, everybody's like, yeah, for sure. Hand's 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.

And, and really important that Most people don't know this statistic, but something like 70% of businesses don't sell when the owners are done. They just shut down.

It's wild. I've, 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% of businesses just shut down. And that's like my little story about one of the reasons I even started doing this is 'cause my Uncle Eb, I mean, you could look it up, Eb Holmes Plumbing, and he had this company. For decades, and when he got cancer and he started getting sick, the company did millions of dollars in revenue, $5 to $6 million in revenue, probably $1 to $3 million in profit. And, uh, he shut the business down. He had no idea he had a sellable asset. It actually cost him money to shut the business down as opposed to being able to sell for millions, which would've set his wife up for life. And so it happens all the time.

Yeah. So, so it makes it easy to begin the negotiation when their alternative is zero.

Yeah, 100%. I mean, let's say you didn't, you know, you said the guy who runs your podcast is his name Jay? Yeah. Okay. So let's say like how I bought that first podcast production company is I was on a podcast like this with somebody listening to one of our portfolio companies and I knew the guy. Um, and so I was like, hey man, uh, 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, 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, yeah, but I, I hate sales and marketing. I hate, I'm so good at production and running this, but I hate selling it. And I was like, I would hate running it, but I like selling things. And so that was how I got that first deal.

And particularly if you have that, again, a 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, 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 can probably start your own podcast production company.

Yeah, there you go, Jay. And give James half of it. Um, yeah, I'm gonna start my own.

Jay won't do that. He's, Jay's so greedy, he won't give me. Even 1% of it. Yeah, no, I, I will, I will give you 0.5%. Thank you, Jay. I would appreciate that.

So, um, you'd have to be meaner, James, and negotiate for more.

I know I'm too nice. I'm like, Jay, do this, spend less time on my podcast and 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, um, I think there's so many ways people could do this continuously. And in fact, I, 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 them, aggregating them. And, uh, and I don't think the process is that different for those of us that could do it one-on-one.

No, I, I always think the, the best and safest business model to get wealthy is the roll-up strategy. The idea of picking an industry 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. Like there's 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 8 to sometimes 15 years whether it's gonna pay off or not. And it's very, it's, it could be a very lucrative way to make money, but it's, it's very, much more difficult and you have to wait a lot longer to see before you see cash flow. 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 and I was too big of a wuss to do it. Um, I liked my paycheck. I didn't wanna sleep on a couch. I wanted a nice house. Like I just didn't have that risk, uh, thing in me. And my parents, you know, immigrants, they're like, What are you talking about? Leave Goldman? You an idiot? And so, um, what were you doing with Goldman? Uh, well, when I left Goldman, I was working on PEP. I don't remember if you remember that, the private equity product that they had. Mm-hmm. Um, and I was trying to figure out, that was 2009, and I was a little peon. I was an analyst at the time, and I was trying to figure out what do I wanna do? Like, there's no deals happening. Because Goldman's like, we're on, we're getting trials every single day. That was when they were going to testify before Congress. And I was trying to figure out, well, what do I wanna do? Do I wanna go and do I wanna build out and, and go be more of this private equity side? Do I wanna stay in investment banking? Do I wanna go into the asset management division? Do I wanna go into institutional sales? And so eventually I only ended up staying at Goldman for 2 years, just shy, because 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 gonna make it. And they were, they were cutting off everybody. I mean, I think they, they fire 20% every year, but that year they accelerated it all. So a bunch of my colleagues got, you know, fired with the boxes and security sort of real time.

And, and you know, it, all this sort, sort of brings into question like, what should one do with one's life? Like everybody thinks, oh, I wanna, 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 rolling up boring businesses, making them successful. You don't have to operate the laundromat. Like you say, you can find operators or, or people to help you with that. And so you could really kind of focus on the parts of business that are enjoyable. And it doesn't have to, every, not every, you don't have to check the box on Oh yeah, I love laundromats. I love finding the right detergent for, for things. And like, it doesn't have to satisfy every, it ha— not all of it has to be joyful.

No, but it, like, 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, uh, finance, you have operations, you have product, you have customer service. And so every business like has these 5 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. And so if you like the game of business, which is really just problem solving in a way that makes you more money, um, and hopefully gives you a better reputation and helps the people that you serve, 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 SaaS companies. The SaaS companies are like, phew, for me, because you can't really see what's happening because I'm not a backend 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, but like I can see what we do with a laundromat. I can see the changes that we make if we buy an RV park.

Also the SaaS business, you're, you're taking a risk on product market fit. So you might buy this thing that people just don't want 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.

Yeah.

But you just don't know if it's like a $100 million business or a, a nothing business.

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've thought of as a kid. And man, not very many of them are very happy or would I wanna change places with them. And a lot of them got there from SaaS companies, the ones that I've met, or from doing these giant huge transactions. 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, uh, that we can actually see and touch and feel in some way and have some measure of success. And so I've always associated with that a little bit more.

Well, I think, I think, you know, they look at the kind of three components of what makes up wellbeing. I mean, this is from in, 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. Trapped in a loveless marriage or, uh, buy all these big houses and jets. So you, you're still in debt and your, your, your businesses are always on the brink of, of losing money 'cause of the debt, even though they're worth over a billion. So, or you could have all these cashflow positive businesses, live in a nice place, go on vacations, not have to operate as much as you thought you were gonna have to. And that's freedom.

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. And so I, I really, if somebody says like, oh, this sounds 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. Uh, I want it to be so easy I can explain it to my grandmother. 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, um, innovation risk. I'm glad other people take innovation risk though.

Although the media business is interesting because 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 your course or whatever, and if it, if it sells, 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 like that. So another component of wellbeing is community and it builds this community of like-minded people. They, 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 and they learn from you. And that, 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 5 to 7 divorces, multiple fast cars, nights out at Tao. 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, 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 changed their lives. Let me tell you, your LPs never tell you that you changed their lives.

No. Ever. I will tell you one time I, in, when I was running my, I was running a fund of hedge funds for several years and, uh, 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. 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 gonna be negative this month. 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 unwind things and, and shut that particular fund down. 'Cause 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, they say to me like, 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, but I just loved writing about it and I was making money from the writing and it was a, a good diversification for me at the time. And I was building that skillset and, and I was meeting people. 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 mo— for a lot of us in finance, um, it was super looked down upon to even ever talk publicly about what you were doing. Uh, and I remember when you were writing that stuff originally, I was still in finance at the time and, you know, Like, I think we had to, we had to run our tweets and LinkedIn 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 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, um, I got over it, but it took a long time for me to think. No, 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 wanna say it. And I've always, I need to do a math model on this, but 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're, you're already, I, I, I'm gonna stop you right there because you've already used words like de minimis, which I have to look up later. 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 if you were taking 2 and 20% of the things that you did? And, or if I was taking 2 and 20% of all of the people that I raised money for, um, to buy the boring businesses 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 is like $10,000 a year, which maybe is a lot, but if they then go and execute on that business and they make $100,000, $1 million, $10 million, I would actually much rather monetarily have the 2 and 20 on the ROI, and they would much rather learn it and keep all of that than on the fund model. Average return in private equity is 8 to 10% per year would be, would be great. Uh, and maybe you could have some funds that are averaging 15 to 20%. That fund model is gonna make you the GP, the fund manager, rich, but it's never gonna make the investor rich. You already have to have money and it just grows your pot. And so I think that's why I've never understood that.

It's hard. I think for me that was what the hard part about raising money for funds is because when you're raising money for a company, you could say, look, I'm raising money at a $3 million valuation, but eventually this is gonna be worth, this could be worth a billion dollars. So that's an easier sell. Than, 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 7 or 8% a year. Maybe I'll do 9% a year. No one's getting excited about that. 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, Exxon. So it's like, and then they're charging 2 and 20 on something that everybody could just do by themselves. Like, I just think it's a whole scam industry.

So, yeah, every time I look at the K-1s, I always get a little chuckle. Um, but you know, and I also think, you know, as investing, so much of the world pre-COVID, or now I'm gonna sound like it's conspiracy theorist, but like pre the pandemic, I sort of believed everything everywhere, I think. And then when that all started going sideways, 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. 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 Wall Street isn't incentivized to do that because they want you to keep making 2 and 20 plus. They don't wanna teach you ways to do seller financing because the bank wants to get the in interest rate. They don't want you the seller to get the interest rate, and they wanna be the middleman. Plus they wanna IPO you eventually. And the same thing, I mean, everywhere you look in institutions, you can just get disenfranchised really easily.

Yeah. Look at, look at the typical bank, right? They wanna manage all your money and, and put, there's the whole model, like to, for, for conservative investing, put 60% in stocks, 40% in bonds. That means 100, 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 10x, 20x, put 1% of your portfolio each in that, and then you'll, you'll probably do much better than putting 60% in stock, 8, 40% in bonds, being subject to the whims of the market every year and 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 the way every. You have to basically shut down all the institutions to kind of think independently.

You really do. And, and even, you know, then they wanna actually go use your money to do the thing that you should be doing, 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 it in pooled securities that'll go and buy the small businesses. 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 3 to 5% per year if they're lucky. Let's say you're exceptional, you get 8 to 10% per year. Okay. But you have the highest tax bracket with no, uh, ability for deductions as a W-2 employee unless you have outside activities. And then you compare that to like, well, maybe I go and I put my money in funds.

Okay.

You're gonna make 8 to, if we're really being generous, 20% per year. Or what if instead you just bet on yourself? And your whole book was about that. You know, it's like, why don't you instead invest some money? Maybe you keep 80% of it in cash and that 20%, go buy a business, go build a business and, and bet on yourself with that cash instead. Exactly.

So let's use your, one of your courses as an example. What, what's, what's the course called that allows, teaches you how to buy a business? I forget.

It's called Contrarian Thinking.

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. You run that for a couple years, you're gonna make much more than the $2,000 you invest. You can make hundreds of percent more, you know, in a, 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? So there's a time aspect, but not as much time as you think once you get used to doing things like that. And once you get used to invest, like if you buy a camera for $1,000 and have one friend with a wedding 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. You're gonna be much more successful. I keep trying to tell my kids this, but they don't understand the concept yet. So they become, you know, 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. 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. So like I direct them to your newsletter where they could maybe see someone like them who's, who does it and, and they could learn from that.

But yeah, I mean, I think for, especially for kids that age, what they should be doing, they should definitely go and bet on themselves because the worst thing's gonna hap— that's gonna happen as long as you make sure that you, you use debt carefully. Debt is like the only thing that is the asterisk to buying 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 asterisk, what's the worst that's gonna happen? You're gonna go, you're gonna buy something, you're gonna do it intelligently, 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 gonna walk away a totally different person. 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 10x what I ever would've made if I just kept doing it for other people.

It's very, it's very valuable. Like to, to use the phrase, the art of the deal is, is very difficult and it takes a couple to, to understand the, the language of doing a deal. And I don't mean like the vocabulary of it, 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 per— a better version of yourself to get better at deal making. And yeah, you know, and, and it's interesting because then like take your, your newsletter. So the, 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, an article about, or, or a newsletter issue about, you know, 12 steps to a good marriage. 'Cause 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, but then a more offbeat kind of lifestyle leads to a more offbeat kind of marriage. You're gonna 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, this is what I've learned from my, 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 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, you know, your, how your current marriage, you know, stays afloat even during tough times. Like I, 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. Even if you're just watching TV, it's very good advice. Most couples don't do that. And, and you know, you, you have your whole TEAM acronym. Um, what's, what's the E again? What, what are the, what's, what's the whole acronym?

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 newsletters I steal from therapy, so don't give your therapist credit.

Like she's never gonna read your newsletter, so you're okay.

That's true. And I do pay her too, but, um, it is, so So it's, uh, touch. So at the end of the day, basically Team is this, 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 wanna do it again. And I think like people should be more honest about that. I'm not saying I'm some sort of therapy rockstar. I'm not. This just works for us. But, um, which starts with touch. 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 and maybe we're holding hands or I'm kind of sitting next to him. And that's important cuz you gotta remember you're not roommates. And then second is E for education, which means instead of just going, how's your day, honey?

Great.

How's yours? Okay, cool. You're like, what's one interesting thing that I learned today? 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, 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. 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, what? Your coffee cup, you're this, you're that, you're whatever. If it's not catastrophic, then we write it down or save it for later. And at the end of the day, we go, it 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, it's just easier. Then 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, um, so that's team and we try to do that at least, I would say we get, 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. 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, okay, I want to buy the, which laundromats today should I buy? They want to hear about Codie 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. And because it's all linked, you can't, you can't run a successful business unless other areas of your life are perform— performing as best as they can. So, and that's not always true. Like with, with every business, 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, are humming along smoothly and, and you're able to express that with the media business. I'm, 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 in the newsletter and, and the courses and so on. 'Cause you, you get real other, other benefits oth— 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, uh, my hair stylist the other day about this and, um, and I was saying, gosh, it's so bizarre how styles come and go, or talking about plastic surgeon or whatever. And, uh, and I thought about it, you know, I don't have a problem with the Kardashians. I actually think that from a business perspective, they're genius and there's so much I would wanna 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. 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 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, 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, 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 in the way that we used to measure PPC with ads.

Yeah.

And so I, I think you're right.

That's, that's interesting. I, I, you know, I haven't been, I haven't been writing as much lately as I used to. I used to write like every single day 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 sh— you should. Do you still do your 10 daily ideas? I want a James Altucher idea notepad.

That, that, that I always do. So that, that I—

now you need one on boring businesses. Like which ones are you gonna 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, and things like that. It's, would you do a restaurant?

Uh, I'm a little bit of, the answer's no. I hate restaurants. I don't think that those are good businesses just from a numerical standpoint. They fail a lot. They have spoilage.

Yeah.

They're hard to run. Um, you know, they, they have, uh, in my, in my belief, one of the hardest, uh, you know, employee bases to manage.

Yeah.

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.

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 buildout costs, like I invest in this, uh, it's a restaurant here called The Well that I own part of. And you know, the buildout costs for that location, like that's a million dollar buildout. And so, and then the problem with it is they're kind of like hotels, like every what, 3 to 7 years you gotta redo the whole thing. I don't have to redo my whole car wash in 3 to 7 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. If I was, who's the guy that owns like Shake Shack and all that? Danny Meyer. If I was Danny, yeah, go into restaurants because he's an animal at it. He's so good. But you and I are probably better at investing and media there. I think it's hard to, to compete with me. I'm pretty good at both of those things, but definitely not operating.

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 is find someone to run it.

So, right. Uh, cause yeah, me too.

Cause 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, 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. 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, my biggest technique is I respond. On average like 7 years later. So, 'cause then, and I will, 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 outta that and they respond and then, and the relationship starts fresh again.

I actually gotta look at when we first DMed on Twitter because I feel like that might've, it wasn't 7 years since I've been doing this long enough, but I gotta, I gotta go see if I have a famous James 7-year response. Um, but I, I kind of like it because I don't, I 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, I'm not capable of responding to everything well.

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 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, 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've responded and it's all, it's all great. He's like my best friend now. So.

Uh, that's hysterical.

So, so Codie Sanchez, where could people subscribe to your stuff? This is so great. I hope you come on the podcast again, but where, where can people find you?

ContrarianThinking.co is where all of our free newsletters, 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 Codie Sanchez on all the interwebs. Plenty of like free stuff and all of that too for people who wanna dabble their toes. But this is a blast.

I love your tweets. Like, people should definitely follow you on Twitter. People should definitely follow your newsletter and, and on and on. So, so yeah, thanks again, Codie. 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, I responded to you.

Thank you. 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.