Stocks, real estate, or your own business? Here’s what I’d choose!

If you're wondering where you should invest your money, whether it be in the stock market, real estate, or in a small business using $100,000, where should we be putting that money? My name is Mike Andes, I'm the founder of Augusta Lawn Care. We have over 150 locations around the world. And on Copilot CRM software I built for home service business owners, we process over a million dollars in revenue each day. Whether you're a business owner and you have an existing company or you're thinking, thinking about getting started and you might be working a 9 to 5 or just thinking about getting a business on the trail, we're gonna be evaluating from two different perspectives. One is from cash flow. The beautiful thing about business or any asset like stocks or real estate is it can produce cash flow. We're also going to be looking at your net worth. If you're trying to grow successfully in money wise, using net worth is an easy way to track this. Net worth is simply your assets minus your liabilities. And if you have more assets in the form of stocks, real estate and businesses, your net worth is going to go up. So when it comes to businesses or even real estate, you can look at the valuation of that asset. So I'm going to be looking at both of these things, cash flow as well as what does this do to your actual net worth. Now if this sort of talk interests you and you enjoy this sort of content, highly recommend the book I wrote. It is just last week went on to Amazon. Total Business Turnaround tells you 13 ways that keeps small businesses from becoming a million dollar businesses. And I think it's super helpful. Now let's start off with the stock market. Now this is the S&P 500. This is basically stands for Standard and Poor's, which is basically just the top 500 businesses that are publicly traded. Think Google, Apple, Nvidia, Tesla, all these big companies, they're in publicly traded stock markets. And The S&P 500 is the 500 largest companies. And they've been around for a long time, many of them and some of them are relatively new. But this is the performance of the S&P 500 over the past. What is this like 25, 30 years now if I want to look at the last 10 years, because that's really what we want to dictate today, like where can I invest $100,000? And in 10 years where will I be with that 10,000 or $100,000? So if we would have started 10 years ago, you can see in the past 10 years, especially the S&P 500, the stock market has crushed it. It's done really well over the past 10 years. You'd make a lot of money being in the stock market. And those are publicly traded companies. These are not private companies. These are ones that you can actually quickly go and transact with on something like Robinhood or an app and immediately buy shares or a piece of the business. So that's the s and P500, the stock market. Now, if I would have done that 10 years ago. So if I look back 10 years ago and say, okay, if I were to put $100,000 in the S&P 500, what would I have today? Well, you would have 276,000, $276,000, assuming you have a 10.7% return annually. And that's what we've had over the past 10 years, if you take out the dividends being reinvested. So this is just the actual increase in value, because remember, we're looking at the valuation or the net worth side of things separately from the cash flow. Now, in the s and P500, you do have dividends. You have companies that will actually pay you to own a piece of their business. And on average, The S&P 500 has about a 2% dividend yield, which means if you have $100,000 in cash in the S&P 500 and you buy that index, which is just a conglomeration of a whole bunch of companies in the stock market, you're going to get about $2,000 of dividends. Think of that as cash flow. And so if we take $100,000 in cash we invest in the S&P 500, we're going to 10.7% return in growth on our equity. On our asset that we purchased, which is the stocks, we're also getting about a 2% dividend yield. Now, this assumes that we continue growing at the current rate, and 10.7% is higher than most years, just to be clear, and it's higher than most decades. It's one of the best decades of the past 10 years ever to be in the stock market. But let's just assume that's going to happen in the next 10 years. You would turn your $100,000 into $276,000, and you'd be getting cash flow of about 2,000 to $5,000 per year and in dividends. And for the sake of this example, that's just going to be cash flow. All right, now let's think about real Estate, because some people are like, well, I don't want to do stocks. It's all a scam. I heard so and so tell me real estate's the best. Okay, well, let's look at the last 10 years in the real estate market, and let's see if putting $100,000 in real estate is a good idea. Over the past 10 years, this is what the average sale price of a house in the United States has been sold for. You can see down here, it's like $340,000 or so over. Over the past 10 years, especially after the pandemic, it really jumped significantly to where now the average house in the United States sells for over half a million dollars. So from 340,000, all the way up to a $500,000 for this house, great investment. Let's go. Now, the beautiful thing about real estate and why so many people are big fans of real estate when it comes to investing, growing your wealth and growing your net worth, is the fact that my $100,000 cash does not just get me $100,000 worth of real estate. It can get leveraged. So, in other words, with that $100,000 of cash, I can actually go out and purchase $400,000 of real estate. So that house, that's $400,000. I don't need $400,000 of cash. I just need $100,000 to put down a 25% down payment. And some people are like, well, I can get 3% or 5% down on an FHA loan. That's right. You're right. But. But in this case, we're talking about investment. So for an investment property, you're gonna have to put down at least 25% if you're not living at the house and you're investing in the property 25% down to buy this $400,000 house. Now, if we look at the past 10 years, and we have about a 51%, 52% increase in the value of homes. Again, pretty historic. But let's assume for the sake of this example, that the same thing is gonna happen in the next 10 years. Well, which we're going to have another 50% increase in the cost of real estate. Now, could this happen? Maybe. There's a whole lot more demand for new houses than there is supply. There's less houses being built than what new people are coming to the United States and people are buying houses. And that's why the cost of real estate continues to go up. And we will always need a place to live. So when we look at the house, it's going to over the course of the next 10 years, assuming it continues to grow at the same rate for the next 10 years, it'll be worth about $600,000 terms of the home value. But I've got to retract or detract the $300,000 of a loan that I have on this house. Now you say, well, you would have paid down the loan some. Yes, you're right. But I'm not taking into account the fact that you're going to have maintenance and roof leaks and changing out the water heater and all this other stuff, maintenance wise. So let's just assume the house was worth 600,000. I got to go pay off the $300,000 of debt, because again, net worth is assets minus liabilities, and the loan is a liability. So I turn my $100,000 of cash into $300,000 of net worth. Very good. Over the course of 10 years. That's fantastic. That's some good money. And this is what's really cool. The thing about the stock market and the thing about real estate is that they probably aren't going anywhere. They have long histories of. There's a long history of us needing houses. There's a long history of, of these companies in the stock market performing over the course of many, many decades. Same thing with real estate. People have needed houses for a very long time. And I can look at a lot of historical data to know that, like, most of these companies are not gonna get wiped out. People aren't gonna wake up, and people aren't gonna need houses. So it's much more stable. Now let's look at a business because ultimately, if you have money, you're trying to think about investing it. The question is, do I invest this in the stock market and trust Apple and the CEO Tim Cook? Do I trust Amazon, Do I trust all these other companies to run the business? I have no control of them whatsoever. I am hoping and praying that when I tap my little fingers on the Robinhood app or whatever app you're using to buy stocks, Webull or whatever else, you're just hoping that they make good decisions. You have no say in what's going on in the business unless you own bazillions of dollars. But we're talking about $100,000 of cash. You don't have any decision making power, but what's cool is it's completely passive. So the stock market, you tap a couple buttons and you don't do any work. You're not thinking about it, you're not stressed about it. You just buy an index and you can literally never think about it again. Real estate, a little bit more work, a little bit more risk, because something could happen to the house. You only have one house. It's not like you have a conglomerate of 500 different houses. And if one of them gets whacked, it's not a big deal. In the stock market, you have that diversification with the s and P500 to get all 500 businesses. Real estate, only one house, which means if you don't have a tenant, if you don't have someone renting out the house, you could go negative. What's cool, though, is you still get some cash flow. The thing we didn't talk about with the real estate is in addition to the fact that the house went up in value, I'm also probably going to get some income from rent. And you're like, oh, that's tens of thousands of dollars a month. No, it's not. The first couple years, you might barely be able to make your loan payment, especially if high interest rates are still around and there's cost of maintenance and, and taxes. Property taxes are going up too. And so you might make, let's just call it 3 to $5,000 also in cash flow from this property. Over the course of the property building value, increasing rents, and in years 5 to 10, definitely make like 3, 4, 5, $6,000 per year in cash flow on top of the actual asset value going up. Very good. Now, most of you are like, that was boring. I like businesses. Me too. The vast majority of billionaires are built because of business, not because of real estate. And they didn't buy like one little stock for $100,000 and become a millionaire. For every one of those people, you know, there are another thousand that became billionaires because they actually started businesses and then ran them for decades. Now let's look at a business that we are gonna hypothetically start for $100,000. And this business is going to, in the first year of operation and do $100,000 in revenue. But in cash flows actually be negative. You're going to lose money your first year. Like, that's horrible. It's very, very normal. Most businesses, when you first get started, you don't know what you're doing. You make a bunch of mistakes. You have to buy a bunch of equipment and trucks and advertising and hiring. You're doing things wrong. You don't understand the labor supply. You don't understand the seasonality of your industry. And you make buying mistakes, you make bad hires, you make, you, you spend a bunch of money on marketing campaigns that don't work. And so we're going to assume in our first year we lose money, our cash flow is negative and we only make 100,000 in revenue. Now I charted out over the course of these 10 years exactly how we're going to grow the business. It's not even until year three that I make any cash flow, any whatsoever. And that's not like getting back to break even and making back my $100,000 that I spent to start the business. That wouldn't happen until like year four or five. But ultimately I'm slowly growing the business. 1000-002000-00500,000, 800,000. I'm growing the business and over the course of 10 years I grow the business until finally after year 10, I am doing $2.5 million in annual revenue. And for me that's probably gonna be three or four locations. I guess the long hair, I like 600 to 700,000 annual revenue. Put a working general manager in place. Let's go. Now because I have that $2.5 million and I have three to four locations, I'm gonna actually have this as passive income because I have general managers running all of them. Alright, so I'm going to build this asset that's basically passive and manager run. Because of that though, I'm going to only take out $200,000 in distributions. That's like 7 or 8% very doable. After 10 years I'm not like assuming 20% profits and that's what I'm taking home. I'm assuming like 7 to 8% distributions to me. So $200,000 of cash flow per year at the 10 year marker, okay, $2.5 million in revenue. And I'm going to assume that now I've built the valuation of the business to a million dollars. That's about three times profit, which cause our profit was 200,000. So three times profit plus all the equipment and the trucks, all of the materials, the inventory, all the assets, I could easily get a million dollars for this business. That's 2.5 million in revenue. Has managers in place basically running passively. I guarantee you I would be able to sell this business for a million dollars assuming it was making $200,000 in profits take home. And it was because it manages in place over three or four locations. So this is the chart of 10 years. Now here's the problem.

Everyone wants the outcome. I'm going to show you what the outcome is. It's juicy, but no one is willing to do the first three to five years. And that's why most people should not become business owners. Most people should invest in the stock market in an index fund like the S&P 500 and or real estate, where it's very predictable, it's going to be much more stable. And yeah, you might only get 10 or 12% annualized returns, but it's not going away anytime soon and you're not going to be stressed out of your mind for the first three to five years when you're not making any money and you're actually negative. Now let's look at the positive side of running a business in terms of what it can do, your net worth and cash flow. So we take $100,000 cash, we buy equipment, trucks, et cetera, we get the business started. Then in 10 years we created a business that has a million dollar valuation. So we basically had a 10x, a 1000% return on investment in terms of the cash being in turn to a million dollar asset. If I go all the way back to the stock market, okay, I had a.

10% annual growth, and over the course of the 10 years, I went from 100,000 to 276,000. In this case, I went from 100,000- to a million dollars in valuation. Okay, in the real estate example, from a value perspective, net worth perspective, I went from 100,000 to $300,000 in net worth. But in the business, I literally had a 10x much greater return. Higher risk, higher return. So because this is so much more risky than investing in the stock market or investing in real estate, I can expect to have higher returns. Now, in addition to the fact that I built my net worth from 100,000 to a million dollars, I also am kicking out $200,000 in profit, which means every single year I'm getting a 200% annualized return on my initial investment because I put $100,000 in. And every year I'm getting 200% annualized returns. Like the stock market in real estate will never do that. All right. Oh, well, I invested in Tesla and Nvidia. Guess what? They don't have any cash flow and very little. Nvidia just started doing some dividends, but very little $100,000. You're not getting rich off the cash flow. In terms of a boring business, a sweaty business like lawn care, landscaping, roofing, tree work, fencing, cleaning, janitorial, pool cleaning, these type of services, you can absolutely produce great cash flow. And this is unheard of. You're never making 200% of dividends from the stock market. In fact, the average in The S&P 500 is 2% in real estate. You might be lucky to get 10, 15% of cash on cash returns and be able to actually make that money back. Over the course of years, I'm doubling.

I'm doubling my initial investment every single year at year 10. That's fantastic. I 10 x my net, my net worth, my value, and I'm also getting great cash on cash returns or cash in the bank or net income or profits. I like to call it distributions. Money I literally can take out of the business and put in my own personal bank account. And I'm able to do that relatively passively using that model over the course of 10 years. Now, when I say this, everyone thinks that I'm saying everyone to start a business. In reality, I think that 95% of people should not run a business. Why? Because 90% of people that start a small business will never make it to year 10.

The massive delineation between who is successful in business and who is not is simply staying in the game. And it's simply getting to year 10 because 90% of businesses that are started in the United States do not make it past the 10th year in business. And yet business and success when it comes to money is not linear. It is exponential. Which means it starts off with very little evidence of success. But as time goes on, gets very, very steep in how much you are progressing. And this ties into my last little segment here. And this is actually the last chapter of the book Dig Build Barry on the left hand side. This is what I would affiliate with real estate and stocks. And that is it starts off small, gradually grows over the course of time, but it's very reliable. There's no downward pressure. You're not losing your money. You're not gonna lose your money. Like regardless of when you invested in real estate or invested in the stock market over the past like 50 years, you're not losing your money if you long just hold it. The problem is this. Most people hold their business, they stop and they start businesses on like they change underwear every single day. And so this is like the stock market and this is like real estate. It's steady, it grows over the course of time. Now when it comes to business, much more exponential, much greater return. More billionaires, like I said, are built from businesses. However, in order to achieve this type of result, not only do you have to survive the 10 years, you have to survive the first few years, when you actually go negative, when you actually lose money. Because everyone wants the $2.5 million business after 10 years, but no one wants to go negative for the first year and then break even for the second year. And then the third year, you don't even get what you originally invested back in the company. You literally, if you use this chart, it's year five that you would actually make back your initial investment on the business.

That's exactly what happened to me when I started Augusta Lawn Care. The first five years was so painful. And, yeah, we grew it past a million dollars in revenue just like this, but it was painful. Like, no distributions, not a lot of profits. I was making a lot of mistakes. I didn't know how to do marketing. I didn't know how to do a lot of things. But what I was doing was I was building the foundation. And that's what Dig Build Bury stands for, is you dig down into the dirt and you're building this massive building. You don't start with the windows, you don't start with the structure, you don't start with the steeple. You don't start with any of those things. You start with the foundation. You dig down into the dirt. And what this first three to five years in business is, is the foundational work. It's the digging. And then once you dig, you then build the foundation. And then guess what you do after all that hard work and building the foundation, that's so difficult, you bury it. You literally forget it ever existed. And then you start building the building. And the titans of industry and the entrepreneurs that we all look up to today, we go and we magnify and we look up to the building that they've built, their massive business, their massive net worth, their massive success. But we failed to realize. What we failed to actually look at is the foundation. The thing that took them years without cameras, without interviews, without anyone cheering them on. And in that foundational period, when you're digging down into the dirt, you actually go down. You're lower than your friends, you're lower than your colleagues. You're lower than the people you used to work with, the people you went to school with, the people that you went to college with, they are now making more money than you. And you left the 60, $70,000 per year job, and now you're not making any money. You're actually losing money. And that's extremely debilitating for many people. Like, I'm working more hours and making less money than I was a year ago, two years ago. But this is the thing. Without that foundational work, without the digging, the building and the bearing of that foundation, you will never be able to build the massive building that you're trying to achieve. You can't build the skyscraper if you didn't first dig down, build a solid foundation, and then the success of that structure is built on top of a solid foundation. And so, if you're thinking about stocks, real estate, and investing in your business, my question is simply this. First and foremost, how long are you going to play the game? Because if you're not going to play it for 10 years, I don't think you should start a business. Furthermore, if you're going to start a business and go for the outsize returns and go for the massive home run, be willing to endure three, four, five years of pain. Because that is the process of building the foundation required to build the massive success you want to have. If this is of interest to you, again, you're going to love the book. But you're also going to want to check out this video right here. Because I actually walk through the budget of using this $100,000 to start a business, build the six locations, and then it actually does $4 million in annual revenue.