Codie Sanchez: How You Can Make $50 Million in 2 Years As A Creator

Prime isn't owned by Logan Paul. He got plugged into a company and he probably owns, I don't know, 5-10% of that.

Ryan Reynolds did that with both Aviation Gin and Mint Mobile.

But 5-10% of what will be a billion-dollar business is much better than a bunch of $1 million businesses. I'm just not a type of person that sleeps well when I think I could go bankrupt. The one and only Cody Sanchez. What if instead of us giving up to the big boys, we take a little bit back? I was at Goldman during the crisis during 2008. If you prepared for your business to be down 20, 30%, you're probably pretty good. Yes. But it's like, here's my business today and here's what would happen if I lost 25, 50, 75, 100% of sales. Here's how long of a runway I would have and here's how that would start to affect my business. I sort of think about it as you have this compounding ability to withstand pain over time. What I've realized is the people that you will trigger the most are those who did the thing you are doing now successfully and failed. I think the truth of the matter is business is hard. I always chuckle with my team when they're like, oh, we got a tough week. There's a lot of stuff going on. I'm like, making TikToks on the internet, you know, nobody's dying. Everybody's fine. I always— every time I haven't done that, I've regretted it. And so if it was me and I was a new creator, I would be thinking—

okay, so Cody, you've built a pretty epic content business, and I want to start talking about that of how as a creator you've actually staffed your team and built, you know, the logistics and flywheels behind the scenes to create the amount of content that you do.

Well, it didn't start out that way. Started out with one person. I ran the business not as a business, just as a hobby. It was a blog for about a year plus. Then I got my first hire. That first hire's name was Nikki. Shout out Nikki. And she basically was a jack of all trades, did everything, and, and helped me figure out was this actually a business? Should we sell something? Or was this just a newsletter that we were going to grow called Contrarian Thinking?

Can I pause you for a second? Tell me, how are you making money during this time?

Zero. Oh, like otherwise? Yeah. I was running a private equity fund with 3 other partners.

So you still— you had another business, basically?

Yeah.

Because I feel like people always have that question of like, how are you doing this for free?

Yeah. I think it's the best way to do it, honestly. It's really hard to ask for people's attention and their money upfront. You got to choose between the two.

Okay, that's interesting because we've talked about when we talk about flywheels in these like workshops and everything that we teach, where a flywheel can only have one goal. And if you try to have two goals and most people are trying to grow an audience and make money from the same flywheel and then never start spinning well, you know, that's so interesting.

I do not— I tell my audience all the time, we're not building an audience right now. Like when you're starting at like what I call H1, which is the beginner stage. Mm-hmm. We're not, we're not building an audience, we're getting money. So like you have professional skills, what can you sell? You only need like 5 clients to be able to pay your bills. Okay, now we have some money and your bills are paid. Now we'll go build an audience next. So I always teach them money first, audience second. Um, cuz they have professional skills where they can sell something for 5 grand, 10 grand, right? Um, with those skills. And that's, that was my path as a lawyer too. I was just like, get this money, pay the bills, then build the audience.

Yeah. There's so many ways to cut the apple. I have this saying with my husband, Chris. Apparently, this is a real thing where I'm American, but I— whenever— what's that called where there's like, it's raining cats and dogs?

What's the word for that?

Oh. Like an analogy.

Euphemism?

Euphemism.

Yeah.

And there's apparently a thing where some people can never get them right.

So I'll go, "Ah, it's tigers and bananas." And he's like, "What the fuck's wrong with you?" And I'm like, "That's not a thing." He's like, "Are you a Russian agent?" That's so much more interesting.

The second that I think of a euphemism, I forget entirely what the right verbiage is. So just, that'll be fun. But the, I think you can do it 6 ways from sideways. The only thing that I would say upfront is you need to be really clear on your goal. So for me, I knew that I wanted to have trust more than anything upfront. And so because I wanted trust, I said, let's do like a year of free, nothing. And so I think a lot of people now, somebody was just texting me like, who's your agent to get on all these podcasts? I'm like, I don't have an agent to get on podcasts. Like, that doesn't work. You can't proactively reach out to Joe Rogan and go, sup, bro, I wanna get on. You know, you can't reach out to big people and do that. They see your body of work, they think that it's interesting and would serve their audience, and they will reach out to you. It is the attract as opposed to chase model. And so the one downside I think to using your audience to make money in the beginning is your audience immediately loses a tiny bit of trust because you're asking for something from them. Now, what I like about your model is if you're like, get your 5 superfans to pay you $5,000 to $10,000 for real value that you can 10x, as opposed to try to get your entire audience to buy a $99 XYZ thing. Yeah, that makes more sense to me.

I hate starting that way because then it's like 3 people buy it. Now you got to deliver this thing for 3 people and you're still like, okay, how am I gonna pay my bills? Right? So now you gotta launch something else. Then you start to erode trust where you're just launching things nonstop every day. It's a new thing. That's right. I like, like it's services, right? Deliver services, get paid to deliver services. You can build trust that way cuz there's a relationship. Also in the beginning, like I can't serve a lot of clients intensely with the amount of time that I have, right? But in the beginning I had a lot more time than money. Yeah. So I could really go deep. That was your model too with ConvertKit, right? Like recruiting those big names.

Oh yeah, we spent so much time with them for like a $50 a month account.

Right.

You know, and you're like, okay, so the hourly wage on this is actually probably like $3.50.

Yes.

But it compounded from there.

Yes.

I think what you're both getting at is that it doesn't matter too much if you go audience first or product or revenue first, but you have to go one or the other.

Yes.

And if you say like, I want both, simultaneously, then you're not gonna get past that cold start problem.

[Speaker] Yeah, I think you're exactly right. Also, if you haven't read "A Thousand True Fans" by Kevin Kelly, critical for creators because if you think about it, what a lot of people do is you don't have faith in yourself when you're first starting out charging for anything on the internet. And so you undercharge pretty much categorically, but your 1,000 first purchasers have the highest purchasing intent and the highest level of trust. And so because of that, they are the ones that you should actually be charging more to You know who they are, they already like you, and because of that, they will pay. And what a lot of people do is they get those 1,000 first people to buy something for $50, and then, you know, they've already committed to you in some way. And now you've also set a price range for yourself that is, I am a $50 creator.

And you're probably overdelivering for $50.

Yeah, maybe. I mean, the split side to that is I live in Austin, Texas, which is like the land of coaches of spirituality and shit that isn't real. And so I do think that, you should have real skills if you're going to charge people for things. So like slight asterisk, you know.

One of my first coaches, you know, I was like, oh, you know, trying to grow my law practice, right? And she was like, well, at least you have something real to sell. She was like, you know, the people with the crystals, like, God bless them. That's what she said.

They don't need God, they got crystals.

Trust me, there are very successful spiritual coaches that, you know, clearly people are getting value. So, but, but yes, it is It's funny sometimes when it feels so esoteric, it's like, what is the tangible thing? You know, whereas legal service, being a lawyer, it's like no one wants to hire you, but they have to.

You know, I want, I want good attorneys. I am— I bought a company yesterday and was in a 9-hour, uh, back and forth trying to acquire this company.

Yes.

And having a good attorney when you need one is the best. So you guys can have a high value on your time.

But so, okay, so I just wanted to add in a euphemism. Because I actually remember it.

That's the tigers. Yeah, tell me.

Chase two rabbits, catch none, um, is what we're talking about, right? With the audience versus money, right? Pick one. But now we can change it to like chase two rabbits— no, chase two horses, chase two tigers, also catch dice. Yeah, exactly.

And catch both of them.

Wait, no, that's, that's wrong. That's the opposite. Welcome to my brain. Really?

Okay, so building— what, what I think is interesting, if we decide, or choosing audience first or product first. In this case, you chose audience first, right? That, that's what we're going to do because you're making money somewhere else.

Yes.

And, and a lot of people might say, hey, I can do audience first because I'm using my tangible skills, in my case as a designer freelancing, to, you know, that's paying the bills. So now over here I can just focus on audience growth. But what I'm curious about is as you get to this bigger scale, right, if you want to produce the amount of content that's going to get— like, I imagine Joe Rogan, like, still scrolls his phone on Instagram Reels like a bunch of other people do. And so probably a lot of guests come from people that show up, you know, in that feed.

Yeah.

And so I'm curious what, like, what the team looks like that you end up putting together in order to produce the body of work that you do.

Yeah, there's basically two levels we had. So after we went with one person, the next level is the generalist level, and that's the same in every business. First you hire generalists Well, first you do everything, then you hire generalists, then you hire specialists, then you do nothing and let the specialists replace the generalists. And that's how every business I've ever run typically goes. And so that second level was we had a team of generalists. One of them was like a content head at the time. One of them was in charge of the actual operations of the business, and one of them was in charge of the product. So at that point, I think we had a community. And so basically for all intents and purposes, head of content, head of product, and head of operations. Then I would say we did that for about a year and a half. And under those people, we started to hire underneath them. I always hire my highest 2 first and let the highest 2—

I agree—

hire those underneath them. Every time I haven't done that, I've regretted it. And so I would never do that again. Today it's a pretty big team, you know. So today there's a head of content. We have individuals who specialize in each platform. Um, we have a team for YouTube. You guys met Lindsay. She's on that team. We have a team, uh, a head of product team that runs our community, our courses, also some of the tech companies that we've bought and integrated into the business. Um, then we have a finance team. Uh, and then we have a head of portfolio and the head of portfolio deals with a bunch of businesses we've bought. And also how starting to think about how can we integrate those better into the content because we actually don't do that well enough. And then we have a head of ops and head of marketing and they're the same person at this time.

Yeah, the head of portfolio is interesting, right? Because if you think about the pushback that you get on your content, right? Because as people, anytime you put something out on the internet, people are like, that's not true. And you're like, no, that's the, 45-second version of what's actually going on. But that's interesting of the more you can integrate those businesses and be on location at businesses that you own and tell those stories, the more people will be like, oh, OK, she does actually own all of those businesses.

Or the internet's a wild place.

Oh, people just say that you're lying about—

That I own nothing and I was a secretary at Goldman. Yeah, for sure.

Well, you're a woman, so you must be a secretary. What else could you do?

Oh, that's so frustrating.

I know. Yeah, it used to frustrate me. Now it doesn't bother me that much. The only thing that would bother me is if real humans thought that. If some dude in his underwear in his basement is talking shit, I don't care that much. And typically what happens is— what I've realized is the people that you will trigger the most are those who did the thing you are doing now successfully and failed. And so you are a mirror to their biggest failures. And so I try to— in the beginning, I was a little mean and I was like, I hope you own as much real estate in real life as I do in your head, motherfucker. And then, you know, otherwise I got a course to sell you, you know? And, and I just thought it was— and then I started having some empathy because I think the truth of the matter is business is hard. Yeah, it is so hard. And small business is hard and failing is awful. And also, truthfully, I think, I think men have it hard in a lot of ways. Like seeing a, a woman who's young and successful relatively saying, it's not that hard, I did all these things, my portfolio is so much bigger than you, you know, I think that triggers a lot of, a lot of men. And, um, well, that's their problem though, and they should deal with that.

Yeah, yeah, they should explore why am I triggered, and then they should go do whatever they need to do to handle that.

Yeah, I agree. I think I, you know, as a— I was a journalist before I did all this, and so I, I can have a lot of empathy for somebody without taking on their, their crap. Yeah, their stuff. And so I see it, and what's wild is You know, I've met a few of these people in real life and they're very different. And so when you meet people on Twitter and you can also clout chase a lot by punching up and then that gets addictive, you know, it's happened to you. It's happened to pretty much all of our friends. Sam Parr, who you had on the other day, we had a friend. Sam Parr and I had a mutual friend that we almost— Sam Parr and I almost both independently looked at buying his business. You would know who this is, who did an awful acquisition. Process. He just didn't run it very well. He's a nice guy. I think he'll be successful long-term. And he went from being somebody we knew to really going hard at Sam about a couple of things on the internet. And so it's so common as to be laughable. But I do think anytime there's that little bit of feedback, I tell the team, because my team immediately goes, you know, "Fuck those guys." And I'm like, "No, you know, what's— how can we be better?" How could we, you know, like one time they took up a video, they took a video of ours, they chopped it up to change it, and they cut out the end where we set all these numbers and we go, "But by the way, we would never do that deal. And here's why, because we don't actually believe these numbers." So they took the whole video and chopped the end, right? So of course, we don't look good. And I said, "Well, you know, maybe we should think what would happen if somebody only watched the first 30 seconds of our video." And so how can we like internalize some of this? And that's something I'm thinking about a lot more. My last little tangent on this is I think that it's fucking criminal that we have normalized in this country that it is better for me as an investor to take your money at 2 and 20, which is the rates, and invest it and make me rich and you 10%, as opposed to teach you how to do it yourself, take no percentage over the long term, and you can go and grow. We on one hand say, yeah, fuck Harvard, fuck universities, they're so expensive, they don't teach us anything. And then on the other hand we say, no, please don't teach us things and please don't have people pay to teach us things and instead take my money and give me 10%. And so to all those people, I just say, let's look at the math. You guys are into math. And the math shows that categorically— Sometimes they're not into math.

That's the problem.

Twitter math. Categorically, you are better off if you can learn to fish than if you get handed a fish. And this shouldn't be rocket science, and yet for some reason it is.

Yeah, and I think there's going to be one part of the message that resonates with different people when, like, it could be said a bunch of different ways, and it finally resonates when it comes from, you know, someone else, right?

Yes, someone they identify with, or maybe they're just ready to hear it now.

But also, You know, like some of the criticism that a lot of content creators get is, you know, oh, you just make money teaching. Yeah.

Right.

And a bunch of people said that to me. I'm sure that both of you have gotten that a ton. And what's fascinating to me, or another side is like, oh, this course is so expensive or this content is so expensive.

Yeah.

And I'm like, most people are paying like $30,000 a year or more to go to college for some entirely bullshit class.

Correct.

And you're like—

Where the professor doesn't even care and like doesn't have the experience experience that we have, right?

Like, and then at the end they buy the t-shirt. It's like, what?

Exactly. And then don't get it.

No content creator is also coming back later. He's like, hey, could you, uh, contribute to the alumni fund?

Correct.

I'm gonna start doing that on Twitter. I gotta stop being so much of a troll. That's funny.

Oh, that's good.

Yeah.

But one thing that I think is interesting is as we go from a lot of these creator businesses focused on content and education, which are amazing businesses, Yeah. You're doing a lot of fantastic work shifting to, look, I want to own these businesses. I want to take this attention into a business that I own.

Totally.

I want to go two different, different directions. First, I want to hear a little more about how you're doing that in your business. And then let's riff on some ideas of how, like, we see people long term.

Yeah, love it. Well, we've bought— so historically I wasn't a creator until like 3 years ago. I was in private equity and finance, which is wild, like the trajectory of audience and everything else, right? Yeah, it's been cool. I've had a lot of fun. I found something that I just think is really fun. I ran funds and we had our last business in Latin America was $1.5 billion in assets under management. That was a company called First Trust. And then we grew a growth equity private equity fund at a company called— at the time, it was Cresco Capital, then it became Entourage Effect to $160-ish million in private equity assets. You know, I got lucky and worked hard in order to have some success in prior degrees like you did in law too.

Well, one thing I want to mention too, that I think there is an art to learning how to work hard for sure. And there's like a— almost like maybe there's a graph where it's like you got to like start out slow and get better at it. And I think, you know, if you've gone to law school, you have to work your ass off, right? In private equity, I imagine you work long hours. You have to work your ass off. So it's like there's certain industries where you have to work, you work a long hours, right? You hustle a lot in law, right? Like I cannot make a mistake. I will lose my license.

Yeah.

With certain mistakes, especially preventable mistakes. Like it's not, it's not a thing. So if you're up all night, you're up all night, right? That's what you have to do. And so, you know, like starting a business becomes a little bit easier because you know how to work hard. Absolutely. And I think, I think that that's something we don't talk about enough. Like some people have never done that. And, and not working hard just in general. Like a lot of people put in long hours and I'm not saying that, but I think there's something to like learning how to hustle, learning how to have a high level of responsibility for the work that you're putting out. All of that, um, I think helps you as an entrepreneur, like where it doesn't feel so like it's not insurmountable because you're used to that intensely hard work, you know, and long hours and high responsibility.

Yeah, I always chuckle with my team when they're like, "Oh, we got a tough week. There's a lot of stuff going on." I'm like, "Making TikToks on the internet. Nobody's dying. Everybody's fine." Nobody should be complaining at this company. Compared to what investment banking was, everybody's doing okay. But I think you're right. I sort of think about it as you have this compounding ability to withstand pain over time.

Yes. Resilience. That's exactly what I'm speaking to. Exactly.

So the more pain that you touch, means you have a compounding ability to withstand it. And sort of like, how do people become immune to certain types of poisons? How do vaccines work? Theoretically, they work because you get small doses of them continuously over time. It doesn't feel comfortable. You usually get sick, but at some point that compounding exposure leads to immunity. And so I think that's the same thing with hard work. If you continuously expose yourself to a small amount of hard work and you ramp it up, then at some point you become immune to it. Yeah.

And it becomes easy, right? Because I remember the first semester of law school. I literally was in the bathroom crying in between classes. Like, I was like, I don't know. I was like, you know, graduated summa cum laude and then went to law school and was like, I'm an idiot. I'm halfway through the semester. I don't know what the hell this guy's talking about.

Are you even working if you're having fun?

I still don't understand mens rea.

Yeah, I totally agree. So we, um, so now I think we were talking about the business ecosystem, so, um How we started this out is I had all these boring businesses that I have invested in over the years while I was in finance. So we just stacked a portfolio just like you would with stocks, right? And what caused you to buy the first one? Like misery in finance generally. You know, I, I, I really wanted to leave at some point and I had been at 4 firms inside of like 8 years or something like that, 9. And I thought each— it was the company each time or it was the role or it was the sector. And actually, I just realized I'm unemployable and I don't want to work at any of these finance companies. And so the only way out, because I didn't even think about startups, I didn't have any clever idea, was, well, I know how to buy businesses. This is what we do. I know how to analyze them. So I'll just start buying a few of them. And so I did that until I sort of by accident grew this portfolio big enough where it started to replace my salary. And then I thought, okay, well, that's when I can put up my F.U. card. If at any point I can't take it anymore.

This is what I love about what you teach is like you teach about buying cash flowing businesses instead of businesses that make no money for 20 years, right? And then one day they'll be valued at a lot, right? There's— that's so overly glorified in my opinion. And then the businesses that are highly profitable, it's like, oh, that's like, that's not good enough. It's so bizarre. I'm like, okay, so money— you don't like money. That's what you're saying.

I do think that's shifting right now.

Yes.

With interest rates being as high as they are, there's a lot of people who are now investing for cash flow.

Yes.

Or they're saying, oh, I'm not going to do that particular deal because I can buy corporate debt at, you know, or do, you know, private money lending at, at these rates. And so, like, I think it's, it's shifting with interest rates in the moment.

Yeah. You know, I think, I think we were part of the normalization of boring businesses, as I termed them, and cash-flowing businesses and pushing back on the establishment and saying, no, I don't think you have to sleep on your sofa for 5 years in order to be successful long term. I think that is a way, and I commend the people who will do that. But I think you can also have cash flowing businesses with a normalized life that is also a healthy life. Yeah, to some degree. And the fact that this was so— that had so, so much pushback that I got on this is actually fascinating from a psychological society perspective of we've turned like American exceptionalism and American hard work into we must have the highest ROI with the least amount or with the most amount of pain in order to be successful, a.k.a. unicorns. And startups and billions of dollars raised. Well, that's coming to roost right now. And we're going to see a bunch of these founders. We're gonna be able to pick up a ton of talent. So if you're a creator right now and you have audience—

It's a great time to hire.

It is a great time to find founders to insert into your ecosystem. We're hiring right now for the first company we'll ever have really, I bought the company and it's not a big company, and we're gonna incubate it with a couple million dollars, and I'm on a CEO search right now to find the person who's gonna run this. And this will be like, try to be my ConvertKit, my big play in my space. And the talent that we're getting is incredible because people are like, wait, boring businesses, an audience of 5 million, 100 million views a month, this is intriguing. Because what most people don't realize is 40 cents of every dollar spent of VC money goes to PPC. It goes to Amazon, Facebook, and ads by and large.

Pay-per-click for those who—

Exactly. So if that's the case and you can replace that with a high-intention audience, man, that's really intriguing.

Exactly. I completely agree. I always hated the like hyperfocus on startups because I felt left out of that conversation because I had never could have gotten in the game if that was the only option, right? The only option was play this game for 5 years like I couldn't even do internships in college unless they would pay me. Yeah. You know what I mean? Like just, I was not in a position to not work, right? I always had to make money since I was 14 years old. So yeah, I, it was not an option to like do something where I didn't get paid for long periods of time. And I think that's true of my audience as well. I think it's true of a lot of people of color. So I like that we're shifting and getting more of a focus on, you know, how can you make money right away today? Even just buying a business that's already cash flowing, that already has customers. You don't have to start it from scratch. So, I like that we're looking at what is the easier way instead of always finding the hardest way.

Yeah.

You know, it doesn't have to be painful. I also was like having kids from 6 months into my entrepreneurial journey. So I also was never in a place where I could just only work, you know?

Yeah. Yeah. That's a level of respect. Yeah.

Um, well, you just learn how to be, we were talking about this last night. You learn how to be hyper-efficient with the hours you have. Like you can waste nothing.

Yeah, you know, actually we employ like we didn't do it on purpose, but oddly in a lot of our businesses and in our media team, lots of moms, lots of single moms. They don't fuck around.

You know, they're like, let me tell you something, you know, my sister's a single mom. Like, run errands with her and you're going to have everything done in 20 minutes. This woman is a machine.

Plus they kind of like, you know, to be grossly stereotypical, you know, like the other day I could see one of my members of my finance team getting a little heated and I'm emotionally incompetent. And so I'm like, you know, what are you doing, man?

Like, are you an Aquarius?

I don't even know, I'm a Virgo. But anyway, the single mom was great because she kind of like looked at him, she like sort of placed her hand on it, and she was super empathetic. And she's like, talk to me about— like, I can see you're feeling a certain way about this. And I was like, oh, that was nicely executed.

You must deal with 4-year-olds.

Yeah, exactly.

You must be negotiating with toddlers all the time.

Yeah.

Yeah, there's a lot of good, good skills that come from that.

Yeah. Parenting, I feel like it matures you in a way. Like, I feel like that about you, Nathan. You're so young, but I feel like part of why you're so amazing is because you had kids young and you had a high level of responsibility for a long period of time.

He's got major dad vibes too. Yeah.

Yeah. Like cool dad vibes.

There you go.

There you go.

You also, interestingly, I think we've talked about it before because, you know, I've reached out when like certain people I felt like were trolling you or whatever. I got like, I got you. What do you need?

You know? And first of all, I love that.

Oh yeah, I believe in choosing sides.

It's important. It's important. I got dragged when I was a young lawyer, and all of these people who were in my community were messaging me and saying like, hey, you should back off. They have like their blogs come up right away in Google. And I was like, really, y'all? They're like, shh, go be quiet. And I'm like, have you met me?

That is the last way to get you to go be quiet. It's the opposite effect.

I wasn't as Rachel as I am now, but I was finding my way. But that was one of those moments where I was like, no, I don't believe in being quiet in this moment. I don't care what the cost is. So fuck that. I have shit to say. And that's actually how I found my audience. I found my people through that because they identified with me. But yes, I mean, there's so much dragging. And then when people stay quiet when you're being dragged and you're like, oh, okay, so we're not friends? Yeah. You're just gonna watch me be dragged and say nothing, huh?

Yeah. I don't like that. Although now it's— I think we've all realized you don't feed the trolls.

Yeah. Now it's a different— it's a different thing.

Yeah.

We were talking about one circumstance that a thread was just going off and I just didn't reply to a single thing. And we're, you know, texting about it and talking behind the scenes. It's like, in that case, I think it was just the right call to—

I think it was totally the right call.

So I, what I want listeners to know is that Nathan loves haters. You know, he's very entertained by them. I'm like, I'm always telling people, Nathan is low-key petty. And I enjoy that actually. Does it give you—

Well, I always liked that idea of, um, chips as fuel. Yeah, you know, I, I do think sometimes I think my haters— one, lots of views from those guys. They're my biggest fans.

They're just on the repeat repeat pissed off because, you know, that replies on like LinkedIn, Twitter, all these channels, it just boosts the content.

Yeah, so it's 100%.

Well, and they have to watch it a couple of times to like formulate their arguments, you know what I mean? So that actually helps. And then they're like, can you believe this? And sharing it with people. It's like you're actually Helping me. You're doing exactly what I wanted to happen for this content.

But I think that— I think there is something there to like, even if you don't have a big audience yet, eventually if you get one, you'll have to deal with this. Probably now you think it's like, whatever, who cares? I'll deal with that when I get it. But if you can use whatever chips have been stacked against you today, you talked about that in your book. I think that's really powerful and underutilized. So many people now go, victim mentality, and thus I am forever going to be the victim. And that just— yes, you can be. Not going to do much for you, right? If instead you're like, all right, because I have a giant victimhood story that is so much bigger than anybody else, I can actually become the Batman.

Like, correct. Yes.

Who's a big, like, huge Superman fan? It was like, he's an alien that's perfect. Nothing touches him. He's perfectly gorgeous. No, nothing bad happens.

Or at least not that many. Yeah, Batman is way cooler.

You want the person who had like a lot of difficulty to, to overcome. And so I, I try to think about it from that perspective too, like, all right, I'm just gonna stack the chips and every one of them gets me a little bit more fuel to the thing I want to do.

This is what I try to tell, um, women of color all of the time, you know, like the— all of this bullshit that we have to deal with actually means that we have a different perspective that is often not representative of whatever industry you want to be in. So like now you have an opportunity to cut through and to hit a market that's being ignored in this space. So like, how can you talk to just your people, right? And like, this is an opportunity and not— yes, it's fucked up and we need to acknowledge that part. And also you have agency and you can still make it happen. And I'm, I'm an example of that. And then every other woman who's doing it right, or a woman of color who's doing it, is also an example of that. And that's really important.

Totally. Yeah. One thing I think would be cool to riff on is I'm obviously a big proponent for buying as opposed to starting businesses. And I think a lot of times creators go, here, the, the market is this, you go to education and that's what you do. And so you, you sell info products in some way, shape or form. And we've talked about like the ladder of, of what is a good business or not.

Yeah.

And you have your ladder of wealth, which I love. And I kind of have this 4-step level of business matrix I think about all just based on multiples. What can you sell them for?

Yes.

And info products are one of the worst businesses that you can sell long term.

Right.

And so if it was me and I was a new creator, I would be thinking, how can I grow my audience first? And then I would be thinking, what business could I buy using the profits of the business, which is called seller financing, in order to integrate it into my ecosystem? Because oftentimes if you are a creator, you're probably not the best operator. I hate to say it, like it's just by and large not true.

I am a terrible operator.

Yeah, you're probably an incredible marketer and you're an incredible— incredible visionary, but you're probably not the executor. And so because of that, I like the idea of buying businesses. So maybe we can riff on like, which businesses should we buy? How should they think about that?

Yes. And I'm very— I'm, I'm in business buying mode now because I want to buy cash flowing businesses just for my own personal portfolio. And then I also want to have some strategic acquisitions because I see that as a faster way to grow my company, you know, like, like buying a company that has a whole department like we need to build an events department, so buying an event business that already has been doing that forever and those people are highly skilled, I get that team, I get their processes, we don't have to start it from scratch. It's like, okay, how can I press the easy button here, you know, instead of making it difficult?

Yeah. And you've done a ton of acquisitions.

Yeah, we've done 2 acquisitions and then started another company. But for me, it's all about the overlap, right? Like, I have no interest in buying a business that is completely unrelated. I guess the only thing that I have is an Airbnb portfolio, but that feels like just a passion project for you, I'd say.

Yeah.

But the— what I'm looking for is like, what can I drive attention to that— like the attention that I have, what can I point to it? Like, for example, you know, on the agency side, like, I know, you know, you have an agency with Viral Cuts.

Yeah.

And all of that. I've got Paperboy, which is newsletter growth agency.

Yeah.

And that is very mad.

I'm not in on that deal. I told Sahil, I was like, I really like that business. Nathan's better partner for you. But I was like, next one, I want to come in. It's a great business.

Yeah. And that one, like, I have never had such an easy time getting deal flow for a business because it's just like, oh, I just barely talk about it. And then Shane, our CEO, is like, okay, we're not taking more clients on because we want to make sure that we can execute really well with like the avalanche of leads that you just gave us.

Yes. Yeah, I'm, I'm about to do the same thing. I'm partnering with a copywriter that I've been working with forever to do an agency business that's like writing newsletters only.

Yeah. Okay, well, let me tell you why I hate that idea.

Okay, tell me.

Because you should buy the business, not start it.

Okay.

So you already are gonna give them an unfair advantage. The first dollar's always the hardest. The first million, definitely the hardest. So you are going to take your giant audience and you're gonna plug it into somebody who, this is an individual copywriter?

Yes.

Who has not run a business before, doesn't already have the infrastructure.

Well, no, she has run a business for a long time.

This copywriting business, or was she an independent contractor, kind of like, like her business, her own like copywriting business courses, different things that she does. Yeah. Um, I think the better play here would be if you got in with somebody who already had scale, because the biggest issue you're going to have as a bigger creator, which we already have, is Viral Cuts is a great business, but we literally cannot handle the demand, right?

You're going to send a ton of leads, like, exactly. And you're restarting an agency, it's going to go fast.

Your reputation is on the line, right? And your ability to execute on that audience when they have high intention is really important.

Yes.

And so if you send somebody 1,000 leads, they can only execute on 2 of them at the time. You have now left a bunch of money on the table with those additional leads.

And those leads are like, you convince them that they have this problem and then you can't fulfill it for them. And so now they're like going to something else.

They won't wait for you. No, I completely agree. I mean, the plan was actually to partner with her so that she creates process because she understands that workflow process.

Yeah.

And then I'm bringing the audience, she's bringing the process, and then hiring a CEO who's going to run, be the operator. Like I always said. But I think because I think what I like is— so, so how would you— so you would buy— what would specifically would you buy?

Well, we could play this game because you could tell the same. I'd be interested in your take too. I'll tell mine in 30 seconds. Agencies are a dime a dozen, right? There are so many of them. It will baffle you if you saw the amount of agencies that I get in deal flow every single month. It's in the hundreds. So the problem with most entrepreneurs is we like things fast, right? So we're like, here, fast solution, go. What sucks about acquisition, you do nothing but like take some pain for, let's call it, 90 days, 6 months in your due diligence phase where you're analyzing people. But that 3 to 6 months that you wait, if you can then acquire a part of a company, meaningful part of a company, 20, 30, 40, maybe 50% of the company that already can handle your scale day one, means you don't lose any of those additional people. Now, if this woman's awesome, you can plug her into your acquisition.

Yes.

And she can be part of it. But if you already have the audience, and we know that right now lead gen and distribution is the most powerful thing, why not just buy it? Do you disagree with me on any of that? No.

This is a great idea.

All right. Well, now you can tell it's Cody's fault.

I will write you a check on the way out.

So I totally agree with it because it gets into like Michael Gerber's The E-Myth. Where he talks about the different roles that an entrepreneur plays, where if you have someone who is the technician in the business, right, they're an amazing copywriter, designer, whatever it is, and they have no ability to scale the business because it's an entirely different set of skills. And so I think that that's super, super smart. That was one thing with Paperboy Shane, who we hired as our CEO and brought in as a partner, right? He had scaled multiple agencies to, you know, a few million a year in revenue. And so it's like, OK, you know how to do this. It's not that you are a technician. You're actually the manager, and you're the operator. And that's the only reason that I would start it, because we had that person. Otherwise, I think the acquisition makes way more sense.

100%. Yeah, and I even think, you know, if— like, I was talking to Austin Reef about it, right? And he's looking at a bunch of businesses like this. And I basically said the same thing. Like, we should maybe find a CEO or really great operator. That's always key. I never do a transaction without having an operator in place, because then you've got to run it. I want a job. Yeah, thank you. But the second that I have that, I even want to have them acquire their first clients or their first employees.

To make sure it works.

Right. You know, as opposed to it's just, it's do you want to go knock on a million doors or do you want to buy the regional developer that already has knocked on all those doors and has the clients? And so it's just scale.

What's an example of a creator who's made one of these acquisitions that's like a perfect fit for their audience that's blown up really well?

Well, it depends on what you consider an acquisition, but Prime isn't owned by Logan Paul. He owns a percentage of it. He got plugged into a company that already had, you know, already had all the manufacturing, already had all the operations and backend, and he probably owns, I don't know, 5-10% of that. But 5-10% of what will be arguably a billion-dollar business is much better than a bunch of $1 million businesses.

What's Prime?

It's like Gatorade.

Energy drink.

Yeah. And the same thing is true, actually, if you dig beneath the soil a little bit for most of these big celebrity companies, they're not cold startups. Like even The Rock, for instance, with his Teremana tequila, I was like, God, this is such a successful company. What happened here? And basically, as I pulled beneath the surface, I saw, oh, well, actually, these two individuals that he started the company with already had a tequila company and a tequila brand, and they sort of I don't know this. I assume that what they did is rebrand part of it. And they were multi-time successful entrepreneurs. I can't remember which other tequila company or alcohol company they sold previously. The other one was like head of distribution for Southern Glazers. Somebody will tell me if that's right on the internet, but some portion of it. And so The Rock kind of bought an asset and then branded it and distributed it.

And added The Rock to it.

Right. So I think a lot of people do it, but they don't talk about that.

Right.

Mm-hmm.

I mean, so Ryan Reynolds did that with both Aviation Gin and Mint Mobile, right? He bought a minority stake in each one, substantial. You know, he's not buying like 1 or 2%. He's buying, I think, 30% of each one. And then, you know, like these are established businesses. The product works well. It's well-loved.

Yeah, well, I was talking the other day with my friend Mike Chandler, who is— he was on that TV show with Conor McGregor where they help fighters get ready behind the scenes. And supposedly he's going to UFC fight, Mike Chandler, and he's a UFC champion and amazing dude. And I was talking to him about, I'm like, what does your portfolio look like? What are we working with here? And so he owns a percent, I won't say how much, of a company called CRAM, which is like Uncrustables, like protein packets. UnCrustables peanut butter and jellies. And then they're like healthy, good for you. And he's a really big family man. And so I was like, this is an interesting model, but we have to make sure that this company can scale enough for you. Because, you know, when I was talking to the CEO of Cram, he's like, Michael Chandler 5x'd our online sales in one year. So I think with a lot of creators and celebrities, making sure they get compensated for what they bring It's really hard to do. Companies will not agree with you on it upfront. You need to structure intelligently for, like, earnouts or milestones based on performance, most likely. And then you need to be really careful what you offer. I mean, I just got into a tiff the other day with a company that I was working with because they wanted a percentage of my royalties for life on one business that we have. And I was like, I will burn down this business before I do that. Like, I will stop— like, no way. You know, you can have a percentage of what we do together while we are working together. But the second that we are no longer working, that will not exist. And so there's a lot of complexity, like Taylor Swift and Scooter Braun, right? Yeah.

There's a lot of deals that I haven't done because I'm an IP lawyer. So I read the contract.

That's so— lawyers are so underrated.

I'm telling you, I remember—

some unfair advantage there.

Yes.

There's a Seinfeld quote where he talks about lawyers as like, he's like, lawyers are basically the people that read the instructions for Scrabble. You know what I mean? And they know how to, they know the rules and then they know how to work around them. Right. And I'm like, it's so true. So yeah, I read contracts and I'm like, yeah, no. I was just talking to somebody about like CreativeLive, like back in the day I did it and somebody else, they had done a bunch of courses on there as well. And you know, you get royalties for a long time, but I read the contract and I negotiated it and their lawyer wanted to play hardball. So I was like, okay, I'm gonna do it, but I'm gonna give you like nothing. You know what I mean? Like I'm not giving you any of my good shit because they own it. And then And now for other creators, they're licensing out, apparently. I don't know how true this is, but this is what I've heard, that they're licensing out this person's content, like the content that could be the subject of books, courses, all kinds of stuff. And now she no longer owns it. So, and I'm like, no, no, I read the fine print. Yeah. I'm not fucking around.

It's really smart. A good attorney in anything you do in life, whether you do a startup, buy a business, yes. Do a contract. Is probably some of the best money I've ever spent. And every time I go cheap on that, I regret it long term. So if you believe in yourself, believe in the fact that money speaks one language, and that's contracts. And if you do not understand the language, you need to find somebody who does.

Yes. This reminds me of Master P, randomly. Um, but he tells a story about how, you know, he was like selling CDs out of his trunk and trying to make it and he got an offer for a record deal for $1 million, and he said no. And his brother was so mad at him. He's like, are you out of your mind? You're turning down $1 million? And he was like, bro, if they're willing to pay me $1 million, how much you think they're gonna make? We're not doing that. So if I recall, he was one of the pioneers of starting your own record label and producing it yourself. And that's more of the long game, but you make way more money in the end. Right. So there's a trend here, right? Is this similar to you turning down the Spotify deal? Right. Like, yes, there's a lot of money on the table, but there's a lot more money behind that. So let me wait and see what it's going to turn into. So it's about like that delayed gratification sometimes. And I have heard from friends of mine who've sold their companies and they maybe sold it for like, let's say, $25 million. Yeah, I have a couple of friends who've sold in that space, right? In that, in that realm. And it's like, it's a good amount of money, but it's not I'm never going to work again money. You know, um, I mean, it can be for some people, but for most creators it's not.

Yeah.

Um, I feel like you have to get to more like $50 million to be like, okay, now I'm done, right? Because now you got a couple million that you live off of, which is around what I'm looking for, right? So, so like, I'm like, I'm not selling my company unless I'm done after that. I'm not gonna sell it and then still have to go hustle. Fuck that.

Yeah.

You know, and I mean, there is something to be said. You could sell it, make some money, let that parlay into the next thing that you then sell for the multiple that gets you free, right? But I think there's a lot of people who talk about selling their companies, which seems so sexy. It's in the news, it's like you've exited, blah blah blah. But then there's so much regret, it seems, after the fact, uh, for a lot of people.

Yeah. Do you ever regret not taking a Spotify deal?

There was a time when like things got really, really hard, uh, maybe 6 months or so after that, and my, uh, like advisors had told me like, hey, Hey, kudos for turning this down. I just want you to know that like the next year is going to be very, very painful for reasons that you don't realize, right? As like team members leave who are not happy that we turned down the deal, like a cascade of things, right? And they said like, this is going to get way harder before it gets easier. And they were 100% right.

Was it the market conditions or was it the fact that you turned down the deal or people on your team were pissed?

People were definitely pissed.

Because it was a life-changing amount. It could have been a life-changing amount of money for them.

And, you know, there were also people who were absolutely thrilled. Like I would say the overwhelming number were like, yes, this is great. But yeah, there are people who were definitely upset. But I think you then end up with all of these like hard moments in the business. And also like, you know, just in that running a, you know, audience online business, COVID was really interesting where like we had a bunch of churn early on and a crazy amount of growth, like the highest month of new revenue ever and the highest month of churn ever in the same month.

Wow.

Right. And then so you have this huge boom and then there is sort of like this I don't know, like softening of everything a year later. Right. And Shopify talked about that where they thought, oh, e-commerce has accelerated, you know, by 3 years, like all, all at once. And then it just basically flatlines and reverts to the mean. And so that there was that middle time period where like every, every creator-focused business I talked to, they were like, we're flat. Like we're not growing month over month.

I think we're coming back to that. Don't you?

I mean, we'll see. I don't know how to predict it, but yeah, it's, it's going to be interesting. I mean, like, I know I'm hearing that a lot where, um, you know, mutual friends of ours are, um, like, I think Eamon, uh, who's a friend of all of ours, he posted that like down 20% is the new flat. Like, and if you're actually, if you're growing 10%, you should think of it like you're growing 30%.

I saw that post.

Um, And I think that's, that's really interesting. That's not at all what we're experiencing. Like, we actually last month had our best month of like net new MRR ever. And so I'm like, it's hard to tell what's a macro environment versus what's within your control.

Yeah, I think it's too soon to tell, but at least, I mean, in our little microcosm of a portfolio, I definitely see the first signs of stress and some businesses. I mean, that's the beautiful part about having multiple ways that you make money. Yes. And, you know, I'm just not a type of person that sleeps well when I think I could go bankrupt. You know, some, some people are like, do one thing and that's it, and you're an idiot if you don't. I'm like, the thing is, I like to sleep. And so I think, I think do one thing to get to—

what I tell people is like, do one thing to at least get one thing to— yeah, to profitability, right? Yeah. And then, then if you want to add other things, it makes sense. But people who try to add 12 things in the beginning, now they're chasing 12 rabbits.

Yeah. Yes.

Catch Ned. Yes.

We don't want that. But I do think I'm starting to see the first signs of stress in the portfolio for sure. But I think as long as you have some diversification, then, you know, that, that's how you weather a storm. And the beautiful part is, you know, since you survived that, I think we're going to see, unfortunately, a lot of these companies shake out. That's also another great time to buy. Like the last 3 years, I've been telling people, learn how to buy a business. Learn how to do a deal. Don't necessarily do one. Like, learn. Because the second there starts to become real shock in the market, that's where you pick up deals. And you don't have to be the smartest dealmaker in the world. If in 2008, you bought a house, you're probably doing pretty good. I mean, I remember I was with my chief economist back when I was at First Trust, and we were giving a presentation to a bunch of investors. And somebody in the audience asked him, It was 2008 or 2009, and they were like, which stock should I buy? And he was like, yes, any stock, pick a stock basically in the market because it's so depressed that there's going to be this big, big reversion. And I think that might be coming. I'm not sure.

Well, I think going like bringing it back to the creator business side, we are talking about all of these examples from celebrities or friends of ours where it's just like they did like audience business like rocket ship. And there's all these examples that actually don't work out that way. And so I'd love to dive into why that happens. Like, um, uh, Hello Bello, the— from Kristen Bell and Dax Shepard, that just went bankrupt like a week or two ago, right? And so that was not a, uh, you know, tequila from The Rock where it just took off. And I think a bunch of people— like, you hear about it when someone so celebrity launches this brand and then many of them just kind of like fade off into the sunset.

Yeah.

So why do you think like some of them work and some of them just don't?

Well, we were looking at this beforehand, and I think I had invested in a company back in the day who got an offer from Laird Superfood to be acquired.

Right.

And this company at the time, I told them, I think you should probably take it because it wasn't operating very efficiently. They ended up passing. But what's interesting, if you look at like the Layered Superfood stock chart, because it went public, from the time that it went public, which looks like that was in, you know, probably 5 years ago, 4 and a half years ago, you can basically see the trend line. I mean, this company— Oh, yeah, it's not up and to the right. And I'm no scientist, but basically, you know, public listing of $45, $1. And now it's trading at $0.81.

Wow.

And what's wild to me is I think, one, to me going public, man, you better be ready. I mean, theoretically ConvertKit could go public and that'd be your worst nightmare. It would be the worst thing you guys could do.

I would stop sleeping.

Yeah, you would stop sleeping.

And it's attractive. You know, I was talking to this with our friend Andrew Wilkinson. I'm like, are you sure you want to go public, man?

Right.

It's going to be brutal. And what is going to happen to your stock price, which is what happened, is it's going to have a pop because it always happens at IPO, not always, often happens, and that it's gonna come down. And it might then rebound incredibly well, but often it doesn't, which is the same exact thing that happened with Honest Company.

Yeah, you also can't talk about things in the company anymore, right? Like talking to the CEO of Thinkific, Greg, or talking to Andrew or these other publicly traded companies, you're like, hey, how's this going? Earnings will be out next week. You know, like, because they, like, you know, you don't want to get in trouble for a whole bunch of things. But yeah, so there's a ton that goes with it. But yeah, with Honest Company, they're also down, like, significantly. And that, like, I have bought a lot of products from Honest Company. I think they're a really good company.

That subscription, I mean, I had a closet full and I was like, okay, we can stop the subscription now because we've got, we were like really stocked.

Well, it goes to show, I think, that for both companies, I actually like Laird's products. I like their products a lot. I think they're really good. I use some of the coffee stuff. Same thing with Honest Company, but there's a real difference between good product and good execution of company management. And it's much easier to do, I think, on the private side. Capital can be more difficult, but once you're public, you are competing with the biggest players out there on a relative earnings perspective. And so if you're not prepared to tell the common consumer and your story to Wall Street, in a way that is 10x more compelling than somebody else, the market will not benefit you.

And you have two customers in that case. You have your actual customers that support the business, and then you need to be marketing and selling to investors and shareholders.

And your employees.

So you have three then.

Yeah, it's really tough. So I doubt anybody listening is considering going public, but like, to me, you would I would need to be prepared to sell before I went public. Yes. Having— and we took companies public in cannabis and you could see how those companies did. Not well. Like, you know, we took a company called Harborside public and did an incredible series of acquisitions and mergers into that company. And like, we could look up the numbers and see what's real. And I have no insider information. I'm not a part of it anymore. But at the time we like tripled revenue basically with these acquisitions and the stock was down like 75%. Like what the You know, and so, um, I think it is really one, you have to pick your right product. Then two, you gotta understand money. How do you fund it? And then three, if you're not the creator, the operator is so key. Who can be your execution to your distribution?

Yes, I agree. One of the things that I love that you've talked about is, and I don't know if this was, I feel like this was recently with the economy shifting. You talked about how like during when we're doing really well, I stockpile. right? And so it looks like people are like, why aren't you spending any money? You know?

Yeah.

Like, why didn't we raise that, you know, exactly a crazy valuation in 2021 when money was just being handed out?

Yeah, exactly. But you're like, listen, I've got a nice pile. I'm not worried about this because I know I can, I can fund the company through it.

Yeah.

You play your own game.

Yeah.

So at one point you're going to look really dumb for not raising money.

Yeah.

And then 2 years later you look really, really smart. And then 2 years after that, you probably look really dumb again.

And then later you look really smart.

And this is just like oscillating around as you is just like steady progress in a pretty predictable and boring way.

Yes. Because, you know, if the thing is, is if a market is down now, right, it's going to go back up and now you're fortified when you get through that process, right? You go through that tough time and you learn how to navigate the company through it and probably get more efficient in that process as well. Get better at marketing because now the lazy marketing is not working anymore. Now you need to turn up the dial, right? And then you do those things. You get back to the core basics. And then when, when it goes back up, you're ready to crush, you know, and, and, and highly benefit from that, that swing. So you just gotta know that that's, that's the game you're playing. Like, so that, I mean, I'm not losing any sleep with this economy because I know I have cash sitting, you know what I mean? And I know I'm gonna be fine getting through it.

Yeah.

I think with a bunch of these businesses, we have to keep in mind, like, as someone with an audience starting you know, buying a business, starting another one, and like directing this attention that we have towards the other thing, you have to remember that the default state for every business is dead. Yeah, right. And so if we walk in thinking like, oh, I'm just going to, you know, direct my 100,000 people on my email list or Instagram or whatever at this thing and it's going to blow up, it probably will blow up and not in the positive way. Like the default state is that, you know, operators it's not going to work out, right? The customers are going to end up unhappy. This is going to blow back on your reputation in some way. All of those things. And so you have to go in with a plan for every part of this. I think the celebrity brands that don't work out are the ones who are just like, oh, she did it, so I will too. And like, they copy that without realizing that like, you have to plan for all of these eventualities. Or, you know, hire a team that has either already planned for it or, you know, will plan for it.

Yes.

Yeah. We always joke at my companies about like my Sauron's eye, which is like just what a nerd I am. But, you know, that like I'm pretty quick. It only really focuses on one area at a time. And like, you're not going to get that much attention except if the red flags start coming. And then like, you don't want this over here because then your life's going to be kind of miserable. But I think a lot of creators and celebrities, they don't have that anymore. They don't have an easy ability to see into their business. They don't have the crystal ball. And the crystal ball is actually really, really simple. It's like a scoreboard with KPIs that you understand drive your business or don't drive your business. And red, yellow, green. Yep. Is it working towards what you want to do? And as long as you have that as the, you know, founder of the business and you're monitoring it, I mean, I'm a crazy person, so I do daily, but daily or weekly at the highest level, and then you can drill down into the underlying businesses, then you can Sauron's eye where you need to. But I've never been a good enough operator with my businesses underneath to just set it and forget it for like a year. Like, see ya, here's the cash, and I won't talk to you in a year. There's typically always some direction needed, even for the companies I have CEOs in.

Yeah, I think that you're coaching, right? Like, you're coaching and you're directing. Because you've seen things that your leaders haven't seen yet. So you're like, hey, this over here, this is a problem. What's your idea to fix it?

100%.

That's not a good idea.

Do you guys have a cash balance that you guys keep? Like, is there amount of cash that you guys like to keep on hand? Do you think about runway, burn rate? I don't allow it to go below this level. Anything like that?

Yes.

What's, what's yours?

It's a couple million.

But is it a relative percentage to the business?

Like, we used to keep it like, yeah, it'll, it It's a good amount of runway.

Yeah.

That, you know, it's like I can turn anything around in 6 months is kind of how I see it. So I'm like, if I have at least 6 months, I prefer more than that. But yeah, then, you know, I'm good because that's enough time to make a pivot if needed, which I've done before, right? Like, for sure, multiple times. I've been in business for 13 years, so you see some shit and that it makes you a little like you're unflappable because you've seen it and you've gone up and down before, so you know you know how to navigate it. I'm not saying nothing can take you out, but it's also like, if it's gonna take me out, right, it's not gonna be because it's not gonna catch me off guard, basically. And I, I have a plan, so that's what it is. So, and then also, I think, like you say, diversifying is, is important because it's like business over here and then a piece of real estate that there's a lot of opportunity there that I'm like trying to decide, am I going to make a move now or wait? you know, for the next upswing. So it's like you have other— when you have assets, you have options. So having assets and different asset classes, right? It's just like businesses. You have a portfolio of businesses. You can have a portfolio that's business, some real estate, some stocks, some different things that allows you to, you know, navigate like, okay, what moves do I need to make? And trusting yourself that you'll know what moves to make, or you'll, you'll have the relationships and the advisors you can call to say, what move should I make? Like, this is what I'm thinking, you know?

Totally. What about you?

Yeah, so I worked really hard to get— first, it was like 3 months of expenses in the bank, because when you're bootstrapping a fast growth company—

oh my God, that takes forever in the beginning.

And then you got to pay taxes on it. You're like, oh man, this is— I'm keeping it, especially as we were a pass-through entity before. And so then, like, even the things you're holding in the bank, you have to pay taxes on it as if you distributed it. But We worked hard to get, get that. And then we've basically maintained that all the way until it got to be like giant amounts of money. And so we're like, right now we keep $8 or $9 million in cash on hand. Yeah, but ConvertKit's doing $3 million a month in revenue.

Yeah.

And so that's the way we thought about it. And I was continuing to increase it as a like maintain that ratio. And I've actually stopped because is I think that there's a bunch of things where the money can be better put to work in the business.

100%.

And so now it's sort of like the business continues to grow and I'm maintaining more of a fixed amount of cash and am reinvesting the rest.

Exactly. That's the same. That's how we do it.

Because the other thing, I think it depends on the type of business, right? ConvertKit is recurring revenue from 51,000 individual customers, right? Our biggest customer is like 0.1 million. 3% of our revenue. And so it's very, very diversified. But if— and it's also not a seasonal business, right? If you were running like a direct-to-consumer e-com business and you made like half of your money in Q4 from like a really good holiday season, you know, or if you're running a course business and you do one launch a year or two launches a year, right? Like, you better hold on to more cash.

Yeah.

Yeah.

Yeah, yeah, yeah. I think about the same thing. I tend to think in these boring businesses, I really like people to have 6 to 12 months of cash on hand. So because the, like, 43% of all businesses fail because they run out of cash. Yeah. And so I like a lot of runway for those businesses.

Well, the more runway, the more peace of mind you have, the better you sleep at night.

Yeah. But I think in a business like yours, like a fast-moving tech startup, it's not the most efficient use of capital. That's, that's for sure. Thankfully you're private, so you can do what you want. You don't get the big pushes to do distributions.

I think the other thing is make sure that you are like you have access to private or like lines of credit. Lines of credit. Yes. Yeah. Because that's the thing that I've actually been in this position like you get offered lots of lines of credit when you don't need it.

Yeah.

And then when we were in that like scaling phase of ConvertKit where it really would have taken the pressure off to have that line of credit, it was like, oh no, that offer is not on the table anymore.

Exactly.

Absolutely.

You have to say yes to capital when you absolutely do not need it, and you just say yes and let it sit. And like, we would use it, like, just like pay these bills through it and then just pay it off every month just to have it and keep it on tap so that when we do need it, it's sitting. And I got that advice years ago, and thank God I did, because then when those offers came in, I'm like, yes, yes, and yes, I'll take it all, you know?

Right. You'll pay a little bit to have access to that.

Exactly. So that— because it's also part of your safety net, right? You've got like your cash, now you've got certain lines of credit. You got other assets. So you're just kind of creating options, you know?

Yep.

So yeah, I feel like so much of the, like, talk about the economy is just being spooked. I mean, I feel like I, I worked at Bear Stearns when it went down.

Wow.

I was literally there, like, the day that they were having the conference call. I was an intern, you know? Um, I was like a legal intern. And that conference call where they were like, well, so here's what's happening. And I was like, oh my God, I felt horrible for everyone. And I was I'm not in that position because I didn't actually have a real job there, but I feel like it was really just rumors that create that. So I feel like sometimes, like, what is your advice to creators and entrepreneurs to like not get spooked and to not let the talk of the economy make them feel like— it's almost like we can manifest losses, right, when they're not necessarily there. It's like the economy can be doing what it's doing but not necessarily affecting you right now. So don't manufacture that it's affecting you. Maybe pull back on some spending. But yeah, what's your thoughts on that?

Well, I mean, I was at Goldman during the crisis and so I definitely still have PTSD from that. You know, I remember the cardboard boxes and the security guards shuttling people out. So I am a protect the house kind of person, right? Yes. And I think in environments like this, because we do have a venture fund also where we invest in in tech companies that basically support boring business infrastructure. So ConvertKit would be a great example. So, you know, old email newsletter business turned sexy with ConvertKit or ShopGenie, which basically helps auto mechanic shops come online a lot more easily. So we invest in these businesses. They're usually the tip of the spear for seeing friction in the market. And so because they've raised the most capital and they're most highly levered, they're the first place where money starts to dry up. And so typically what I'd say is instead of like feeling any emotion about it, I just look at the numbers like, what are these companies raising at now? Are they being able to raise as easily? What are interest rates at the banks? Oh, all of that's kind of trending in a negative direction. That probably means that historically we're going to have some sort of pullback. And if that's the case, let's just look at what the numbers were. I mean, during 2008, You know, if you prepared for your business to be down 20, 30%, you're probably pretty good. You know, in 2020, some of those businesses had to be closed for a long period of time, and that was like 40 to 50%. Yes. So I kind of look at historicals and just go, okay, if my business suffered, we actually have this cool calculator. I'll get it to you guys somehow so people can look at it. But it's like, here's my business today and here's what would happen if I lost 25, 50, 75, 100% of sales. Here's how long of a runway I would have, and here's how that would start to affect my business. It's very simple, but sometimes it's nice to just have a calculator and go, I want to cut my expenses down to this 25% level because I think that's reasonable. And then I can ramp back up again. And the only thing I'd say for, for creators listening to this is like, be really careful with fixed costs. That's always the first thing that kills you. Employees, insurance for them, tech-related costs, leases, anything where it's fixed and you can't get out of it. And really thoughtful for these small businesses. Yes.

That might be a good place for us to wrap up. Just we're thinking about like what's coming is just sharing, like Rachel, I'm curious if you have any thoughts for creators on, you know, assuming that there's a downturn coming that is very significant.

Yes.

Like how would you, if, how would you recommend that creators position for that if they're at that, say, you know, $500,000 to maybe single digit millions a year in revenue?

I think they should grow their audience. And I think they should double down on growing their audience and accelerate how much content they're creating. Be going to events, be meeting people, do these sort of old school marketing, right? But grow your audience as well significantly because there's always somebody with money, right? Like I, you know, became an entrepreneur at a time when there was a recession and things were down. And a lot of my clients were people who got severance packages. So they had money to invest in this new business that they were creating. And so those were my clients when I started my law practice all those years ago. So there's always somebody with money. So the bigger the audience— so it's like, let's say you have an audience of 1,000 people and, you know, 100 of them in a great economy are ready to hire you right now. But now it's not that great of economy. So like maybe 10— yeah, only 10 of them are willing to hire you. So now it's like, okay, well, now 10x the size of the audience and you still get that 100.

Right.

So if you can be reaching more people, right, and thinking about who has money to pay me right now, who is my ideal client right now in this economy, who's making a move or who's the type of person who's going to hire me, and then focus on serving that customer and building your audience with that customer. That's what I would do.

I like that. I think just a lot of people are thinking about, okay, how do I pull back?

Yes.

Why, you know, almost shrink the business, right? And so realizing that, hey, if you're doing it from a position of strength, like if you have that cash balance, you've operated conservatively, then like, sure, go look through the expenses and be like, okay, we don't actually need that. That was a nice to have. But then say, hey, this is the time when everyone else is being fearful. This is the time for us to really scale. And if someone's like, hey, I'm not spending on advertising anymore, or, you know, I'm not going to get out and travel because we're saving on that budget, then you're like, like, finally the market's not competitive, let's go. Like, I'm gonna get much cheaper CPMs, I'm going to scale up.

Yeah, exactly. What are the opportunities that this recession is creating for you, right? Or this, this, you know, troubled economy, what, what, what opportunities is it creating and how can you take full advantage of that?

Yeah. And I also think you really should— every market either has, has one driving component, fear or greed. And, uh, if you realize that every market has fear or greed as a driver, then your messaging really needs to differ. So in a greed-based market, like let's call it 2021, NFTs are growing like crazy. Everything's making all the money in the world. Greed is the driver. And so your marketing messaging should be focused on something that is greed-based. In a market like this, where there's a lot more fear in the market, then you want to lean into that side. And it doesn't mean you have to play to some Machiavellian instinct, but it does mean that you have to have context. Context. If you go to a room full of a bunch of people that just got laid off and they go, this is how you're going to make a bunch of money today, they're not primed for that, right? It's like, here is how you protect yourself from ever having this happen to you again. Yes, that is two— that is the same product, potentially two very different messaging.

Exactly. I mean, that's what we did during COVID We said like, okay, so let's talk about how do you grow your business or just keep building your business, right, um, during a recession. So like, it's— I'm teaching the same content, but the story at the beginning and the name of the webinar is now different.

Right.

Right. To, to speak to the experience that they're having right now. So it's just, you know, it's basically do the same shit you're doing, right? Like, yeah, do it what you do, what you've always been doing, and stay focused on your customer because that's where the answers are.

Yeah. Metal is just easier to bend when it's hot. And so figure out whether you are in a cold or a hot environment and adjust accordingly.

Yes.

Yeah. Okay. I think that's good. So thinking about that, like lean in and grow the audience. And then really read the room and adjust the messaging. Same product, but adjust the messaging for what the environment is. That's good. Cody, thanks for hanging out with us. Thanks.

This is fun.

Where should people go if they want to check out all your content and subscribe to the newsletter and all that?

Contrarian Thinking is probably where everything is. On there is anything you want to learn about boring businesses and buying them, and also a free newsletter. Two of them, actually.

I love it. Thanks for hanging out.

Awesome. Thanks for having me.