Cash or Stock? Smart Strategies for Business & Investing

If you have strong hands, you don't have too much in the market, then you can get more aggressive. You can buy stocks when they're down. And so figure that out. For some people, that's half their money, say 50% of their money. For some people, they can take the risk and they're higher than that. They're 75 or 80, but that's where emotions are really important. And everybody needs to get in touch with their own emotions before they really put too much in the market.

Welcome to the High Voltage Business Builders Podcast, a Show where we interview high-voltage entrepreneurs growing and scaling through e-commerce, real estate, and other Wealth Without Wall Street ventures, showing you the path to making your first or next million.

All right guys. Well, thank you for joining me again on another episode. As always, like, share, comment, engage. I don't care if it's snide remarks, leave something in the comments and help me beat big tech so someone else can hear this. And as always, share it with someone who needs to understand this conversation today. So I brought in somebody, uh, who I've gotten to know a little bit over our pre-show call and just a few minutes ago having some pre-show conversation and there's some definite alignment with the concept of building businesses to exit. And there's combinations of deals and how we trade time for money and deal with money and deal with taxes and deal with post-sale and pre-sale and during the sale. And what I don't always talk a lot about, and I think it's gonna be a great conversation today with Mick, is what happens in the art of the deal and the kind of deal you take should you sell your business, right? Which has to do with the upside potential and maybe some strategies that we can unpack today. So if you're Consider the possibility of selling your business and you're listening to this, or you are in the process of selling your business. Let's unpack some of this today, Mick, for those who are listening in that category. And those of you who are not in that place, maybe you're just getting started. Well, buckle up because there's some good information I'm sure we can share today. So welcome to the call, Mick.

Well, thank you so much, Neil. I really appreciate being on the call. And, you know, my background is more on long-term investing, but I do have the experience of being part of a sale of a business. back 20, 25 years ago. And even some of those lessons from long-term investing and kind of being common sense played a hand in people who made some good decisions and some poor decisions regarding how that sale happened.

Yeah. Let's break that down and unpack that for us just a little bit. What do you mean good and bad decisions?

What did you see? So the way our deal worked was it was part cash and part stock. You were able to get the stock of the purchasing company. And so of course the cash all felt good, but of course there were taxes involved, long-term gain taxes. And then in terms of the stock, the way it worked, at least for us, was as long as you held onto the stock, you were not able, you did not have to pay taxes on that. And so in some people's cases, that was a lot of money. And so their argument was, I'm going to hold onto this stock. Even though it was a very significant part of their balance sheet because they didn't want to pay the taxes. And at that point, the purchasing company stock was around $40 a share and not a bad company. It looked okay from a long-term perspective. But if you were just looking at that stock, there's no way you would've said, well, that should be 30 or 40% of my assets.

Right.

I mean, you know, a long-term investor would never think that way.

Right.

And yet to avoid taxes, a lot of people decided to hold that stock because they didn't want to pay that immediate capital gain tax. Well, the stock goes from like in the next, say, 6 to 12 months, the stock drops from that $40 to about $11. And so you're thinking they would have been a lot better off paying some taxes. And of course, are you going to sell all the stock? Maybe not. But that's another case where you'd say, use your long-term investment sense and don't let that, again, I can't remember the exact expression, but the tax tail of the dog wag the dog or whatever it is. Don't let taxes totally influence every decision you make. Sometimes it's better to pay the taxes.

Sometimes it is. And sometimes we have to argue taxes and what they actually are.

Well, that's true too.

Why should we have them in the first place? What do you say to that? It sounds like you're on the same page as me.

No, absolutely. And certainly there are people smarter than me that can figure out timing and everything else, but here we are at the end of the year and the market's done great. And people have large gains. And it's one of those timing issues. If you have a large gain in NVIDIA or Eli Lilly or some stock like that, Do you want to take a little profit now or do you want to like gut it out and try to wait for the first of the year so you don't have to pay those taxes in April?

And depending upon who gets into office, you would either pay no capital gains or you may have to pay up to 25% on unrealized taxes for the gains.

That's a whole different conversation. That's a whole nother conversation I'm glad we're not talking about.

Yeah, no doubt. It's a, it's just something to think about in business as we constantly navigate this river of information, as well as change, political, socioeconomic, and everything that impacts the businesses from, you know, purchasing them to, you know, running them and closing them and starting them up and everything that impacts when you do these things. What?

Well, and I will say this without diving into a political discussion. Typically you're harmed by either guessing what policy gets through. Too early.

Yep.

Or, and guessing of course what candidate's going to win and how that's going to impact things. And so my advice typically is wait it out, you know, and policies change and Congress changes and there's usually plenty of time to do these things. And yet it is the topic du jour right now.

Oh, it's a fun one to hang onto. It creates trending trends, but like you said, it's going to kind of be what it is no matter what, happens, we're going to deal with whatever outcome it is. But in business, we have to kind of negotiate those to a little degree, don't we? And try to figure out, especially on the taxes side, how do we put that money to work in building the businesses, buying more real estate, investing in more stocks or whatever it is you do to invest and gain that. What would you say this year and maybe going into next year by the time this recording is out, actually, because we're in October already, what would you tell people who are thinking about investing in the next year? What's your strategy? Feeling bullish? You feeling— Like there's some good things on the horizon. What do you, where are you at? Where's your headspace?

Well, you know, we had a great year last year. The market was up over 20% and it looks like we're going to have another 20% kind of year unless we get a bump in the road at the end of the year. And so it's easy for somebody to say, whoa, enough's enough. We're due for a bump in the road. And there are plenty of economists who are who've been calling for this imaginary recession a couple of years ago and for a while, they're still calling for it.

Right.

And believe me, if you say something long enough, you will be right.

Manifested into reality.

You know, eventually it will happen.

Yeah.

But regarding investing, I tended to be right down, if you compare it to golf, hit the ball in the middle of the fairway. Don't guess too much. You know, if you're a, A person that likes to be around 50 or 60% in stocks. And because the market's been up, now you're up close to 70% because the market's run. Not a bad time to cut back a little bit, right back to your target.

Yeah.

And if the market gets bumped down, then you have money, you know, you have strong hands to buy the stock. And so I would be tempted to not guess if you're getting started in investing. and you're kind of averaging in and you're putting a certain portion of your paycheck to work each month, don't change that because you don't know if the correction's going to happen now, in a week or in a month or in 2 years.

Yeah.

And I will swear if people get that right occasionally, they will tell you they've got it right, but they tend to not get the sale and the buy right. You might get out right, But then they don't get back in. Or, and you've got to do that so many times correctly to help yourself. You're better off not guessing. Stick to your long-term plan. And what I've found over time, that's the people who are most successful longer term, not the ones who are paying attention to every newscast that's out there and some person predicting this.

Right.

And believe me, everyone gets introduced as as the master and he predicted the 2008 decline or he predicted this or that, or she did. And in the end, we don't know if they predicted it 10 years before it happened or whatever, but the real long-term successful investors have just kind of taken that steady approach.

Yeah. Somebody getting started, what would you tell them and where would you kind of take them? What's your first step?

I think the first thing is to First, get in touch with how much you can put away safely without needing to touch. So there's always a sense of, if you're in business, you want to have some money in the bank in case something happens. Same thing with investing or in your personal life. You want to have some emergency fund in case something bad happens. I almost, you don't want to guarantee anything, but whenever you've needed, someone needed money for some reason, The stock market's always down that day. You never, you don't want to be selling stocks for an emergency.

Yeah.

So first of all, set aside some money, then figure out how much you could lose without getting scared because that's the other thing I've seen with investors. If they have too much invested and the market goes down, instead of getting more aggressive, which is what we ought to be doing, we get scared because the market hardly ever goes down without scary headlines. There's always something out there that's going to cause you to think, oh, I better get out now after it's gone down 20%.

Right.

If that would've happened 2 years ago and you got scared, you would've missed these last 2 years of the market being up over 20% per year. And so, If you have strong hands, you don't have too much in the market, then you can get more aggressive. You can buy stocks when they're down. And so figure that out. For some people, that's half their money, say 50% of their money. For some people, they can take the risk and they're higher than that. They're 75 or 80, but that's where emotions are really important. And everybody needs to get in touch with their own emotions. Before they really put too much in the market.

Yeah.

I think there's a great quote. I can't remember, Adam Smith might have, I'm not sure who said it, but it said, know yourself or the market is an expensive place to find out. And so that's, you know, that's where I put, really lean into that.

Yeah. Warren Buffett says something similar to the effect of when the water goes out, you get to find out who's naked, right? You find out real quick who's up and who's down, right? With somebody who's more looking for alternatives, do you talk about that at all? Are you predominantly invest in the stock market? That's your long-term game? Or do you invest in other things, in real estate long-term? Or are there other investment plays you move into, other channels?

I personally am not a real estate— I'm not an advisor for real estate. I have some of my own and what I've found both looking in the market and also my own personal experience has been If that's your thing, if you're a person that can find attractive pieces of real estate, fix it up, rent it, be hands-on, being able to deal with things like that, I think real estate can be quite profitable and has been. Certainly in Southern California, it's been amazing.

Right.

But in other areas too, it can be a great investment. But what I've also found is, of course, You know, what's the expression about location? It's important to know where you're buying and also how much expense there is. You know, people say, well, I could buy this for X thousands of dollars, rent it for so much a month, and look at what I'm making. But they forget that the air conditioner's going to break or the renter's going to leave and it's going to not be rented for 2 or 3 months while you're fixing it up. And there's all these different expenses that that people need to be aware of before they just jump in and say, oh, real estate, the way to go. Typically, and over a long period of time, real estate and the stock market have done, depending on where you are, pretty similarly. So you can do both, but one takes hands-on. Real estate takes, you know, working, whereas the stock market's a little more passive.

Yeah.

Some people like that hands-on. That's the way they want to do things. They hate the fact that they don't control the stock market. And other people want to just put their money away, forget about it, and let it go over the long term. And, you know, that's been my, mostly my path.

And mostly your path. Mine should have been that way when I bought Bitcoin at $600. I should have just bought a few thousand dollars more of it and just left it there and forgot about it and didn't play around with it.

Well, that, for those who bought it a long time ago, it's been an amazing run.

A crazy run.

I actually was looking at Just the last year or two of Bitcoin and Ethereum and some of those that have done it. They hit a bump in the road a few years ago. They got hit really hard. And since they've come back and they've done fantastic, but so has Nvidia and so has Eli Lilly. And so of course it's the woulda, coulda, shoulda works for everything.

Even Amazon, right? People are saying, well, you should have invested in Amazon stock back in the day, even though you were running on their platform and doing physical products. And I probably should have because Amazon stock's done really well.

It's done fantastic. But Amazon's a good point though, because, you know, when it came out, I, along with many people, were saying, why would you pay so much for Amazon? It's a bookstore. And at that point, you didn't realize what Amazon was going to become.

That's right.

But you had time. You didn't have to buy Amazon in the '90s to make a lot of money on that stock. You could have bought it 10, 15 years later. And I would say the same thing about cryptocurrency. Yeah, the guy that got in 10 years ago has made a fortune and that happens and, you know, all over the map.

Missed opportunity.

But if cryptocurrency is for real and we really at some point understand that that's going to be some global currency that everybody's going to be trading in Bitcoin, we've got time. You don't have to jump on these things because some of these things work out and some of them turn into Beanie Babies back in the '90s.

That's right.

That didn't turn out so well.

You never know ultimately what's going to happen in the future, but you try to do your best to gauge your level of risk reward, right? For me, it was less about putting money into Amazon and letting their stock ride and do that kind of thing. For me, it was more, how do I utilize the system to turn this into a commerce machine? And that's how I went about it.

Which is really important because I remember we were managing a lot of stocks in the '90s and the guy I worked with said, You know, we're, we're, our company's going to make it or break it based on the stock market. So personally, I'm not going to own stock, at least too many of them, because our whole balance sheet was based on the stock market. And so it is important to make the decisions like you made. If your whole business is based on Amazon, you don't need to buy the stock. If, you know, if you do well, you know, you know, buy something else.

Yeah, it's a bit, it's different strategies. I'm a little here into I'm definitely in the e-commerce space, but I also hold coins and there's different levels of types of coins, stablecoins and risk coins and utility coins and crypto coins. And you have to kind of understand that. It's for most people, they don't get it. And I think most of the time you could walk around down the street in San Diego and bump into 10 people and ask them what Bitcoin is, and at least 5 of them wouldn't have a clue what it is because it just isn't there yet in the, in the mind.

Well, and it's another example too, is if people say, oh, should you buy any Bitcoin? Well, you don't have to, but it doesn't hurt if you want to, you know, to buy a little bit, like you're saying, doesn't hurt. And if you lose, you lose. And, and, uh, don't risk anything you can't lose.

You said that earlier. It's something I would also say for anybody listening anywhere. Don't risk a new business, a startup, a venture, buying a company, or investing in stock markets or not investing in the stock markets. Never put money out you can't afford to lose. And get the right frame of mind for that risk reward, right? It's not the end of the world if you lose some money and you have an opportunity to make more and just get out of the scarcity fear-based mindset. There's money flowing everywhere like crazy and so much of it, it's hard for us to comprehend sometimes, Mick, where the numbers are when they spread 'em around like, oh, billions of this and trillions of that. And you're like, do you even comprehend how much money that is?

No, I think none of us have a billion dollars or a billion of anything. I don't think those zeros compute.

They don't compute. It's called zero stroke. You ever heard that term?

No, but I'd like to.

Yeah.

It came outta Zimbabwe when they were basically carting around wheelbarrows full of their currency in order to pay for things. And they had so many zeros attached to their deflated currency that they coined the term zero stroke. Because when people would say, well, how much, how many kids do you have? Or how much of this? They'd be like, well, I have 6,900 kids. And they'd be like, what? Because their brains literally just fried on the numbers because it's just so much you can't hardly fathom it, right? And we talk about these numbers in such crazy amounts and don't realize how big it actually is. In our world, just one channel of Amazon moves 8,600 units a minute. Amazon is just an absolute juggernaut. It's huge. It's a location-based logistics company with the 6th largest planes, trains, and automobiles logistics company in the world. It moves freight, enormous amounts of freight.

Yeah.

And enormous amounts of stuff. It's so big people can't quite comprehend the opportunities. The stock market and the money flowing around over there, in businesses or development or the acquisitions or exit of companies, there's just money flowing everywhere. I think that's something just for anybody listening to take away from this call is that it really just gets down to where you feel your risk-reward ratio is and what you're feeling comfortable. People are adamant about not investing in wealth without Wall Street is what it's called. And there are people who are very adamant about getting in the portfolio and staying in it long-term and riding through the ups and downs of Wall Street. I don't think there's a wrong answer. answer to either one of those. It's just going to get down to what your aptitude and risk level is. Would you agree or disagree?

Totally agree. And I think it's actually one of the most important questions to address. We talked about earlier, but that mentality and really knowing yourself and then having the courage to stick to your guns, because you just talked about the billions of dollars floating around, trillions of dollars in some cases. But in just, you know, looking up and down your street, you might see somebody making a lot of money doing this or buying the Bitcoin or whatever it is. And the potential fear of missing out, that emotion can strike us all. And then all of a sudden we're doing something we shouldn't be doing.

That's right.

And so whatever it is you believe and you know yourself about and you want to go for, Be courageous enough to stick to it and don't get distracted because it's at that moment that you can take more risk than you should or get into a business that you really didn't feel comfortable with. And all of a sudden you're set back and that's the— it's, you're going to get set back anyway in anything we do. But when we get set back, when we make those clear errors, that's the hard thing to take.

Yeah. Very well said. Anything else that I didn't bring up that you'd like to, or didn't ask you yet that you want to bring up on the conversation?

No, I think, you know, I, like I said, I mostly, my experience has been in long-term investing and, you know, had the one, you know, sale of a business. And I just think that in business itself, sometimes people forget that being likable, being patient, being a good listener, Those are all things that really help us, help ourselves succeed, and then also have people draw people to us so we can do better at business. And I think when I think back at the company that we had, there were people who were fantastic at both selling and managing money and such like that. But it was really the people that were willing to listen, be humble, on that were the most successful. And so I guess I would encourage everybody not worry so, so much to be the smartest person in the room, but if you're the one that's listening and you're the one that's, that's trying to help people along the way, oftentimes long-term, that's going to bring you the most success.

Very well said. Thank you, Mick, for coming on and sharing some good words with me today.

Thank you, Neil. It was really a pleasure. I really appreciate it.

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