How To Build Wealth AND Income, With Roland Frasier (Part 2)

You're listening to Business Lunch with Roland Fraser. This is your seat at the table. Welcome to Business Lunch with Roland Fraser. This is the show's producer, Darren Clark and I want to first thank you for tuning in. Now today, Roland shares more of his insight, expertise and straight up wisdom because we believe entrepreneurs are uniquely positioned to impact the world for good. And now more than ever, the world needs you. This episode and part one from last week is going to help you focus on creating income for the short term and build wealth for the long term. So be sure to go back and listen to episode 255. Now this episode follows on from that, delivering Roland's thoughts on building long term wealth. In other words, how he does it. So if you want to grow your business faster than you ever imagined possible and work on building wealth for the long term, you're in the right place. But before I hand you over to Roland, he's actually launching his five day epic challenge on April 15th. It's only $55, which is kind of ridiculous and it's about ethical profits in times of crisis. And this is his program that has blown up over the last year. So to check it out go to businesslunchpodcast.com epic and the more you listen to this podcast, you'll hear a theme from Roland. And that theme is acquisitions are the fastest way to grow your business and also the fastest way to build wealth. So if you want to go deeper with Roland and learn from him, check it out. Businesslunchpodcast.com EPIC okay, without further ado, here's.

Roland five strategies for building long term wealth, including four that most people never uncover. So last month I shared several thoughts on the long and the short and I included several very specific strategies for maximizing the short. In this podcast I'm only sharing my thoughts on the long and the five strategies that I've used the that have worked pretty well for me in maximizing the long. So let's talk about the long. A good long term plan should provide enough wealth assets to replace your from your efforts income for the rest of your life post earning short term years. So plus any additional growth you're going to need an income to cover inflation or that kind of stuff. So this is going to be accomplished through passive income that can increase in conjunction with increases in inflation or through sales of appreciated assets and after taxes that will provide from your efforts income replacement from the disposition of those assets for a period of time more than adequate to cover your expected life expense. So all that's a long way of saying you need something that's going to replace the money that you're earning. That's what we call the from your efforts money. And so here are some strategies for doing that. Okay, so five proven strategies for the long these are the most effective long game strategies that I have found for building wealth. The first one is real estate. Real estate's been a constant throughout my life. I've built, owned, flipped or held more residential and commercial real estate than I can remember. I've stood in sweltering hot parking lot in Las Vegas buying auction properties. I fixed them up and flipped them. I've sent out dozens of purchase contracts, cold, cold contracts to addresses and bought homes sight unseen using a computer algorithm, then immediately flipped them to buyers that I also never met using that same program. And if this stuff appeals to you, then message me or go to realestateworldwide.com or kentclothier.com, kent is my partner on stuff like that. I've also purchased raw land, had it rezoned and flipped it for a profit. I've sent thousands of letters to prospects, then went out and looked at their properties, bought them for no money down, staged them with rental furniture and then auctioned them off for a profit even in seven days. I've raised multiple real estate funds, both private and public through syndications we call them, to buy properties with other people's money. And I've built thousands of houses from the southeast US to the Cayman Islands as a real estate developer. That and much, much more. In real estate. Real estate is one of the best wealth building assets that you can find. And there's a million ways to get involved. You don't need any money down and you can play both the long and the short with real estate. The second way for the long is software as A service or SaaS. Subscription companies. Subscription and recurring revenue companies provide huge wealth building opportunities because investors are always looking to de risk like to mitigate the risk of loss when investing. So they like where sales are guaranteed and recurring businesses have an advantage over those that have to continually go out and find new business to sell every single month, every single year. So I've learned to program basic HTML and several programs a long time ago. But I'm definitely no developer and I don't have any desire to spend hours and hours wired in coding software. But despite that fact, I own several software as a service companies across real estate, marketing and the business verticals. So you don't have to know how to code to start or own a SaaS business. A lot of people don't realize that you just have to know someone else who does and bring them in as a partner or get them to bring you in to add value doing other things that you're good at. If you don't have anything to bring to the table in terms of services, you can always just buy in as a partner. Although I like the earn in concept better with my partner Kent Clothier, I own several software as a service companies in the real estate space through Real Estate Worldwide. These companies aggregate real estate transactional data from all over the United States and provide data enhanced versions of that information to the real estate investor world. And we also have a couple of other partners. We own a company called Cribs with which is in the process of a geo specific launch to do blockchain. This is what cryptocurrencies like Bitcoin are based on, but many many other things too. This is kind of a blockchain for real estate deal. And then with my partners Ryan Dice and Richard Lindner, I own several SaaS companies in the digital marketing space, including a new LMS we recently launched called Praxio and a newsletter service called Recess. But we also have Digital Marketer which has a SaaS subscription business for people interested in digital marketing. Now I didn't code any of these or conceive or create them. I just partnered with smart people that did and so can you. One of the best people to learn how to grow and build SaaS businesses from is Dan Martel. Dan's a great guy. He owns a company called SaaS Academy. You can find him@danmartel.com and we and lots of other smart SaaS business owners have learned an incredible amount of valuable information there and Dan will be on the podcast very soon. 3. The Third Way Buying and Selling Businesses Just as you can buy real estate for no money down, you can also buy businesses with no money down. When I teach my legs intensive leg ridge, exit, grow scale, I Review in detail 27 different ways to purchase businesses with little or no money down. And I've used those little no money down strategies a lot of times over the past 30 years to buy businesses, to fix them up, or to run my 1KX, my 1000X playbook to grow and scale revenues, profits, valuations and then sell them at a profit. And let's just suffice to say that you can frequently attain some version of seller financing, third party loans or partner your way into owning businesses without having to come out of pocket yourself. Many larger businesses will require some money up front to get your foot in the door, but through partners and third party financing, that's not nearly as difficult to obtain as you might imagine. Owning a portfolio of businesses that have value and can be sold to generate revenue above and beyond what they produce on an annual basis provides one of the greatest wealth building opportunities I've been able to identify. And over the past 12 months we've exited three of the businesses in our portfolio. Because a subscription based business sells for a multiple of EBITDA or net sales, even that means that each time you sell one you're receiving many years of income all in one lump sum and usually very tax free favored. So if you'd like to learn more about how to find, evaluate, acquire and sell businesses, then message me or reach out and we will send you details on the next intensive where I go into great detail in how to do this. Or just stay tuned on the podcast and I'll continue creating podcasts about how to buy and sell from time to time. Fourth way is equity investing. That's by taking ownership in companies in exchange for providing value. I recently posted one of my strategies for doing this. If you like the idea of equity investing, then definitely go to that podcast from a few weeks ago. Equity investing is just providing your services or other resources that you have access to in exchange for options, stock or some form of ownership in someone else's business. You provide those services or other things that business owners want and value and then you receive cash and or equity ownership in return. Win Win. Okay, that brings us to number five. Trend based investing in insider private companies that have momentum. This is one of my favorites. So while I don't really care for the public stock markets for investing, as you can see from a few of my top long term investment favorites that we've talked about here, I do love a good private company investing in private companies that are already operating. Don't give me any startups unless you have a ridiculously inside access to deals that everybody wants. Like Kamal Ravikant. I just don't like those startup deals. There's too many failures, too much risk. So I'm not buying these companies and I'm not providing them with with resources like equity deals here. I'm just a passive investor. I'm coming in early to companies that I believe can quickly exit for a nice profit given the teams and trend favored focus that they possess. So a good example would be the High School Esports League, something like that, where I've got a buddy that has an inside track or they're raising money and the team is just super successful and has done it a million times and there's a high valuation and the trends are behind them. That might be something I would invest in stuff I do not invest in for the long. You'll notice that investing in the stock market, forex, commodities and precious metals are all conspicuously absent from my top long game strategies that we've talked about. And that's because I've found those options to either be too risky, not interesting to me, not offering enough involvement or control, or just something I haven't taken the time to fully understand because my plate's full with all these things that I know and that have worked for me really well throughout the years. And it doesn't mean that I think there aren't good potential long game strategies. So before you tell me that you know I'm crazy and I don't have those, I'm just giving you what has worked best for me. And since I have plenty on my plate, I haven't really had to look beyond these things and it just means that they're not for me right now. Conclusion to this is the long and the short, right? Let's talk about how we brought it together. So if you've absorbed all of what I've talked about over these podcasts about the long, long and the short, then you'll know the importance of knowing how much income you need to live the lifestyle you want, how to generate that income from your short game, while also creating a strategy and a plan to build the wealth assets, income replacement and wealth preservation that you need to support you when income dries up or drops, as it inevitably will do in most cases as markets change and you get older and that sort of thing. So don't get lost in focusing only on creating and building income. Don't get lost in focusing only on creating and building wealth. Create a strategy for building both A strategy for the long and the short. Build your active income and use it to create passive income and wealth assets sufficient to appreciate and sell off to replace your from your efforts income. That earned income you do after you can no longer be a dancing bear anymore. And the easiest way to do this is to set aside a portion of your active income for investing in true passive income income and appreciating or at least sustainable wealth assets. One of the best and simplest plans I've ever seen for this is contained in the book the Richest man in Babylon. It's an old book. It was written way back in 1926 by a guy named George Clayson. It was actually given away in installments at banks long ago. Highly recommend that book. It follows a bucket method that I think has just worked really well for me. And if this sounds interesting to you, go pick up a copy of George's book and read it. Follow his advice. And in the advice that I've given you in this podcast, get yourself focused on playing the long and the short. I know I've done this ever since I was about 15. It's worked amazingly well for me. On the other hand, if you've already accumulated pretty good income of say a half a million dollars or more of investable assets, then get yourself an amazing wealth planner. There's a guy that a gentleman in our war room mastermind named Jim Doo who's a smart, honest, creative in a good way guy. Or you could go to the virtual family office if you have significantly more. That's something the ultra rich do with their personal it really means they're just hiring their own private wealth planner and asset managers. They call those family offices. So if you've only got if you are not if you've only got but if you are under 20 million in investable assets and you need to create your own family office, there are now virtual family offices. And that's something I mentioned Jim Doo can tell you about if you want to look him up. It's that's Jim D E W do and I don't get anything for recommending anybody on here. By the way. If this is something that sounds like it might be of interest to you and you have a half million or more of investable assets, think about attending a wealth management intensive or something like that. That's really the long and the short of the long and the short. So no matter what, you definitely want to start playing both of them, both the long and the short. You can't succeed in golf without both games. You can imagine driving a ball 500 yards and then not being able to chip and putt into the hole, or being an amazing chip and putt player, but being unable to drive the ball more than 30 yards at a time. You just can't succeed in wealth and income without them both either. So you need them both the long and the short. Love to hear what you're doing right now for both the long and the short in your business or your wealth plan. I'd also love to hear other long and short strategies that I didn't cover in this post or that the the preceding podcast in this series about the short and the long did not cover. So please share this with your friends and followers and let me know if you think that any of this stuff works well for you, or if you have any other ideas. Want to grow your business faster than you ever imagined possible? First, you need to identify the major growth levers. There's seven of them and I'm going to be sharing each with you with detailed explanations. Media Growth Lever Number one if you want to acquire more customers extremely fast, you need to get your offers in front of more eyeballs. You can do that in several ways, but all of them require you to have access to media. What is Media? Media is defined as the main means to mass communication. You want to access the means for mass communication so the greatest number of potential customers can see what you have to sell them. There are five types of media Media comprises several different types media type 1 paid media there's paid media like when you spend money on Facebook, Instagram, Google, search or display, native ads, YouTube, email drops, radio, TV, print, et cetera, et cetera. Paid media is highly effective, but your ability to use it to share your offers is limited to how much cash you can afford to spend and your return on ad spend. Media type 2 is organic social Media there's also organic social media. So like the platform that you are listening to right now, the podcast, social media is wonderful because social media platforms need to make returns for their shareholders and most limit your organic reach for social to motivate you to pay more for access. Organic social media could be considered a type of owned media because you generally own your social media accounts. However, I like to think of it as a separate class of media from owned because you're really leasing your social media accounts. That is you don't have unfettered access, use and control of these accounts like you would if it was a channel you actually owned because you're subject to the rules and agendas and whims of the platform's owners, which, as you know, if you've done anything with them, change pretty dramatically. For our purposes here, organic social media is a cross between earned media via likes and shares, paid media via boosts and social ads, and owned media, which would be your own social accounts. Okay. Media type 3 search media search media is extremely effective because people are in the market for whatever you're selling and they're searching for that kind of thing through buyer intent keywords. So search media includes any search engine like Google, Amazon, YouTube. A lot of people don't think of Amazon or YouTube as search engines. YouTube's actually the second biggest search engine. I think Amazon is number four right now. Might be three by the time you listen to this. Search marketing, though, requires you to negotiate a complex labyrinth of algorithmic hurdles to achieve top rankings. And you are ever at the mercy of of the latest slap or update. So it's a good one, but it has its own set of challenges. Media type number four Earned media. Earned media is exposure to the masses resulting from publicity from other people creating content about you and your business. Basically pr. Earned media includes everything from viral content to news coverage. It typically provides a quick shot in the arm and it can, as in the case of dollar Shave Club or Poo Pourri, launch huge businesses. But earned media does put you at the mercy of a fickle press and public. There's no certainty that anything that you create will capture the attention of the public long enough or deep enough to induce them to share it and cause it to become viral. So there is no command or button that you can hit that says go viral. Nor is there any guarantee that any press coverage or media appearances will generate the exposure that you need to move the sales or profit needle for your business. Media top type number five Owned media. Which leaves us with Owned media. Owned media is any platform that you own and control that provides you with access to communicate with with a group of people. Own media would include your blog, your social media accounts, Instagram, YouTube, et cetera, your customer and prospect lists, print newsletters, podcasts, live events, and so on. It's everything you own and control that allows you to communicate on a one to many basis. It also includes your email list. Major growth lever number one. Now we know what the different types of media are, let's talk about the growth levers. Major growth lever number one. Rapid growth through Owned media acquisition. If you own the media, you have the ability to use it to communicate with your prospects at will. You're not limited by any social platform imposed rules. There is simply nothing more important in your communications arsenal than owning and controlling your own media. Homegrown media. You can grow your own media. Creating content, events, newsletters, groups, et cetera. There's a great long term strategy here, like planting trees. The best time to grow your own media is years ago and the second best time is now, so keep that in mind. But growing your own media takes time, just like trees take to grow. And we're talking about accomplishing things quickly here. So let's look at another option. Acquired media. You can skip all the effort and hassle of creating own media yourself and simply acquire other people's media or OPM as we like to say. Rather than relying on third party media or taking the time and expense to grow your own, why not just buy it from somebody else? Want an extra hundred eyeballs on your next piece of content? Acquire a Twitter account with 100 followers. Want a thousand people to see your next video? Acquire a YouTube channel with 1,000 subscribers. Think you could sell more of your product if 10,000 people could see your webinar offer? Acquire a blog with 10,000 unique monthly viewers. Wish you could immediately access an extra hundred thousand email addresses? Acquire a business that already has one with strong open and click through rates. Owned media is the answer. Your ability to access more potential customers is only limited by your ability to access more media. You can do that through paid search, social or owned media. But owned media is forever. The other types of media are controlled by third parties whose agendas and goals might differ from yours. Their financial interests absolutely differ from yours. You level the playing field and ensure your continual access to renewable sources of new products and customers when you own your own media. So if you'd like to learn 23 ways to acquire media for no money down, I can talk with you about that as well. How do you structure an equity deal where you would like both 1 continuing cash payments plus 2 an ownership interest in the company that you're going to work with Lately, quite a few people have asked me this question. What is an equity deal? Let's start with that. First, let's define what we mean by an equity deal. An equity deal is a deal where you'll provide products, services, or other resources to a target company we call the client in exchange for an ownership interest or phantom stock. We'll talk about that in a minute. Warrants options, a revenue share, a profit interest, or some other equity or equity like interest in the client. Equity deals can also include a cash portion of compensation in addition to the equity interest, though they don't always include this. In this particular podcast, I'm going to break one of my favorite types of equity deals down for you here to provide one very effective way that you can structure a deal like this for yourself. So this is the cash plus Equity gap multiplier method. It's a fancy way of describing it, but let's talk about it. Let's break it down. So this particular method presents especially well when attorneys, accountants, minority shareholders, venture capitalists, angels, or other advisors might be in the mix. And it also works well when you need to have a mathematical justification for granting the equity that you want to grant. So let's first talk about the cash need. So for this type of equity deal, first be sure that you receive enough cash to cover your needed living or operating expenses. I know it seems like it should go without saying, but it comes before everything else. And I've seen a lot of deals with tremendous upside opportunity fall apart just because the service provider failed to negotiate a cash portion to cover their operating or living expenses. Now how do we come up with cash calculation? Well, your cash compensation in the deal then becomes the minimum that you calculate you need to provide your operating or living expenses. So let's assume it'll cost you about $2,000 a month to provide the services you're going to provide to somebody because you'll have to hire the following people to help you perform the services. Let's say you need one contractor and we'll say that's $1,000 a month and two $500 a month offshore contractors. So that's another thousand dollars a month. Let's also assume you need an extra $3,000 a month to contribute to your personal living expenses. You add all that together and you're going to want to have cash of about 5, $5,000 a month. 1,000 for the contractor, the two people at 500 that are offshore, and then the 3,000 for your living expenses. Once that cash portion is established, then you can move on to the equity part of your deal. So let's talk about the equity. You now know that your cash compensation in the deal is the minimum that you calculated through the thing we just talked about to provide your operating and living expenses. And with that number in mind, we, we can calculate your equity piece of the deal. So here's how the equity calculation works. To determine the equity piece, calculate the high end of the scale market value on the services that you're gonna be providing for the client or the company. And for purposes of this example, let's just assume that the work you'll do for your equity deal, exclusive of costs to be paid by the client. That might be like ad expenses or something like that, would normally command a fee of, let's say $10,000 per per month. So deduct that from the cash portion that you need to receive that we discussed above. This gives you the equity gap. Now let's. So that would be 10,000 is the value of the services minus the 5,000 we calculated that you need for cashes the equity gap, and that would be 10,000 minus 5,000. $5,000. Now we do the equity gap multiplier. So next you Want to multiply the difference between that high end market value of the service you'll provide the equity gap that we just talked about by three to five times. Why three to five times? Because you're taking a risk by investing the cash equivalent of that equity gap into the business, you're really putting your profit into the business. So this is way riskier than just getting paid for your work. And you're willing to do it so that you can earn a lot more than you would have had you just been paid the guaranteed amount of cash for your services. So you're betting on the company, it's management, and you're putting your money where your mouth is by showing that you believe that the value that your service is going to bring to the client will increase the value of the overall entity itself. Therefore, you should receive an interest in the company that's worth more than just the cash value of your services. So the three to five times number is a multiplier that's designed to accomplish just that. So what it does is it proportionally increases the value of your services in comparison to the valuation of the business that you'll be adding to. Now let's talk about the equity valuation. So the product, meaning you multiply the product of the equity gap and the equity gap multiplier determines the equity value of your deal. So earlier we determined the high end scale of the market for your services was $10,000 per month. That leaves an equity gap of $5,000 a month. That's the 10,000 value of the services minus the 5,000 actual cash you need. That was for your contractors and living expenses. Now we multiply that $5,000 number by the equity gap multiplier. So let's be conservative and use 3 as our multiplier here. 3 times $5,000 equals $15,000 a month in equity buy in value. Now let's say this is a five year deal. So $15,000 per month times 12 months times five years, that equals $900,000. Now we know the value that you are looking to have in the company for the gap in what your services would have cost versus what you're providing them for. So now we determine the equity interest percentage. So let's say the business that you're working in has $5 million in sales and EBITDA or profits of a million dollars. And the valuation multiple for that industry is 9. So the valuation of the company that you're working for then would be 9 million 1 million EBITDA times the multiple of nine. And that means Your equity piece works out to be 10% because your equity piece, the value of your total services through the equity gap was 900,000 and the value of the company is 9 million. So that's 10% the end result. Based on these numbers in this deal, you'd receive $5,000 a month cash for five years. This covers that 3,000 living expenses, the thousand for the contractor, and the thousand for the two $500 offshore people plus a 10% equity share. And that equity share we just calculated, that's you're going to do 900,000 worth of services outside of the cash portion during that time and you get in a $9 million company, 10% of the equity. So the equity gap multiplier method is just one of a lot of different ways to put together an equity deal. Its major advantage is it provides a formulaic, like a mathematical approach that most shareholders or stakeholders in the client can understand. Most advisors can understand it as well. And I've used this method a whole lot of times. It remains one of the most dependable, comprehensive methods for putting together a deal like this. Everybody gets it. It just kind of makes sense. So I hope that was helpful and I'll see you next time.

You've been listening to Business Lunch with Roland Fraser. If you're enjoying the show, let us know by subscribing and leaving a review. And for more information, go to businesslunchpodcast.com thank you for listening.

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