How This 31 Year Old Will Have A $20M+ Pay Day From Buying PAVING Companies w/ Sam Silverman

Summary

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Action Academy | Millionaire Mentorship For Your Life & Business

Episode: How This 31 Year Old Will Have A $20M+ Pay Day From Buying PAVING Companies w/ Sam Silverman

Host: Brian Luebben
Guest: Sam Silverman
Date: April 24, 2026

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Episode Overview

In this episode, Brian Luebben sits down with Sam Silverman—a 31-year-old entrepreneur poised for a $20M+ payday from buying and rolling up paving companies. They dive deep into Sam’s unconventional journey from corporate sales star to a real asset and business investor, focusing on how roll-ups in the paving industry can create generational wealth. The conversation is a tactical blueprint for high-earning professionals seeking actionable strategies to transition out of corporate, accelerate their path to financial freedom, and leverage small business acquisition for massive returns.

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Key Discussion Points & Insights

1. Corporate Exit & Early Hustles

[02:42]–[05:50]

• Sam’s Corporate Launch: Started in entry-level sales at a small tech startup, quickly rose through the ranks, and helped scale a team from 1 to 140.
• Stock Upside: Substantial compensation upside came from public company stock 3.5x-ing during his tenure.
• First Active Investments: Explored single-family rentals—realized the headaches outweighed the $200/month property cash flow.

  “Quickly realized it was a freaking nightmare. Right? Go make $200 per home per month. It takes up so much of your time and headspace.” — Sam [03:54]

• Passive Investing: Shifted to LP (Limited Partner) investments across real estate, credit, and debt to learn and scale efficiently.
• Launch of Silverman Capital: Built a capital arm co-sponsoring deals and acting as the capital-raising connective tissue between investors and operators.

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2. Smart Moves in Corporate Sales

[06:44]–[15:32]

• Finding the Upside:

  “If you go into a less established organization, that can be an organization in a company too... they have no fucking clue how to go structure a comp plan. You have two years to break that comp plan in your favor.” — Sam [06:44]

• Startups vs. Giants: Opting for startups or new units inside big companies means greater potential to “break the comp plan” and outperform on commissions, compared to the rigid ceilings at established giants.
• Mentorship Over Brand: Choosing to work under a world-class sales leader accelerates learning faster than joining a big company training program.
• Transitional Skills: Corporate skills like sales, team management, navigating public company bureaucracy, and cross-cultural leadership directly transferred into entrepreneurial success—though some had to be built from scratch, e.g., managing teams as a founder.

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3. Building Investment Runway and Deploying Capital

[15:32]–[21:48]

• 100+ LP Investments: Sam built an extensive LP portfolio but also acted as a GP (“on both sides of the deals”), optimizing for both tax advantages and broader learning.
• Strategic Allocations: Every dollar has a “job” in the portfolio: cash flow, tax benefits, growth, liquidity, etc.
• Current Strategy: While building operating companies (which don’t yet produce active income), Sam optimizes for liquidity and cash flow via heavy private credit allocations (16% annual preferred, for instance).

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4. Lifestyle Inflation and Financial Freedom

[21:48]–[32:31]

• Keep Lifestyle Replaceable:

  “Keep your lifestyle to a place that's very replaceable, cost wise.” — Sam [21:48]

• Runway Calculation: Have enough savings (Sam left corporate with 5 years of personal runway) so you never have to go back.
• Cash Is Oxygen: Both agree to maintain substantial cash buffers to avoid stress and bad decision-making.

  “For as aggressive as I am with investment, I'm equally as aggressive with cash. Because cash is Runway. Like, cash is oxygen.” — Brian [23:59]

• Housing Choices: Both remain renters, preferring liquidity over the capital deadweight of homeownership—especially at luxury/prime levels, given opportunity cost and poor mortgage amortization.

  “You're trapped in that home, you have cash tied up and your life is more expensive. Like, I will buy in the future, but when I buy in the future, it'll be purely a family emotional decision for like a quality of life scenario.” — Sam [31:22]

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5. Paving Industry Roll-Up: Strategy & Execution

[36:11]–[50:00]

• Why Paving?
  • Mom & pop paving companies can be acquired at 2.5–4x EBITDA.
  • Public companies trade at 20x+ EBITDA (huge arbitrage opportunity).
  • High barriers to entry due to capital requirements and aging ownership.
  • Owners’ kids rarely want the business—creating acquisition opportunities.
• Roll-Up Mechanics:
  • Buy small at a discount; aggregate; improve operations and financial controls; realize multiple uplift at exit.
  • Paving is less susceptible to disruption (e.g., AI) versus other blue-collar trades.
  • The right partnership is essential—Sam’s team brought on operational veterans to bridge the industry expertise gap:

    “He’s them who then made it. There's a huge level of understanding there.” — Sam [43:12]

• First Deals & Growth:
  • The first acquisition was a messy turnaround. Today, the team looks for larger, higher-Ebitda targets ($4–12M EBITDA, bought at 3–4x).
  • Strategic acquisitions allow for vertical integration; e.g., buying a concrete company to capture profit margin previously lost to outsourcing.
• Standing Out Against Private Equity:
  • PE has a weaker reputation among blue-collar owners who want their teams cared for; Sam’s team wins deals by offering respect and smoother transitions.

  “We've competed really well with groups like that... It's a small industry... You just do things the right way.” — Sam [44:34]

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6. Advice for Would-be Buyers & Operators

[45:50]–[52:34]

• “Go Way Bigger” in Acquisition:
  • Many first-timers look at $300K EBITDA deals; Sam says bigger is easier to operate and worth the effort—if you partner smartly.
  • Lacking experience? Borrow track record from a more seasoned partner, even if it means giving up a slice of equity.

  “You can go borrow your track record and credibility to the broker, to the lender, right? All those things. You can go pay a tax... But now I can go do it myself.” — Sam [47:11]

• Prepare for Cash Needs:
  • Every deal has a “season of mess.” Working capital is always more than you think.
  • Overcapitalize; whatever you think you need in operating cash, double or triple it.

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7. Deal Structuring & Financing

[52:34]–[54:55]

• Equity: Moving to a preferred equity model—fixed coupon for investors (e.g., 8%), then buying them out at a multiple (1.8x for larger checks within two years).
• Debt: Started with private credit funds, now moving to larger bank deals as scale increases. Delay-draw term loans allow programmatic acquisitions.

  “Your quality of bank goes up every time... from small credit funds in the mid teens to institutional banks in the 6 to 7% range...” — Sam [54:16]

• Sam’s Role: Bridging operational strategy and investor relations, leading capital raises, legal, strategy, and external communications.

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Notable Quotes & Memorable Moments

• On Career Focus:

  “I need to go focus on one or two things very, very, very deeply.” — Sam [01:11]

• On Homeownership for Entrepreneurs:

  “You're trapped in that home, you have cash tied up and your life is more expensive.” — Sam [31:22]

• On Running a Roll-Up:

  “So we love this space for kind of those reasons and we think it's a huge opportunity when looking at the big value increase you get from what you can buy them for versus what they're worth in the future as well too.” — Sam [38:08]

• On Leveraging Partnerships:

  “You can go borrow your track record and credibility to the broker, to the lender, right?... But now I can go do it myself.” — Sam [47:11]

• On Cash Flow vs. Equity:

  “You’re almost using cash flow as a defensive metric. You're using it to just be able to outlast while you do the economic play, correct?” — Brian [20:40]

• On Industry Knowledge:

  “You're not going to have robots paving roads. May have the robots assisting roads. You're not going to have robots actually fully doing that kind of work with liability.” — Sam [40:17]

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Actionable Advice for Listeners

1. Accelerate Active Income Before Leaving Corporate:
   • Over-earn and under-spend to buy yourself a runway and future optionality.
2. Be Intentional About Cash:
   • Hold significant reserves and keep your baseline lifestyle “cheap to replace.”
3. Go Bigger, Faster:
   • First-time buyers should aim for larger businesses and partner for credibility rather than go it alone on micro-deals.
4. Master Partnerships:
   • “Pay a tax” (equity/fees) to borrow track record; you’ll go further faster.
5. Operating Cash Is Everything:
   • Overcapitalize and expect surprises—your sustainability and growth depend on cash flow.
6. Build Skills Where You Can:
   • Use corporate to learn management, team building, and leadership; those skills are invaluable down the road.

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Timestamps for Key Segments

• Sam’s Corporate Story: [02:42]–[05:50]
• Advice for Sales Professionals & Corporate High Performers: [06:44]–[15:32]
• Passive vs. Active Investing Philosophy: [15:32]–[21:48]
• Lifestyle Runway & Cash Management: [21:48]–[32:31]
• Principles of Renting vs. Buying for Entrepreneurs: [27:37]–[32:31]
• Roll-Up Strategy Deep Dive (Paving Companies): [36:11]–[50:00]
• Structuring Big Deals & Partnerships: [45:59]–[52:34]
• Capital Raising & Debt Structures Explained: [52:34]–[54:55]

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Connect with Sam Silverman

• Website: SilvermanCapital.co
• LinkedIn: Sam Silverman

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Final Takeaway

“Figure out what you want to do first and make as much money as you possibly can. And that when you go figure it out, you'll have way more Runway to go figure out what it is you want to go do and actually build the right way.” — Sam [57:28]

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For listeners ready to escape corporate and build generational wealth: keep your lifestyle low, your income high, cash is king, and go much bigger than you think you can—especially when building or buying cash-flowing businesses.

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Transcript

[A]

Go, man.

[B]

Sam Silverman. Dude, we've been talking how many years now about doing this podcast?

[A]

Yeah, probably a few years coming now, which is good.

[B]

Few years coming now. And so, guys, this is the power of social media. Like, I don't think either one of us had like too, too much going on on social media. I think we just got connected by like mutual friends or something. And both of us were doing interesting things, young guys, and we had some similar interests. You were able to leave corporate America in a really, really interesting and cool way. And now the stuff that you're doing with roll ups, specifically with pavement roll ups, you say, you're saying this is going to be like a generational walk away check, you're thinking, right? Yeah.

[A]

So it's interesting, like you go through all these different phases of, you know, you build up to go leave corporate, you have some money, you have the freedom to go do it. You didn't go through that phase of mine. Took about two and a half years of trying ten different things to go figure out what it is you want to go do, right?

[B]

You think you're God's gift to entrepreneurship and that you should go, you should go passively invest everywhere, right?

[A]

Well, dude, the passively investing was one thing, but then just you're more of your time. Like money is. You put it places and you're good, right? The time piece of it of focus. Like, I've realized I'm someone that I cannot focus on a lot of things and I've learned that very clearly that I need to go focus on one or two things very, very, very deeply and in turn have. Now this is the area where it's one worthwhile and to like, very excited about a folk to go focus on just this one key thing for a very, very long time. Hmm.

[B]

No, I really like that. And we'll get into your backstory here. We'll take it all the way back to you exiting corporate America. But first, to that point, what I've been working on right now with like Hormozi, I went and was able to hang out with him and Layla at their like acquisition headquarters. And he has that new concept that he's talking about where he's like, man, I only have five or six shots on goal in my life. Because he says that anything meaningful is like a decade. Takes a decade to build anything meaningful, or at least like five, six years. And so by the time you're 30, 40 years old, it's like you have one or two moonshots left where they're like pitches down the middle and you gotta freaking swing at them. And so I thought that that was really interesting. That's how I've kind of been thinking about business here lately as well. Because to your point where instead of doing 10 things, kind of okay, like how do we do one or two things world class, and then that's where the economic return of the Delta is. So take us back, man, to corporate. So what was your corporate role and how are you able to get your initial escape? Because that's where a lot of people listening to the show are at right now. And then. So we'll get them out of corporate through kind of some of your advice here and then take them to the next level.

[A]

So mine in corporate, I started out in like the entry, entry level sales where I had no clue like what I wanted to go do. And I figured, hey, well, I figured out, let me go make some money. And right. You look at sales, I know your background's in sales too. It's natural meritocracy. And what that means is that if you perform well, you can then earn more. It's not tied to your age, not tied to your tenure. It's purely numerical based, right? If you perform well, you will earn more money and have more opportunity because it's what's best for the company. So I started out in sales, worked my way up pretty quickly, actually got hired from my first CEO from like a 30 person super small tech startup to go build out a bigger team. We grew that team from meeting the first person there to 130, 140 people in a span of two years.

[B]

Wow.

[A]

Public company. The stock price went really well while I was there, right. Luckily where you know that stock 3 1/2 x in that period of time. So in turn you have in leadership, a lot of your compensation is tied to, you know, your base salary, commission, but also stock plans in a public company equity opportunity where you can go park some cash and then go reallocate that. At that time I started investing into single family homes, right? Built a portfolio of 10 of them. Quickly realized it was a freaking nightmare. Right? Go make $200 per home per month. It takes up so much of your time and headspace. So I was in a position where if I crushed my day job, I was making $600,000 plus a year. Gangster things up, that goes to 250 and I'm almost getting fired every single week. So I'm like, okay, this is not only taking my money and my time, it's also costing me a lot of opportunity here. So sold those homes off, dumped all my cash in LP deals right across real estate, credit, debt, everything you can go think of to go learn. I'm like my money, who cares if I lose it. Luckily it's turned out decent and from there did one more stop at a job. But in that time period I started building up Silverman Capital and what that was was we would go co sponsor projects in real estate, debt, credit, small business, etc. Kind of being the capital arm alongside our investors into those deals. Because I found that there's really two things that matter when you look at projects is can you go find operate deals and can you go find and attract capital. And I fit way more so on this side of the house and have had to go partner on that area. So fast forward 2022 September left my corporate role. Really great story too as to how I left my boss. I've worked for three times to that point. Announced our senior leadership meeting, right. That my last day was end of our fiscal. I had no clue that was coming.

[B]

Wait, your. Your boss announced to the team, correct?

[A]

Yeah.

[B]

Not even in a one on one.

[A]

Correct.

[B]

So how many years have you been working at that point?

[A]

I worked for him for like six years. So it was more so the push of like hey, it's time to go right? Of like you need to go build on your own than it was like a hey you're not performing type thing. So you get to a place too in corporate where like it was a very, very good job and if you're not fully in it like you're doing disservice to everyone around you. And I built up my company enough where I had enough there. I kind of hung on long. Most people would, right. Versus kind of jumping early. So it was more to the push of like dude, it's time to dude

[B]

so much to unpack there. And obviously I want to take like a massive leap into now what you're doing today. But I think that there's. I think it would be unwise of me to skip over how you were able to accelerate your active income so fast in the corporate kind of sphere. So what's some advice you can give to particularly somebody in sales, you know, because I do we have such a similar backstory. So I was the sales guy, made it up to where they were trying to get me to sales manager. And then you go from sales manager to vp, like a regional VP or like area vp. So that for me it was vice president in the Southeast is what they were kind of grooming for. And that's when I realized oh, I didn't want to do it. But I think it was because you were in more of the up and coming startup world versus the very well established Fortune 500, Fortune 100. Is that something that you would recommend to somebody that's in sales is to capture some of that upside down.

[A]

So if you go into a less established organization, that can be an organization in a company too. So for example, my department that I was in was a new business unit in a much bigger company, so public a new business unit. So what you'll likely find in tech, right, and kind of looking at these startup type companies or startup in startup units inside a bigger company is that they have no fucking clue how to go structure a comp plan. So that means that you have two years to go break that comp plan in your favor. And in sales, how that works is that you know, say you're a sales rep at company x salary is 100k. If you sell a million dollars that year, you'll make another 100k in commission. So basically 10% effective rate. Your all in blended cost is 20% because they're paying you $200,000 in total deliver $1,000,000 of earn of sales. If you hit over a million dollars, they'll Pay you then 20% right in terms of your effective rates. So if you overperform, you'll make exponentially more cash per dollar sold on that structure. The benefit of going into a less established company or a very high growth company where you're paying. Your companies are valued usually in two ways, right? On growth and on profitability. Like you look the rule of 40, you can get there in two ways, growth rate and net rate, right? And you want to be in a company that they're focusing on growth so they will pay more for growth. So in turn if you can go outperform in a place like that, they likely don't have the company history of this what people should be selling here. So you can go disproportionately earn in that space versus if you go sell at like an Oracle or a Salesforce that place much higher floor. They have systems, they have process, they have support staff, all of those things. But they have their comp plan so established from decades of history, thousands go break it. So in turn you'll likely make in much closer standard deviation of what your complex is. You should make like if you're that rep, you'll probably make between 175 and 250. But if you Go to a new company, you can probably make between 100 and 400k in that same structure. So I chose the routes of one following a good boss, but two places that were unestablished that structure. So I can go break the comp plan.

[B]

What do you think are. This is actually not something that I. I typically talk about, but I think this is such an interesting and useful conversation for people listening specifically for like a sales role. And you guys can. That are listening and watching can take this and apply it to other roles and other industries as well. But the way that you're saying this in my experience as well, is coming from a very professional unit, very groomed, very like thousands and thousands of head count in our salesforce. I was trained very well. I was trained in a very corporate environment I like. It was a wonderful experience. However, I stood around and hung around too long, kind of trying to climb that ladder. Whereas now, in hindsight, looking back in particular from what you're saying, I'm like, man, who you're selling for is almost. I'd say the order of importance is who you're selling for, what price point you're selling at, and then kind of comp plan and structure that will determine your overall economic success there. Because I'm like, man, for me, 250,000 was the ceiling. The ceiling. And then I left to go to a payroll processor company. And we all hate all of those. They all suck, man.

[A]

My first job, my first internship was at Paychecks. I got fired.

[B]

First day Paycom I got. I quit. I quit within two months. Because they were like, hey, you're gonna make a million bucks here. You're gonna work a hundred hours a week. And I thought it was worth it. But I was too deep in my career for me to. I was like, dude, I can't do this anymore. So to wrap all of that up with in a bow and put it on a bumper sticker, do you think it's best for somebody that's getting started in the entry levels of their sales career to go start at that very established corporate company to get the training and then leave? Or do you think it's better for somebody to work their way up or. Or perhaps start at the brand new company?

[A]

It really depends. So I'd say it's the latter if you can work for a very, very, very good sales leader. So my first boss out of college was a CEO of the company. He had exited his first company when he was younger than us. Today, for eight figures, and this is decades ago. Wow. Someone who was like a very sales driven CEO. So usually when you have a CEO, you have a product driven CEO, an operation driven CEO or a sales CEO. I got the sales CEO. So for me, the education I got from him, one on one, I got to go live in this guy's office. I'll be like, Sam, get the fuck out. Like, it's time to leave me alone. I have to actually get some work done. So I got to go have a great person to go harass for knowledge and get that transfer himself. So that's 10 times, 100 times more valuable than it is to have a really good training program at an established corporation. But you don't know if you're going to have that. So if you don't know, you're going to have like, I got lucky. Like, I don't, you know, if you don't know you're going to have that role. An established place is great because you can go take that skill set, you learn there and then go to a smaller company. But the issue is that I'm sure you've seen it too. Like in the space that you're in, you have these people who, you know, say you have Joe and you have Jack, right? And Jack has come from managing a $500 million P&L at Oracle and Joe was the VP of sales from 0 to 5 million at a startup company.

[B]

Give me that guy.

[A]

If they switch roles, they probably can get the same stuff done, like resource wise, right? You likely couldn't take Jack into Joe's role. Joe likely could do Jack's role, right? Maybe some touching up around corporate policy and professionalism, but he can likely go that, get that stuff done. Jack without the resources wouldn't bet on him as much, man.

[B]

I think that's really well said. And this is again, this isn't something that I hit on typically, but now as years have gone by, I've been out of corporate 40 years. You three and a half, correct?

[A]

Yeah, yeah.

[B]

Now that some years have gone by, I am looking back on it removed and I'm very appreciative for the skill sets that I built in corporate because those transferred very well to entrepreneurship, in particular sales. And so it's, it's really cool. And so now I'm telling people, I'm like, hey, if you're listening to this podcast, like be where your feet are crushing in your job, but go like figure out and like ask for advice, build these skill sets. I wish I would have managed a team so I could have taken that into entrepreneurship. I didn't have those skills. I had to build those skills on the fly as a business owner. Did you have any examples of that happening as well? Of skills that transferred versus skills that you were like, man, okay, he's smiling, guys. So we're. He's about to. He's.

[A]

You learn. There's like two key things I'm thinking of, right? Actually kind of three, right. The first one, I inherited a team when I was at my second last top live person, and there were 30 team members in Berlin, Germany. And, you know, I was the youngest person. They all reported to me. And in the. In the office, I go there and I got my ass kicked culturally in terms of, like, how people operate, right? So, like, you learn a ton really quickly just about how different people are in terms of the world, especially if you have a global team, global companies. That was one. Number two was dealing with a CFO at a public company as to your team's commission checks, right? Because my team at the time, we were probably 15, $20 million payroll across the entire org structure. And you have to go deal with comp plans and fighting for people to get paid and clawbacks, all those things. So I think how to go manage expectations across the board, from both your people to leadership, how to go communicate up and communicate down was really important, I think. And I think lastly too, is understanding how to go have certain conversations, right? Like learning things of, hey, if there's an issue, pull someone behind closed doors and have the conversation versus doing things publicly.

[B]

Yeah. Perhaps don't fire somebody that you've worked with for six years on a. On a group call.

[A]

No, no, that was actually a favor, right? Like, he. That was like. So him and I are still very close. Like, that was a.

[B]

That was like a nod.

[A]

That was like, dude, it's fucking time. Like, go. Go do this. Like, you need to go think bigger than it was. Hey, like, we just need you out.

[B]

Wow. So very cool. So who you work for is almost the most important Delta that people should pay attention to.

[A]

My last company was Prometrics. So it's like the most dated, boring company you can go think of, right? Like, we were delivering tests with, like, paper and pencil at the time to. To different. Different licensing exams. But I chose that over taking some really cool, trendy job at a place because, like, I know this guy has my back. He'll give me a chance. He knows I'm working towards, like, that matters so much more. Having a supporter behind you in corporate is. Will make your life so much easier. Especially being the youngest on the executive team by 10 plus years helps.

[B]

Correct. Correct. Man, that's huge. So let's walk quickly to 100 plus LP investments. I know people that have been investing for decades and they don't have 100 LP investments. What convinced you to have that amount of capital and to invest that passively versus if you had that velocity of capital and that velocity of active, like massive income, why did you decide to go to passive income versus deploying that into your own active deals on the GP side?

[A]

So I went active first and I was buying single family houses and like my breaking point was I had a tenant drunkenly drive over their sewer line with a lawnmower and it was like the week of our board prep, right? So like I'm getting grilled by our cfo, grilled by my CRO who needs, you know, material and reporting for this so they can go present to their investors. I'm getting called by property managers. The tenant got my number somehow, the vendors got my number somehow too. And I'm like, I don't want to deal with this anymore. So I went all in the other direction. But a lot of deals too. Of those hundred, I'm on both sides in a lot of deals, right? So both LP and gp, Right. So on both sides of those deals, right? So both active and passive.

[B]

Got it. That's a huge distinction.

[A]

Yeah, yeah, yeah. So you get both sides of it, right? So for the tax piece, being active in real estate too has helped a ton. Right? The all those pieces have been really helpful. But for me I'm like, okay, I have more money than time and I can go focus on like a really singular area versus having my time spread all these places. So, you know, now I'm going much bigger allocations in deals that I'm in versus like tons of small ones. My tax returns are freaking mess, right. I think in mine was like 300 pages one year. But it was like all these different K1s and all this mess here as well.

[B]

Yeah.

[A]

But yeah, now it's just going much, much bigger in allocations versus smaller ones. So in that, that piece too is like my whole portfolio I viewed is like each piece of capital has a certain job, whether it be cash flow, tax benefits, growth, liquidity. Right. Like whatever it may be, each, each piece of capital going forward has a function and a job. Some stuff I have out now will not get reallocated to that same area as it comes back in.

[B]

Do you do it like a percentage based allocation or is it like a structural Allocation. How do you, how do you think about it?

[A]

So right now I think about differently than I will in likely a few years. So right now how I think about it is that I'm basically building primarily three things, right. In terms of all my focus the last 18 months and those three things, I am negative money into those three things in each one of those areas. So right now I've optimized for granted. There's enterprise value, they're building, they will be very good long term. But there are things that don't pay me today. So my active income has dropped substantially. So what I'm optimizing for right now, my portfolio is liquidity and cash flow. Right. So I have a really heavy allocation. Private credit. Right. Our private credit fund pays 16%. I full ported a lot of cash into our private credit fund because that then helps me live a certain lifestyle that I want to go live and not have to go think to go suck cash out of my companies. If you're trying to grow certain companies growing and pulling cash out usually don't go hand in hand together.

[B]

Correct? Yeah. What is the opposite of a symbiotic relationship is a parasitic relationship because you're just, you're hemorrhaging your own company. And so that's kind of how I thought about it as well is I always heard kind of build the cash machine. So I heard plant trees, managed orchards is how I always heard it. Which was when you plant a tree it's like, and you plant the seed into the ground, it's like you have to sit and you have to protect the sapling, make sure it grows to be a fully load bearing tree that can produce fruit and stand on its own against like the wind, the rain, the economic conditions. And then once your tree is bearing fruit, then you could take the fruit and then use those seeds to plant additional trees. And, and then you just do that one by one and eventually you have enough seeds and enough apples to be able to hire somebody else and pay them an apples to manage the orchard. And so that's kind of how I've thought about it too where I say I started with cash flow and then eventually you get to a point where you're like, okay, this number is hit for me and then this number is hit for my family. And then now it's just all EV and equity conversations is what you're saying.

[A]

Yeah, it's also too just solving for, you know that I know that hey, in two or three years the companies will be in a way different spot than they're in today. Like, we're growing very heavily, we're stabilizing certain things. And again, sucking cash out of these companies is not conducive to growing how we want to go grow. So in turn, okay, I need cash flow to go cover my life today. I also want stuff that's either liquid or close to liquid. So I look at it and like I've got say I spend X a month, right? And I say I have, you know, 2/3 of x coming in every month in cash flow. So then I'm covered, I have to go solve for 1/3 of X. So I know that, hey, if I have, you know, 20x, I'm good for 60 months there theoretically in terms of ongoing cash. I also know that, hey, I have all this money in private credit, which I can go pull in three months if I need it. So for me, I'd say if I have liquidity and I have cash flow, adjacency is my positioning now is more so getting to a place of two, three, four, five years, it'll all be negligible relatively in terms of what we're building. So it's more so right now you're

[B]

almost using cash flow as a defensive metric. You're using it as just be able to outlast while you do the economic play, Correct?

[A]

Yeah. So as you kind of go model out, okay, what do I need to go spend? Right. And like, you'd be very conservative with that. At least myself relative to where I think get this, these companies to longer term before start taking cash out of it. Yeah, I mean, I'd rather go build the 10 figure company versus having to go suck cash out of it and it becomes much, much smaller.

[B]

Got it. So somebody's listening to this to put on a bumper sticker and they're like, wow, okay. Brian and Sam are saying a lot of terms with a lot of different companies. Like, I'm still in corporate, I'm about to leave, I got a couple of properties myself, and I'm looking to go buy a business myself or try to do something. And they're looking at this from like step one, what order would you do this sequentially? I know the answer is it depends on the person's goals. But if somebody's trying to leave corporate and get to where you and I are at in the conversation right now, how would you handle it sequentially to give them an ABC 1, 2, 3 kind of path? Because they can get a little complicated and confusing with everything that we're talking about.

[A]

So I Think the first thing that's just the most simple thing is like keep your lifestyle to a place that's very replaceable, cost wise. I talk to, we have a lot of investors who are the medical field, right? Like They've eaten for 10 years to become a doctor, a surgeon, whatever it may be, they then typically feel, I deserve to have all these things as

[B]

lifestyle and they blow every dollar.

[A]

So like you have 50k coming in, you've got 55k going out, so you stop doing surgery tomorrow. You are right. So what we've seen is that, you know, for me, like I went from making $37,000 a year to a half million dollars a year in like a three year period. So when legal had that shift, my expenses really didn't change a ton. So what I was able to go do is like park cash and go pump it in different things. Additionally, because my baseline expense was so low every month replacing that was very, very easy to go do with the kind of income I had. So the issue people have really frequently is that, you know, if you're like, hey, I need to go have 20x my retirement spending goal saved to go do it, to go leave. The issue is if you keep spending more and more money and you make more money, that just moves in a proportionate way going up each time. If I can keep my expenses low, my earnings higher, that time period condenses massively. So you can do that, right? I think it's also just having Runway for me. You know, I was more conservative person when I left of like I once I leave, I can never go back. Some people are like, hey, I'll go try it for a year or two. If I fail, no problem. I'll go back like, nah, burn the boats. I'd be broken, like I couldn't go do it. I'd be bitter, I'd be pissed off. I'd be just terrible. So I had enough Runway between current income from investments, between cash savings. So I looked at it as like, what's my net Runway? So my burn minus my cash flow from investments or active income outside of work was kind of a net number of okay, that's whatever it is, whatever cash I had in hand and then whatever reasonable confidence I had to earn going forward. Right. In other ways. So you kind of have a whole equation I think depends on, you know, where you're at in your life and your family and what, you know, what risk you want to go take and how much Runway you need to feel comfortable doing it. What I'd say Is Runway is so important to not force yourself in bad decisions.

[B]

I, for as aggressive as I am with investment, I'm equally as aggressive with cash. Because cash is Runway. Like, cash is oxygen. Well, cash flow is oxygen in business. But like, I just, I'm a big cash guy. I. I love cash. I'm never. I'm the opposite of Grant Cardone, where Grant's like, hey, like every single time I've got a couple million bucks laying around, I go deploy it. So I'm broke and I'm hustling again. I'm like, man, like, there's no. There is no there to get to. And so when I don't have cash, I'm like, man, I'm stressed out and this is affecting my relationship, it's affecting my health. I don't like that. So for us, it's like we normally try to target about a 12 month Runway minimum just in pure cash, let alone cash flow. Like, if everything went to Armageddon, everything stopped printing money and didn't make a single dollar passively or actively, we're good for an entire year, both me and the company. What's kind of your views of like, what cash flow Runway, or what cash position Runway were you looking at back then versus how has that changed today?

[A]

I probably had five years of cash.

[B]

Five years of cash when you left. Wow.

[A]

So five years of cash on hand before I left. Right. Like, granted, my engineers listening to this

[B]

are like, this is my guy.

[A]

Like, much less expense wise too. So my life costs a lot less than I done have five years of cash in hand now. Now it's more of like one and a half and a lot of stuff in cash adjacent. So. I agree with you too. Like you're saying I work well under business stress. I do not like being under personal financial stress. Totally different. So, like knowing, hey, am I going to be able to go pay my rent or if I have this thing pop up. The more money you make, the more things you have your hand in, the more random expenses you get that are really fucking big.

[B]

Yeah, I agree. Well, that's why we've waited so long to upgrade our housing. And so now we're, we're doing a tour tomorrow of a new house where the monthly payment, I won't say what the monthly payment is, but it's. It's probably like three times what I'm paying right now.

[A]

I just, I'm signing a lease this week with the exact same thing.

[B]

So I don't know. I'm curious how you walk through this Mentally and like modeled it. Because how we modeled it was I said, I looked at my girlfriend and I was like, nat, you know, we can do it. We can afford this today. But my rule is that all of the additional that we are going to be incurring, then that means that we have to make 10 times that in additional revenue sources, in additional profit sources in the business to make this like an aggregate like wash. Because for us it's like, I don't want housing to be more than 10% of the take home. I understand that. I think the average in America is 30% like of people's monthly. And I understand that somebody that's like in the thick of it may be like, oh, that's a privileged thing to say. Yeah, well, I mean, we worked really hard for this and we were intentional about it. So do you have like a certain percentage that you like to keep your total spend at? For me, it's normally like 17 to 20% spend of my take home and then 80% reinvestment. Is that kind of like similar with you or a little bit more aggressive overall?

[A]

But it's also my confidence of hitting in like a really big outcome has gone up dramatically as well too with things that we, that we hold, like, hold ownership in. So this like, similar to your scenario. You know, mine's roughly 3x in terms of the house that we're looking to go move into. And like we're renters through and through. You know, the renting value for nice areas, you're paying like 0.3 to 0.5% of the whole purchase price a month, which is a, you know, half of what it would cost to own it, plus no down payment.

[B]

Can we talk about that? Can we talk about that for a second? I think that's something worth double clicking on before we get into the pavement roll up. Because people act like I'm some type of idiot for not owning. Right.

[A]

I love this topic.

[B]

Yeah. And so I do we. I take. So. All right, so for people, listen, let me set the stage real quickly. And then I want. Sam, I just want you to cook, dude. So I've got introduced. So you and me are looking at the same loans. Jumbo loans. Right. Look at jumbo loans. Jumbo loans suck, dude. So I'm looking at these jumbo loans. We got like a 6, 7% interest rate. For a jumbo loan, you need to have like an additional six to 12 months of cash reserves or cash equivalents of the PITI on top of a 20% plus down payment. So if you're looking at a $5 million home, it's a million dollars down, plus you're spending 3, 400 grand to furnish the place because it's so big. And you have to have another 500,000, a million bucks in cash sitting there liquid or at least available. Like, I'm like, dude, that's 2 million bucks capital. What are we talking about?

[A]

Your opportunity cost is so nuts. So I look at it in a few different ways. So one is your rent to purchase ratio. When you get above that like two and a half million dollar mark, usually if you're in a decent bigger city, is that, you know, awesome, I may say are somewhat adjacent, right? You probably are like point three, 2.5% of your home value as a portion of rent. So if you're getting a $3 million home, you're likely paying between 9 and $15,000 a month, right? That $3 million home or kind of use $5 million. Your example, that $5 million home, you have, you know, a million into the home, right? Opportunity costs a million dollars. And if you're an investor and you manage your own money and you're, and you're competent, you feel confident yourself too. It's very expensive, right? Because that money is effectively dead going forward.

[B]

Huge, huge cost of capital.

[A]

So big cost of capital, that same placement, factory in things like maintenance, factoring things like insurance, taxes, right, that don't play rents for call it 15 to $22,000, $23,000, right? So that your mortgage then is probably what, 35, 40 grand all in plus expenses. Plus if you say, hey, you know what, you know, we have to go move for whatever reason we want to go pack up and leave. You have the tax of the 6% transaction costs, right? To go sell it, you are not paying down any principal. Your first probably 10 years, it's negligible.

[B]

Okay, tell people about that. For some reason people don't understand that you're basically making interest only payments for 10 years.

[A]

So anyone who has, if you have Claude, if you chatgpt, like just go

[B]

ask it, say, hey, look at your amortization schedule.

[A]

Yes, go in there and show me. Hey, after a five year period, whatever mortgage amount you're looking at, what do I have paid off? And you'll be really surprised that the only winner in that scenario is the bank and the mortgage broker sold you the loan, right? Like that's literally it. So when you look at it, you have these huge transaction costs. And in higher price real estate, they don't trade as frequently so is that you go on a house tour with your girlfriend, your girlfriend loves the house and you're like, yeah, fuck it, we'll do it. Right? But in turn, you're then paying an emotional tax that home where when you sell it, you may not have somebody pay the emotional tax to go buy it from you. So there's actually a big likelihood that that home may actually have gone down in value or trade net neutral. If it trades net neutral, I think you're like eight years to go break even on just transaction costs on their side of the property from pay down. So it's. You're trapped in that home, you have cash tied up and your life is more expensive. Like, I will buy in the future, but when I buy in the future, it'll be purely a family emotional decision for like a quality of life scenario. Because I want this home to be in the family for a very long time.

[B]

Right?

[A]

Being this is a choice that I want to use my dollars for today.

[B]

Correct. Yeah, you're. I used to be like, man, like, I don't understand why your home is not included on your accreditation because they're like. But now I get it. Because if you sell your home, you're going to just go buy something that's adjacent. You're going to buy something in the same range with the same payment because that's what you're comfortable to. You don't downsize unless you're absolutely forced to. And so that's where I've been like, oh, wow, that makes a lot of sense. Like, I really, really enjoy running now. There's some, like, limits to it, of course, but it's just like, I think people go so housebroke that it prevents them from like, once your house broke, like, dude, it's really hard to dig

[A]

your way out of. My family growing up too. Like, we lived in a, you know, nice neighborhood, but like, the house was beyond stress in terms of what we could financially afford. And like, that caused meaningful issues internally in the family. Like how I look at renting now. I'm sure you guys may look at it somewhat similar to is if you spend even 3 extra rent today. Right. For me, like this upgrade in the home, it's set aside my account already. Like, it's liquid in cash for the next year. Like, that's already just moved over and gone. Not touching it all, dude. That's there same.

[B]

I already bookmarked it. I was like, all right, cool. I don't have to think about it. This isn't coming out of my Cash reserves, like it's like a whole separate thing. That's crazy. One last thing on this and we'll move into the payment roll ups because like then I really want to geek out. I was told when I first started that and again, I'm a guy that was in a very affordable apartment. To living in the basement of my own house hacks for four years. To getting a nice apartment in Austin, Texas. To getting a very nice apartment in Austin, Texas. To where I've got a beautiful view of the river and everything to now I'm going to get like the nicest apartment in Austin, Texas. A friend of mine told me when you make these leaps with where you live, you, your mindset just 10x is 100x's. You think bigger, you act bigger, like you make bigger plays. And I didn't think that he was true or that was accurate, but I can say from my personal experience it has been, I'm curious what your experience has been.

[A]

So yeah, you're spot on too. And also matters like what you value. So I've had this conversation like a very good friend of mine too, who's done very, very well. Younger than me actually too. And you kind of talk about what are things that are worth spending money on. And for me the home was always one of them. Because if you look at it, you're going to go be able to host people. You can go, you know, do certain things. The house too, like, and that is dramatically better for quality of life. Like if you map out all the areas of life that are actually worth spending on. For me, like, that's a big one of those things because you can go actually, you know, hosts, you have a chef comes to the house, you can have events at your house. Like you can do all things that just make your quality of life better. I'm also home, dude. Like I work home full time. So like I'm home 20 hours a day most days, right? So like I want to have a decent view at my office. I want to have space to have guests over, right? So like things like that, you then start associating yourself internally, okay. Like you've now made that step up. And it's also, you know, have the conversation of the carrot, of the stick. The stick of having something taken away from you feels a hell of a lot worse than getting something given to you. So you kind of look at it as like now this is yours, it's only yours, so you can go keep it, right? So you kind of think of it that way as well too.

[B]

Dude, you, why are you in my brain right now, man? You're thinking of things the exact. Why have we lived the exact same life in the exact same. In the exact same thing, Going through the exact same thing right now. Left corporate four years ago, now we're going through the exact same thing. Dude, I literally was in my journal two days ago, 48 hours ago. I said, well, if we're getting this new place, for reference, I, I'm in a condo, two bedroom condo right now.

[A]

Same.

[B]

Yeah. And, and we're going to a three bedroom, kind of like a penthouse scenario to where it's going to be like substantially bigger to where we can comfortably host like 20, 30 people there for a dinner party. And I was like, well man, if we just host people then like we can for sure do a dinner once a month with like 10 or 12 entrepreneurs that are local to the area. We could be the epicenter of everything. We can invite people over. And I was like, if we do that once per month, 10 or 12 new people, that's 120 new relationships that we're making. And so that's an ROI on investment. And maybe that's, what do the girls call it, Girl math. Maybe that's boy math for why we

[A]

should be in the place.

[B]

But dude, I had the exact same thought. So anyways, we'll stop doing karate in the garage right now and we'll build bunk beds later. So let's go move to the roll up strategy because again, another thing that you and I are doing at the exact same time, what is the roll up strategy? Because you're buying companies, namely paving companies. So walk me through the first paving company that you bought. What attracted you to the industry, what attracted you to the deal? And walk us through the roll up strategy that you got going on.

[A]

Yes, when you look at the roll up strategy, there's a few things you want to look at. So one, right? In terms of why paving, you can go acquire companies in this space between 2 1/2 and 4x that are doing between 1 and $10 million of EBITDA, even sometimes as high as 12. And what you're seeing at scale is that if you look at the ticker road, right, they're a public traded company in a paving space. Their last quarterly report, their enterprise value to their EBITDA was 21.4x. So what you're seeing is there's a massive spread between the mom and pop in this space versus the institutional type size and obviously different like breakpoints between that based on size. Scale how much you've integrated the companies, etc. So also it's also hard to break into. Like you have the whole H Vac type of community right now too, where you and I, if we said, hey, we want to go start H Vac company with a credit card, we can go ship it pretty quickly, right? Entry. So what we found in the paving space is that you look at one of those pavers, right? The whole setup we have going, her crew is like 1.2 to $1.8 million just in equipment. There's a better entry right there. I think other piece of it you have is most the owners in this space are call it late 50s to mid-60s. And they have kids that are our age and in turn they grew up likely to finish high school and they built a business that's now doing a few million dollars a year of profit. So they've lived really well their last decades of life. Their kids our age were like, I'm not going to be a paver, I'm going to go to college, I'm going to be a doctor, be a lawyer, and I'm not going to be in this blue collar space.

[B]

So they're going to be an influencer. YouTuber. Yeah, there you go.

[A]

There you go. And in turn they're like, I'm not taking dad's company. So what happens is that dad built this great company, he wants to go pass it to his kids, his kids don't want the company. Dad's now saying, you know what, I like this business, I like this space. I'm just fucking exhausted. I want to be able to go transition to either a step down type role where I don't have to go do payroll, I have to go do gna, I don't have to go order equipment, I don't have to go deal with bonding, I can just go manage my crew who are my best friends. I've been working them the last two decades and we've really found a great niche where we can go help them transition from being super active to getting a payday, take some trips off the table and then eventually, if they're the right people for it, stay on, who help build the company in the right way and really eliminate all these things in their space. So we love this space for kind of those reasons and we think it's a huge opportunity when looking at the big value increase you get from what you can buy them for versus what they're worth in the future as well too. All these big groups have massive capital in this space and they're paying you a premium to consolidate them for them.

[B]

So how do you. How did you get this first one across your desk? So you're a real estate guy and how'd you go from that to this to where you're now like, oh, paving company. That makes sense. We should buy a bunch of those.

[A]

So my partner Chris is more of like the operational CFO behind all this. I mean, he spent like probably nine, 10 months going into depth on every industry. We talked through each one of them. Everything from ed tech to all the typical home service companies, everything. What we found was that paving had, was early. Right. Like we're now seeing way more development in there. What you don't want to have happen, right? Think of like real estate in 2022 is that you don't want to be buying when the, the chairs start being pulled back from you. Right. In terms of musical chairs.

[B]

So, yeah, you want to surfboard in front of the wave, correct?

[A]

Yeah, yeah. So you want to be going to a place that is going to have tailwinds. Right. So our thesis there was that we think that paving is going to keep getting bigger and bigger. Right. The roads are poor quality. You have autonomous driving cars need certain line stripes. You have all these insurance claims. You need to have parking lots pristine. That we, what we see is that we think multiples not only maintained, they'll actually go up, especially with AI. So what you're seeing is that companies that their revenue's not defensible. You're paying multiple on a company because you're confident, right? Say you sold me a company for 5x saying that I'm confident I can get 5 years of good revenue at this company from you. So what we think is that payment will become more and more defensible. Therefore multiples will go up and up and up. Longer term, you're not going to have robots paving roads. May have the robots assisting roads. Sure. You're not going to have robots actually fully doing that kind of work with liability. So what you're seeing is that we think multiples there will go up in a substantial way. The first ones, like we're looking like really small, messy companies like your, our quality as a buyer when we first started, it was dramatically worse than our quality as a buyer today. So in terms of looking at like worse quality.

[B]

Go on. Yeah.

[A]

Smaller companies, more messy.

[B]

What range were you looking at?

[A]

So our first company we bought was. They're actually negative that year. Right. Like they were going to go sell, they fell out of contract to Go sell, have been a great valuation, big earn out all those things. But that was probably would have been like a million and changing be the company we think we can get it to now. That was in September of 24. We think this year we can probably get it to worst case 3 million. Best case 7 or 8 million of EBITDA this year. So we turned around massively. But that was a freaking time suck. Like it's. Yes, we grew it a lot percentage wise, but time level of effort and cash to go grow it that way was not a great return overall versus what we can do today versus buying better quality companies.

[B]

Okay, so what's the revenue? What's the. So you don't even look at revenue range, you just look at EBITDA range. So what's the EBITDA range that you look at today that you found to be the sweet spot? Like 2 to 5?

[A]

No, so bigger than that. So like we have one of our contract for four. We have a few in the pipeline for like nine to 12 as well. Yeah, we honestly want to go bigger and bigger and looking at sizing bigger without kind of breaking that multiple type range. Like we're still buying companies in that range at 3 to 4x.

[B]

Okay, you're still buying in 3 to 4x at like 4 million plus EBITDA. Yeah, that's banana land.

[A]

And also you get big levels of lift too. Like for example, there's a company we're talking to right now and you start getting levels of synergy across the board. So we have a company that does, you know, highway maintenance in Texas. Right. In College Station. And we do a lot there, a lot of volume and they're quickly growing. We also sub out now $10 million of concrete work in that company to a third party at no margin. Right. We're now acquiring company that has a concrete plan. Right. So in turn that brings in $2 million of profit day one into that company. So you're actually net EBITDA when looking at first year acquisition price goes from like a 3.5 to more of like a high two when factoring that one piece that, that we bring in day one.

[B]

So then you can do equity, multiple arbitrage.

[A]

Yeah, so I was saying more so like when you look at the company does like $3.8 million EBITDA give or take. We're still waiting for final quality earnings to come back, but we think it'll likely do first year, probably 6 million instead just be from the work we can go bring from one company to the other.

[B]

Okay, so like vertically integrating. Yeah.

[A]

So you start getting like these lifts from the companies you have in terms of work, in terms of sending cruise from places, borrowing equipment, like all these things that just, it becomes more of a pull play versus like pushing things forward.

[B]

I love it. So then how many have we successfully transacted on so far? And then what's the current EBITDA of the portfolio?

[A]

So we have three companies in our portfolio. Today we're going through a merger with the fourth. And the merger is strategic in terms of who we're bringing in from that team. Right. Like myself and Chris are 31, 32 and we're new to paving this space. There's a lot of things in this industry like we need to go fix this. We need some support in terms of actually fixing those things. Right. So in term we brought in are bringing in a new partner. Right. Where he's 50ish and grew up on paper by 10 years old. Right. So in terms of knowing the contacts, the vendors, the partners there, he can go speak to the crew in a certain way that they, you know, respect. They respect him. He's also someone like he's them who then made it. Right. So like there's a huge level of understanding there. He can go. The owners aligned to him really well. He can go see things we can't see. So it's been a really key partnership and for him he needed a actual go to market acquisition arm for growth and a legit CFO and my partner Chris. So like all of that just come together really well. We think this portfolio, you know, kind of Forward looking for 20, 27. We think the four companies we have in line could probably be about 30 of EBITDA. 35.

[B]

Beautiful. Damn, dude, you're freaking crushing it. So how are you competing right now against private equity? Because private equity is playing in that space.

[A]

Yeah, I mean, so product's having a tough time buying paving companies right now.

[B]

Okay, how come? Because the Pavers don't like them from a moral perspective.

[A]

Yeah, I mean so you look at it like, dude, think about it. Your name's been on the door of the company for the last 30 years. You know, you want to go sell it to, you know, Johnny and Chad at the PE companies and go fire all your people and go just cut costs into oblivion like this rattle. Yeah, we competed really well with groups like that. Actually there's a few bigger groups targeting a lot of companies in this space now that have not had a lot of success buying things. And we've competed well Also it's helpful too. Like it's a small industry, right? And if charting, you look at it right, we acquired a company in Texas and there were three owners. And those three owners are, call it late 50s, 60 years old. And their friends are people who are late 50s and their 60s who are own paving companies, right? And you say, hey, this was good transaction, treat the employees well, gave us great jobs, the things we enjoy doing. We want to stay up the next five, 10 years. That's really compelling that they can go tell their friends, you know what, you guys should go talk to them about selling. So in turn it becomes more of a, you get to go, you know, on the inroads with certain people. Banks don't you perform. Brokers underperform, right? Like it becomes an easier transaction to go get things done. I just do things the right way, right? Like don't go retrade, do what you're saying, go do, communicate well, right? Like just deliver on what it is that you say you're going to do as long as being somewhat reasonable. Like, like you, you, you go perform.

[B]

There's a lot of people listening to this right now that have made it to this point of the episode where they're like, man, I'm looking at 300,000 in, in EBITDA.

[A]

Go way bigger. Go way bigger.

[B]

Go way bigger. Yeah. So how do you, how do you structure that? So as a first time buyer in particular, right? So I mean you can say that because you've got a little bit more of experience with corporate. So somebody that is like really getting their buyer profile together. Because I mean obviously we run Action Academy where we have like 600 people doing this and some of them like they aren't sophisticated enough to go play that game and to have those conversations versus a sub million EBITDA business. But some of them come in day one and I'm like, girl, like you can go buy you something for 3 to 5 million EBITDA right now, today. And so like what are the skill sets and like what, what is kind of like the boxes to check to, to be able to go and confidently take down one at that level and compete. I think as an operator, as the person that's, that's leading and guiding the

[A]

acquisition, I think it's easier to go do, right. If you can go pull the pieces together, right. Actually get the deal done. I think it's easier to manage post acquisition.

[B]

Oh, it's 1000% easier to manage post acquisition. I'm talking about the brokers and the lenders and everyone and the sellers taking you seriously. Because everybody comes in and they're like, oh yeah, I want to do this. They're like, okay, well, so more like

[A]

you can go partner as well accordingly. Like on mine, when I first started, even in real estate, like, you go borrow some else's track record, right? Like, if I was brand new to this space and then, you know, say, like you and I were friends and I was just first starting out and you, you've done, you know, you've bought 10 companies, say, right? And I'm going to go saying like, hey, you know, I'll, I'll give you a piece of equity in this company. You can help me, like, get this deal done. So in turn, I can go borrow your track record and credibility to the broker, to the lender, right? All those things. You can go pay a tax, right? Like, and that tax is likely a piece of equity or fees maybe to someone else to go help you become more qualified. But in turn, if I'm like, hey, I'm borrowing Brian's experience to get this done. Now I do this myself. I don't have the experience, so I paid the tax to go do it, but now I can go do it myself. But at that point too, like these bigger companies doing $3 million even a year, you have some area go wrong. Like almost every company you buy will dip when you first buy it. Like, it's, you're going to have a season of just mess.

[B]

Oh, for sure.

[A]

No matter what. Especially if it's a seasonal company too. Like we bought a company that went from, you know, doing three and a half million dollars a month of revenue to like $1 million for three months in a row because we just couldn't, you know, seasonal work. And you have just the, you know, things change now it's pumping, but you go that period of time, you don't have the cash in hand too. Like, whatever cash you can get on hand and operating cash, go add 2 or 3x to it and like, make sure you know, you're getting into. Because if you run out of cash, nothing can save you from that. Like, cash is your lifeline in the company too. So you can look at your personal Runway, your business cash Runway too is massive to give yourself time to go figure things out.

[B]

Yeah, that's, that's been something that we've been learning a lot. Like both in businesses that I've invested in and then also in a lot of Action Academy deals is the working capital requirements. Like a lot of us have misunderstimated even again, even in my personal deals. Completely misunderstimated the amount of working capital required. And then the air issues or you know, what they're lying about when you come in. It's just stuff that you just can't read. Like everyone's like, oh, I'm going to go read by, by them. Build by Walker Dibel. Love Walker. He's a buddy, he's been on this podcast. But it's like you can't go read a book. Like, you need to like actually like do this stuff totally for you to, for you to know this stuff. Like, it's just like, no, you can't read a book that's going to tell you like chapter 11. You're going to need way more working capital. It's like, what does that mean?

[A]

Like you're paying off. You just don't see stuff like that. Or like, oh, the owner was going to sell the company to his nephew who works there, and then he also was going to go sell it to Foreman who works there. And it's estimated they all thought their company's being gifted to them. Like, things like you just have no clue is going to happen. So what I'd say too is like, you want to have as much Runway as humanly possible. And there's a tax of doing everything right. You learn lessons each thing, each time you do something. But there's tax of like paying for partnership or education, whatever it may be. There's always a tax of some kind of doing something differently than you would have done it now, knowing what you know. So 100% tax once versus paying it many, many times.

[B]

Correct. And the better that you can partner with somebody with experience. You could pay the super tax through them. They've already paid it 20 years ago and then so it made against, but you're still going to pay something. And I want to, I want to validate what you just said too, because that's exactly what I'm doing on our hotel deal. So I've never done a ground up development hotel. And so I joined a GP. I've got like 10% of the GP that I'm on for our hotel that we're doing that we raised capital for. It's a $14 million project. And I'm like, man, okay, I want to work alongside really seasoned operators that know what the heck they're doing. So I can really see the intricate details of like, what goes on behind the scenes. Like, how are we negotiating debt? How are we doing cpace? We're doing a Lot of cpace. We're doing a lot of agriculture loans and lines of credit. We're doing, like, a lot of permitting stuff. Like, I'm learning all of this so much on the gp, and it's just like, you're paying the tax of, like, okay, yeah, I don't have, like, a huge percentage of the gp, but. And that's okay. I'm learning so much stuff on the job. That's what. When I go to do the next hotel, I could take a significantly larger chunk because I know what I'm doing. And people are just like. People are so. They want the whole pie. Like, they want to eat the whole pie at the first. The first time they see the pie. I'm like, dude, get a slice. Like, see if you like apple. You know what I mean?

[A]

Part of it, too, is figuring out, like, what it is that you want to go do long, long term. Because if you look at all the people who have, like, made, you know, meaningful, meaningful amounts of money, like the I'm a big dork with the founders podcast.

[B]

Right?

[A]

Like, you look like a James Dyson.

[B]

Yeah.

[A]

Takes home a billion dollars plus a year in distributions from his company. You don't build that by doing that in three years, five years, 10 years. People also don't realize, like, how expensive growth is. Like, for example, in our companies, we have a lot of, you know, customers that are, say, the, you know, Fortune 100 companies, and they pay us every time, 90 days after we do the work. So you have to go. Your crew, materials, your operating costs, all those things, they still get paid every week or before the job's even done. So you have a huge lag in cash. And we don't realize that if you want to go grow, growing is very, very expensive to go do it the right way, too. So, like, operating cash is just such a big piece of it. Yeah, I mean, you're right of, like, figure out what it is you want to go do. Try a lot of things, take less than you deserve for it, but go learn, and then you can figure out, narrow it down to what you want to do, and you may realize, like, hey, I love this area, but if I make a lot of money in this area, I can go allocate money to these 10 areas. Some people who are better at than I am and still get exposed to it, I still focus my one key area, make as much cash as I possibly can, and then give it to these 10 people instead.

[B]

Love it. So closing question is, how are you financing these? How are you structuring the debt and equity on these.

[A]

Yeah. So right now going forward on the equity side, we're actually raising all our money as prep equity going forward. So fixed coupon right. In terms of prep called 8%. And we're actually programmatically buy investors out every two years. So we're paying right now on bigger checks. A 1.8 buyout. So $1 million in, we'll buy out a $1.8 million in two years right through debt, smaller checks, 1.5 and then every tranche of capital we do, so we can call it every 15, $20 million that we raised for it will make that time horizon longer. So then It'll go from 2 years to 2.5 years. So our cost of capital goes down, but our credit profile, the company goes up. So in turn what allows us to do is that we'll own this ourself as management team. But investors get a great return for a short period of time. They get liquidity option to go roll future equity as well going forward. On the debt side, we've worked with at first small private credit funds, now like mid sized banks and we're working actually now on getting a delay draw term loan. So the best case scenario for us when we go land this is that we've got probably $17 million of senior debt in the company. When I find a bank, they'll go take that out. They'll go programmatically fund our senior debt going forward and they'll go give us draws in the future. So say you're approved at 60 million bucks now. We'll then go buy out $41 investors in the next two years for you if you hit certain thresholds on EBITDA. So it allows us to go draw future capital against it as a multiple of ebitda. So your quality of bank goes up every time too. From like small credit funds in the mid teens to institutional banks in the 6 to 7% range in the future, hopefully.

[B]

Dude, that's, that's freaking bananas. So you're doing, so you're doing like this debt, this equity payout. So you're doing a 1.8 payout. That's freaking awesome. So have you been. So I guess like how do you view yourself primarily? Do you view yourself primarily as like a capital company or like a mergers and acquisitions company? Because it sounds like your, your, your day job, like what you do as a day to day is like capital guy where you're able to come in like silver mint, like with your capital, attract investors, build that pool of Capital, and then you and your operators go deploy it. Like, what. What do you kind of view your role in the day to day as?

[A]

So my role, I work on connecting what goes on the operational company to what goes on in the actual real world of investors. Right. So I kind of play in that direct middle ground. So internally, I work a lot on our strategy, our legal, our marketing. Right. All those things. And then externally, basically the face of this in terms of all interactions with both banks, with investors. Right between that. So, yeah, I say kind of a combination of type of roles as well. But we have more people internally who are more operationally focused on myself.

[B]

No. Well, that checks out.

[A]

Yeah.

[B]

So, man, I've got so many additional questions to ask you, and I'll save them for another episode because we're. We're at time now, we're at the top of the hour, so let's do a full episode on just like debt structures and offer structures and how you're structuring earnouts, buyouts, all this different stuff, man. Like, this is so interesting. Like, I love all of this, dude. And you're. You said you're 31 too?

[A]

31, yeah.

[B]

Yeah, dude.

[A]

Yeah.

[B]

You're freaking doing everything that I'm doing, but better. I love it, dude. It's so interesting to me, kind of in closing, where it's just like, Pete, there's two different types of people. There's the person one where it's like, you see somebody doing the same stuff that you're doing, but more sophisticated, and they're like, oh, what do they do? I'm like, brother, I love meeting you guys. I'm like, dude, your body and me. I love this shit. Tell me more, man. This is sick.

[A]

Because there's just other.

[B]

Right.

[A]

The same way, too. Like, dude, right now I'm working a ton on social Stitch. I've been following your stuff of you has been on Instagram recently, right. And there's different people in your life that you can go look to for different types of things, right?

[B]

For sure.

[A]

People. So, for example, in their 10 areas of life, they may be killing you in three or four. They're like, okay, I can learn from that person and vice versa, too. So I think it's. People look at things of, like, doing better too.

[B]

Binary.

[A]

Yeah, yeah, There's. There's enough to go around. You can go kind of take things from, like, each person too.

[B]

A thousand percent.

[A]

Yeah.

[B]

Everybody has their own unique zone of genius and value to add.

[A]

Yeah.

[B]

Thousand percent, man. So if people. Speaking of adding value if people want to go follow you, they want to learn more about you or they want to invest with you, where can they go?

[A]

Yeah, so SilvermanCapital Co or I'm most active on LinkedIn.

[B]

Most active on LinkedIn, dude. That's another thing that we need to get going on is LinkedIn. It's a huge sleeper for us. That's freaking awesome, man. And then so for everybody listening, everybody watching, we'll include that in the show description. You can go click the links and follow Sam. We'll also include his LinkedIn as well. Anything, any piece of closing advice for the listeners or watchers.

[A]

I think for all people listening to show too, people want to go leave their job and I'd say, you know, figure out what you want to do first and make as much money as you possibly can. And that when you go figure it out, you'll have way more Runway to go figure out what it is you want to go do and actually build the right way.

[B]

And you have more permission to fail. You have more swings.

[A]

Totally.

[B]

Yeah. Love it, man. So, guys, this has been Brian and Sam with the Action Academy podcast signing off.