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Afford Anything | Get Smarter With Money
Q&A: How to Spot Investment Scams Before You Lose Everything
01:15:39
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- [00:00]
Paula Pant
Joe, when you were a financial planner, did you ever have clients who got scammed in any kind of wire fraud scheme?
- [00:06]
Joe Salsihai
Man, I got very lucky. We never had that happen. We had a few people that got the phone calls, but you know what? We never. We never came close. Everybody that I worked with was lucky enough to not have that happen.
- [00:18]
Paula Pant
You know, I got a creepy phone call the other day, actually, from somebody who was like.
- [00:22]
Joe Salsihai
They were like, you're gonna say from you?
- [00:25]
Paula Pant
No, someone who called and they wanted to talk to me about my bank of America card. And I was like, I don't have a Bank of America card.
- [00:31]
Joe Salsihai
Ye.
- [00:32]
Paula Pant
Then I got super paranoid when I hung up because I was like, was that one of those AI where they call just to get the AI of your voice? But if any. I mean, if anyone wants the AI of my voice, they. I've got like a thousand hours of podcast in the public record.
- [00:46]
Joe Salsihai
Yeah. It might be a few files. This is the most creative one that I've gotten lately.
- [00:50]
Paula Pant
Yeah.
- [00:51]
Joe Salsihai
I got a docusign returned to me saying that the document's been completed. Click here.
- [00:56]
Paula Pant
Ooh.
- [00:57]
Joe Salsihai
With all the docusign verbiage and everything. And I'm like, docu sign what? I mean, it was very official looking. Yeah. So. And so countersigned the document. Click here.
- [01:08]
Paula Pant
Yikes. Man, you. You can never be too careful. Well, we're going to tackle a question today from a listener who might have had a very close call with a potential wire fraud scheme and wants to know what he can do to protect himself against future potential fraud. We're also going to hear from a listener. This is like, can you use a audio testimonial as a success story? He took my advice, and his net worth is up $3 million. I mean, cheers to him, for he's the one who did the work, but wow. So listen to this show. It can be worth a lot is what I gotta say to that. And finally, we're going to take a call from a listener who wants to know if we can put the E in entrepreneur.
- [01:54]
Joe Salsihai
All that.
- [01:55]
Paula Pant
All that in one episode. Welcome to the Afford Anything podcast, the show that knows you can afford anything. Not everything. This show covers five pillars. Financial psychology, increasing your income, investing, real estate, and entrepreneurship. It's double I Fire. I'm your host, Paula Pant. I trained in economic reporting at Columbia. Every other episode, ish, I answer questions from you, and I do so with my buddy, the former financial planner, Joe Salsihai. What's up, Joe?
- [02:20]
Joe Salsihai
I put the ish in every ish other ish episode.
- [02:25]
Paula Pant
We were just talking about that pre show. We. We like the flexibility. Right. So basically every other episode except when it's not.
- [02:33]
Joe Salsihai
She's the Paula, I'm the ish.
- [02:34]
Paula Pant
Yeah. Well, our first question today comes from Paul.
- [02:39]
Paul
Hey, guys, this is Paul from North Carolina. Sorry if you've answered this question before. I just look into diversify my investments a little bit and was looking at mobile home park fund that seems to have a good track record. I've actually listened to their podcast for a long time. The guy's name is Kevin Bupp and the fund is Sunrise Capital. And I literally, I had gotten the paperwork and went to the bank to wire them the money. When I went to the bank, the wire number they sent me didn't pull up an account and so just put up some red flags. I called the investor relations guy and he said that it was never heard of that before. People were wiring into their account that morning even. So I called financial help line and they were like, how do you know they're legit? And I was like, honestly, when they asked me that, I didn't really have an answer. Said I've listened to their podcasts. They're pretty public. They've raised three funds in the past. Obviously, that doesn't mean for sure. So I guess my question really is how do you verify that it's not like a Ponzi scheme? Take that whichever direction you want to. Thank you, Paul.
- [03:56]
Paula Pant
Thank you for the question. And I actually hear a couple of different questions embedded inside of your question, because there's the question of how do you verify the soundness of the investment itself or the investing group? But then there's also the question of how do you verify when you get wire information that it's that wire is going to go to the people that you intend it to go to? Because you mentioned that in this particular case, you gave us the name Kevin Bupp from Sunrise Capital Investors. I looked him up, and just from a cursory Google search, I mean, I see a. A robust LinkedIn profile. I see a profile on Bloomberg, I see Facebook pages, I see a website, I see the podcast books, et cetera, et cetera. I'm not familiar with this individual or with this company, but I can certainly see that there is a strong Internet presence around him. But there's also the question, when you receive wire information, is that wire information actually stemming from Sunrise Capital? Is that wire information stemming from Kevin himself, or was it intercepted? And is there some scammer who is impersonating Them who has sent you wire information. I want to talk about that first because that is particularly when you're dealing with somebody who is in the public sphere, that is a big threat, frankly. You know, it's a big concern. I know. And Joe, you can probably, I'm sure you can relate to this. I've had, without exaggeration, hundreds of fake Instagram accounts that have pretended to be me, that have DMed my followers, asking them to send money, you know, trying to sell some $5,000 or $10,000 quote unquote investing course, or quote unquote crypto course.
- [05:48]
Joe Salsihai
We've got one going on right now on Instagram for stacking Benjamins.
- [05:51]
Paula Pant
Yeah. There have been, I mean, without exaggeration, literally hundreds upon hundreds of fake Instagram profiles impersonating me, fake Facebook profiles impersonating me. It would not be, particularly when you're talking about wiring money where you don't have the same protections that you do when you're paying via credit card. The major threat is that a scammer might impersonate this person who's in the public sphere and send you wire information that doesn't lead to Sunrise Capital accounts, it leads to the scammers account.
- [06:25]
Joe Salsihai
Yeah, that's the issue is that it might not even be regardless. And we can get into Sunrise Capital in a minute. And this gentleman, Kevin Pupp that he talks about. But to your point, Paula, it can be a person in the middle who's just watching the transaction. When you wire money, that's like handing somebody cash.
- [06:44]
Paula Pant
Yeah.
- [06:45]
Joe Salsihai
And so if I'm taking 10,000, 15, 20, 25, 50,000, whatever the number is, and I'm wiring money, man, that's a dangerous, dangerous moment when you release those funds.
- [06:58]
Paula Pant
Right. A few weeks ago, we had a cybersecurity expert come on the show. His name was Dr. Eric Cole. He was the cybersecurity commissioner under President Obama. He was the guy whose job it was to give President Obama a BlackBerry. And he is now a security advisor to Bill Gates. We talked for a very long time, and in the YouTube comments on that episode, somebody said, and this moved me. They were like, wow, this is maybe one of the most valuable episodes you've ever done. So if you haven't listened to that, please, please, please go listen to that episode. We will link to it in the show notes. Our interview with Dr. Eric Cole. It was episode number 6 16, but the chief takeaway is this. Dr. Cole recommends that if you need to wire money to somebody, don't instead give them a cashier's check and do it by physically driving to the bank. Walk into a bank branch in person, get a cashier's check made, then go to the office of that person, or go to the office of an attorney or some other liaison who represents that person. And physically, in person, face to face, hand them a cashier's check. And when you do so, have them show you their ID and videotape with your smartphone, video the entire exchange. That is the number one way to transfer money. And it's not convenient, but it's way more convenient than having to deal with the fallout of accidentally wiring the wrong person. Accidentally wiring a scammer. I did this myself in December. I needed to transfer a hundred thousand dollars to someone. I was in Atlanta at the time. I physically got into a car and I drove to a bank branch and I walked into the bank and I said, I need to transfer a hundred thousand dollars. I'd like to make a cashier's check. And the banker actually told me they were like, you could just wire it. You could just go online and wire it. So even they didn't understand why I was there doing that. And I was like, nope, I want to sit down with you and I want to do this with a physical cashier's check. And so that's what we did. That's what we did that day.
- [09:18]
Joe Salsihai
The aftermath of this is horrifying. We did an episode on Stacking Benjamin's Paula back in 2017 with a mutual friend of ours, Shannon Allen, who was purchasing her first home. She was excited. It took her forever to save $50,000 and this was her personal residence. She had all these dreams to fix it up. She works with the bank. And anyone who's been through a bank closing knows this. They give you wire transaction information literally the day of the transaction, which is a whole different podcast. It drives me crazy.
- [09:55]
Paula Pant
Yeah, yeah.
- [09:56]
Joe Salsihai
She has the $50,000 minutes before she's supposed to wire this money. It turns out that there is a hacker who is watching at the title company, meaning not a part of the title company broke into remotely the title company computers and saw everything changed. One digit. One digit in the person at the title company's name. So on the surface level look like the exact same name. One additional digit said, oh, you know what? I gave you the wrong wire information. Here's the correct wire information. Please send it here. So Shannon, in a hurry, excited about this, gets this second email, goes to the bank, wires $50,000 to a hacker. And by the way, that's not the horrifying part, Paula, the horrifying part was trying to get that money back. Because again, it's like I handed you $50,000 of cash, right? All of those things, like when you pay with a credit card, all of these, the safeguards have been put in place. You forfeit all of those in a wire transfer. Now, luckily, because she was an online personality at the time that this happened, she raised a huge stink online and finally shamed the banks enough and got the FBI involved that finally, finally she had some resolution. And only because, not because there was a lot that either bank could do, Paula, but only because the hacker was dumb enough to leave the money in the same account where they had had it sent to, they were able to go back and retrieve the money and retract the transaction. Because luckily the hacker had left it there. Had the hacker move the money, which will happen in 99.9% of these transactions, they will have you send it to an account, they will immediately move the money. It's gone. But luckily the money was still there a few days later.
- [11:56]
Paula Pant
So, yes, to the greatest extent possible, avoid making wire transactions. And if you absolutely must make a wire transaction, don't ever follow instructions that are sent to you by email. Because hackers can spoof emails. Instead, you'll want to independently look up the information of the company that you are trying to send it to. Independently look up their website. And bear in mind, hackers can also spoof websites as well, but look up their and don't click a link on an email that leads you to their website. Search for their website in an incognito browser. Find the page that claims to be their website. Find a phone number on there, Call that phone number independently. Verify all of the information with the person who answers that call. Bear in mind that even as you're doing all of this, that website might be a spoof, right? So this isn't perfect, but it's certainly better than following instructions sent to you by email. Call the phone number on there, get that information, have a zoom with somebody from that entity, have them give you that information on the zoom call, have them show you their ID into the zoom camera and record that entire conversation. Those are the steps that you need to take. If in the worst case scenario this can't be a face to face transaction, but in the best case scenario, make this a face to face transaction and physically show up in person. Even if you have to board a flight to do it, physically show up in person to hand them that check. I would way rather take one day out of my schedule and pay 200, 300, $400 for a flight, then I would lose a couple hundred thousand dollars. What's $400 on an airline ticket compared to the risk of loss of a few hundred thousand? Worth it. Worth it. That is, if I have to fly there in the morning and fly back in the evening, that is one day well spent.
- [14:00]
Joe Salsihai
This to me is parallel. Is a parallel argument to people, Paula, who buy a primary residence or buy any property and they waive the inspection. I'm like, why would you wait? Why? That inspection is your insurance policy. This plane ticket to drop this off is your insurance policy that I'm not stepping into a transaction that's not going to end up well.
- [14:24]
Paula Pant
I can understand advanced investors waiving an inspection. I. I wouldn't advocate that for any retail home buyers.
- [14:31]
Joe Salsihai
Sure. And especially for your primary residence, I think.
- [14:34]
Paula Pant
Right.
- [14:35]
Joe Salsihai
Can we talk about the other half of this that Paul didn't ask about?
- [14:39]
Paula Pant
Yeah.
- [14:39]
Joe Salsihai
Let's talk about this idea of Kevin. Bup. And the mobile home park investment. I don't know a lot about it, but I think that part of what people have told us they like about this show is they like hearing about how we think about these things. So let's talk about this because you may be presented with a similar investment. On the surface of it, what I like, I like that you're investing with someone who is public enough that they continually are out in the public eye. They are willing to discuss the investing that they do with the public. I like that. So I like the fact that they're findable. Often I found people want to go into investments and, you know, you hear about this, I didn't know who the person was. All of a sudden they're wonderful, they're there, and then the second I give them the money, they're gone. It decreases the likelihood that that would happen. When I'm investing with a person who has a podcast that's been on for as long as Kevin's has been on. When it comes to investing in a mobile home park, I want to investigate what are some other opportunities that invest. Similarly, what are the upsides of investing in a mobile home park? And by the way, I'm sure Paul did this piece of work. Right. What are the upsides and what type of return in general would I get from this type of an investment? I want to compare that with just investing in a REIT or doing a good property by myself. Now, the cool thing about investing in Kevin's or someone else's investment is I save time, right? So I don't have to do all this legwork that I have to do if I buy myself. So maybe it's more applicable to compare it to a reit, because a public reit, I'm having some other ownership group that is buying on my behalf, and then I'm taking part in this diversified real estate discussion. But in this case, it's a lot less diversified. And so there's a risk that CFPs worry about that I see a lot of investors don't worry enough about. And it's the specificity risk, which is if I'm investing in one mobile home park or two or three, versus investing in 50 different properties spread across different economic regions of the United States of the world, I have this risk that maybe the economy in that area blows up, maybe something bad happens with a tenant in this particular mobile home park, and then bad things happen. I get this real risk. So what professional investors will demand is something called a risk premium. And the risk premium is, how much more return are you going to give me because I'm investing in your mobile home park than I would get if I just did this very professional open thing that I can trade daily. I mean, a reit, I can go buy a REIT fund on the open market. I can buy it, I can sell it whenever I want. Bam, I'm in. I'm out. Very professionally running. Lot of oversight from the securities and Exchange Commission and from the listing place, like if it's on the New York Stock Exchange or the nasdaq, I also have some oversight from them. I have far more safeguards when I invest that way. So what am I getting in exchange for those safeguards? And I'll tell you the reason I bring that up. And again, I don't know this investment. But this, Paul, is just a question I would ask, which is, what's the excess return that I get? And I'll tell you, the reason why a lot of these investments exist is because of the fact that amateur investors don't ask for a high enough risk premium they will accept, oh, I would get 10 in a REIT. You're going to give me 11. That's nowhere near enough. It's nowhere near, near, near enough return. So what is the return and that return, by the way? And a lot of the time, again, some smoke and mirrors. And by the way, I'm not saying this is Kevin. I'm not saying this is this investment. A lot of the time also, they will tell you what the return is to the fund. Not to you, which is why I would also identify a couple others that Kevin directly competes against. And I would do at least one more interview, maybe two, just so I can compare the strengths and weaknesses of two or three of these types of investments before I go there. Now, I'd also look it up online. You did this online, I'm sure, Paul. Paula, you mentioned looking it up online. I noticed that they're not accredited by the Better Business Bureau. Companies have to. There's a whole process of that. That's not a big deal that they're not accredited. The bigger thing is you can complain about any company with a Better Business Bureau. There's been no complaints. There is a complaint on bigger pockets, that. Which is for people that don't know a big real estate group and they have these online forums. There's a complaint that the sales people don't return calls when they're supposed to. There's also a complaint from one person that lives in one of the mobile home parks saying that Kevin and his group say that they're there for the tenants, and he says that they are not there for the tenants. Now, all that's disputable and it's not a reason why I wouldn't invest. Certainly not a reason why I wouldn't invest in either one of those cases. But they're great things to know and they're fantastic to bring up. When I'm finally talking to the Sunrise Capital, I see this person over here said that you aren't as responsive as you say that you are. What's your response to that? It's a great question. I still might invest anyway. I mean. And I'm thinking about a mutual friend of ours, Alan Corey, who said that often when it comes to getting a property manager, Paula, the property managers with the worst reviews are often the best ones. And the reason is the property manager has to discern when a tenant is being unreasonable and not being unreasonable and often the ones who are the best at dealing with unreasonable tenants. The tenant's only recourse then is to scream out into the wilderness and tell everybody that this property manager sucks. So Alan actually goes toward a lot of property managers that are, no, you're paying your rent on time. No, I'm not. I'm not taking your excuses. No, no, no. This is a business. Not. We're not friends. I'm sorry. You're renting from me. So all of this I want to know. It's a great data set before I jump in.
- [21:18]
Paula Pant
Yeah. I think the broader fundamental question is when you're doing business with anyone, how do you suss out whether or not they're a worthwhile company to interact with? Again, when you're paying by credit card, you have a certain level of protection. If I purchase gloves or sunblock or any other good or service from a company that I've never done business with, as long as I use a credit card to make that purchase, I know that within a reasonable amount of time I can, if worse comes to worse, file a credit card dispute and there will be some level of protection. I think where the added risk comes in, Paul, is when you are doing business with an entity through which there is no third party protection. And for that I would need a very, very, very high risk premium.
- [22:19]
Joe Salsihai
Yeah. This is most probably organized as what's called a syndication. And in a syndication, the only thing that you are betting on is the person who's running it.
- [22:28]
Paula Pant
Yeah.
- [22:28]
Joe Salsihai
That is your only assurance. So now we get into how long have you been doing this? We report a story on stacking Benjamin's poll of just over a year ago about someone running a syndication in Dallas. This is from the Dallas Morning News. That had huge reap failure, monster reap failure. And it turned out, Paula, people had given this gentleman all of their retirement, like every dollar of their retirement. And here's the kick. The guy wasn't crooked. He just didn't know what he was doing. He had no idea. He'd never done it before. And the question, the only thing that you have when it comes to a syndication is how long have you done this? How many transactions have you, how many years? How many transactions? What are the size of the transactions that you've done? I need to see those in writing. I need to officially see those. I can't just take your word for it because in the syndication, you're investing in a new investment, not the ones that were successful before. You're investing in something new. So even if they've done this for 15 or 20 years, it can still go bad.
- [23:35]
Paula Pant
Right.
- [23:36]
Joe Salsihai
And so investing all of your retirement money like a bunch of people did, millions and millions of dollars worth of people did. This guy was a phenomenal talker. Just a great talker. Had all these big visions. It turned out he'd never done one of these before.
- [23:50]
Paula Pant
Oh, so he wasn't crooked. He was just incompetent.
- [23:53]
Joe Salsihai
Just incompetent.
- [23:54]
Paula Pant
So you can't even get him for anything then, you know, Right. Like, right. He didn't break any of the rules.
- [24:00]
Joe Salsihai
The money's just gone. So I worry about that also. But. And that's not part of Paul's question, but I thought that since we're on this topic, when I'm investing in a syndication, which can be. Can have phenomenal endings, there are advanced investors, Paula, who invest in syndication after syndication, after syndication and do very, very well. But there is a level of risk that you're taking on. I would never invest all of my money in a single syndication.
- [24:26]
Paula Pant
Yeah, Paul, I hope that helps as you navigate the risks associated with doing due diligence on a company, any company that you find online. And again, prior to your call. I've never heard of Kevin. I've never heard of Sunrise Capital. I'm not commenting on them. I do not know either this individual or that company, and so I cannot comment on either one.
- [24:53]
Joe Salsihai
Yeah, me neither.
- [24:54]
Paula Pant
Neither of us have heard of them before, and neither of us have done the due diligence on them.
- [24:57]
Joe Salsihai
I actually have heard of Kevin, by the way. Oh, I have heard of Kevin. Bup. I've run across his show before. I've never listened to it, but I have heard of him. Paul.
- [25:05]
Paula Pant
Oh, okay. Well, I've never heard of him. I can't comment on him. But it's. This is more. These are general comments on how to assess and do due diligence on any group that you find. And beyond that, how to put some protections in place so that a hacker impersonating him doesn't get in the way. Because that's going back to the people who have impersonated me. I know people who have had entire Facebook message conversations with someone who they thought was me.
- [25:42]
Joe Salsihai
With fake Paula.
- [25:44]
Paula Pant
Yeah, it's scary. I'm aware of at least two instances. One was a friend of my parents, old family friend. You know, this is somebody who knew me when I was a child. And so she follows the Afford anything Facebook page. Some scammer reached out to her. She thought that she was messaging with me, right? And she was like, oh, she calls me Pragya. That's my Nepali name. Oh, Pragya. So good to hear from you. I've been watching a year. You're doing so well. I'm so proud of you. Blah, blah, blah, blah. And then they start pitching her and selling her on some stuff. And fortunately, it was getting weird enough that she asked my parents. She was like, you know, this is. This doesn't really sound like Pragya. Like, you know, and so we caught it. But I mean, it's just terrifying. These are people who know me who genuinely believe that they're having a conversation with me. And so I know that happened. And I also know separately another instance in which a friend of a friend thought that she was messaging with me. And then we both went to Greece. We met each other in Greece. So it was a big group of friends. And she started talking to me about this Instagram DM conversation that we quote, unquote had had.
- [26:59]
Joe Salsihai
Oh, man.
- [26:59]
Paula Pant
And I was like. I was like, what are you talking about? Came to find out that some hacker impersonating me had been DMing with her. So that's the other thing to be wary of. When people are in the public eye, they get impersonated a lot, particularly when you're in the public eye about a money related topic. So be cautious about that as well. And if you choose to go through with this investment, buy a plane ticket, meet him in person, hand him the cashier's check in person.
- [27:31]
Joe Salsihai
Well, the cool thing is if he has any other properties that are local as well, then you might be able to go on a personal tour and see some of the other properties that they own, which I think would be a great due diligence trip as well.
- [27:43]
Paula Pant
Yeah, exactly.
- [27:45]
Joe Salsihai
And if you organize this investment as a business, there may then be an opportunity also to use it as a business expense. That's something you talk to a CPA about directly.
- [27:55]
Paula Pant
Right. So thank you, Paul, for the question. Speaking of real estate ninja. Yeah, look at that. Our next call comes from someone who took a piece of advice from me and made $3 million. I gotta do a victory dance on that.
- [28:12]
Joe Salsihai
Oh, no.
- [28:13]
Paula Pant
Well, I. I can't claim the credit. He's the one who did the work. He's the one who, who added value to.
- [28:19]
Joe Salsihai
I totally claim the credit. No, no, no, no, no, no, no. Totally claim the credit, Rob. This is all Paula.
- [28:27]
Paula Pant
Well, we are going to hear from the sponsors who make the show possible. And when we return, we're gonna hear from Rob. Okay, so imagine this. It's midnight. You're on the couch. You're scrolling through a website, hitting the add to cart button. You decide to check out. And you remember that your wallet is in the other room and you don't want to get off the couch to go get it. And that's when you see that purple shop button. You know the one. It's the purple button that has all your payment and shipping information saved. It makes it super easy to check out. Well, that is shopping Shopify, and there's a reason so many businesses sell with it. And it's because Shopify makes everything easier from checkout to creating your own storefront Shopify is the commerce platform behind 10% of all e commerce in the US from household names like Mattel and Gymshark to brands that are just getting started. And Shopify gives you a leg up from day one. They have hundreds of beautiful ready to go templates. They have built in marketing and email tools to help you find and keep customers and you can tackle all of your most important tasks in one place from inventory to payments to analytics. And you know their iconic purple Shop pay button used by millions of businesses around the world. If you want to see less carts being abandoned, it's time for you to head over to Shopify. Sign up for your 1 month $1 per month trial period and start selling today at shopify.com go to shopify.com Paula shopify.com Paula.
- [30:03]
Rob
This episode brought to you by Progressive Insurance do you ever find yourself playing the budgeting game? Shifting a little money here, a little there, hoping it all works out well. With the name your price tool from Progressive you can get a better budgeter and potentially lower your insurance bill too. You tell Progressive what you want to pay for car insurance and they'll help find you options within your budget. Try it today@progressive.com progressive casualty insurance company and affiliates price and coverage match limited by state law not available in all states.
- [30:39]
Paula Pant
When it comes to growing your business, we all know that engaging with customers is crucial. But the question is how? Because most of us don't have the time, skills or money to put towards keeping up with marketing every single day, we're too busy running our companies to begin with. Well, that's where Constant Contact comes in. Constant Contact has an award winning marketing platform that makes marketing easier and more effective for small businesses like yours. And you don't need to be a marketing expert. So if you struggle with expensive, slow, unmeasurable marketing, well they've got the solution. They have an all in one platform where you can manage email, text, social media events, landing pages. Their AI content generator helps you turn a rough idea into a ready to go message. You get automated sending, real time reporting and tools that help drive sales. Pricing is transparent. They've got friendly phone support if you ever get stuck and half a million small businesses trust Constant Contact to stay top of mind. I'm super glad I found Constant Contact. I've been curious about text based marketing text based messaging for a while, particularly if it can add genuine value to the recipients. That's one thing that I'm very excited to explore with Constant contact. Get a free 30 day trial when you go to constant contact.com Try Constant Contact free for 30 days at constant contact.com constant contact.com welcome back. Our next question comes from Rob.
- [32:16]
Dan
Hi Paula and Joe. This is Rob Brown, a San Diego broker, investor and loyal listener since the 2017 J Money days. We met briefly at the Choose5 San Diego meetup. You've graciously answered two of my questions before. One on stock versus real estate allocation and another on choosing a value add deal vs buying more VTI. I bought the deal, which was your advice and my net worth is up over 3 million since then. Thank you so much. Today's question I'm an $11 million net worth with a $17.3 million real estate portfolio and 9.8 million in equity. My liquid side is 100% VTI or cash reserves for the real estate portfolio. No bonds. If more than half of my wealth is in diversified income producing real estate, do I still need a bond allocation? If so, how much and why? For someone whose career and balance sheet are already heavily tied to property and split between index funds and real estate. Thanks in advance for hopefully taking my third question and keep up the great work. I really appreciate all you do, Rob.
- [33:25]
Paula Pant
First of all, congratulations on everything that you have built. I am so thrilled for you. What an incredible success story. As to your question and Joe and I have not discussed our answer beforehand, so I am very curious to see if we are going to agree or not. My answer is very straightforward. No, you do not need a bond allocation as long as you are not currently in retirement. As long as you are not currently in the drawdown phase. And frankly, even if you are in retirement or in the drawdown phase, you still may not need a bond allocation. If you're actively earning income, you definitely don't need a bond allocation. That's my position. Joe.
- [34:07]
Joe Salsihai
I think Paul, you're completely wrong. And no, no. By the way, before I get to my answer, I have to say Rob, I follow you on social media and my favorite Instagram post of yours are the ones where you have a cigar in one hand, a glass of wine in the other. You're in your hot tub. I don't see the hot tub. I just see the glass of wine and the cigar and I see the ocean across the street from you. I'm always jealous, Rob, every time. But had I known that those cigars and glasses of wine had to do with Paula's success at helping you, I would have felt differently about the about this. But so I think there's a difference between need, need and want here. I agree with Paula that if you have enough income producing property in your portfolio that even if you needed income streams, that that gives you enough, there is zero need for a bond allocation. Also, the fact that you have seen over the last several years when the market takes dips, you've watched your own behavior to see how you act. That tells me you're comfortable with what we call the standard deviation of the portfolio or the wiggle in the portfolio. Right. And if Rob doesn't have any bonds now and is not responded negatively to that and can imagine yourself in a place where you're withdrawing income and you're still comfortable with that, I would still stick with your allocation that you have that you have currently. There is frankly the only thing that bonds are going to do is cap your upside potential. I mean that's in the big long world. What it will do as a positive measure is while it caps your upside potential, it will also make the ride smoother for people that don't like the gyration of having money all in long term assets like real estate and stocks. But for you, no, I think just a little bit that you described and a little bit that I know about you, I think you don't need a bond.
- [36:13]
Paula Pant
Oh my goodness. We agree, Joe.
- [36:16]
Joe Salsihai
Well, the place that I disagree, Rob.
- [36:17]
Paula Pant
Does not need a bond allocation.
- [36:18]
Joe Salsihai
Well, but just to be clear here, that doesn't mean everybody doesn't because I've met so many investors who have said I'm very comfortable with risk and then they're not. Right. There's a lot of know yourself here, which is why need versus want. I want to draw the line there.
- [36:37]
Paula Pant
You know what's interesting? I was thinking about, remember back in early April when the markets just tanked? Do you remember that?
- [36:47]
Joe Salsihai
Yes.
- [36:48]
Paula Pant
We started getting emails, DMs. I started getting. I'm sure you did too, Joe. Flooded with messages from people who were like, I'm so worried the sky's falling, the sky is falling, my portfolio is crashing. I look at what my portfolio balance used to be and it's not that anymore. And I'm freaking out. What's funny is that when the market recovers, I never hear the opposite. Right. No one ever messages like we don't, we don't get inundated with messages from people being like, I'm so happy. Look at the recovery. We're essentially the like negative Yelp review of the stock market. Like when the stock market is doing poorly, we get flooded with messages. And when the stock market's doing well. It's crickets. It's just total silence.
- [37:38]
Joe Salsihai
Everything's like it should be. But Paula, when it goes up like that, that's not your fault. That's their fault because they're a phenomenal investor.
- [37:46]
Paula Pant
You mean it's their win?
- [37:47]
Joe Salsihai
Well, yeah, I just like the emotional roller coaster. Like when you're high fiving yourself and you think that the world's great and you're incredibly smart as an investor. That's actually the time of greatest risk. Right. When the market is low and you are in this state of complete despair. It's generally, not always, but generally the time of greatest opportunity. During those times, I remember, I remember a mentor of mine early in my career saying, imagine if you were on an elevator every day where your two choices were soar or plummet because that's the way the media is going to describe what happens every day of your career. The stock market soared today. The stock market plummeted today. And so you just got to get used to that, that roller coaster. And clearly if you're somebody who wrote on social media that you're worried, and by the way, no judgment here because I get worried, which is why I have a more conservative allocation than I would if I didn't have those feelings. Because for me it does matter. It does matter. And I don't sleep that well at night. So I've realized that my picks, my investment picks are not as aggressive as they could be and it's purely sleep at night. And do I understand the fact that I'm holding back from some potential returns 100%? Absolutely.
- [39:11]
Paula Pant
Well, and it's a very rational fear. If you look at the history of the stock market. The history of the stock market is littered with crashes. Look at the flash crash of 1962. Look at pretty much the entire decade of the 1970s with high inflation, right? Look at the 1980s with stagflation and a bull depression. And then you had Black Monday of 1987. And then you look at the dot com crash, the big run up in the 90s followed by the dot com crash. And then there was 9, 11. And then there was the Great Recession of 2008. The history of the market is the history of lots and lots of crashes. And frankly, in the United States historically, so far we've been lucky. We haven't been Japan, but we could be.
- [40:00]
Joe Salsihai
We did have a time from the early 2000s, Paula, a long time where the S&P 500, it took it forever to get back to zero.
- [40:09]
Paula Pant
Right. Just to get back to zero the last decade. Exactly. We had a lost decade in there. And so it is absolutely rational to be worried about the stock market and to choose to invest more conservatively, if that's how you feel. And so, Rob, you and I, as real estate investors are hedging our risks in a different way. Because as buy and hold real estate investors, we have a significant portion of our portfolio that is oriented towards a predictable and reliable stream of income. That's what we've created by virtue of creating rental income, and that is our way of offsetting some of that risk. And because real estate is the income portion of our portfolio, we don't need bonds because bonds otherwise would be an income portion of a portfolio. So as real estate investors, we can have a portfolio that is all equities on the stock side, all VTI or other broad market index funds, and all rental real estate on the income side. So it's perfectly fine for anyone who has a large allocation of rental real estate holdings to not have a bond allocation. But I also do want to say, for the sake of everybody, if you choose to have a bond allocation, there's no shame in that. I support either decision. But I myself, Rob, follow the same example that you've outlined. I have no bond allocation. I think of the rental income portion of my portfolio as my income investments. And bonds are an income investment.
- [42:06]
Joe Salsihai
What's funny for me is that I'm all stock allocation as well, but I'm further down the efficient frontier than I would be if my. If I was more comfortable with a higher standard deviation. So my portfolio has more large companies, more boring companies in it because of that. But I think there's a lot of people, certainly a lot of people that were clients of mine that would still look at my allocation go. You're really aggressive. But I've backed it down specifically so that I don't blow up my own plan.
- [42:38]
Paula Pant
You know, I realized I shared in a previous episode my allocation for my Roth IRA, my 401k and my taxable brokerage. But there were two accounts that I forgot to mention. One is my HSA and. And the other is my donor advised fund. Since you brought up asset allocation, just to talk about both of those real quick, my hsa, I have invested in the Paul Merriman Forefund portfolio. So it's 50% large cap, 50% small cap, and my donor advised fund. Technically I can't reallocate it. I can only issue a recommendation because once you put money in a donor advised fund, it is technically no longer yours. But just last week I issued a recommendation for the donor advised fund to get reallocated into purely a one fund portfolio, which would be a total stock market index. So, yeah, I'm going zero bonds on all of them.
- [43:36]
Joe Salsihai
No bonds across the board?
- [43:37]
Paula Pant
Yeah, across the board. No bonds in, taxable in 401k, in Roth IRA, in HSA or in. Not even, not even in the donor advised fund, which is where withdrawals come out more frequently. Assuming they take my recommendation, I don't think it's common that they would reject a recommendation, but it would be, it'd be interesting if they did. Like, could I appeal that? Right.
- [44:05]
Joe Salsihai
Congratulations on the success, Rob.
- [44:07]
Paula Pant
Yeah. We're gonna take one final break to hear from the sponsors who support our show. And when we return, we're gonna put the E in entrepreneur.
- [44:19]
Sponsor
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- [44:57]
Paula Pant
Welcome back. Our final question today comes from Dan.
- [45:03]
Sponsor
Hello, Paul and Joe. This is Dan. And I was recently contemplating my retirement. I have a question and a brief challenge for background. I'm 56. My wife is 55. We have about $1,700,000 in retirement, $600,000 in a Roth and the balance in pre tax. We bought $450,000 in after tax. My wife and I started side hustles recently. Hers in 2022 and mine in 2024. And they cover about 20% of our living expenses. Our current plan is to continue my W2 job and plan to work another three to four years and then sometime around age 60 start living off of our savings after tax savings plus our side hustle for about five to seven years. After that we would be able to go into full retirement knowing that we've got the last double on our retirement money. We're definitely coast fine and probably pull the trigger now if we were frugal and or included Social Security in our plan. My question. I was recently presented with an opportunity for the purchase of a business in which I would work full time. I signed the NDA, reviewed the financials, talked to the bank about an SBA loan, et cetera. I'm not sure this specific purchase works out, but it got my brain working. What if I purchased a business to replace my income? I've enjoyed running my side hustle but would not scale to full time. I read the Cody Sanchez book and really enjoyed your recent podcast with Grant Sabachier and I'm in the process of getting his book. My questions are how would this fit into my five plan? I'd like to take the down payment from my retirement savings using Rule of 55 or using other sum after tax money. What are some good sources to learn about buying a business? Unlike fi, there are very few trusted resources in this area. How do I find a good advisor for this overall? What framework should I use for making this decision? Lastly, my challenge is for you and Joe to lean into the E from the double I fire. You both have started multiple businesses and I really think the community could benefit greatly from your sage wisdom and entrepreneurship. Thank you for your help.
- [47:02]
Paula Pant
Dan. Thank you for the question. I love the plan that you have. I love the mindset. I love when you talked about taking advantage of the last doubling because that is so critical. With all of that said, let's get to the heart of your question. What if you purchased this business? So a couple of things come to mind right away. One is that purchasing a business buying a business is a very different game than starting one from scratch. And one could argue that buying a business in some ways might have less risk associated with it because the business has a solid track record, it has an established brand, it has an established customer base, it has operations, it has employees. And to that extent, it has some degree of stability and some degree of predictability. By contrast, it also has all of the flaws, problems, weaknesses, pain points that have already been part of it. If you imagine. I guess the analogy that I would use would be buying an older home. An older home has a lot of character and it's got some things that need to be fixed, but it's also got some things that are really unique about it that are difficult, if not impossible to replicate. Now, with regard to how much risk this is going to carry, a lot of that is going to depend on what type of business we're talking about. If this is a doggy daycare, I have literally no idea what type of business this is. Let's just say hypothetically, this is a pet boarding and daycare facility that is in a small to mid sized city. All right, that's a relatively stable business. It's not going to get replaced by AI. AI can't board your dog even if it does have some operational pain points. Maybe it has kind of a weak tech stack, maybe it has messy sops. Those are all very, very fixable problems and you can come in and add quite a bit of value and make it run a lot better. So I would be far more inclined to go for a business like that where the brand is established, the customer base is loyal, the offering itself, you know, dog walking or dog boarding is not something that is at risk of getting usurped by big technological changes and any problems it may have are likely going to be highly fixable. By contrast, if it is a graphic design shop, I'd be a little bit more wary, particularly because we don't know where we are going to be with AI in five years.
- [50:12]
Joe Salsihai
I want to talk just big picture, Paula. This idea, Dan, of owning a business, I think can either be your best friend or your worst enemy. Just depending on how you approach is your best friend. When the business works for you, especially as close to a full retirement as you are, it's your worst enemy if you end up working for the business. And this is the problem and the trap I believe most entrepreneurs fall into is that you start off with great intentions. Your goal is to bring something to market but also have it be something that supplements your lifestyle and fits into your lifestyle. You get to use some creativity, you get some nice cash flow, you're a part of a community, you're leading others. What tragically usually ends up happening is you end up at the whims of whatever the business needs and you find yourself working around the clock to satisfy needs of fickle customers and you become a victim of your own success in a lot of ways. It's not that you're failing, it's that you're so good at things and the business is doing so well that you end up just so Joe, what I.
- [51:26]
Paula Pant
Hear you saying is the question then becomes the first question is do you want this to be a lifestyle business or do you want this to be a business business?
- [51:37]
Joe Salsihai
Yeah. Based on where Dan is in life, I'm assuming he wants it to be a source of cash flow and of purpose and not something that he's working 24 7, I could be wrong, but when he leads off with I've got this side hustle and I have this career that I work in, but I'm thinking About instead buying a business that supplements my income enough that I can get rid of the job working for somebody else. I think the intent then is to go more smoothly into this full retirement.
- [52:12]
Paula Pant
Yeah. Well, Dan, I guess that would be the first question I would ask you. Are you looking for a lifestyle business or are you looking for a business that you can really scale and grow and see what this can turn into? And there's no right or wrong answer there. Sure, it's whatever you want it to be. But if you are looking for a lifestyle business, then there are a couple of points that I would make. One is don't have any type of a business in which you yourself become the bottleneck. Katie talked about this. Money with Katie. She sold her business. She said this in the interview that we did. You can go back and listen to that episode. But she made this comment in that interview. She said, hey, word to the wise, don't put your name in the title of the business if you ever want to exit.
- [52:59]
Joe Salsihai
Right.
- [53:01]
Paula Pant
She was like, I started a business called Money with Katie. Then I sold that business because she sold it to Morning Brew. And she was like, but I could never really exit it because it's called Money with Katie. What am I going to have Money with Katie without Katie?
- [53:14]
Joe Salsihai
We got to find a Katie. Some buyer named Katie.
- [53:19]
Paula Pant
So there are certain types of businesses in which you yourself become the face of the business or for some other reason. Even if you're not necessarily a public face, there's some reason why you are the bottleneck in that business. And when that happens, you functionally own a job. You are the owner of the job that you have. And that's great. But that is not a lifestyle business. That is owning a job.
- [53:47]
Joe Salsihai
Yeah. And even if your goal is to have a job based business, I think that still becomes a problem because of the fact that the business then is tied to a single person instead of tied to a series of actions that the business needs to take.
- [54:03]
Paula Pant
Right.
- [54:03]
Joe Salsihai
So even for companies where it's not a lifestyle, where, you know, my goal is to grow it big. If I want to grow it big and I call it Money with Joe, I then have just in. In the naming. Completely to your point, Paula, I've created the bottleneck in the name.
- [54:18]
Paula Pant
Well, look at the Dave Ramsey podcast, right? Ramsey Enterprises is massive. That, that's obviously not a lifestyle business. That is a massive. I mean a behemoth of a company sitting at.
- [54:31]
Joe Salsihai
You're my vantage point where we are watching Ramsey. Not every day, but of course they work in A spot where they're very visible. And you and I being in that arena, we see what they're doing. The struggle they had over the last 15 years of broadening out the brand away from Dave Ramsey. And I would suggest that while it's going very well, finally, it still isn't. It took a massive undertaking to turn it from Dave to Dave and Company.
- [55:01]
Paula Pant
Right.
- [55:01]
Joe Salsihai
So I think you just want to always ask yourself, is the business working for me or am I working for my business? Which one's happening? I like the books that you're talking about. I love Grant's work. Read that. I like what Cody says. I also like the way that Cody coaches.
- [55:20]
Paula Pant
I love Cody.
- [55:21]
Joe Salsihai
There are a couple of other books, though, that I would say are really the first two that are spot on for me. Number one is the E Myth, because I think you'll realize that then the less you're there, the better the business is going to operate, which is the conundrum that entrepreneurs deal with all the time. You want a system oriented business, not a personality driven business, and the E Myth will teach you to do that. I think that's required, really.
- [55:49]
Paula Pant
I'm going to put an asterisk here. I want to first kind of take the step to establish the different types of businesses because there's nothing wrong with having a personality driven business. It's just that if you have a personality driven business, then you own your job. And if you want to own your job, that's great. Do it. Absolutely. You could have a great deal of joy doing that. But that is a very different type of undertaking than having a system driven business.
- [56:18]
Joe Salsihai
No, no, it's not. No, it's not. It shouldn't be. Because even if I'm doing it all by myself, what the E Myth will help you do is still compartmentalize. I need to spend time on this division of tasks, then I need to spend time on these divisions of tasks and these divisions.
- [56:35]
Paula Pant
I'm not talking about doing it all by yourself because obviously you have an entire back office of support. I'm talking about if you have a personality driven business, then you yourself are very, very tied into that business. You can't leave that business for a prolonged period of time because you're so tied in by contrast, if you have a system driven business, let's look at the doggy daycare, for example. If you can get that doggy daycare really running smoothly and you have a great team, great operations, great sops, a great manager, you can completely exit that business and it can become Very passive or very residual in a way that owning a job with a personality driven business never could be. I'm not talking about doing it, you know, a one person entity versus a multi person team that's separate. I'm talking about with a personality driven business, you must always be there. And with a doggy daycare, it could become a residual business in time.
- [57:37]
Joe Salsihai
I still think. Even so, the E. Myth is the first book I would read. It is still the first book because whether you're present or you're not present, and I'll tell you what happens if you are present, which is actually the person in the book, because the book's written like a story. The big problem that entrepreneurs have is that they are passionate about one piece of the business, but the piece that they're passionate isn't where they end up spending their time often. And if they are able to organize it so that they spend their time on the piece that they're passionate at, that's one win. But the second win is you can't just, and these are Michael Gerber's words, the author of the E. Myth, you can't just abdicate the rest because this is what people do. Paula, I do not like bookkeeping. You're going to be my bookkeeper. You're going to take that okay thing, oh, thank goodness. I don't got to deal with bookkeeping anymore. Then Paula has all kinds of questions about doing the bookkeeping. And next thing you know, Paula's like, screw this. Why am I? Why am I? I'm not getting any leadership. I'm not getting anything. I'm not getting any. I mean, people that work for you also have to have a way that they're delegated to. And I think the E. Myth really fleshes out how to get that done. So I think regardless of what type of business, if you're going to be an entrepreneur for the first time, I still think read the E. Myth first and then second. I mentioned this guy before, but I think you need to then also think about, especially where you are, Dan. You need to think about building a business to sell. And even if you have no interest in selling your business anytime soon, the frustration that I've always had is some event comes along that changes your time horizon and you have not built the business to sell and suddenly you need to sell and you can't sell and your business goes by the wayside. Not only can the business bring in cash flow, but what a lot of mom and pop, as they call them, entrepreneurs, a mistake that they make is that they don't realize the business also has value to a potential investor in the future. And if you build it right from the beginning, not only is it going to work for you instead of you working for the business more, because you built it to sell, it will then operate without you, which makes it easier to sell, and you will have more life satisfaction regardless of whether you're building it for something, for the passion that you have to do this thing, or just to create an income stream. Regardless of all that, if you think about building it to sell from the beginning, you're going to make a lot of decisions that you won't regret later. Let me give you the biggest one that I see. I see entrepreneurs that are ready to sell their business, Paula. And I'm the person evaluating their business and whether I want to buy it or not. And I come in and I go, hey, so let me see the books. That's the funny thing about the books. Show that I only make $35,000 a year. Wink, wink, wink, wink. The business really makes three times that. But I've been organizing things in a way with my accountant or without my accountant, whatever, that this business minimizes cash flow so that I now don't have to pay much in taxes. If I were organizing my business to sell, I wouldn't have done any of that. And I would also sleep better at night knowing that the IRS is not just one or two steps away from me. But Paula, the number of times I've had conversations with business owners that over the short run think, oh, hey, I could live on more tax free because I run this business.
- [61:17]
Paula Pant
So you're talking about heavily cash based businesses.
- [61:19]
Joe Salsihai
Heavily cash based businesses that are taking money out the back door. It's almost impossible to sell that business. I don't want to buy a business like that. I don't want to be involved with a business like that, even if it's cash based. I want all that above the board, on the books. I want it all systematized because the multiple that I'm going to get on selling that business is going to be way unbelievably higher. And I'm going to have more people that are going to go, okay, yeah, I want to buy this business. But if I have to figure out the IRS the day after you sell to me, let's say you sell to me and then the IRS comes knocking a week later, hey, yeah, you don't.
- [62:02]
Paula Pant
Want that on your. You don't want that headache on your hands.
- [62:04]
Joe Salsihai
Yeah, like all of this is Just it's a massive short term and obvious trap that a lot of, sadly, a lot of entrepreneurs I've run into run into that trap. And you want nothing to do with that. So for that reason, I like John Warlow's and I've mentioned him before too. John Warlow's built to sell. John, by the way, also is a good advisor in that area. Cause you talked about who's a good advisor. John Warlow's a guy I have a ton of respect for that. The reason he has the whole built to sell brand is that he coaches people on setting up businesses that are built with that end game in mind.
- [62:39]
Paula Pant
Dan, I'll tell you what I did that I have found most valuable inside of my company is I hired a fractional coo.
- [62:46]
Joe Salsihai
Oh, this is really cool.
- [62:47]
Paula Pant
Oh my goodness. One of the best things I've ever done because we were growing and we were adding these team members, but it was all very hodgepodge. There were all of these tasks and they were. There was ambiguity as to what task would fall to whom and who was responsible for what. And so I hired a fractional coo and she came in and she just cleaned everything up. She built a better organizational chart. We had an organizational chart. She built us a better one. And then she wrote very clear job descriptions for every single person on the team. And she kind of gave new job descriptions and job assignments to various people on the team based on our skills assessments. So she had us all take the Colby A assessment. She did in depth interviews with us. There's the Colby, there's the disc assessment. There are all kinds of assessments in which you find various strengths and weaknesses of different types of team members. And you can use that to make sure you put the right people in the right role. She looked at our Colby, she looked at our disc, she looked at what it is we're already doing, she looked at what it is the company needs to do. And she kind of reassigned all of our roles and gave us very, very clear job descriptions and then created a organizational chart so we all knew how to what we were doing and how that fit into the broader scope of things. And then the next thing she did was she put us on much, much more robust project management software. She helped us streamline and really tighten our tech stack. Now we're currently in the process of her guiding us in how to create these SOPs, standard operating procedures that then integrate with this far more robust project management software. You know, we have. We had a knowledge base that was like kind of floating around like a big Google Drive folder and then also a Dropbox folder. Like we, we were really running out of a, you know, this company out of a lot of like Google Drive and Dropbox. And she pulled us out of that and cleaned up our knowledge base, cleaned up our SOPs, cleaned up our project management system. Overall, hiring a fractional COO was probably one of the single best business decisions I've ever made. Dan, what I would do if I were you, if I were looking to buy a business, the first questions that I'd ask beyond can I see your books operationally are can I look at your project management system? Can I look at your SOPs? Can I see your org chart? And can I see your job descriptions? And can I see your onboarding process for new employees? Those are five things, right?
- [65:42]
Joe Salsihai
Let me tell you, Dan, I get excited if they don't have those. And the reason I get excited is because I can put those in place and I understand how valuable those things are and the current owner does not. And if they don't, I can then drive value into this business that did not exist.
- [66:04]
Paula Pant
But if they don't have those, then you need. It should be priced accordingly.
- [66:08]
Joe Salsihai
Absolutely.
- [66:08]
Paula Pant
You need a discount premium. We talked earlier about a risk premium for this. You need a discount premium if the company doesn't have those.
- [66:15]
Joe Salsihai
No, but I think, Paula, it will be discounted already. In most of the businesses that I've looked at, it's discounted already because I can build the multiples that the business is making much more quickly. Businesses are sold based on profit, right? I mean, there's different ways to buy business, but the most popular way is X times profit that that business brings in. So if the business right now is, is earning X amount of money and I can drive this system down and I can then double that or triple that because of better systems. I can take advantage of the fact that this business has intrinsic value. There's gold in those hills that the current owner does not realize. My biggest problem when I go buy a business, if I buy a business that's already optimized, that business that's already optimized is going to demand a multiple that I can't squeeze any more juice out of.
- [67:15]
Paula Pant
Well, just because it's optimized doesn't necessarily mean that the revenue reflects that. You know, I can, I can think of certain businesses that have much, much better SOPs than we do and, but their revenues are a lot lower where.
- [67:30]
Joe Salsihai
You can, you can make it a higher revenue number if you went in and Bought it? Could you make it then a higher revenue number? Like how do you, how do you justify the upside in that purchase then?
- [67:43]
Paula Pant
Yeah, so the, well there's, there's one particular business that I'm thinking about in which I know and this is much more of a one person shop, but I know the proprietor, the, the, the tracking, the UTM codes, the tagging, the segmentation, I mean the, all the back end is so just perfect. I mean it beautifully, beautifully run. But the front end, the marketing, the sales, the, the public facing element just isn't there.
- [68:27]
Joe Salsihai
There has to be, there has to be some, some place. There has to be something that you can improve fairly easily. I think when I'm, when I'm evaluating a business, there has to be something that I can improve easily that's going to make this a business that I want to buy. I do not want to, I do not want to just sign up for something that that is going to be, that is so optimized is going to be.
- [68:56]
Paula Pant
Right.
- [68:56]
Joe Salsihai
Incredibly difficult to.
- [68:58]
Paula Pant
Right. And so, so I guess so my, so then my point Joe, is that the back end can be absolutely optimized but if the front end, the public facing side isn't there, the. Then that actually might be the best possible business to buy because the operations are totally nailed in but the revenues don't reflect it because of the fact that the marketing just isn't there.
- [69:20]
Joe Salsihai
Beautiful.
- [69:20]
Paula Pant
Right. And so then that's the element that you come in and bring in.
- [69:24]
Joe Salsihai
Beautiful.
- [69:26]
Paula Pant
So in that regard, I mean personally I would rather buy a business like that where the operations are in place. But the marketing sucks because for me I'm better at the public facing side than I am at the back end side.
- [69:41]
Joe Salsihai
Well, that's what I was going to bring up next, Paula, because that reflects your individual expertise. I think Dan looks at his expertise and go and says what, what am I really good at here? And if this is what the business is not as doesn't excel at yet and I can, I can bring that to bear with my unique talent and the rest of it, the stuff that I'm not great at is already optimal. Beautiful.
- [70:05]
Paula Pant
Yeah. So then, so Dan, my question to you is are you a better operator? Are you a better marketer? Are you a better brander? Are you better at sales? Where are your strengths and how do you find a business that is solid at everything else but that lacks in the area where you're strong? Going back to my previous statement, part of the reason for me that hiring a fractional COO was Such a game changer is because operations is where I'm weak. And so functionally, I hired someone who had a specialized skill set in the area in which I'm weak. So, Dan, I think that's how I would approach this. Start with, do you want this to be a job that you own or do you want it to be a lifestyle business that can become residual in time? And either answer is fine. It's just, what do you want?
- [70:58]
Joe Salsihai
What's your intent?
- [70:59]
Paula Pant
And then, yeah, from that, how do you find a business that is strong in the areas in which you're weakest and that is weak in the areas in which you're strongest? Those are the two questions I would ask. The two broad questions I would ask to get started. I hope it's a doggy daycare. That sounds like a fun one, doesn't it? That's just sounds like a fun business to operate.
- [71:28]
Joe Salsihai
No, for you. And that's why you start with what lights you up. Because no.
- [71:36]
Paula Pant
Reptile and amphibian daycare, Aviary daycare. Could you imagine that bird boarding? Right. That'd be great. Just don't. Just make sure they don't fly away. Yeah.
- [71:54]
Joe Salsihai
I have good news and bad news. Your bird seems very happy. That's the good news. The bad news is it's up there.
- [72:06]
Paula Pant
So thank you, Dan, for that question. What a great discussion.
- [72:10]
Joe Salsihai
I love, love, love, love, love, love. Just that question. And I ask myself this all the time with stacking Benjamins, Paula, Is the business working for me or am I working for the business? And there are times when I am working for the business and that makes me think what needs to change because the business should always work with me. That's the great thing about being an entrepreneur. That's why we get into it. It's why anybody would own a business. Is so it works for you. Which goes back to your question of intent.
- [72:37]
Paula Pant
Right. Well, Joe, I think we've done it again.
- [72:41]
Joe Salsihai
Again. High five.
- [72:43]
Paula Pant
Joe. Where can people find you if they'd like more of your sage wisdom?
- [72:46]
Joe Salsihai
Sage wisdom. At the Stacky Benjamin show, every Monday, Wednesday and Friday, Mondays, we dive into a current topic like all the new tax law stuff that's come out recently. Paula. And starting to sort through those. How do we make the most of that? On Wednesday, we have phenomenal mentors like the Paula Pant diving into negotiating some of the greatest minds on Wednesdays. And then Fridays we have a nice fun roundtable discussion with a topic like are you in or out? Which. Which we're getting ready to record right now, I. I deliver to our roundtable contributors statement that is controversial. And then Paula has to tell me and Jesse, and in this case, it'll be. Don McDonald from Talking Real Money joins us. Are you in or out on that statement? And it's interesting because then we start. We start talking about how cool it is that. That we disagree on some of these things, but also how nuanced. A lot of these things that we think are black or white truly have some nuance. And I love what all three of you. We haven't even recorded yet, and I know I'm already gonna love what the three of you are gonna bring to the table on each of these statements. You've already heard some of the in or outs, and they're. Yeah, they're good ones.
- [74:07]
Paula Pant
They're great ones. So thank you, Joe, and thanks to all of you for being afforders. If you enjoyed today's episode, please do three things for first and foremost, share this with your friends, family, neighbors, colleagues, your dog walker dog, border bird, border.
- [74:22]
Joe Salsihai
Salt with Michael Gerber, who wrote the e. Myth.
- [74:25]
Paula Pant
Oh, I was going to say your reptile and amphibian border. Share it with.
- [74:31]
Joe Salsihai
Share it with your real estate customers, Rob.
- [74:33]
Paula Pant
Share it with the person on the other side of Zoom who's holding his ID up to the Zoom window to as he's telling you the wire instructions.
- [74:42]
Joe Salsihai
Share it with the gate agent on. That's letting you on the plane.
- [74:47]
Paula Pant
Right, Exactly. Because you're flying to take that cashier's check. Share it with the Uber driver when you land at your destination with the cashier's check burning a hole in your pocket.
- [74:57]
Joe Salsihai
Sell it to that person that sold you the cigar that's in your picture while you're in your hot tub, Rob. Oh, I'm speaking directly to Rob over and over. Sell it to the guy that all.
- [75:08]
Paula Pant
The people Rob should share this with.
- [75:10]
Joe Salsihai
I don't care what anybody else shares, Rob. Here's who you need to share it with. No pressure, Rob.
- [75:15]
Paula Pant
In that case, Rob, you should also share it with the guy at the wine store.
- [75:18]
Joe Salsihai
Duh.
- [75:19]
Paula Pant
And the hot tub repair person.
- [75:23]
Joe Salsihai
I don't know if that hot tub breaks down because he's in it a lot.
- [75:26]
Paula Pant
There's got to be a maintenance person, isn't there?
- [75:28]
Joe Salsihai
There's got to be.
- [75:29]
Paula Pant
If not, share it with the people. The other people who come to the ocean. Those beach people.
- [75:34]
Joe Salsihai
Yeah, yeah. The people biking by.
- [75:36]
Paula Pant
Yeah, exactly. Share it with the tenants at the mobile home park. Share it with the banker who's like, why Are you in here for a check? You can just send a wire. Cause that's literally what they told me when I walked into the bank. They. I physically went there and they tried to send me home and I was like, nope, I'm here. I'm doing this in the flesh.
- [75:54]
Joe Salsihai
And she sat down in the lobby, said, I'm not moving.
- [75:57]
Paula Pant
Yeah, more or less. It was nearly closing right before they closed for Christmas, so I think they just, like, didn't want to be there.
- [76:04]
Joe Salsihai
Yeah, please.
- [76:05]
Paula Pant
I walked in like an hour before they were about to close for Christmas.
- [76:09]
Joe Salsihai
Oh, that's great, Paula.
- [76:11]
Paula Pant
Yeah. Yeah.
- [76:12]
Joe Salsihai
You're their favorite. You're their favorite person to see already. Oh, God.
- [76:16]
Paula Pant
Well, I wanted to get it done before they shut down for the holiday.
- [76:19]
Joe Salsihai
I have a complex transaction. And you're about to go home.
- [76:22]
Paula Pant
Yeah, exactly, exactly. Share it with the customer who walks into your place of business an hour before you close for a long holiday. Share it with that person. Share it with all of those people and birds and frogs and turtles and dogs and more aviary boarding. Come on, Someone's gotta buy this business.
- [76:48]
Joe Salsihai
It could be you.
- [76:50]
Paula Pant
Because sharing it with all those people in your community, that is how you spread the message of F II R E. This is like the best. Who are the people in your neighborhood? Is what this has turned into. Said this is the Sesame street who are the people in your neighborhood of personal finance.
- [77:08]
Joe Salsihai
Oh, boy.
- [77:09]
Paula Pant
What are the other things you should do if you support the show? Make sure you hit the follow button. Leave us up to a five star review. Share a few sentences in that review about what you enjoy about the show. Subscribe to our newsletter affordanything.com Newsletter I think we've covered all the bases, haven't we?
- [77:26]
Joe Salsihai
I think so.
- [77:27]
Paula Pant
All right, well, thank you so much for tuning in. I'm Paula Pan.
- [77:30]
Joe Salsihai
I'm Joe Salsihai and we'll meet you.
- [77:33]
Paula Pant
In the next episode.