Passion Struck with John R. Miles - Episode 541 Summary
Title: Codie Sanchez on the Secret for How to Gain Financial Freedom
Release Date: December 3, 2024
Host: John R. Miles
Guest: Codie Sanchez, Entrepreneur, Founder of Contrarian Thinking, Author of Main Street Millionaire
Introduction to the Episode
In Episode 541 of Passion Struck, host John R. Miles welcomes Codie Sanchez, a trailblazer in the realm of small business investment and financial freedom. Codie brings a wealth of experience from her journey transitioning from a Wall Street investor to a passionate advocate for investing in "sweaty and boring" businesses—industries often overlooked but ripe with potential for sustainable wealth creation.
Guest Background: Codie Sanchez
Codie Sanchez is renowned for her unconventional approach to wealth-building. As the founder of Contrarian Thinking, she empowers individuals to achieve financial independence by acquiring and managing established small businesses. Her bestselling book, Main Street Millionaire, outlines strategies for creating extraordinary wealth by investing in ordinary businesses such as plumbing, cleaning, and construction.
1. The Decline of Small Business Ownership
Codie delves into the historical decline of small business ownership in the United States. She highlights a startling shift:
"We started as a nation of owners. In the 1800s, 80% of Americans owned their own business. By 2020, that number is somewhere between 6 and 10%."
— Codie Sanchez [18:21]
Key Points:
- Historical Context: The entrepreneurial spirit that once dominated America has waned significantly over the past two centuries.
- Current Statistics: Small business ownership has plummeted to below 10%, with larger corporations and private equity firms taking the forefront.
- Contributing Factors: Ease of controlling employees, favorable regulations for large entities, and the overwhelming buying power of private equity have marginalized small business owners.
2. The Hidden Potential of Small Businesses
Contrary to popular belief, small businesses offer substantial opportunities for financial growth and personal fulfillment. Codie presents compelling data:
"When you work in a small business, 60% of the time you like what you do for a living. The average corporate employee 85% of the time does not like what they do for a living."
— Codie Sanchez [13:34]
Key Points:
- Higher Job Satisfaction: Employees in small businesses report significantly higher job satisfaction compared to their corporate counterparts.
- Community Impact: Small businesses foster a sense of belonging and community, enhancing overall happiness and safety within neighborhoods.
- Stability Over Startups: Investing in established small businesses offers higher success rates and lower risks compared to the unpredictable nature of startups.
3. The Battle Between Small Street and Wall Street
Codie frames the current landscape as a silent war between Main Street (small businesses) and Wall Street (large corporations and private equity). She emphasizes the detrimental effects of private equity on local communities:
"Private equity in 2000 owned about 4% of private companies in the U.S. Flash forward to 2020, that's about 20%."
— Codie Sanchez [18:21]
Key Points:
- Private Equity's Rise: The significant increase in private equity ownership has led to the homogenization and often soul-sucking acquisition of local businesses.
- Community Erosion: Large firms prioritize profit over community values, leading to the loss of local character and customer loyalty.
- Call to Action: Codie urges individuals to reclaim ownership of small businesses to preserve community integrity and promote decentralized economic power.
4. Framework for Buying Small Businesses: R.O.C.H.
Codie introduces her comprehensive framework for intentional wealth creation through small business acquisition:
R - Research: Finding the Perfect Fit
Understanding personal passions, skills, and existing networks is crucial.
"I give you what I call the perfect fit Venn diagram... your passions, your skill set, your network."
— Codie Sanchez [36:46]
Action Steps:
- Passion Alignment: Invest in businesses that resonate with your interests and strengths.
- Skill Utilization: Leverage your unique abilities to manage and grow the business effectively.
- Network Support: Utilize your existing connections to facilitate smoother transactions and operations.
O - Opportunity: Minimizing Competition
Focusing on less saturated markets with ample opportunities.
"Most people who talk about acquisitions refer to businesses doing 100 million or more in annual revenue... overlooking the profitable small businesses."
— Codie Sanchez [38:08]
Action Steps:
- Target Undervalued Sectors: Invest in industries with high demand and low competition.
- Strategic Positioning: Identify businesses that can easily integrate into your investment portfolio.
C - Capital: Creative Financing
Exploring diverse financing methods to acquire businesses without substantial personal capital.
"You don't actually have a money problem ever... it's a knowledge problem."
— Codie Sanchez [46:06]
Action Steps:
- Seller Financing: Align with sellers to use future profits as collateral.
- Alternative Funding: Utilize lines of credit, equity from other ventures, or third-party investors.
- Creative Deal Structuring: Implement earn-outs, milestones, and other flexible payment terms.
H - Harness: Defining and Achieving Success
Setting clear goals and scaling strategies to maximize returns.
"No matter what, I've never met somebody who regretted getting educated on deal making and learning how to structure deals ever."
— Codie Sanchez [49:20]
Action Steps:
- Cash Flow Focus: Prioritize businesses that generate consistent cash flow.
- Scalable Models: Implement strategies that allow for growth and expansion.
- Continuous Learning: Stay informed on best practices and evolving market trends.
5. Mindset and Environment: Overcoming Limiting Beliefs
Codie emphasizes the importance of surrounding oneself with supportive individuals and cultivating a conducive environment for success.
"Life's hard enough as it is when you have people who are cheering you on to win. The last thing that you need is to let those who don't want you to win into your ecosystem."
— Codie Sanchez [33:47]
Key Points:
- Environmental Influence: Your surroundings significantly impact your ability to succeed. Positive environments foster growth, while negative ones hinder progress.
- Proactive Change: Moving to a supportive community can exponentially increase the chances of achieving business acquisition and financial freedom.
- Personal Responsibility: Focus on building habits and relationships that align with your goals, rather than merely adapting to your current environment.
6. Limiting Beliefs and Overcoming Them
Addressing psychological barriers that prevent individuals from pursuing financial independence through small business ownership.
"Everything is contextual...we are easily influenced by our society and by our culture and by the people surrounding us."
— Codie Sanchez [32:36]
Key Points:
- Contextual Realities: Success is often influenced by external factors beyond individual control.
- Self-Efficacy: Belief in one's ability to overcome challenges is crucial for entrepreneurial success.
- Educational Empowerment: Gaining knowledge about business acquisition can dismantle limiting beliefs and open new avenues for financial growth.
7. The Battle's Bigger Picture: Main Street vs. Wall Street
Codie articulates the broader implications of the battle between small business ownership and large corporate buyouts.
"If you get ownership, if you have skin in the game, if you own part of a house, you don't burn it down, you build it."
— Codie Sanchez [50:48]
Key Points:
- Economic Decentralization: Promoting widespread ownership can protect communities from the monopolistic tendencies of large corporations.
- Community Resilience: Empowering individuals to own and manage local businesses enhances community stability and prosperity.
- National Impact: Cody warns of potential societal downturns if small business ownership continues to decline, using Japan's current economic challenges as a cautionary example.
Key Insights & Takeaways
- Sustainable Wealth: Investing in small, established businesses offers a more reliable path to financial freedom compared to the high-risk startup ecosystem.
- Community Preservation: Owning local businesses helps maintain the unique character and economic health of communities.
- Educational Imperative: Knowledge of creative financing and business acquisition strategies is paramount for aspiring entrepreneurs.
- Mindset Matters: Cultivating the right environment and mindset can significantly enhance the likelihood of successful business ownership.
Conclusion and Next Steps
Codie Sanchez's insights provide a transformative blueprint for individuals seeking financial independence through intentional business ownership. By embracing her R.O.C.H. framework—Research, Opportunity, Capital, Harness—and fostering a supportive environment, listeners can navigate the complexities of small business acquisition and pave their way to lasting wealth and community impact.
Action Items:
- Educate Yourself: Dive into Main Street Millionaire and explore Contrarian Thinking resources.
- Evaluate Your Fit: Use the perfect fit Venn diagram to identify businesses aligned with your passions and skills.
- Explore Financing Options: Learn about creative financing to overcome capital barriers.
- Build a Support Network: Surround yourself with positive, like-minded individuals to bolster your entrepreneurial journey.
Further Resources:
- Visit codysanchez.com for more information on her book, events, and Contrarian Thinking Academy.
- Subscribe to the Contrarian Thinking newsletter for ongoing strategies and insights.
Notable Quotes
-
On Personal Accountability:
"Chris doesn't say he's going to do a thing and not do it... if you lie to yourself, then you are more likely to lie to everybody else."
— Codie Sanchez [09:59] -
On Changing Career Paths:
"If you don't like where you are today... you might not like the person that you see as future you in 10 years."
— Codie Sanchez [11:30] -
On Business Ownership vs. Startups:
"Most startups do not make money. 90% fail within the first 10 years. The few startups that are, the average entrepreneur makes anywhere from 30 to 60 thousand dollars a year."
— Codie Sanchez [13:34] -
On Creative Financing:
"It's never that you don't have money, it's that you don't have knowledge."
— Codie Sanchez [46:06] -
On the Importance of Ownership:
"If you have skin in the game, if you own part of a house, you don't burn it down, you build it."
— Codie Sanchez [50:48]
Join the Movement:
Inspired by Codie Sanchez's approach to financial freedom? Take the first step towards intentional wealth creation by exploring Main Street Millionaire and engaging with the Contrarian Thinking community. Empower yourself to make meaningful investments that not only secure your financial future but also strengthen the fabric of your local community.
This summary captures the essence and key discussions from Episode 541 of Passion Struck. For a more in-depth understanding, listen to the full episode on Passion Struck’s YouTube channel or subscribe on your preferred podcast platform.