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- [00:01]
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Welcome back to the Business of Beers podcast. Your daily dose of strategies, tools and tips to help you build an eight figure business. Today's episode is a clip from one of my YouTube lives. If you'd like to hear the whole thing, there's a link below in the description. Cheers.
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Alright then, the next big jump is this like 10 to 20 million dollars in revenue. Now what? We're at 20 plus locations, right? You've probably got three or so districts, three DMS. You've definitely got a strong back office. And at this point one of your main functions or really things you're thinking about is I'm going to say capital. Fancy way, but money, like it's really, you've got a lot of money coming in, right? Hopefully at this point you've got pretty strong margins. I mean you're probably gonna be making a million dollars a year or more. I mean you should be able to make 10% at minimum in a lot of these businesses. So you know, you're kind of in this, this range and you have a lot of big decisions to make, right? As the owner of, like how are you gonna allocate capital back into the business? Are you gonna continue to build new stores? Are you going to reinvest in the stores you have? Are you going to start trying to buy real estate? Are you going to possibly look to sell and get into something completely different? This is the phase that I think the money gets way more serious and the decision gets way more impactful. And for you as the owner, this is really what you're going to start to think about and you're going to think about and change the way you view the business as a job to an investment vehicle. So think about it like this. Like if today you said, hey, I got, you know, $100,000 to like invest and you decided to put that into, you know, the stock stocks. Like you would get a 10% return, right? So you maybe would make $10,000 a year, like cash flow, right? At a certain point, you know, you put it in the stock market because you believe like it's, you know, passive, it's just going to grow without you. Like it doesn't have anything to do when you're small and maybe you're doing less than a million dollars of revenue to put $100,000 back in your business. It you have a job, right? Your business is a job at that point. And so it's like, it feels really risky for you to go ahead and put a bunch of money back into the business with an unclear path of how you're going to get it out. And so you're kind of afraid to put money back into the business. And it feels like, not like an investment at all, but it really feels like an expense and something that you're not sure. But once the business gets to this higher level, you're in this 10 to 20 million plus per year. You've got very good systems, you've got great people. You couldn't to get to this point without really great people in your organization. And you've clearly betted on yourself enough times to get to this point that you know what to do and you're gonna be probably okay, right? And so now like you have the ability, or for me at least, this is like the way I see it that I can put, I don't know, I just put $200,000 of cash to open up a new store, right. Does include the real estate. It was, it was a vacant building that we were able to go and like renovate and do all these things. You know, I expect that store to produce 150 to $200,000 a year return, right? And so from a math perspective, right, that gets me like a 75 to 100% return. So like when I think about like investing money, I used to think I'm going to pull it out, put in the stock market, I'll buy real estate, I'll get like a, you know, 9% return and 10% return or whatever it is. But really if, if you're, if you can get your business to the point of having this confidence that you have a money machine, right, that you can put like $200,000 into a new location. And even if you, even if you made only a hundred, like $100,000 back that year, you just got a 50% return on your money, right? Let alone if you put, if you put 200, $200,000 in, you can get 200k back and you're 100% return. So your entire mindset and everything changes when you can truly feel that your business becomes an investment vehicle that you control. Like every day you wake up and you decide how this thing's going to be driven and what investments you're going to make. I've made the mistake of investing into too many other people's deals along the way. This is something, this is like one of the biggest mistakes I've made. And like, honestly, I've lost more money doing this than like anytime I put money in my own business, I've lost more money putting it into other People's businesses. Like, I mean, I don't know if I want to go down a tangent, but, like, you know, I have $250,000 in a real estate development deal right now in Florida that looks like it went to zero and it's in foreclosure and whatever. Lawyers are, like, digging into it. We have another deal where I had more money than that, that the guy committed. It was a giant Ponzi scheme, and it was somebody I knew and thought I trusted and whatever. Totally gone. He's, like, in jail right now. And, like, he was, like, $30 million that he had basically wiped away from people. And so, like, all the biggest mistakes that I've made have been putting money into other people's deals versus, I think of, man, if I took that money and I put it into buying more stores, even if I had to, quote, overpay for a multiple, like a, it wouldn't have been lost. I would have a store that would have been, like, producing some sort of money, and it has some sort of terminal value to it, or at least it should, right? At some point. So I would just. I mean, I talk to owners all the time, too, and they're talking to me about putting money in other things. And it's like, instead, I'm like, don't do that. Don't do that. Put it back in your business. Figure out what you need to do to make it. So it feels like this thing is a money machine. Otherwise, like, I don't know, the richest people in the world. This is how they do it. I mean, I know guys worth 200 million bucks, like, net worth, private jets, all this stuff. Like, I know them, like, personally. They followed this exact plan. It was reinvesting back into their own business, betting on themselves day after day after day. And that sounds easy. It sounds easy for me to say that. And you may think right now that sounds, like, great, yeah, of course I could do that. But it's like those opportunities, when they come to you, aren't shiny, right? They're turds. Like, there's stores that are losing money. There are a group of stores that are making $0 of profit. Five stores that you could buy for, like, pennies on the dollar, but they are all losing money. They have no team in place. They have no systems in place, right? And it is going to cost you. Maybe. Maybe it's whatever. Maybe it's $500,000 to get these things going and you don't have, like, they're not profitable. Like, I bought stores like this, right? This is like, many of the stores that I bought of the 36 that I own were in very similar conditions to this, where they were turds that we had to polish. Now they're not turds anymore. But that was the idea, though. It's like they were unprofitable, losing money. Stores that required tons and tons of money to be put back into the stores to get them up to the standard they had to be. And so that's really the challenge is these deals that you get aren't great. They aren't shiny or they feel like a great deal, but they're gonna have a lot of work associated with them. And that's when it comes back to your systems. So, like, you as the owner, have to have strong systems. You have to have the ability to be able to go in there and, like, turn these things around. Otherwise you aren't gonna trust yourself and you're not gonna do the deal even. I think about something myself. Years ago, it was like. Let me think. It was 20. I wanna say it was 2017. It was like a few years. Maybe it was 2018. It was a few years after I kind of like got in and bought my first store. I had an opportunity to. To reopen five closed shops in our market. And I did everything for them. I found them. We got the leases, we got the franchisor's approval, we got everything teed up ready to go. And at the end of the day, I backed out of it. And I was like, I got too scared that we just couldn't make money there. They were all opening for zero. It required a ton of money out of cash. It would have been pretty much all the money I had at that point. And then all that and plus debt. So anyway, I didn't do it then. Another franchisee in the market because it was all teed up. He basically did it and took it. And those stores are crushing it right now. He's doing a great job. I missed out on that. And those stores are probably producing $8 million or more of revenue for him today. And profitable stores and doing well anyway. I think back to that of, like, that's the kind of deal that I passed on. And maybe I wasn't ready back then. Maybe they would have wrecked me. Maybe, you know, maybe everything happens for a reason, right? But I think about that all the time of, like, if I just had pulled that trigger, like, I don't know, I wouldn't further along. So just think through that as you go, right? Think through this. Like, capital allocations and your buy box. And what would it. What would it have to look like?