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The Foundr Podcast with Nathan Chan
543: How She Made $50M Buying Boring Businesses | Codie Sanchez [VIDEO]
00:59:04
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- [00:00]
A
Being an owner sucks. Not being an owner is worse. We are very quickly losing our ownership. It's a quiet war between the few who own everything and the many who don't even realize it. Startups have a 90% failure rate over any 10 year rolling period. Small businesses you buy have a 25% failure rate at the height and a 5% failure rate at the low. And so that just made me realize, huh, I'm just going to go where the odds are better. I don't have to buy the shitty house and fix it up. I don't have to buy the nicest house. I kind of want average. There are businesses that were two weeks out of cash and $25 million in assets and millions of dollars in liabilities and we had four weeks to turn them around and that was miserable. We've got to push back on feeling like we have to get bigger and bigger and bigger and that the few of us have to own it all. Why can't we be happy with like our little corner coffee shop? Hear the stories, learn the proven methods and accelerate your growth and future through through entrepreneurship. Welcome to the Founder podcast with Nathan Chan.
- [01:09]
B
You build this incredible community and movement with contrarian thinking and really this idea that you don't have to start a business. You can buy a business, in particular a boring traditional business, usually from a baby boomer, and you can achieve financial freedom and all the other things that you know. We talk to a lot of successful founders, usually that have created a brand from scratch or create a product from scratch. So first things first. Welcome to the show. Super excited to speak with you. But how did you get started in this space?
- [01:49]
A
Well, thanks for having me, I appreciate it. I, you know, back when we first met years ago, I think I was still working inside of a private equity firm. I would have had to been if it was only six, if it was six years ago. So I kind of got started in the fact that I worked in finance forever. I had a corporate job for a long time. I was kind of too much of a wuss to ever leave it. And so the only out that I saw was doing what I did in my 9 to 5, but by myself, kind of privately, quite quietly, meaning buying small businesses on the side. And I did that for years before I left and had the guts and enough money saved up to actually go and buy my own business. But I don't know if I ever told you one of the reasons why I even got into finance in the first place was that I was a journalist before I did Anything with money. And. Yeah. So I lived along the US Mexico border for my senior year of college, my graduate thesis, and I wrote about human trafficking and drug smuggling and what happens at border crises. And I lived in the time, at the time, back and forth from between a couple different cities. One was called Agua Prieta, one was called Juarez, and Juarez is called La Ciudad de Muerte, the City of death. And at that time, this would have been like 2008, 2007 period. They had about 10,000 murders that happened in any two or three year period in Juarez. It was a city just rife with violence. And it was very normal back then to see cartels fighting. The Sinaloan and the Sonoran cartels were fighting between the two of them. And so I saw, you know, bodies hanging from overpasses. You know, I saw personal violence for the first time ever, up close and personal. And I. And I felt what it felt like to be. You know, they say the quote about war is that war is long periods of boredom punctuated by moments of terror. And border towns during this time period were a lot like that too. Juarez was like that. And so it had a flood of people that left the city for that reason. But I was a young journalist, so I thought it was. I thought it was fascinating and I loved the adrenaline of it and the story chasing. But the thing that got me out of journalism was my last name is Sanchez, I'm Latina. And I was covering at one period this thing called Las Desaparecidas that disappeared. And it was basically these women who came up from southern parts of Mexico and Latin America to work in the maquiladores along the border. Maquiladores are like worker factories, like factories where you. You make U.S. goods along the U.S. mexico border. And they would come up and they'd get bussed every day from kind of these little shanty towns, these very poor areas, into the maquiladores. And these women were often targeted. And I remember like so vividly that you would see all over the city these little paper posters put up with women's faces on them and their names, and these would be the missing women. And there was like one day in particular where for some reason it like kind of clicked. And my last name was Sanchez, this young woman's last name was Sanchez. And it was like, you know, all of these women were ages, like 15 to 35, long brown hair, you know, cute, young, young women. And I remember thinking in that moment, whoa, like one, this is kind of dangerous. Two, two. What is the difference between me and her, like, why, if I die, if I would have died then and somebody would have killed me, like, it would have been on the news, people would have looked into it, they would have gone after it. And yet all of these women were just. Nobody cared. Hundreds of women murdered there every year. And the real difference wasn't that I was American, she was Mexicans, it was just socioeconomics. It was that I had more money, my family had more money, even though I didn't grow up rich at all. And so we could assert our will on the world. And when you don't have money, you can't assert your will on the world. And that's what originally drove me to finance, is being like, I'm never gonna be on that poster. And I wanna figure out why some people can live quiet lives of misery and why other people can live lives of excess. And I think the only difference between the two is money. And so everything that I do today kind of stems from this idea of, yes, I want you to be rich and buy a boring business and live a huge drive a Lambo and do all the things you want to do, but I would rather that you get to assert your freedom than somebody else do it upon you. And I think money and freedom are sort of synonymous.
- [06:48]
B
What a crazy story. So tell me about the first. Like you said, you said you got into private equity and you said you bought and sold businesses in your 9 to 5. And then, you know, you, you started buying them for yourself. What was your first business? Was it a laundromat?
- [07:05]
A
Yeah, well, the, the very first business was actually a, a cross border consulting business. So it would have been a, a professional services business. The problem is that business didn't do that well. So that was not my best transaction. And, and it was. I basically bought a job. It's okay, we made a little bit of money, but I didn't think that was repeatable. And then I had a second business, which was Threads Refined. And that was a fashion styling marketplace. Maybe like some of your business was kind of sexy. I was like, oh, I hate getting dressed. What if somebody could dress me and I could do it on demand online and I'd just pay this price. And I think we've all like imagined, you know, Judy Jetson, right, stepping into that little egg and she walks out and her hair's done and her clothes are picked. And so that was sort of my idea. That business didn't make much money either. And I had started that one, not bought it. And so finally I was like, all right, turns out I'm not the idea girl. Like, my ideas aren't making me money. This isn't really working. And I didn't have anything brilliant. And so one of the first businesses that I ever bought was a laundromat. And I basically just went the opposite end of the spectrum. I was like, all right, it's not working out great to do these sexy things. What's like the most simple, boring, I can't fuck this up business that I could buy. And how could I do it with an operator? Cause I was traveling a lot at the time for work. And so I found a guy who was in real estate as well. So we knew a lot about placement of businesses. And he had done some stuff with laundromats before. And I partnered with him to do my ferry purse deal.
- [08:38]
B
Yeah, there you go. And when was that?
- [08:41]
A
So that would have been. God, I mean, I was probably in finance for eight years, nine years before I did that. I think I, you know, that's just 15 years since then. So, you know, it took me eight years of figuring out, or nine years of figuring out how to actually do a deal before I felt comfortable even doing a tiny deal. You know, that deal was only 100k. Not that 100k is not a lot of money. It wasn't for me at the time, but it was material. Like I didn't want to lose the 100k, you know. And then that turned into multiple laundromats and then those laundromats turned into some car washes. And then, you know, it kind of continued to spiral from there until I started running my own polling company.
- [09:28]
B
Yeah. And you have a portfolio of like an eight figure portfolio of basically boring businesses like this. And, and can you share, like, why you particularly like these kinds of businesses? Not the, as you said, the sexy thing perhaps like an online business where, you know, it's, it has a lot of appeal for most people.
- [09:50]
A
Yeah, well, I mean, behind me you could probably see there's some hats up there. And those are hats for one of our window cleaning. I sort of realized, I think early on that every business is the same. Every business is widgets. You have in every business. You need sales, you need product, you need operations, you need marketing, you need some sort of distribution or logistics. And so every business has this same inside. Now the outside could look very different. You could be selling, you could be selling washing services like we do, you could be selling e commerce products, you could be selling media spots and ads and sponsorships. But it's all actually kind of the same. And after doing tons of deals in private equity, I realized this. I, at the time, didn't realize the power of the Internet. Like you knew that way before that. I did, but what I did realize is that boring businesses are not as competitive as the Internet. Like the game we're playing right now. This game for attention is the hardest game I play. Like I'm competing against every single human out there, from Donald Trump, right. And the best at media to whatever the hottest show is on Netflix, like you. And I compete against everybody. There's no moat, and it's complete competition for attention. When I live in a geographic area, the businesses that service me as an individual and my business as an individual entity, they're not the ultimate competitors. You know, I would much rather compete against the other local window washing companies or painting companies than I would compete against hbo. Competing against HBO is hard. Competing against my local handyman service, not that hard. And so I think what I realized early on is you do the fun things without trying to make a ton of money at them. Like media companies, they're hard to make money at. You make money in the business. That is an easier and more likely ability to win. So for boring businesses, you know that startups have, let's call it a 90% failure rate over any 10 year rolling period, Right. For businesses that you buy that have the same term, so 10 years, the SBA loan term shows that small businesses you buy have a 25% failure rate at the height and a 5% failure rate at the low. So we have a 90% fail rate or a 10% success rate in startups, and we've got a 25% fail rate and a 75% success rate in buying businesses. And so that just made me realize, huh, I'm just going to go where the odds are better. Like I just have a better shot at winning if I'm good at poker than I do at playing slots. And that was really the difference between the two and why I started to look at this industry.
- [12:49]
B
Yeah. And so talk me through. Do you buy businesses that are struggling? And then you apply your framework and talk us through that framework is. Or do you buy. So you're buying distressed, usually distressed, boring businesses.
- [13:08]
A
It's a great question. I try not to. I try not to buy businesses that are struggling. I think turnarounds are really hard. I did a lot of those in cannabis. I was a cannabis private equity investor for a while and man, you know, there are businesses that were two weeks out of cash and you know, $25 million in assets and millions in dollars in liabilities. And you know, we had four weeks to turn them around and that was miserable. And so I try not to do that very often, if at all humanly possible. But I try to buy what I call like the nicest house or I'm sorry, I try to buy a nice house on a normal block. I don't have to buy the shitty house and fix it up. I don't have to buy the nicest house. I kind of want average. And the reason is because the first time you do a deal and buy a business, and you know this because you've done deals before too, but something will go wrong, you will pick something wrong in your first deal. And so you want to make sure that you have enough cushion of cash flow in the business where that something going wrong is okay. It's like a buffer, you know, you know that you're not going to die. If you play a game of basketball and you scratch up your knees, you're like, hey, that's the price of playing the game. Right. And so when I buy a business, I try to buy businesses where they have enough cash flow in them. They've existed for at least five or 10 years, they have operated, they have product market fit, you know, they have a lot of users, they have diversified users because that way I have more confidence that they're going to continue to succeed.
- [14:36]
B
Yeah, and gotta be boring though, right? Traditional services, local businesses, easier to compete. These are some of the parameters you're looking for.
- [14:48]
A
Yeah, that's exactly right. I mean, we have a couple different strategies we call one brrt, which is we buy boring businesses in recession resistant asset classes, raise their prices and add technology. And so the playbook is essentially we want sort of a normal business, we make it a little bit nicer, we increase prices because usually they're underpriced. And then we potentially add on a few more of those businesses. And so that's one of the methodologies that we teach in the book on how to do this.
- [15:22]
B
Yeah, so talk to me about the book. You got a copy in front of you?
- [15:25]
A
Yeah, I do. This is so good. This is why you're a better marketer than I am. And I actually don't do this very well, but it's called Main Street Millionaire.
- [15:34]
B
And here we go. It's a good cover, I've seen it.
- [15:38]
A
Thank you. You know, you know this cause you've written a book, but covers are a real pain. So you'll be Getting a copy all the way in Australia. But the idea with the book is essentially, you know, I didn't want to write a book. And so I feel like there's enough inspiration books, there's enough books out there telling you that you're sufficient, you're good, you can do this, whatever. My idea instead was I think that acquisitions can be really intimidating. And when people hear about buying a business, they just inherently think that it is harder to buy a business than it is to start one. And if you are a founder and you've already founded a business a few times and you're good at it, you also think it's harder to start to buy a business than found one. And you feel that to the core. Like I talk to founders, they're like, no, it's so much easier to start. And I go, first of all, you're rare. Like, founders don't realize that if you are, if you have started a business and it is profitable, you are the top 6% in the U.S. only 6% of Americans have a profitable land, long standing business. You're very rare. Most people are like me, where they're like, you know, I can follow directions, I can work really hard, I can get after it, but I don't know how to create something from nothing and make it profitable and lasting. Or they've like tried a bunch of different things and none of the things have really worked and stuck. And I think that's totally okay because we don't actually need all the innovation in the world continuously. We need like clean streets, we need coffee served, we need landscaping done, we need houses built and you can just buy those. And so that's the idea in the book is like, you don't have to come up with a billion dollar idea to make a billion dollars. And in fact, if anybody becomes a really good founder, like they've done and built a business that's doing, let's call it 50, $100 million in annual revenue. At that level, you don't get there without acquisitions. Actually, once you get to $100 million in revenue, your likelihood of not having done an acquisition is basically 10%. In business, once you create a billion dollar business, it is zero percent. There are likely about zero percent businesses that are a billion dollars that have done no acquisitions because they realize that the fastest way to grow is often in groups of 100 as opposed to client by client.
- [18:09]
B
And I love you. You're very good at, I think, creating the packaging around this idea of Main street versus Wall Street. Can you talk us through that, like now you've got the book Main street millionaire contrarian thinking you're really good at kind of like helping people and build this community, which I want to talk about in a second. But yeah, Main street versus Wall Street. Talk to me about that. What does that mean?
- [18:36]
A
Well, I noticed a trend in the US which is really concerning and I imagine it's the same exact trend in Australia. It's almost a global phenomenon. If you were to look in 2000, private equity companies owned 4% of all U.S. companies. In the year 2023, they owned 20%. In the 1800s in the U.S. we had 80% of Americans were owners in something. Now we have 6% are owners in something. We are very quickly losing our ownership and we are giving it up to the few who own. And you know, if you go out and you talk to people today, they say, well, most people can't handle it. Most people can't handle being an owner, Most people can't handle being a founder. Well, maybe if we do it the startup way, if we do it where there's a 90% failure rate and we have to come up with a novel idea in order for us to become owners. Yeah, that's not for everybody, that's hard. But we have owned businesses and had apprenticeships and transitioned businesses from one generation to the other since the advent of bartering. And so I think what we have done is we have let these intermediaries come in the middle of just about every type of ownership we have. We no longer think that we can buy a business straight from a business owner. We need an investment banker, we need a bank, we need a title company, we need title insurance. Like, it's just, it's bizarre. And so we've let these middlemen make the transactions harder and we've let these middlemen make the transactions more expensive. And we've let them talk us out of the fact that we might be able to do it ourselves individually. And so I do think we're at a little bit of a war. It's a quiet war, but it is a war between the few who own everything and the many who don't even realize it. And you know, not to get so dramatic about it, but if you look at the S and P, let's look at just the s and P 500. There's three companies that own 80% of the S&P 500, and that's State street and BlackRock and Vanguard. @ which point you might say, Cody, those are passive investments. Those are exchange traded funds. And Mutual funds, they don't actually, they don't have any decision making power. Oh, whoops. Except Bill McNabb, the CEO of Vanguard, a company of which I worked for and I have met Bill many times, said publicly, we're not passive in governance, we're actually quite active in governance of our companies. And so I don't think any of these companies are bad. I worked at Vanguard, it's full of great people. I worked at State street, it's full of great people. But should anybody have all the power and ownership, not even me or you? I don't think that's right. And so that is what I mean by Main street over Wall street, we've gotta push back on feeling like we have to get bigger and bigger and bigger and bigger and that the few of us have to own it all. When instead, why can't we be happy with like our little corner coffee shop? And why can't we realize that when we buy local, 60% of every dollar goes to the local economy. When we buy from Amazon, 10 cents of every dollar goes to the local economy. We are very, very slowly centralizing everything away from our communities. And I don't think shopping local really works because Amazon's fucking awesome and I totally overuse Prime. But I do think that we can own our communities because guess what, private equity kind of sucks at scale. They suck the life out of companies. And so I think we can compete against them actually and we could win and we can cash flow and the user can have better experience and so can we.
- [22:17]
B
Yeah. I love this thinking, I love this movement that you're talking about. I have to say though, like, I've never run a local based business, but friends that have. It is tough, Cody. Like I get the whole boring, you know, laundromats, car washes, you know, simple value proposition, you know, like the whole methodology there and it's easier to compete as well. But local businesses are tough.
- [22:46]
A
Yeah. Well, let me ask you this question. If I was to say, if I was young and I wanted to start out and I came to you and I'm like, Nathan, I want to start a media company just like founder. That's what I want to do today, what would you say? You would say, it's fucking tough. It's a really tough business. It's so hard. Why would anybody want to come into this business? So that's like a weird thing we all have as entrepreneurs. Every one of us goes, oh, you want to be in my business? My business is the worst business. It's like it's hysterical. I mean, because you. You've done this, too. But we've interviewed hundreds of small business owners and, you know, thousands of companies I've looked at in private equity, and I still haven't found one where the owner of the company is like, you should play in my sandbox. It's easy over here. I'm just swimming around in cash and no problems. It doesn't exist. Being an owner sucks. The only thing is that not being an owner is worse. And so, yeah, I think. I think all business is really hard, and it's a way to become a better human because it's getting punched in the gut continuously. But then the last little tirade I would go on is, this is my favorite thing. I always go, all right, you say your business is really, really tough, and not everybody could cut it, and, you know, they shouldn't be in this industry. Why don't you go back and be an employee for somebody then? And they're always like, well, the thing is, you're like, I'll believe that your business sucks when you go back and get a job. And you think that the job is better than the job that you have today. And sometimes people do. They're like, actually, I need a break. But all business is tough, I guess, is my saying. And I do think it's easier sometimes in some ways to run bigger businesses. But I also think higher levels hire devils.
- [24:37]
B
Yeah, look, I. I'm the belief. I'm of the belief that anything to build anything of true worth and significance, it takes a long time, right? It takes a long time. Seven to ten years at least. And also at the same time, right, like, there's just. You have to go through, like, the hero's journey, right? Like, you have to go through the hero's journey, and a lot of people can't go through that, right? Like, it is. It is really, really tough. Like, you look at someone, even like, Elon Musk, you know, love him or hate him, he's quite a controversial character now, like, the amount of pressure he's put himself under, right, the amount of stress, and I think there's a correlation between, you know, how big a business you want to build, how much success you have by the amount of stress and pressure that you can take on as an individual.
- [25:29]
A
I think you're right. I mean, one of my friends says entrepreneurship is a trauma response, which I think is funny. It's like, you know, the bigger the entrepreneur, the bigger the wound. And I think that could be true. But I also think that There's a lot of people that when we're on the Internet and when we run eight figure or nine figure businesses or whatever the levels are, it's hard for us to remember also that there are a lot of people that you know what they want. They want to make a couple hundred K a year, they want to run a nice business that allows them to hang out with their family, that allows them to be local, allows them to live in like a nice house, send their kids to school, be present for their kids, hang out with their husband or wife, and like, live the actual American dream. That like, a lot of us are just psychopaths that want to build a giant thing. So a lot of people, you know, when they come to me and they're like, I want to build a holding company, I'm like, well, we can teach you that. But like, are you sure you know how big is your trauma that you want to build this? Because what you know for sure is when you have a portfolio company is like, I do. Something is always going wrong. I mean, just today, like one of the companies that I have, it's a $60 million a year company. It's a big company issue, you know, and so I'm like, I got to step out of this meeting because these silly gooses are doing something they shouldn't be doing and I gotta go wag my finger at them. And so at some point I am probably gonna wanna go back and I'm just gonna wanna have a floral shop and I'm gonna be stoked, you know, And I think you can be really happy doing either. I wanna see how far I can get. But everybody doesn't want that. Like, my mom doesn't want that. She's really happy, you know, with a small teaching school that's like, she's thrilled. And so I think on the Internet sometimes people forget that. They're like, yeah, it'd be way easier to run a $5 million a year solopreneur company. And you're like, most people will never be able to run a $5 million a year solopreneur company. You know?
- [27:38]
B
Yeah, look, I agree, I agree. And that's what we've noticed as well. Like, so for us, we interview tons of super successful founders. You know, at this point, I've lost count, but I think I've interviewed close to over 100 billionaires, right? Like some of the richest people in the world, right? And we find like those stories, while they are incredible and amazing, they're not that relatable because you're right. Most people just want to be able to have a business that allows them that financial freedom and time freedom. But then at the same token, right. It's never enough once you get there. Like, what got you there? That's what I found as well. What got you once you do have that, this is something for most people. What got you there. You're just like, oh, let's get some more people. Let's see how far we can take it. Just like how you said, right? So it's. Yeah, it's. It's an interesting dichotomy.
- [28:32]
A
Yeah. You know, you know what's interesting for the big time founders? It's never enough. And that's something we gotta battle against. But I mean, I was like just talking with a guy the other day that I think really highly of. His name's Spencer Scott and he ran a bunch of like, SaaS. Light SaaS. Businesses, basically. He was a software engineer, spun up a couple of businesses. They did well, not crazy well, but like kind of okay. He sold one that did kind of okay. And then one day he was pissed and he was in his neighborhood and his trash cans had just been like mangled and thrown over in his neighborhood. And it had happened like a lot. And so he puts up a post and a quick landing page and just says, if you guys are as mad at this trash company as I am, I will spin up my own trash company. If I don't know. 200 of you sign up here for this service for X a month and do this recurring service. And it was a Facebook post in their community group. He posts this, wakes up the next morning, is like, holy shit. He's got $15,000 in pre orders. And so Spencer, who really like originally made all his money on the Internet from software, is a garbage man once a week, every Wednesday, and every Wednesday he drives around in a garbage truck and he picks up garbage and then he goes and tosses it to the dump. And then he comes back. And so I did it with him for a day. It was oddly kind of fun. And if you like, I was like, spencer, you're the happiest motherfucker I've ever met. Like, what is going. I mean, he's honking at neighbors, he's saying hello, they're saying hello back to him. He's like, do you know how miserable I was sitting in front of my computer coding shit, having like, you know, customer requests via email that I never met, I never knew them. There weren't that many people saying nice things to Me, I was, like, vitamin D deficient. I didn't realize I was lonely. He's like, now I'm pretty happy. And. And he can have both. And so I don't want to. I don't want to be dramatic and say that, you know, garbage men are happier than people who own software companies. That would be a crazy line. But I do think that there is something to, like getting out and touching your neighbors and touching the humans around you. And I think our generation is starting to wake up to the fact that we were sold a bag of goods when it came to being happy. And it's not inside of a cubicle doing what we're doing right now all day. Like, zoom meetings all day is a recipe for misery.
- [31:01]
B
Yeah, I agree. I agree. And I think what we both can agree on is life is too short to not do work that you don't enjoy. Right. That's what life is all about.
- [31:12]
A
Yeah. Well. And isn't it wild that most people do? I mean, you've seen the statistics. It's like 60 to 85% of people actually do not like what they do for a living in the US at least. And, yeah, and I think that comes from fear and this. This truth. The reality being that starting something's really hard and not everybody can do it. And so I think that truth leads a lot of people to stay in jobs that they hate. And that's why we like those accounts that are, like, corporate, Natalie, or whatever, and they're making fun of, like, all the dumb shit that you do at work that makes no sense when you're in a corporate job and, like, we're living in perpetual office space. A movie that we all remember, you know, from the 90s. And I don't think we were supposed to do that. So my hope is that this idea of Main Street Millionaire is a way to push back. But it's not to say that it's easy. It is not easy. It's not easy buying a business. It's not easy running a business. But you can also start by owning part of a business. You can start by being the operator of a business. You can start by getting skin in the game and the company that you're at. But I want people to progress into ownership as opposed to all of us getting out of ownership.
- [32:26]
B
Yeah, I agree. And you talk about fear, right? That holds a lot of people back. And you also shared that you're a bit of a wuss and it took you a while to go all in. Can you share maybe a personal story? Or like, what. What kept you, like, going all in?
- [32:48]
A
What kept me? Well, I mean, the. The. I kind of was joking with my team two minutes before this. They were like, why'd you write the book? I was like, for all my haters. And I think that is. I think that's part of it. You know, I had bosses I hated who had lives I didn't want, who I thought I knew more than not. Always true, by the way, but, you know, I think most of us founders are totally unemployable at some degree, and we realize that later on in life, but in. When we're young, we're just. We bitch and moan a lot. And so that was me. But, you know, eventually I. I got to what I call my. My fuck you o meter basically went too high. You know, it was like I couldn't handle it. I was bursting and. And so there was some point where I was like, the way we're doing business doesn't make sense. I actually really liked my job. I liked what I did every day. I liked my team. I ran a team in finance, but I hated how the bosses wanted to run the business. And I was like, if you guys saw what we could do on the Internet, like, you would change how we did investing and you would change how we did distribution. And then they told me no, and they were like, listen, you're on my boat. If you want to go left and I want to go right, you have to row my direction or you got to get another boat. And I was like, very mad about that. And then now I realize that's totally reasonable. And that was the right move by them. And so. But it was basically that, like, I couldn't take anymore. I was like, this is not how we should run the business. And so it was at that point, I had already had a few deals go through. I was already making money on the side that I realized, like, I could do this by myself. And so I finally, finally did, but it took way longer. Like most people who are big time founders, they didn't work in corporate America for 10 plus years. Like, that's not that normal. But I guess my point there is you can still be a successful founder even if you have only been in corporate for a long time.
- [34:44]
B
Yeah, I agree 110%. So I'm curious, when did you start really building this movement, building this community? Because as I shared offline, it's been really impressive watching your journey from afar. We connected well before you blew up. And then I just started seeing you everywhere, especially just Kind of after Covid, you start the Contrarian newsletter, Contrarian Thinking newsletter. And I've just been like, you know, watching from afar, super impressed by this community and platform that you've built and built your personal brand. Like, you've done such an exceptional job. Talk us through, like, how all that came about and why you decided to kind of start creating content around this. Building a media company versus just kind of having a holding company. Building in silence, building in private.
- [35:42]
A
Yeah, well, you know, Naval now talks about the three layers of leverage. I think I realized in 2020, when I wasn't traveling so much, I wasn't doing roadshows, which is what you do to go raise capital for funds and private equity. So I had some time to think, and I realized that at the time, I think he was right. There were three types of leverage. There was capital, which is money. The banking regulations happened. Rothschilds became very, very wealthy. That was a big lever. There's labor, which historically was slavery, and then became employees. And then there was code. So Bill Gates and Elon Musk and Jeff Bezos, and they all had like an army of labor in the form of code that did things for them. And I started seeing in 2020 this idea that audience could be an even more powerful form of leverage. And in finance, we understand leverage pretty well because that's how you make more money, is you see a deal, you think it makes sense, and then you add more money to it in order for the returns to get even higher than they could if you didn't have leverage. And so I saw this leverage happening in an audience, and I tried to, at the time, get my firm that I was a partner at to do more, to gain an audience. Like, I wanted us to have a big email list. I wanted us to go on substack. I wanted us to build a little bit of a media company. And they were like, you're out of your fucking mind. No way. That's. So the word in finance would be retail. They called me retail, which means that's. That's like what low level finance people do, not the fancy finance people. And so we would never do that because that would not be sophisticated and that would be beneath us. And then serious people wouldn't take us serious. And so I kind of fell for that for a while and listened to it. And then finally I was like, you're wrong. You're literally wrong. And I don't think you see where the puck is going. And so I started creating content myself. And I was like, I'm fuck It. I'm gonna do it. And so I started doing it. And then I remember at some point, this is a similar unemployable Cody thing. My boss was like, well, he wasn't my boss because I guess I was a partner. But the senior partner, the one who had founded the firm, was like, we don't feel comfortable with you creating this content. You know, this doesn't look good for the firm overall. You're gonna need to stop doing it. And I was like, one, you can't tell me what to do. And two, no, this is actually huge for us and we're raising millions of dollars. And what are you talking about? And at that point he said, well, you really need to make a decision between the two. And I said, well, it's no decision. I'm gonna go do my own thing. So you guys need to pay me out for my percentage of the firm. I don't wanna have anything to do with it anymore. And so we went to settlement, came to some sort of terms, and I left. And one of my partners got it. He had been actually early at Moviefone and before they sold the AOL and Sportsline, before they sold the cbs. So he had seen this in other industries. So I remember he reached out to me and he was like, listen, I see it. I see what you're doing. I want to stay in touch. And like, I think this is going to be big, and I'll always respect him for that. And so I went out and started creating more content. And I think I proved that theory right. But at the time, it was really scary because I've always been the type of person to want other people's approval. And they're like, I wanted all the credentials, which is why I went to grad school at Georgetown and then got a PhD in Brazil. And then I worked at Goldman, and then I got this title and then I spoke this language. And I was always wanting to prove myself and I never thought I was enough, which sounds goofy, except just that's how I was raised. I don't know. And so it was really hard to leave and go retail and talk to the people instead. But I think it was the right move. And hell, I mean, you've seen. I see the exact same thing happen right now in politics. Like, I was at this think tank event in the U.S. nathan, right before the election, and a bunch of people were saying and like, forget the politics of what side you're on. But they were basically like, ah, these podcasters are dumb. You know, they don't make any sense, you know, we don't like them. And this was like from the guys on the same team as those guys. So it was like conservatives to conservatives. And they were like these low level podcasters, Yuck. And I remember sitting there thinking, I mean, this is like some of the leaders of the free world are at this event, like some of the richest people, biggest minds. And they all were like, these podcasters are dumb, these people are dumb. And don't worry, we're gonna just kind of get rid of them. And I remember thinking, oh my God, they don't see it. They don't see it at all. They think this is retail. And they don't realize that there's like a movement happening in the world today. And that is that we do not trust institutions anymore because institutions have not been very trustworthy. And so the people are saying, you need to listen to me. I don't care if you have a degree, I don't care if you have a title. Like, I am just as much a human as you are. And so I think the movement and how I was able to grow online as much as possible is because I saw that, I was like, I agree, yeah, I went to Georgetown, I worked at Goldman, but that doesn't fucking matter. What matters is like, who are you and do you see each other as humans? And so I think it's only going to become more important that you talk to people direct because people just do not trust companies and institutions like they used to.
- [41:31]
B
Yeah, look, I agree. More than ever now, people are interested about the person behind the brand and the why. And more than ever now you see founder led brands going, you know, building in public, all of these things and taking people on a journey. It is so powerful and you're doing exceptional job. But here's the thing, right, Cody, There are so many people that I've seen. I've been in this space for a long time, right? And I did. I've kind of always just kind of, you know, most of the people online, you know, I'm still in Australia, but I've met most or connected or friends with a lot, right? Most. And I've got stories for days, but there's a lot that come and go and it's not that easy, right? Like, and you've been able to get incredible cut through. You talk about attention, like, where did you start? What did you start with? How did you work this whole thing out? Because it is not easy to create the brand that you've built and this community that you've built in the past, like literally three to four years.
- [42:43]
A
Yeah, well, if I could give one piece of advice on what I think we did. Well, it's, we try to not be takers but be givers. So like, if you come onto any of my platforms, you don't see me doing a lot of advertisements for one off random shit all the time. In fact, you'll probably never see me do that. You'll see me advertise very particular things for companies I really like, normally have invested in and own part of. I'm real transparent about and usually like with some sort of giveaway or something associated. So I tried to not take a lot from the audience, which I think is the opposite of what a lot of influencers do because they make money off of their audience's attention. What we do is we, I make most of my money off of my small businesses that I own and then we have an academy that we help people buy businesses and now scale businesses and eventually exit businesses. But it's expensive. And what that does is that means that I am actually only selling a very small percentage of my audience every single month. Like I don't need tens of thousands or hundreds of thousands of people to buy from me. It's a very few people that the price is so reasonable for them. It'd be ridiculous for them to not do it. Because even if what we sell is a five figure investment in order to, to learn how to buy a business, your ROI on buying a business is six figures millions dependent. But for most people it's like give everything possible for free. You really don't find like a lot or any low ticket anything from us. And so I think that was really powerful. In the beginning. I never said that, you know, I never said that I didn't have anything to sell because I don't think there's anything wrong with selling. I think it's if I have a product that is amazing for a human, I want to give it to them. That's, that's incredible. Love that transaction. Same thing for me. Instagram knows the stuff I want to buy better than my husband. Half the time Zuck's got me down. But I was really thoughtful on like give, give, give. So I think for the first year we were in business, I took not a single dollar from the audience. We didn't charge for anything. The second year in business we started charging for a few things. Ooh, and the, and the third year in business I started taking a salary from the business. But before that I didn't take Anything out of the business. And so I think the give versus take thing is super, super important. And then the other thing I think I got lucky in, but it wasn't. My plan is just I really obsessed on like, what was my niche. I didn't try to be everything to everybody, you know, especially when I started, it was like, I talk about boring businesses and how to buy them and how to grow them and that's it. And if you want to see some wild videos on that, awesome, we'll be buds. But I didn't try to go wide. And I think a lot of creators, they try to be relationship advice, home advice, personal advice, business advice. And I was just like, here's the one thing I think I might be the best in the world at, which is how to buy businesses paired with how to make it really simple paired with content. And so that's all I'm going to talk about. So those would be my two pieces of advice. Maybe for people who are just starting out, who want to grow really fast.
- [45:57]
B
Yeah, look, I also see your content is. It does, it does start to go wider because you talk about, you know, making money, financial freedom, but yeah, the buy, yeah, it's core around you help people really buy boring businesses.
- [46:13]
A
You can go wide after you've captured your main audience attention, then you can be the Rock and you can talk one moment about WWE and you can talk the other moment about Tequila and you can talk the other moment about being daddy. Right. But people have to care about you before they're willing to hear all these things from you. In the beginning, it's either just massively entertain me or massively educate me. And so that's what we tried to do was really think about, like, how are we serving these people? And hopefully as much as possible, like, I want to make it about them, not me. And that I think, I don't think a lot of people do that. Like, they want to go on a stage and have the crowd chant their name. Like that's intoxicating. You know, they want all the photo shoots, you know about them with the brands and whatever. I don't so much care about that. I really, at the end of the day, it's not that I'm egoless. I love building huge businesses and having huge bank accounts. I fucking love it. It's my favorite thing. I love making money, but I don't care about getting all the credit at all. And I think that helps online because a lot of those people do care about the credit. They're like, yeah, I Told them how to do this. I'm like, no, no, no, you did it. Like, I gave you the idea, but I can't. I can't make you better like only you can. That was all you, man.
- [47:35]
B
Yeah. And you're very authentic. I think that is one of your strengths. Like, yeah, it's. Yeah, it's very. It's very trustworthy. You can see that you're a good human being and somebody that, yeah, you want to follow. So just to round out the whole buying businesses piece, you. You talked about kind of, it is costly. Like, you know, your first business costs, you know, 100 grand. And you do also have this idea of, you know, seller finance. And can you talk us through that?
- [48:13]
A
Yeah, you want to know something crazy? So 60% of all businesses are sold with seller financing, which is essentially the seller of the business will help you pay for the business using their future profits. If you would have told me that even when I was in finance and had done, like, I don't know, probably dozens of deals by then, if not 50 plus, I don't think I would have known that we were so indoctrinated to think we raise capital from investors, we get loans by banks. That's how deals are done. And yet that's not really the case in small business. The second thing that's wild is that the government doesn't really want you to talk about seller financing. And again, I think it goes back to intermediaries and some scammy people. Like, listen, there are scammy people on the Internet that will be like, you too, can buy a business with no work $0 down in 20 minutes in your backyard and sell it for millions. Right. And so the. So there are protections in place to make sure that there aren't scammy people trying to sell you a pipe dream. And because of that, seller financing or creative financing, they get a bad rap. And also because maybe sometimes when people do them, they try to take advantage of the seller. So they'll be like, I've never run a business before. I don't know anything about your business. I don't know you, but I want to buy it for $0 down. And you sell or finance the whole thing. To me, you're like, kid, what? And so I think for all those reasons, this thing got a bad rap. Which are like, reasonable reasons. But the truth of the matter is there's really no difference between seller financing and bank financing, except one is normalized, expensive, and has an intermediary in between. One is not normalized, harder to get and does not have an intermediary in between. So getting bank financing is faster, typically, and more expensive. Getting seller financing is slower and potentially cheaper upfront, maybe could be cheaper overall. The thing that's cool about today is that we have a supply and demand imbalance. So we have millions and millions and millions of small businesses for sale all around this country. We have hundreds of millions of businesses around the world that people don't realize they can even sell. They think about it as jobs. They're just gonna close them down. We have a baby boomer generation that doesn't have retirement plans, that doesn't have enough money because most of their net worth is tied up in their small business. And they're looking for an out eventually, but they're just going to work in the business forever because they really don't have any other option. And so the idea that I have is let's pair together the two generations, the baby boomers or the elderly generation, and the Generation Z X and millennials, and let's let those two generations, instead of being mad at each other all the time, become each other's solution. And I think we can do that through seller financing, because the baby boomers want an exit, and the millennials and Gen Z and Gen X want some ownership and they want wage increases. And so that is where seller financing comes in and I think is a really powerful tool for businesses that otherwise are unsellable.
- [51:40]
B
Yeah. And look, I've never done it before. I. I think it's really interesting, but I was going to say I saw.
- [51:48]
A
Have you ever bought a business?
- [51:50]
B
No, I've never bought.
- [51:52]
A
Have you ever aqua. Hired anybody?
- [51:54]
B
Nope, never.
- [51:55]
A
And bought no IP either?
- [51:58]
B
No, no, no, no.
- [52:00]
A
That's just total organic growth.
- [52:02]
B
Yep, yep, yep. Never bought a business. Was looking to buy a few at one point, but no. Never bought a business. Sold, but never bought.
- [52:11]
A
Oh, that's cool. So you built a business and sold it. So you've seen the back end. I mean, I think that, you know, well, here's where. Here's where the deal junkie in me comes in. But, like, your business is perfect for acquisitions. I think some of the best people for acquisitions are people who already own businesses because you already know how to run them and you can handle velocity and scale. Right. Like, you know how to handle speed. And so especially a media business, you have all of these assets that people don't know how to price that just get shut down all the time in media because they don't have like a physical store or inventory or things that you can buy in the traditional sense. So we've bought. I mean, I've bought newsletters, I've bought podcast production companies. I've bought video production companies. I've bought. I've aqua hired teams in the media space before I bought part of an education company, online education company. So there's like, so many things, and most of these deals were done with seller financing or a percentage of future profits. And I think once you do a couple of these, you get addicted and then you don't look at. You don't look at making money the same, you kind of start going, huh? If I want to start a podcast business like I did, I'm like, who can I buy that's going to accelerate this, like, way faster than if I just did it myself? And so I did. And then it's just like hiring an employee. You're selling them on a dream that their dream is going to get bigger underneath your dream. Like your dream's gonna lift theirs up and make it higher than they could have ever gone by themselves. So you'll have to tell me if there's any deals you want to look at. But I think it's just such an accelerant on a business.
- [54:09]
B
Yeah. So I saw, like, what you're doing. It's really clever. Like, you, you've now got a marketplace. Did you buy that marketplace or you're building that from scratch?
- [54:18]
A
Yeah, this hat right up here is Biz Scout. And I bought it. Yeah, I bought it to start, and I bought it the way I like to buy it, which is I didn't buy some big, huge, crazy software company. I bought a kind of reasonably priced, not very expensive software company to just MVP What I was doing. I was like, does this even work? And then we put a bunch of money into it, and now we're scaling it. And then I bought that company, which is a window cleaning company, and that company, which is a paint company. So, yeah, and I bought them in a way where those two companies are franchises because I kind of like the idea of other people being able to own part of a national brand. Otherwise, I'm no better than blackrock or Blackstone. I want to create a mountain of owners. Even though franchises are a lot of work, it's a heart. There you go. See, it's a tough business. I'd tell you to not go into it, but. But, yeah, I try to practice what I preach, which is buy wherever we can. Sometimes I get a crazy idea and I start outright. Like, I didn't buy A book business, for instance. I, I started the book.
- [55:27]
B
No, look, it's really clever, super impressive what you've built. And it's really interesting to hear this alternative of starting a business. Right. It's an alternative you don't have to start. You can, you can own and you can buy and you can sell a finance. So look, Cody, we have to work towards wrapping up. I could talk to you all day. I know we're at time, but. And I know you're going crazy on this book tour. And a couple last questions. Where's the best place people can find about. Find out about more about your work and Main Street Millionaire. And then what's happening for the future that you're super excited about?
- [56:05]
A
Love it. Well, msmbook.com or codysanchez.com, both of them lead to the book. We're actually doing this thing, which I haven't talked about yet, which is, is we're throwing a giant book celebration event. So not a launch. It's only for people who've bought the book. But we just hit, I think they just hit 22,000 pre orders. And I was trying to kind of like share live. Cause like, launching a book's a real pain in the ass if anybody's doing it. Also a terrible business. But anyway, so we just hit that. So I was like, you know what, I want the people to be able to celebrate that we got there instead of just like the authors, like, sick. I sold a bunch of books. So I'm doing this free event for anybody who bought the book. And it's going to be amazing. We're going to give away something worth hundreds of dollars to every single person who comes virtually. Not info, products, not videos, not nonsense like that, like a real thing. And we're going to have a special guest who's the leader of the free world. And so if they go to msmbook.com, you can get the book. And when you get the book, you get a bunch of pre order cool stuff, calculators, tools, templates. But you also get to come to this event, which I think hopefully will feel like a big gift to people. It'll feel like I'm glad I was there that day.
- [57:21]
B
Awesome. Well, I look forward to diving in, grabbing a copy and congratulations on all your success thus far. Thanks again for coming on.
- [57:30]
A
You're the man. Thanks for having me. This was fun, especially all these years later.
- [57:33]
B
All right, so if you love this episode, make sure to check out my interview with Alex Hormozi on how he scales companies from zero straight to $2 million a month in less than a year.
- [57:45]
A
We were like, how have you achieved you cheaper? Like, there's five years of my life that disappeared. In fact, I lost all the money, which I talk about in the book. I had all the gyms, I did the turnarounds, and then I had $0 five years later because of mistakes that I made. But the things that I was gaining was not the money. It was the skills. It was the character traits and the beliefs.