Loading summary
Transcript64 lines
- [00:00]
A
Literally. My opening presentation was, hi, I'm Brandon Dawson. I have a $35 million business doing $2 million of EBITDA. If you acquired me and integrated me into your business, I would add $2 billion worth of value within 36 to 48 months. And I want 10%.
- [00:20]
B
Ladies and gentlemen, welcome to a very special edition of the Money Mondays. Because as you know, 99% of the time I film these podcasts inside of an RV motorhome traveling around the country. But I'm in Phoenix, Arizona. We got the Aspire tour and so I decided to come to the 10X Ventures office where Cardone Capital has their own podcast studio set up because the co founder is here. Mr. Brandon Dawson. So good to see you. As you guys know, we cover three core topics. How to make money, how to invest money, how to give it away to charity. These podcasts range from about 34 to 42 minutes for your listening pleasure because the average workout is 45 minutes. The average commute to workers, 45 minutes. So I want you guys to have 34 to 42 minutes. So you listen to this whole thing because that's why we have a 93% listen through rate because of you guys there at home or in the gym or in the office. Right this second, I'm going to ask Brandon so many good questions because I've been following him for years. I'm super excited because he's filled up stadiums, filled up events, raised billions of dollars as a health company. Everything in between. There's so many things to cover. Might have to do three or four episodes today. So, Brandon, if you can give us a quick 2 minute bio so we can get straight to the money.
- [01:22]
A
Yeah. Brandon Dawson, serial entrepreneur, business partner with the one and only 10x himself, Grant Cardone. And we have multiple companies. He and I partnered with my wife Natalie Dawson about six years ago, and in six years we built Cardone Ventures to $120 million company 10X Health. From a $1 million $1.5 million business to $120 million company. And we have other multiple companies. We're rolling out on our way to a billion and loving every minute of being part of the 10x family under the Grant Cardone brand.
- [01:57]
B
All right, there's so many questions. Let's go company by company. So I like to cover the make money side. Yeah, there was an existing business that you had with, you know, Gary Bracko was doing one or two million dollars and then you scaled to over $100 million in the blink of an eye with your Guys, power to make him more famous, make the business more famous, more efficient. Talk us through how a company's been around for years. You can all of a sudden scale so quickly.
- [02:20]
A
Well, Gary was a grant service provider, and I had a few of my own. One in Arizona and a guy in Fort Lauderdale. And I was doing this human optimization thing in 20, 19 and 20 when Covid hit. I really leaned into it to keep me healthy. I was doing a lot of IVs, I was really getting into things like, because I'm 56, at the time, I was 52, 51. I was getting into things like testosterone, getting my blood checked, doing the IVs, doing all the cool stuff. But I was not getting sick during COVID And so I really. I came out of healthcare. The business I sold was in healthcare. And part of that business was an allergy. So we had a whole allergy business. And so I looked at people that were having allergy problems, and part of that crept over into longevity. Being affected or impacted by things you eat, things you breathe, environments you're in. And so in this longevity space, I was getting very curious and then became a Chairman of a 275 location chiropractic, regenerative medicine business. And so I started looking into. A lot of them were doing IVs, they were doing stem cells, they were doing things of that nature. And I was like, I love this space, this whole space. And it was so mom and pop. So I met Gary through Grant and I liked Gary. We got along great. And so I told Grant, look, I'm just gonna. Gary's business had been doing. It was actually his wife's business. Gary didn't own any of it, but he was her partner. And Gary was a great communicator. Sage ran all the back, back in, make sure the nurses show up, do the things they're supposed to do. And one of the things I noticed in that whole space with everybody I worked with, they were all doctors and nurses. None of them had a big personality. Gary had a great personality, very communicative, but he just had no audience, no stage. He was small. And he and Grant actually tried to launch a 10x health product at GrowthCon. The first one I went to in 2019, and Gary wasn't able to fulfill any of the orders. And so they killed it and it went away. Well, cycle back. Eighteen months later, when I tell Grant I'm gonna do this, he's like, you should talk to Gary. We were gonna do it with 10x health, and I'm like we might as well do a 10x health brand. So I revived the whole thing. I went back to Gary and said, you want to try this again? But I' gonna, you know, I'll give you 10% of the new company, we'll buy Sages and give her 8%. And then, and then I. But I'm the managing partner and I'm gonna do it my way.
- [04:51]
B
Sure.
- [04:51]
A
And we launched that business. We went from 1.8 to 25 million, 75 million, 120 million. And Gary went from nobody knowing who he was anywhere in the world by Grant putting him on our stages and by Grant introducing him to our community. And then a few of Gary's relationships getting on the bandwagon too. It led us to Dana and many other people of course, and blew the business up. And it, I'll be honest with you, it's beyond even my like that business is such a cottage business that help that innovative health space, cottage pharmacies, cottage service providers, no systems, no technologies, federal laws that are different than state laws. And every time you start to figure it out because big Pharma doesn't like that competition, they change them constantly.
- [05:39]
B
Right, Right.
- [05:41]
A
And it's just the complexity. But see, I came out of that space, I already understood the complexity as much as it's pain in the ass. I'm still willing to work around it. And we have now innovated. We're now in 46 countries. We launched in the UK, we're launching in the UAE, we've got multiple partnerships in multiple parts of the world that are happening. We are. I acquired another business in the UK that had spent 10 years on life sciences doing precision nutrition, IVs, precision supplementation. So I did a global deal with a manufacturer who's a leading state of the art manufacturer in Europe. And I acquired Control through bridge financing of this UK company. I combined that IP for rest of the world, brought in the best of that IP in the United States and we are the only people in the world and we're just rolling our app out. We're out. Everything can be managed, which we can get into. But I want to have a global healthcare company that's centered on longevity, health, wellness and human optimization that can touch 8 billion people. Because my partner said when we were postulating four years ago, we need a business that can touch 8 billion people. And I went and thought the only way to do that is to be in healthcare, be on the front end and provide value to every human being on this planet. How can we do it? And that put us on this mission.
- [07:06]
B
Wow. So you mentioned something about exiting company in the space. Is this right? Was it 77 times EBITDA?
- [07:13]
A
77 times EBITDA.
- [07:14]
B
So most of the time people exit for 2 times EBITDA, 6 times EBITDA. Or maybe in the tech space they'll get 8 to 12x EBITDA and some sometimes 14x. How the heck did you get 77 times EBITDA?
- [07:25]
A
Yeah, well, so when I took my first company public when I was 29 and and I was a consolidator, I bought about 136 businesses, although as phenomenal experience and more than I ever thought I would do from a little town of Corvallis, Oregon, sitting on the tractor, barely getting out of high school. So I had, I mean it was a dream come true and I'll never regret it. But I did leave about 400 million off the table because I didn't know what I was doing. And when my private equity group sold the business, I decided I was going to learn to build a business without using anybody else's money. And I understood consolidation, I understood platform companies because for seven years I was traveling around with my private equity group, going to healthcare conferences, looking at what they invested in, meeting other CEOs and asking a lot of great questions. So I decided I want to innovate the small business space. It's a 16 trillion dollar space today. And I knew that consolidation on a very fragmented basis, small businesses didn't work and very, very rarely worked, which is why it's private equity. You need a platform company. So I thought there's got to be a different way to build a platform company. Because billion dollar companies are worth a lot more than 5, 10, 15, 20, $50 million, 100 million dollar companies. So how could I aggregate billion dollars of value bypassing Wall street and redistributing that money to back to the business owners who normally don't get it at that size. And that became kind of my thesis. And so I created my own business plan. It was a democratized, decentralized collaboration model I called it back then. And I had to go through the SEC eight times, finally got it approved, launched it in 2005 here in Scottsdale, actually at the Phoenician. And the idea was I would swap equity rights, I would give up fractional equity in the management company which would equitize up to 250 independent businesses in exchange for upside rights in their business and management fee. But I would build a centralized brand which got around franchise Law because they were owners, so they had the right to use it. And then I would build what a platform company had, systems, technology, leadership, people development, skill sets, R and D on how to scale in your micro market and your regional market. And I would build an acquisition company for these guys and then they would pay the management fee and then they would get the benefit in their marketplace. And everyone said it wouldn't work. Fast forward. I had 1,000 locations to 198 equity partners that owned 35% of my management company. We were only doing 35 million in revenue, a couple million in EBITDA. But what I had built was an engine that if any strategic bought it, they could plug it into all the businesses around the world that they were operating and elevate them to the standard of our businesses, which were three and a half to 15 times larger than their peer groups in efficiency, effectiveness and market share dominance. And so I took the same research that we did 9, 10 and 11, where we broke down 10,000 businesses across hundreds of verticals for me to understand consolidation, disruption, all these different convergence of multiple businesses into others. And we studied the Best Buy, putting all the mom and pop video stores out of business by using a revenue share model versus a buy and rent model. And then Netflix and Redbox putting the pressure on Blockbuster and Hollywood Video. And then innovation of WI fi and technology and putting them all out of business. And all those things happened over a few years. But we did like 20 of those things to create a data set. Then we took all these little businesses and ran them through those data sets. I did that for three years, had a team of 16 very smart people from Harvard, from Stanford, but I could buy them cheap because 20, 19, 11, 12, the world was in a meltdown. And I formulated this engine and I found something. And what I found is that if you find the right strategic, they're going to buy you not on your revenue and not on your ebitda, but on a synergized value. And if you could prove the synergy by them buying you and what they could do with their businesses with you. So I did that and then I researched our industry and I found the eight natural most best buyers, all big companies. And I literally my opening presentation was, hi, I'm Brandon Dawson. I have a $35 million business doing $2 million of EBITDA. If you acquired me and integrated me into your business, I would add $2 billion worth of value within 36 to 48 months and I want 10%. And when I pitched the head of in private banking and investor relations and health care banking for, for Piper Jaffries out of Minneapolis. He was that ran the whole thing, $10 billion division. He said, that's the dumbest pitch I've ever heard. It's not going to work. I asked him, when's the last time you've ever been out of the office? He's like, what do you mean? I said, when's the last time you did a roadshow and watched a pitch? He says, oh, it's been years. I run teams. I go, you come with me. Eight strategics and these are like Siemens Healthcare EQT 56 billion under management, all these big public companies. I pitched eight companies, I had eight bidders. We reported 151. When it was done, I got 189 million.
- [12:45]
B
Oh my gosh. Okay, let's talk about the 10x side of things. 10x growth con started 10 years ago. So you mentioned around 2019.
- [12:57]
A
20, 20, 2019 was the one I went to as a guest.
- [13:00]
B
So was that half a decade in? That's like number five or so.
- [13:03]
A
Yeah.
- [13:04]
B
So those are very, very large format events. They became the premier of all events in America, if not the world. As far as like the, the big bad conference one time having 30ish thousand people.
- [13:14]
A
That was the one I went to.
- [13:15]
B
Oh yeah, 34,000 people. Yeah, I was there. It was a sight to see how like there's so many companies that have plenty of money, can book, you know, celebrities and talent too. But why do you think it was that 10x became the premier big name?
- [13:30]
A
Same reason I partnered with the man who had the thought, Mr. 10X himself, Grant Cardone. You know, if you would have met Grant And I in 2010, 11 and 12, you would have said I was the successful entrepreneur, he was the guy making 3 million a year. I had 68 full time marketing people on a team of a couple hundred running a thousand locations and they were trying to get me to launch a YouTube channel, a Facebook podcast, all in 2009, 1011. They were way ahead of the curve. I ignored them and told them it was dumb, that we just needed to focus on our business. And I was doing all this research, I wasn't thinking. I was working with Michael Gerber. And then I got to know John Maxwell, started building, helping him dou his business and built a relationship with him, Sharon Lecter. And they're like, you have all these authors and Jim Collins at the time, you should be shooting these podcasts. 2011. I'm like, guys, guys, guys. Nobody Care. Nobody cares. Nobody cares. We could be spending a little bit of money and you get millions of people. And I'm like, guys, guys, guys. Stick to the hearing aid business. Worry about our customers. But Fast forward to 2015 and 2020. Grant Night took a completely different trajectory. He went for me and a guy making 3 million a year. Being a billionaire, I went to a guy, Yeah, I was successful. I sold my business and made 100 million bucks. Okay. But the divergence of resources we Both had from 10 to 20. He just had this vision and went for it. And he did it. And he did it because he believed it. And he put everything into making it happen. I didn't see it, I didn't believe it. And I stuck to the thing that I was good at. So I had to really do an assessment, because when I sold my business, I integrated into the billion dollar company. And in 36 months, we took them from one to four and a half billion. So I was done. They said, thank you. Other than raising them $400 billion or $400 million euros, they didn't really need me to run the business anymore. So we were looking at what we're going to do next. And I started looking at Grant because my wife Natalie's like, you got to look at what this guy is doing.
- [15:31]
B
Done.
- [15:32]
A
It was a little difficult for me, my ego, because I was a type A driver, very successful, had all this research, which I refreshed all that research in 16, 17, and 18 to get it up to current times. And I knew I was the only guy in the small business space that actually had 10 years of research force, ranking all the different growth and value factors of all these micro businesses, trends, all this stuff. And so I knew I had something. I just didn't know how to bring it to market. So she put me on Grant. We went to that 2019 conference, and I was like, what this guy? I had been running meetings since 2010 with a thousand, twelve hundred people. I knew how hard they were put together. I knew how much time, energy, and effort and how expensive. I walked in that stadium. And I was like, anybody that could do this has to be able to do anything they want to do. And I want to be on that wagon. And so that was the moment. Half. First day, first half of the day, I had five things I wanted to see. And if I checked those five boxes, I knew I was going to be Grant Cardone's partner. But he had never met me. So, wow.
- [16:35]
B
Why do you think it's important for someone listening to this Podcast for themselves or their friends to attend a business conference or a mastermind to learn in those environments.
- [16:44]
A
Well, I don't think it's important to them if they don't know what their three to five things are. I think to the level you have intentionality, you know what you're looking for. If you go to the right places, you're going to find that right data. If you just go because you just want to get something and hope it works, it's never going to work. So if you can say these are the things or the areas I'm deficient, these are the things holding me back and I want to go to a place where I can receive information that can bridge that for me, find mentors, find information that will help me take a different action tomorrow than I'm taking today that's different than what I did yesterday. So I can drive to a different result. Like, if you're gonna go for that reason, I think it's critically important to go to the right places, listen to the right people and get the right information because you're not gonna get it where you're at and you're not gonna get it from the people you're talking to. If they knew how to do it that you, you wouldn't be talking to them, they wouldn't be talking to you because they'd be doing it. So trying to do it the traditional way through pulling P O L L I n g, what do you think I ought to do and what would you do and how would you do it to. People have never done it, it's the wrong place to go. Pulling P U L L I n g. Go up and pull down from someone who's been there, done that, doing it and learn from them. It's the only way to do it. And that's why I would go to those conferences.
- [18:01]
B
So you guys also host a lot of smaller workshops, high level ones, more expensive, more focused. And what about that? So the people that they know that they want to do it, they know the three to five things they need. They've got a business doing 2 million or 5 million, 20 million, 10 million, whatever. And they just know they want to scale and learn from guys like you and Grant. What about for them?
- [18:19]
A
Well, so, so the people that we work with and the reason we've been so successful, we've had almost 9 billion in businesses come through our format in six, six years.
- [18:30]
B
It's crazy.
- [18:31]
A
Six years is because Grant has proven he is the world's greatest marketer. Now let me tell you the five things that drove me to the Growth Conference to see if I wanted to partner with Grant. And I can answer this from my perspective because everyone has a different perspective. But I was already hugely successful, I was already wealthy and I had a plan. I just didn't know how to at scalability execute my plan. When I went to the Growth Conference, I wanted to know what kind of person Grant was. So you really need to know when you go places, if you're listening to people, what kind of people are they? You need to figure that out for yourself. You can't watch YouTube. You can't listen to other people's perspectives. Self education is the only way to do it. Secondly, I wanted to build with my wife. So is Grant and Elena really a team? Do they believe in that? Because I've worked with entrepreneurs that don't really believe in working with family or spouses. So I wanted to go check that out. Thirdly, the community that he draws in that 10x community, does it fit the community that fits my research? Are they independent business owners in spaces that we've got all our research in and that we know has have the opportunity to do some wealth creation strategies? Fourth is, is he can I actually get along with this guy and do we compliment him or conflict with them? Because I, I knew he did sales and marketing training and I knew, I knew he was the global leader in using crowdfunding for multifamily real estate. Like I knew that and there was nobody that competes against him. The things I'm an expert in and all the research and the execution and all the systems and technology I built will complement his belief system and how he teaches or will we have a problem? And then the fifth thing was I had all my targets since I was a kid. I was told by one of my mentors at 26, Warren Buffett at 27 was worth a million. At 37, 10 million. At 47, 75 million. At 53 he was worth 350 million. And then obviously went on from there. Well, I, at 27, I was worth 10 million. The problem was at 32, I was back down to only being worth 250 when I sold my business. The reason I picked that number is because it got me 75 million net. And that was my target at 47. But I had a new problem. I had no idea how I could escalate my success at 51 to be worth 350 million. So could the things Grant does rub off on me enough and compliment my skill set and my research and my business to accelerate my growth. So I was less fixated on starting another company and building it up and more how fast can I do it to hit that 350 number? So when I got a chance to meet Grant, I said, these are the five things I need from you. Are you committed to those? And he said, absolutely. Here's the five things I need from you. We're like, let's go. Okay. For me, being able to hit that next target was everything I was fixated on and finding somebody who could help me do it. And there wasn't a lot of people out there that I thought I could do that with. So that's why I went there and that's why we started doing what we're doing. And I forgot the exact question you asked me.
- [21:28]
B
So someone did it. They went to the workshop. They learned from you guys. They spent a year, two, three years and really dove in, scaled their company from 8 million to 16 to 32. When should someone be considering to exit? How do they know? Is there an emotional thing, a mental thing? Are things breaking or they can't hire a scale? Like, is there a thing that you would say to someone when they're considering selling?
- [21:49]
A
Most people sell when they're under pressure and it's not working anymore and they get a low value for their business. Private equity is like the big troller that's going through the water just waiting for somebody to go. I'm overwhelmed. I got all these high costs. In fact, what we identified within our research is there's seven breakpoints between startup and 125 million and another four between 125 and a billion. And people tend to sell at the top end of any one of those breakpoints because it's the hardest thing to do, is punch through them and they increase costs and then they get less return and they get worn out and then they sell. And if you're a 15 million or 25 million or 45 or 75, you're in that perfect sweet spot for being tucked into a platform company. And they can buy you cheap. You know, they offer you six or eight times ebitda, a real buyer that's offering eight times ebitda. If it's a platform company, it's eight times your ebitda, it's four times or three times theirs. And they know that when they buy you. So when should a seller sell? A seller should sell when, when they've predetermined a target, a net worth target and they've built to that target and that Target will accommodate that. The passive income they'll generate after exit will accommodate the lifestyle they want. And this is the calculation none of them do. Most entrepreneurs build and build and build until they're worn out and then they sell or they just stay small and they take an income. If you said to me my target is I want to be able to live on a million dollars of income a year and have a remarkable life, own two houses and not have to do anything anymore, and I want a million dollars a year, well, you're going to need to sell your business for a net of somewhere between 18 and 25 million bucks. Now if you want a 3 million dollar house in both locations, you're going to earn that money while you're building to your net worth target because you're only a 5, 6% protected on the income. A lot of people though will build their 20 million dollar business and they'll live on 4 million a year and then they sell and then they only making a million a year. So they start spending the principal and then they find themselves they got to go back to work. So if you know what kind of lifestyle and you build it that lifestyle and you have those targets, and I always tell people have a 10 year target, but you can do it earlier but have a 10 year target and know what you want to do and when you hit those targets that that's the time to sell. If you don't hit the target, you got to keep building. But what really happens if somebody gets their lifestyle to that and they get to the 20 or 25 million, they're like, I can go a little further and it becomes less burdensome because if you have that backstop, you have that confidence that hey, I can quit anytime, I'm going to have a great life. And that's usually what happens when people takes their first money off the table and they go back at it. They're like, I got a backstop. So then they get more aggressive and they actually do the things they could have done right before they sold. And so that's why you get serial entrepreneurs doing over and over and over.
- [24:35]
B
So somebody went to the workshops, they scaled their business and they had the exit. They listened to all your advice, they got $32 million exit, they took home $10 million for themselves with their partners, blah, blah, blah, blah blah. Why real estate? Why are you guys so all in real estate? Why have you raised billions of dollars for the real estate category?
- [24:50]
A
Yeah, so that's my partner. So my partner is an expert in real estate multifamily assets that traditional people would never have access to. The big institutions buy them, I am the other side. So I'm launching Cardone Equity Group, which is our private equity group for businesses, for investing in businesses. So I always say to people, you should have a diversified portfolio. In full disclosure, outside of Grant, I'm the second largest investor in Cardone Capital. So again, I like to use myself as an example. I want to have a diversified portfolio. I'm happy with 5 or 6% coming in on things I don't have to touch. They also give me a tax shield. But for me, real estate's boring. I own a lot of it. I don't really love any of it unless I work in it. Like I own a big piece of this building with Grant through Cardone Capital. So I love being in here. It's my building too. Right. But I love businesses and I can move the dial on businesses and I can move the dial on businesses. So I think a balanced approach. So when you take for example, I do have a guy that was, you know, we grew him from going out of business 2 million to 8 million to 22 million and then a $35 million exit. Now he's got 10 million.
- [25:58]
B
I'm just kidding, by the way.
- [25:59]
A
But that, that there is a guy and he had a couple partners and they, and, and they each took 10 million. They've retired and they're living off 400 grand a year and they're happy. So real estate, they were able to put it in real estate, not do anything. That's the beauty of real estate, you don't do anything. I like active investments, so I like to take my cash and I like to have an 8 to 20% return on my cash. Well, I have to be able to drive that. And so the example of the guy that had a couple partners and they took that money off the table, that was a three year cycle, by the way. $2 million of revenue going broke to a $35 million exit in 36 months. The one that has 11 million that's working with me, he took his expertise because many business owners don't do a completed cycle. They don't know how to do the exits and all that. They usually screw them up. He did it and so now I have him working with other business owners. But he also co investing some of his money with us in those businesses like a traditional private equity exit strategy. And he's in adding operational value and we're launching a whole new business around his expertise that happens to be an Automotive repair. So it depends on what you as a human want to do. But for me, I want to have a diversified portfolio. I want to have something that's going to pay me me 5 or 6% for life, where I don't have to even think about it, I don't have to manage it, I don't have to take the phone calls, I don't have to change the toilets. And I. And that gives me my passive income. And for me it's mostly cardone capital, but I also own a partner in 700,000 square feet of storage units. I own warehouses in Texas, Midland, Texas, for oil and gas. So I have a real estate portfolio that I want to have passive income. I don't have to do shit. Then I can go risk my personal active time making passive income in investments in business. So if you, whatever you're good at is where you should spend your time and what you're not good at, you should trust somebody and give them their money and go generate money in what you're good at.
- [27:54]
B
So I did this speech called 40, 40, 20, 40% low risk, where I want to make between 5 and 8% for the year, 40% medium risk. I want to make 10 to 25% for the year and then 20% my shot at glory. Private equity investments, angel investing, cryptocurrency, et cetera. What are your thoughts on that concept and do you have your own version of that for yourself?
- [28:13]
A
Yeah, so I agree, I agree with the 40, 40, 20. I just do it a little differently. 40% real estate, that's fine, great. Only with people. I implicitly trust most of that because I've been doing that for 20 years. But two thirds of that is with Grant, my business partner, because I implicitly trust him. And I, I would live in any asset he buys. Right. Or work in any office building we own. And because we're partners and we see these things together, I'm always like, wow. I'm always mind blown at the stuff he gets and how he gets it. He's a genius in that. The other 60% of the 40, 20, 40% of that is something I'm still actively involved in, but it's at critical mass. So my business model is bringing all these people through that I help grow their business and then in partnership with them, acquiring businesses and aggregating them into their business and then helping them go to the next level. And so it's a little less risky because of the engine I've created of deal flow and being able to buy things right and at low risk but with great operating partners. So that's why I wanted to protect that other 40%. The 20% is in with people I have relationships with, like micro nuclear investments, things that I generally. Or public company stuff that my friends are involved in that they're like, hey, this is a good target. Or that's a good target. And so I do less of that 20% with few people. But when they're like, you should look at this company. I have very wealthy friends, 30, 40, 50 billion dollar portfolio managers, very successful. And when I'm sitting around with them, I'm like, what's the one thing you really love? Three to five years. Then they tell me and I'm like, is it insider information? They're like, no, it's just, you know, you can go search it yourself. So then I go put my attention on. I'm like, it's two bucks a share. It's a rocket. It's a four, three bucks. It's a rocket. It's supposed to go to the moon. It's the only one that's done it. I bought a million dollars of this stock and I sold it for $4 million nine months later because it landed on the moon even though it fell over. So I like look at stuff like that. And if I really fall in love with it, that's my risk, 20%. But otherwise I'm fairly disciplined in the 80%. I don't like to lose money and I only like to work with people I trust and invest alongside them.
- [30:38]
B
So I have this thing called the Elevator syndicate. I have 960 investors and the last three years I raised 56 million for small rounds, 3 million to 6 million per deal. Company's doing 2 to 20 million in sales. And I like that bite size thing that I can help, right? I can't raise the kind of capital you guys raise. And I don't go invest in companies are doing 600 million. I like 6 million and 12 million, 18 million. Then if it works out, we can have a big exit. What are your thoughts about doing a bunch of small bite sized things like I'm doing? Or is it better just go for like Jaws and go for the big ones? Go raise 56 million for one deal instead?
- [31:11]
A
Yeah, here you said something though in that you said things I can help. I, I fundamentally believe that 20% risk is the big things you put money in. Because if I'm not involved, I don't trust anybody. Honestly don't, I don't really want to give my money to private equity Groups and trust them. I would rather put my money in my own private equity group and, and have be able to leverage that with people that trust me and Grant and my wife because they know we're great operators. Think about 10x health. I put a million dollars of cash into 10x health by buying Sage's business. I paid for it over four years because they had a little business making a hundred grand each a year. I mean they had no risk. They made their last year working with us as partners. They made over $11 million personal income. They made a lifetime of money. They made six times revenue in their last year of working with us as partners. Now we had a falling out. You know, I find that people fight when there's no money or too much money. And I also find that when you buy businesses that are owned by artists because Gary's really an artist. Gary is your typical artist. He is so in love with the science of what he does. But a lot of those artists aren't really, you know, that good at business. And so, and they, and they have this feeling of how exactly the piece of art needs to work. And you know, sometimes it's hard to please artists and so you have a falling out. But we patched it all up and he's doing what he loves to do. We're doing what we love to do. And where it fits, we're still working together, which is great. But that was a million dollar investment and some equity. Turn it into, you know, whatever the business is going to be worth in three to five years, it'll, trust me when I tell you it'll be astonishing. But see, I can affect that and have low risk. And so for me, putting my money in our private equity group that we launched having our friend business owners, a lot of our business owners have lined up to invest alongside of us because they love business. They want us to invest that money in businesses. They want us to co invest with them, buying and we create our own ecosystem. That'll be 10 billion to $100 billion. So I don't need any outside influence. But if I didn't have that and I didn't know what to do, I would only invest with my money with people I implicitly trusted. And what you're doing is you're making micro investments with people that trust you to overlook those investments and you don't need to make a lot of them. If a handful of work, it's going to give all your money back. So your downside protection is somewhat protected. But if you weren't involved with that, the people that trust you, that give you money and work with you, they wouldn't put money in that if some stranger came along.
- [33:50]
B
Sure.
- [33:51]
A
It only works because you have the relationships and you know what you're doing.
- [33:56]
B
So someone that's out there making money from their core job, they're making 3, 400 grand a year, 500 grand a year. They're starting to really grow as a family. How do they decide if there's real estate, stock market, cryptocurrency, private equity deals, their friends, opening a bar, restaurant. There's just so many options of what to invest into. How do people research or figure out what the heck they should be investing into?
- [34:14]
A
Yes. You mean a micro investment. Well, first of all, like you gotta look at the track record. 96%, 97% of all businesses under 100 million fail. Two thirds fail in the first five years, 97% fail in the first 10. Now the actual stat, 65, the pure stat is 65% fail. So everyone always asks me, why do you say 97%? Because out of 34 and a half million small to mid sized businesses under $100 million in revenue, 26 million have a sole producer, sole provider, sole owner working on their living room making 72,000. To me that reeks like failure. So I count those in the failure rate. That's not a real business. So how do you know and what do you know to invest in? I would never invest in somebody's idea, it's guaranteed to fail. I would invest in an entrepreneur who's been able to complete a cycle which includes an exit, who has a stellar track record, knows what they're doing, their authority, they are unauthority in whatever they're doing. And they have a legacy, historical capability to not only build, but exit. Because the number of ideas that never go anywhere, and majority of them, even if they do, they fail not because the opportunity is not good, but because building a business. The first 3 million is what you do, the what you do has to work. It'll get fleshed out in 3 million. But once it's 3 million, the what you do still has to be excellent, but it's who you do it with, how you do it. And most of these small business owners don't know how to find, attract, align, develop and retain great people. Most of them don't know how to promote properly, most of them don't know how to scale financially, most of them don't know how to train other human beings. So what happens is it just falls apart and so you're never going to get your money out of it. And it's not, it's not liquid. There's no point in investing in something that's going to be tiny. So the idea has to be huge, has to be with someone who has a phenomenal track record and authority and has to be somebody who's proven they understand the concepts of building and scaling a business. If they can't fit all three of those buckets, I wouldn't even entertain putting a dollar in there.
- [36:21]
B
Part of my speech is zero to 1 million, super hard. Rarely ever happens. Very people will do it. Going from 7 million to 14 million. Not that hard if you get systems and processes and people to help go from 7 million to 14 million. So if your friend is opening their seventh salon or their seventh gym or their seventh restaurant, their failure rate is going to go down. But their first location, you're not even just gambling, you're just almost no chance, right?
- [36:43]
A
Well, the rule of three, because we studied 10,000 businesses and what caused them to fail and what allowed the others to succeed. And we came. I came up with this thing I call the rule of three. It's crazy how the business concepts, the number locations, all these things became 3, 3, 3, 3. So I called the rule 3. Even if you have seven locations, if two, so that's three times two is six. So if the seventh location's underperforming against the six and they cannot get it to the standard of the best two or three, the business ultimately will fail. It only takes two to take six down.
- [37:26]
B
Interesting.
- [37:27]
A
And so it isn't the seventh because they have six, because normally what you see with, with someone that opens six is, is two are working really well, two are breaking even, two haven't got to break even yet. So what I would say if someone said, I'm opening a seventh, I'd say, great, show me the individual store P&LS. And they'd say, here they are. And in aggregate, I would look at the best three, say they had six, I would look at the best three. What are the revenues, how long have they been in business, how much profit are they driving and how much cash are they actually collecting? I would take those three and average them. And I'd say, now compare that to the next three. And if the next three were not on the exact trajectory as the first three, I'd say you're crazy for opening the seventh because you're going to go out of business. So the rule of three never lies. It's true with people it's true. With. You could just take three. Three times three. How should you scale business one to three to nine to 27 to 54 to 81. That builds a $25 million business. It only takes the total aggregate divided by three to show if it's going to succeed or not. Because we never saw any format that worked. And you see this a lot with franchises. People have 12 locations, they start selling franchises. Now there's 20. They can't support them. Nobody knows what the hell's going on. There's no statistical facts. Everybody gets sued, things go away.
- [38:53]
B
All right, so we talked about making money side. We talked about the investing money side. Let's talk about giving away money, by.
- [38:57]
A
The way, on the investment side.
- [38:59]
B
Yeah.
- [38:59]
A
My partner has been innovating this in crowdfunding. David Weild wrote the JOBS act under Obama. Grant was the first person to really stretch into it. I was using a different model. I created that. Now, because of the JOBS act, my model is going to be a lot easier because it was the first democratized, decentralized model equity model. But now you can do it digitally, which is phenomenal. But now grants raised 1.7 billion since 19. Okay. And. And now he's combining with the bitcoin fund of this property. We're doing real estate and bitcoin. And I had. David will come out because I work with David, and David is the most progressive thought on. On crowdfunding, on equitizing, on public company stuff. And he looked at. He's like, man, this is going to be the biggest thing that's hit real estate. Because now you get a hedge in traditional real estate, you can do it by location, you can do by portfolio. So if you love bitcoin, now, if I would never go out and just buy bitcoin because I have no control over anything, but if I'm hedging it against something else that has value, that protects me now, I'd be like, I'm going all in on it. Right. So we like to innovate these spaces. And so when you talk about it, you can combine it. Bitcoin, real estate. You can actually now do both, which now I'm like, okay, I'm in. That's amazing. We want to do the same thing with business where you can do these hedges. And that's what I've been creating is pooled hedges. Because if you're in the H Vac space and you're working with us and you're growing your business, and now you can be part of a pool of another 200h vac people hedging how well they're doing, sharing data, sharing information, sharing shared economies of scale and purchasing of other assets that then hedges everybody's business. So that's what I've been focused on for the last 20 years is creating hedge pools. And that's why I got 77 times EBITDA. Because when we sold the business, we didn't just sell the business, we sold something that allowed a bigger entity to hedge what they were doing against what we built. And so if you think of building businesses with hedges, that's why hedge funds become the most valuable because they got multiple ways they can protect themselves themselves. Small business owner doesn't have that. Usually they're key man dependent, key producer dependent and key economics dependent.
- [41:14]
B
So the giving away money side, you guys have a pretty big charity component to the live events with 10x events and also I've seen the crews you guys were doing and things like that. Why do you think it's important for business owners or just people in their own family and household to have a charity component to their life?
- [41:29]
A
Yeah, it's a great question. We have the Grant Cardone foundation for Kids Kids and that is an amazing entity that brings inner city kids and kids without fathers into our ecosystem to give them a perspective, a hope of a vision for the future. And we collaborate with a lot of great organizations to do that. And that was Grant and Elena Cardone's vision for me. Fifteen years ago I launched the Dawson foundation and we've worked with halfway houses, family, local family, displaced family, abused and victims. A lot of and I and I've been on the Today I'm on the Scottsdale foundation police board in Vancouver, Washington. I was on the Vancouver Police Board. Nationally I'm on the U.S. marshals board for fallen officers. And we've given a lot of money to things like St. Jude's Hospitals for Kids. Our whole team, we have CV cares, so we'll shut the whole company down. And I did this up in Vancouver with Autogy Cares. We'll shut our whole company down and we'll go to the food banks and we'll prep food and we'll do this once a quarter and we do these drives two years ago through a company. I'm a chairman of the American Academy of Hospitality Science which was a five star, six star original certification with Frank Sinatra and Joey Cinque. 50 years now and Joey's 90. Frank's obviously dead. So I'm became chairman to help this. But millions of dollars a Year of toys, Toys for Tots. We work with these other, you know, but I brought it into Arizona. We give 130,000 in toys away to kids in, in, in, in homes and displaced shelters so that they can enjoy the holidays as well. So we really believe in and, and I think where I align with Grant, with the Grant Cardone foundation and why I'm such a huge supporter of it, because children, they deserve to have somebody that takes an active interest in them. And we're really committed to doing that. And if we can get kids to see something bigger, something more hopeful, inspire them to be able to take care of the needs and necessities of today by helping the way we can. And me, I do it through law enforcement because a lot of these law enforcement, local law enforcements have programs, but they don't have the funding.
- [43:46]
B
Sure.
- [43:47]
A
So I like to combine what I'm doing with law enforcement and drive it into the communities so the right people get what they need to get. And we've been doing this now and supporting these. And I give millions of dollars away to charity a year and a lot of it to Grant Cardone. And then Grant and Elena do so many amazing things through the Grant Cardone Foundation. The Cruz was one of them where we get to activate business owners to come in and support that. To answer your question, why should somebody do, do any of this? Look, there's no better like the biggest joy I have is when a business owner's life transforms because we helped them. The biggest joy I have is one of my team members. Their lives transform because we help them. The next biggest choice, when the lives of the people that we work with, with people that work with them, transform, driving impact through human beings. And I've been very close. One of my closest, dearest mentor and friend is John Maxwell, number one thought leader in the world. If you have the ability to create and you don't share it, then you'll lose the gift of the ability to create. And when you lose the gift of the ability to create, you will lose your superpower. So to me, if you're thinking about yourself and always thinking about yourself, you'll eventually be a miserable person dying a miserable life. If you think about the people around you and how you can drive impact and how you can shape and support and invest in those people and you're able to do that and affect that, then true leadership says you won't stop there. You'll continue to perpetuate it and perpetuate it. But a lot of people don't know how to do that. So through our organizations, we drive our teams to do it in the community so that they get gift of giving. And when you do that and they bring their kids along and stuff and we have kids days and things like that, you perpetuate this idea that if you can, you should, and if you don't, you won't. And so I'm a big believer of that. You spend the way you buy and you buy the way you spend and if you're cheap and if you're inwardly focused, you'll die cheap inwardly focused. If you're not concerned about money and you're investing in others and teaching others to invest in others, you will actually drive and perpetuate long term impactful change. And if you're unwilling to do that in any ways at all, you'll never get it. Because John says if you want a hand, you got to give one first. And if you want to be interesting, you first have to take an interest in other people. So for me, I just believe that exchange, it's called law of circuit circulation. And if that circulation isn't happening and it stops, it also stops on all the good shit that's happening to me.
- [46:37]
B
So I built a ranch in Temecula, California and our mutual friend Michael Chandler comes there once a month and we do training called Operation Black Site. But I built these shoot houses and I let the police, K9, SWAT and Sheriff come there every single week for free for the last half a decade. On the toy side, I didn't know you guys did it that big. That's my biggest passion. So we started 11 years ago the Treatise Kids Foundation. There was eight of us on the floor wrapping toys. Three years ago we filled up SoFi Stadium, broke the Guinness Brook world records. Last year we filled up the Miami heat arena and 11 other cities in 17 days including here in Phoenix. And same concept, hundreds of thousands of toys. And I fly around like a crazy person to all 11 cities in that 17 day period. I would love to. I mean it's my true passion. I self fund the majority of it. It's just like I do the 100k one on one coaching. I make them wired to the charity.
- [47:28]
A
That's awesome.
- [47:29]
B
And So I raised 2 million a year for charity by doing 20 clients and then they wire to the charity or I give them three charity choices but that's the main one.
- [47:34]
A
That's great.
- [47:35]
B
That way I can help pay for it and whatever.
- [47:38]
A
Yeah, of course. Well you are paying for it because your time is funding these opportunities.
- [47:43]
B
And so My last question is the only one question. I ask the same question every single episode and I've never gotten the same answer. And I know I'm not getting the same answer today. It's about children. So Brandon Dawson goes off to become a multi, multi, multi billionaire. And unfortunately, at some point, time goes 10x health. You last 100 more years, but you still have to pass away at some point. What percentage of that net worth of those billions of dollars do you leave to children?
- [48:10]
A
I think for every single person, the reason everyone has a different answer is because it's a unique. It's unique to the individual. Right. I have three remarkable daughters, three great grandkids. I'm expecting to have more. I will leave enough that my kids will never have to worry about money if they maintain a reasonable lifestyle. The rest of it will go to things that will support the beliefs I have. And a big piece of it for me because my wife is half my age, so she's statistically going to significantly outlive me. A big piece of that decision will be whatever decision my wife makes. And I believe in my wife. I support my wife, but she's helping me create the net worth. She's president of all of our companies. She's actively involved and she has things that she loves supporting, and the things she loves are women driven businesses, minority driven businesses owned by females. So I am 100% certain that wherever that money is allocated, it will be used well. But if you think about even the most wealthiest people, after a few lines of generations, their wealth is gone because it gets pissed away. So one thing I can assure you is nobody's going to touch the money to spend the principal. They're only going to be able to spend what the principal generates and that will determine what happens with the wealth. But I'm not leaving billions of dollars or hundreds of millions to each child. I'll leave enough income that money won't be an issue. I'll leave enough income that health care will never be an issue. If they want to live a moderate, great life, they'll be just fine. So will my grandkids and my grandkids after my grandkids. But if anybody wants to go and live the life I have, they're going to have to go earn it.
- [49:50]
B
I love it. All right, guys, this is one of my favorite episodes of all time. I'm going to hopefully come back here to do it again because there's so many more questions that I have. But what you need to do is have all your friends that are in the business world. Real estate world. Listen to this podcast. Make sure to follow Brandon Dawson across social media. Check out the different companies, 10x Health, Cardone Ventures, and all the things in between that you heard in this episode. And as you guys know, the reason for this podcast is we grew up thinking it's rude to talk about money. I think that's ridiculous. You have to have discussions about accounting, legal, taxes, situations, borrowing money, loans, debt. What happens if my friend borrows money? How do I get it back? We got to be able to talk about money because it's part of our real life. So check out this podcast, share it with your friends. Like comment, subscribe and we'll see you guys next Monday on TheMoneyMondays.com.