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Young and Profiting with Hala Taha
Codie Sanchez: The Business Model Quietly Creating Millionaires | Entrepreneurship | YAPClassic
01:10:42
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- [00:00]
Cody Sanchez
If I go to college and I become a roofer, that's not very cool. But if I become a marketer or a graphic designer, that's cool. Here's the problem. Roofers make way more fucking money. Ownership actually is a synonym for freedom. So the more that you own things, the less other people can tell you what to do.
- [00:17]
Nathan Latka
How do you see mom and pop boring businesses really evolving in the next five, 10 years because of AI?
- [00:24]
Cody Sanchez
The first jobs that AI took were artists, copywriters. Because AI lives online. You know where AI is going to take longer? Painting companies, roofing companies, plumbing companies. The best ways to make money are super simple. If you want to make more money, you should look at and you will have a hard time being poor.
- [00:45]
Podcast Host/Announcer
What's up, yap gang? While everybody is chasing the next big idea, some entrepreneurs are quietly building wealth with businesses that most people overlook. On our Monday episode this week, David Royce shared how he built and sold a $500 million pest control company. Not glamorous at all, but wildly profitable. And today's the App Classic guest Cody Sanchez has built her whole investing strategy around what she calls boring businesses. Turns out that some of the richest people out there are making serious money from roofing, plumbing, laundromats, landscaping, like some of the most unsexy businesses you can think of. In this episode, Cody walks us through how everyday people can start acquiring these businesses and why they might be the ultimate path to making extraordinary wealth. After this episode, I bet you're going to start seeing opportunities in places that you least expected. Let's dive in. Welcome to the show, Cody Sanchez.
- [01:39]
Cody Sanchez
I'm thrilled to be here.
- [01:41]
Nathan Latka
Me, too. So last time you came on the show, we talked about your background, we talked about your contrarian investment views, and we talked about buying boring businesses, which I absolutely love.
- [01:52]
Podcast Host/Announcer
And now you have a new book out.
- [01:54]
Nathan Latka
It's called Main Street Millionaire. So I can't wait to find out how we can all become Main street millionaires. So my first question to you is trying to really understand some misconceptions that we have about rich people. When I think about rich people, I think about billionaires like Elon Musk and Jeff Bezos and tech entrepreneurs or celebrities like Oprah and Kim Kardashian. But tell me why you are challenging this idea. What stats and facts do you have about rich people?
- [02:25]
Cody Sanchez
Let's start with a fun one.
- [02:26]
Podcast Host/Announcer
Okay.
- [02:26]
Cody Sanchez
You want to know who the richest woman in the world is? This is as of the end of last year when the Forbes report came out. If you saw it, Maybe it's T. Swift. I know she had a big tour wrong. She's like 34th on the list. If you thought it was Kim K. You'd also be wrong. She was like 21st on the list. If you thought that it was somebody like Oprah, also wrong. She doesn't even crack the top 10. Who is it? Actually, it is a woman who grew a roofing company to more than $15 billion in net worth. And so my point here is I think one of the biggest misconceptions with the really, really rich is that they do things that are really, really sexy. In fact, most of the richest people on the Forbes 100 list, if they didn't inherit it from a boring business, they started a boring business or they bought businesses, AKA finance. So I think there's a matrix kind of like this. So, you know, on the vertical side of the matrix, you basically have the sexiness of a business. You know, from artists to musicians to actors. And on the right side, you have the income or how much money you can make. And what it turns out is if you correlate the two, the sexier the industry, the fewer the people make an obscene amount of money in it. The more boring the industry, the more people make consistent high dollars in it. And so there seems to be a correlation between boring, traditional, everyday businesses that we need nonstop and more of us making money, which I thought was interesting.
- [03:58]
Nathan Latka
That's so interesting. And we're going to find out later why these boring businesses are so overlooked. But before we do that, you open up your book basically saying that we are programmed to be poor. Tell us why. America basically teaches us to be poor our whole lives.
- [04:15]
Cody Sanchez
I heard a quote once that just seared its way into my soul, which was that you are as rich as you programmed yourself to be. And if you think about it that way, there's a good and a bad side to it. The good side is we. Well, you can reprogram yourself just like a computer. You can scrap the software, keep the hardware, and realign what is inside of you. The bad part is that the foundation on which you and I have learned money is actually a one that incentivizes us to stay just sort of tracking to our spend for our entire life, which is why most people will die alone and without much in the way of resources, which is really, really sad. And so when I started thinking about writing this book, I was like, we listen, we can't make ourselves smarter very easily. We can't make ourselves have more money than other people do up front so what would be a way to level the playing field? And because I was in finance for 12 years, I watched what the really, really rich did and they did something completely differently, which is they didn't innovate as often as Silicon Valley did. They didn't come up with some crazy startup and sleep on couches. In fact, they wore Gucci loafers all the way to the private plane. They eventually bough. And how did they do this? Because they bought other people's hard work, other people's years of hard work, and then they did a little bit of what's called financial arbitrage, but basically make expenses a little bit lower, increase profits here and apply the Wall street mechanism for growth to most businesses. And I was like, why does Wall street only do this? Why can't we? And so I think that we can reprogram ourselves to be rich by realizing that we just have to cop people's homework from those who have already achieved the thing we want in life. And that's kind of what I strive to do.
- [06:07]
Nathan Latka
Yeah, so I'd love to understand the difference between living a life where you have non ownership. Right. Versus living a life where you actually have ownership in something. Can you like compare and contrast that for us?
- [06:20]
Cody Sanchez
Yeah. So I think ownership actually is a synonym for freedom. So the more that you own things, the less other people can tell you what to do. And if, if your listeners are like, you and I, you and I, we're probably pretty unemployable, right? We're like, we're a pain in the ass. Which is why we became entrepreneurs. You know, we are just on the other side of diva, which is like, you know, I think we should do it this way. How come we can't do this? Let's go faster. What do you mean I can't make more? That's what a good entrepreneur is. And so I think if you are also like that, you are set up to succeed in some ways, which is that you will fail at being an employee for a long time. And the best entrepreneurs are failed employees. And so you will eventually get to a path where you realize that you can own the equity in the business, that you have distributions in the business over a long term, and it can be on legally binding contracts, you can take it with you as opposed to your W2. And the only little caveat there I like to put out there, hala, is like, I loved being an employee. Actually like the tail end of my career where I was a partner at a few private equity companies, I really liked What I did, I could have done that forever. At one company in particular, I just wanted to do it my way. And so I was annoyed at their speed. And because of that, I ended up going and doing my own thing. But what I wished I could realize at the time is that I could have had even my own business on the side and I could have negotiated for more equity and distributions in a business so that you could stay an employee too, if you want, and own a business. And so I think there's lots of ways to get to the end game of ownership.
- [08:01]
Nathan Latka
Yeah, I love that you make that point. I also love the fact that you actually had a corporate job where you were helping people buy businesses. And I mean, I think it's pretty safe to say you probably learned so much, which is why you could then become an entrepreneur who's, you know, has a holding company that buys businesses. So you also learn the ropes on somebody else's done 100.
- [08:22]
Cody Sanchez
I think any, like, there's so many people on the Internet now and you're not one of them because you've done this game too. But there's so many people on the Internet who want to tell you, like, go be your own boss. Be an entrepreneur, and that's fine. I do think that that's great. For many people, however, there's risk associated with pure ownership, where you own the entirety of the business. And so one don't assume that in order to buy a business, you have to buy the whole thing.
- [08:45]
Podcast Host/Announcer
You don't.
- [08:45]
Cody Sanchez
You can actually just own part of it and you can use other things besides your money to buy it. That's really cool. We talk about that in the book. But number two is there is no better way to learn the game of business than by getting a salary, learning under somebody else's tutelage, and eventually, if you're a great employee, getting a percentage of their company or getting them to invest in your business. And this is actually fascinating because people on the Internet don't always love to hear this, but in finance, most of the companies that we start. So if I left a finance firm like when I left Goldman, I was too young, they wouldn't have given it to me. But when I left my last firm, which was eec, they asked if they could invest in whatever my next venture was. They wanted to give me my first checks. And I think more often than not, if we kill it as an employee, we can actually push that into capital in our next adventure.
- [09:38]
Nathan Latka
Yeah, it's so true. I have somebody named Kate on my
- [09:42]
Podcast Host/Announcer
team who started as an intern four
- [09:44]
Nathan Latka
years ago and now she's a partner who's vesting to get 10% of my business and helps me manage, you know, the whole social side of our team. So it just goes to show that, like, you really can get equity in a company. And she's not really an inventor, right. I'm always inventing things, creating things, like that's my skill set. And she's really good at managing. So it's a way for her to become an entrepreneur without necessarily inventing anything.
- [10:07]
Cody Sanchez
Oh yeah, I love that. I mean, I think you're really smart because a lot of young entrepreneurs don't understand a few words that will change your life when it comes to making money and ownership, which is vesting equity, AKA you can give somebody a percentage of your company, but they don't take it right away. They get it over years of work, a little bit at a time each year, which is called a cliff. So nothing earned in the first year until they make it to the end of the first year. And if they're successful, then they earn a portion. Same thing with year two, year three. We talk about lots of the lingo in the book. Another thing that you mentioned that I think is really important is she was a high performer, she kept growing, and so you were rewarding what you had already seen as positive behavior, not trying to incentivize future better behavior. So I think a lot of times what people don't realize is they give a carrot to somebody who is underperforming or sort of flat and they say, you could earn equity in my business if you do X and Y and Z. What you really should do instead is say, wow, you're the fastest greyhound on the track. You're crushing it right now for me. I want to reward you for what you're already doing now over a multi year period. The best predictor of future behavior is past behavior. So your high performers are more likely to continue performing than you changing the mindset of a poor performer.
- [11:26]
Nathan Latka
So true. So entrepreneurship is like thrown around all the time. Everybody thinks they're an entrepreneur. Can you talk to us about freelancers, gig workers, solopreneurs? Do you feel that that's the same thing as owning a business? Why or why not?
- [11:42]
Cody Sanchez
I think we were sold a great lie. And the great lie was essentially this. First we owned our businesses back in the day when we first started in this country, we didn't pay a ton in taxes and we owned our own businesses. And then we apprenticed to eventually take over those businesses. Then one day big corporations came around and they said, instead of you owning these little things, come work for us. We have this big, huge opportunity. You can come work inside of our sphere. Then we worked in corporations and realized the only place that padded walls should be is insane asylums. And I don't want to work in a cubicles any under fluorescent lights. So we said, wait a second, startups. That's what it is. It's Silicon Valley backed venture rocket ships. We'll go to do those. So then we went and did that as a society and that's what we glamorized. The problem there is, Nobody told us 9 out of 10 of those startups would fail miserably and they would leave a bunch of us with a mess on our hand with companies that were failing with heartache. Right? And the people who would win would be venture capitalists who got to sprinkle tons of dollars across many companies and also fueled a ton of innovation. But it's not for everybody. It's a very hard path. And then finally we were like, no more venture. I don't want to do that. So we were like yolo into freelance and I own my own company or what I'll call solopreneurship. And we were like, solopreneurship is the way. Well, you've done this before too. I think the road to hell is paved with individual zoom meetings back and forth between yourself and no help. And so we didn't real that. All we did actually was now go work at the behest of an Uber or at the behest of a substack where they still own us, Silicon Valley still owns us. We just make a smaller percentage of our total profits as a solopreneur. And now we're like, man, we're not even making enough money in solopreneurship anymore. And we don't really like this. And so I think the solopreneur movement is actually not as glamorous as we thought it was. And so my hope is the next movement is this Main street movement. Can we go back to the thing we were originally talked out of, which is let's own a portion of small businesses all around this country that are already profitable, that have existed for a long time, that don't have crazy volatility of online businesses and that are simple and that you're going to pay even if it's in a recession because you want your plumbing to work, even if it's a downturn. And that's my belief.
- [14:06]
Nathan Latka
Hmm. I Love that. Anna, you have this quote in your book and you say, your salary will never set you free. Your financial freedom can only come through ownership, specifically through equity done the right way. So my question is, what do you mean by equity done the right way?
- [14:22]
Cody Sanchez
Such a good question. Everybody wants equity, right? That sounds good, but the problem with equity is you can't eat it. Meaning, like, what are you gonna do? I can't take my equity and go pay for something or put a down payment on a house. It's sort of like up in this ether, this thing that I can't touc. And if you went and looked at a bunch of Silicon Valley startup employees, you'd see, oh man. Most of them thought they were being compensated like this very high because they had a lot of equity and realized, wow, my equity wasn't worth anything like that. And so I think there's a better way, which is equity plus distributions. So that means, hey, I get a percentage of a company and that you can't really take that away from me unless I do something fraudulent or crazy. I own, I don't know, 10% of XYZ company that I work at. But because I need to eat and make money, there's something called distributions, which happen for all owners of a business. And so if you take, if the owner takes $100,000 out of the business, and then that means that I get what's called my pro rata. So my percentage that I own of the business, I get distributed too. So let's say the owner is going to take $100,000. I might get 5% if I own, or $5,000 if I own 5% of the business. And that way we can eat as we move along and get equity. That is equity done right. Distributions today, future profits tomorrow.
- [15:45]
Podcast Host/Announcer
Hey, yap fam. I'm not afraid to say producing this podcast requires skills I do not naturally have. From audio engineering to video editing, I have to hire experts who are way better than me in those areas. And as I scale my podcast, this becomes more and more important. And every time I need to hire, my first thought usually is this is a job for Indeed. Sponsored jobs. When you sponsor your job on Indeed, you find candidates with the exact skills you're looking for without the stress of digging through endless resumes. Sponsored jobs posted directly on Indeed are 95% more likely to report a hire than non sponsored jobs. That means you're not tossing your post into the void. You are connecting with qualified people who can actually help your business grow. Spend less time searching and more time actually interviewing candidates who check all your boxes. Less stress, less time, more results when you need the right person to cut through the chaos. This is a job for Indeed Sponsored Jobs and listeners of this show will get a $75 sponsored job credit to help your job get the premium status it deserves@ Indeed.com podcast just go to Indeed.com podcast right now and support our show by saying you heard about Indeed on this podcast. Indeed.com podcast terms and conditions apply. Need to hire. This is a job for Indeed sponsored
- [17:00]
Nathan Latka
Jobs
- [17:05]
Podcast Host/Announcer
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Nathan Latka
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Podcast Host/Announcer
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- [19:37]
Nathan Latka
So you have this new book that's out right now. It's called Main Street Millionaire. Can you talk to us about what a Main street business is?
- [19:45]
Cody Sanchez
Yeah. So Main street business is the business that you pay right now every single month, but you kind of ignore it. It's your landscaping business, it's your house cleaners, it's your roofing companies, it's services like your podcast production company that you pay as a vendor. These are businesses that are the opposite of Silicon Valley. They're not something new and innov continuous and compounding. And so when I think about Main street businesses, I look all around our small community and I realize, man, it's not just the local coffee shop that's interesting. It's also the street sweeping business that cleans up the streets. It's the person who does line painting in the middle of the street to make sure that there are parking spaces. All of those services are businesses. But we were taught as a generation, you're in my generation, that, you know, if. If I own a handyman business and I'm a handyman, that's bad. You know, if I go to college and I become a roofer, that's not very cool. But if I become a marketer or a graphic designer, that's cool. Here's the problem. Roofers make way more fucking money. So. So I think we were sold a little bit of a bag of goods. Maybe you don't want to stay a roofer forever because it could be hard on your body. But you learn the trade, then you learn the business, then you own part of the business, then you own the whole business, then you sell it, and that is how you were able to pass off your work over time.
- [21:10]
Nathan Latka
Talk to us about how these businesses are overlooked and why they're such steady, reliable businesses.
- [21:17]
Cody Sanchez
Yeah, I think a lot of reasons why these businesses are overlooked is really three things. Main street businesses have a societal belief that they are less than. We call them blue collar, not white collar. Right. They're not shiny. They are something that, that is done by people who don't have university degrees and somehow that's a bad thing. So we have a societal sheen on them. The second reason people don't love these businesses is because we've been told, well, these people don't make very much money and these businesses don't make very much money. If I'm going to be a banker or an accountant or an attorney, I'm going to make more. Well, that turns out not to be true over time. And then the third reason is because these businesses don't have what's called a moat. So there's probably, I don't know, a couple thousand handyman companies, maybe 10,000 handyman companies. In Texas there's like one Facebook. Right. And so we thought you had to have this new, sexy, innovative business in order to make money. You don't. In fact, it'd be much easier to compete with your local handyman company than Mark Zuckerberg, who's an animal. And so those three reasons kept us away from Main street businesses. The other thing that's interesting about Main street businesses is most of them are, are recession resistant. So you're going to use a landscaping company if you need to have your driveway shoveled during the winter, no matter what. Most of these small businesses have some version of subscription revenue. The thing that SaaS companies, tech companies love. And most of these businesses are pretty simple to understand. Now I don't want to idealize this. I'm not saying this is like a fast, easy, 30 day to million type thing. It's not. But these businesses have been overlooked. And anytime that happens, there's money to be made.
- [23:02]
Podcast Host/Announcer
Can you talk to us about the
- [23:03]
Nathan Latka
Lindy effect and why it matters?
- [23:06]
Cody Sanchez
I love it. You have read the book. You're gonna be, you're gonna own a bunch of these things by the end of it. So the Lindy effect is really important. So it's very simple. And I think the best ways to make money are super simple. If you wanna make more money, you should look at how long a business has existed. The Lindy effect says the longer a business has been in existence, the higher likelihood it will have to continue to be in business. So essentially the opposite of what I thought was true. It was like this thing's been around for 30 years, must be old, outdated, not work. But in fact it has a higher likelihood of continuing to succeed as opposed to a brand new startup. Much riskier, much higher likelihood to fail. And so if you look at businesses that have survived for over five to seven years, you have taken away anywhere from 50 to 60% failure rate. That means you're left with only 44%. What if I could tell you today you could start a startup and I could decrease your risk of failure by 50%? You'd be like, that's cool. Yeah, let's do that. Well, that's what you can do with these boring businesses that have existed for a long time.
- [24:11]
Nathan Latka
Is there a certain like personality type or level in which we should be before we should actually go and try to seek out a boring business?
- [24:20]
Cody Sanchez
That's a great question. So the question usually comes to me like, when am I ready to buy a business? How would I know? And my question back to you would be one. One skill set that I have never regretted, that I wish I had learned earlier was deal making. Because it will forever change how you make money. Even if you never buy a business outright, if you understand terms structuring, deal making and how the world of money works, you will have a hard time being poor. And so because of that, I like to teach people business buying before, before they even think they're ready for it. So for instance, I gave my cousin this book who's 16 and he's reading through it and he's figuring out ways to do deals right now. And the way that I think you know you're ready is basically this. If you are in business right now, it is a no brainer. If you look at the biggest companies in the world, they grow through acquisitions. Amazon, Facebook, they've done, both of them have done over 200 transactions. They grow faster through acquisitions than they do organically, customer by customer. So if you own a business today, you need to understand how to do deal making. It's how you will be harder to compete with. You can acquire 100 customers at a time, while most people are acquiring one at a time. Total game changer. If you don't have a business yet, what I'd like to do is turn on what I call your reticular activating system of business buying. So your reticulator activating system is what gets turned on when your brain tells you that something is important. And so when you go and buy a car, for instance, like a Porsche, let's say you go and buy a Porsche and before you bought the Porsche, you're like, I don't see these things anywhere. After you buy the Porsche, you're like, fuck, everybody has a Porsche. In Austin, Texas, what happened? Nothing happened. Your brain just started getting a signal to it saying that this is important, and so you started noticing it. Right now we're walking around sort of in the matrix, not realizing that all around us are dealing potential deals. And what I want to do is turn on your brain so you start seeing them. And what this might mean is if you work for a small business, you might not even realize that the owner is ready to retire. And if you positioned yourself correctly, you could take over that business using seller financing. If you're a solo content creator online, you might not realize that the thousand dollars they want to pay you to promote XYZ product, you should actually negotiate a deal instead to get future distributions and a percentage of the company deals all around you. It just wants you to turn it on.
- [26:50]
Nathan Latka
I love that. So I know that it's a lot of hard work to have a boring business, but I think people have the misconception that it's like passive income. Like, oh, I'm gonna buy a bunch of vending machines, plop them in the stores, and passive income, why is that not really the case?
- [27:07]
Cody Sanchez
Yeah, I, you know, I was joking with one of my favorite CEOs that I used to work for back in the day. He runs a. A company that does, I don't know, $300 billion in annual sales. It's a huge company. And when I was talking to him, he was pretty funny. I was like, jim, I'm curious. He's older, so he's probably in his mid-70s. And I was like, you've been around for a long time. You've been an investor all your life. You own all these companies. You ever met any passive income? And he was like, sure haven't, but I'm open to it. Sort of mean that the way you get passive income is years of active work. Work. And I think we need to be honest about that with each other. Now, that said, there's a lot of people that want to tell you two things. Either one, you can't. It's not possible for you. Stay in your lane. It's much easier to be a hater than a hope giver. And then the second group wants to tell you, hey, it's super easy. Anybody can do it. Look at my Lambo. Look at my private plane. Look at my Gucci. And because of that, you know, I'm really Successful you can be too, and they want to sell you something. I think the truth is somewhere in the middle. And in fact, with small businesses, I think you should expect for the first year, you got a lot to learn, man. It's a hard. It is not complicated, but it is hard. It's not easy, but it is simple. And I think when you realize, oh, running a laundromat is not complicated, but it's hard work, running a vending machine business is actually harder than a laundromat business because you have these tiny little stores, right? Machines that have very limited cap on how much they could make per month. Let's call it max. I mean, if you had a $5,000 a month producing vending machine, that'd be incredible. So you have Max, this little $5,000 machine. And then you got to figure out the logistics to go back and forth to all of them to accumulate, eventually to a business that does, let's say, a million dollars a year. It's actually pretty. It's a lot of work. And so I don't like to talk about passive income. I like to talk about horizontal income, which basically means where can you layer your income like a cake so that at any given time, your day is split between a few activities, mostly oversight as opposed to execution. So in my businesses, I run a big portfolio at Main Street Holding Company. You can see a bunch of the businesses we own there. And part of my day is spent with like this company up here, which is Pink's. So, you know, I'm talking to the CEO, Steven, and I'm saying, hey, you know, how is the cash flow looking? What's going on? I'm actually doing nothing in the business, but I'm at least thinking about it. So I like to be honest about that.
- [29:50]
Nathan Latka
Yeah, it's not going to be easy, guys, but it could be very lucrative. Okay, so let's talk about prep before we buy these businesses. We talked about what do we need to get started? In your book, you have four levels. So I thought we could do something fun, quick fire style. Well, I will list the level. I'll say level one, level two. And then you tell us, like, what is this level about? Who's this for? What are some examples of the businesses that we should be looking for? What should we expect at this level? And this is an entrepreneurship show, so we really have people who are want to be entrepreneurs. We've got people who have $50 million businesses listening in. So we've got lots of different people on the show. So I thought this would be fun. Level one solo venture.
- [30:32]
Cody Sanchez
So a good level one business might be something like a vending machine. These are what I call people, light businesses. So it might be something where you could be the owner operator of the business. The business is probably not making eight figures. You're talking about businesses that are, you know, 1 or 3 million and less. These businesses on average are what I call gateway drug style businesses. So, like, you can dip your toes into your first small car wash deal, your first small laundromat, your first vending machine, your first podcast production company, but you're probably not going to get independently wealthy working on these businesses. You are in it. It will require some work, but it doesn't require as much cash.
- [31:12]
Nathan Latka
What was your first level one business?
- [31:15]
Cody Sanchez
Well, my very first one was a website called Selling south back in the day. And I tried a game that I was really bad at, which is I think we made money on ads and affiliates back then. It was really hard and I didn't make very much money at all. But it was a good entry drug business. And then I had a vending machine, or I'm sorry, a laundromat business, which I would put in this category too in the beginning. And then I also had a consulting business which was right on the edge of a level one. Level two.
- [31:47]
Podcast Host/Announcer
Okay, moving on to level two, Hands on CEO.
- [31:51]
Cody Sanchez
So this business is one where you're going to be potentially have an operator right along with you. You might have somebody who's actually in the business. My first business, I had a GM in the laundromat. So he's the one actually running some of the laundromat specifics. I invest in it, I track things. Overall, I'm still involved in the business, but I have a little help. These businesses are slightly bigger in size. There's also a slight bigger complexity here. This could be things like multiple laundromats. Let's say, for instance, this could be things like having a media company. What we have now, I would say most media companies fall into this category. They never get to like a huge daily wire allowance. These businesses also, on average still have most of your time dedicated to this business and are going to have some employees, but not a ton.
- [32:40]
Nathan Latka
Okay, level three. And this is like, it gets harder and harder, right? Or like less likely that you fit in the level as we go along. So level three is on deck. Operator.
- [32:50]
Cody Sanchez
So this means you got an operator that's rocking and rolling in this business. You are in oversight mode. You basically get to do what I do. Which is Financial Fridays. You're reviewing what's going on. You have a operator who probably knows more than you do about the business. You've got employees underneath that operator. This business is doing millions of dollars in revenue and that means alternatively you could be doing a million plus in profit. This is a business where you could have almost any type of business imaginal could be in this amount. So you could have a small furniture store. You could also have a roofing or an H Vac company in this amount. These start to get to the level where you're starting to do roll ups in your business.
- [33:30]
Nathan Latka
And so the idea is that you're actually not the operator of this business, you just invested in this business.
- [33:37]
Cody Sanchez
That's right.
- [33:38]
Nathan Latka
Okay.
- [33:38]
Cody Sanchez
And the way that we think about these levels is mainly does the revenue support the employees and infrastructure that allow you to work on the business as opposed to in the business. So the first two, not as much. The third one, you start to get into it.
- [33:54]
Nathan Latka
And I'm going to dig deeper on that in a second level four, market leader.
- [33:59]
Cody Sanchez
So this means we're a big business now. Not only do you have a CEO, but you probably have a C suite staff. You've probably got a few other real pros in there running the business. Now we're talking about tens of employees plus we're making real revenue and real profit in this business. And you're in a stage where you're either already at or getting to a spot where private equity might buy you, might compete with you. And these all are still in what I consider small and medium business. So this is still sort of micro PE below the level at which you're going to compete with what's called middle market and private equity.
- [34:37]
Nathan Latka
So you have this framework, like now we know the levels, we know where we gotta start. We're about to go look for our boring business. We need to have some sort of criteria to pick a smart move. Right. We can't just like go after any business that we find. You've got this acronym, S O W S sows. Is that, is that how you say it? Sows.
- [34:56]
Cody Sanchez
Okay, yeah, I'd say sows.
- [34:58]
Podcast Host/Announcer
Yep. Sows.
- [34:59]
Nathan Latka
So stale, old, weak, simple. Can you explain and break that down?
- [35:04]
Cody Sanchez
Yeah. So when we think about the like what is the right type of boring business to buy really depends on who you are. But if I was to give you a framework, it would be sals, which is when I look for businesses, I look for a business that is stale. That means that it's been around for A long time. That means that the business probably hasn't done much in the way of innovation. Might have something called the fax machine test, which is they have a fax machine still. That's crazy. Do they actually use that thing? They might take invoices on a piece of of paper as opposed to putting it into QuickBooks. Then we get to the O, which is old. Has the business been around at least five to seven years? Is the Lindy effect in effect, can this business be one that we think has a lower risk? Because the likelihood of future success is probably based on historical success, then we have weak. This one I really like. If there are competitors that are weak in this space and also the business itself might be semi weak. So can I compete with a bunch of handyman in Austin, Texas? Maybe because I don't know the name of any of them. Can I compete with Dell computers hard? Right. Like that is an entrenched business. Overall, I want to see sort of weak competition and weak execution by the company. And finally, I want a business that is simple. So I want a business overall that is not difficult to understand, that is straightforward, so easy your grandma could do it.
- [36:27]
Nathan Latka
So this is so counterintuitive. You wouldn't think like, oh, I want a weak, stale business. I want it to be so simple. This seems so counterintuitive. So is the idea that you could come in and make small improvements and then make more money. Like, why do you want those things?
- [36:41]
Cody Sanchez
Yeah, the fastest way to lose money in buying a business is to think that you know more than the owner of the business and to take on more complexity than you actually should. So I think about buying a business kind of like I think about maybe buying your first house to fix up and flip. Like you don't really want to buy complete disaster on a street. Why? Well, you've never done a construction project before and so I don't know about you, but I've never heard of a construction project that comes in under budget and faster than you think. And so what I really want for your first acquisition is the first acquisition to go so well that you go, oh God, that business was like a little too small, a little too easy. We're going to build it up, then we're going to sell it, then we're going to do our next one. Because your first deal turned out so well. And so that's why I like really simple businesses for the first one business is complex enough and we can layer on top of it great marketing, we can layer great advertising, we can Layer a great team and culture. But we want to make sure we don't bite off more than we can chew with our first acquisition. Unless you're a pro, in which case we teach some different things.
- [37:44]
Nathan Latka
Yeah, I love that you made this analogy to buying a house, but actually buying a business can be a little bit cheaper upfront than buying a house because you don't have to lay out all this cash necessarily. You talk a lot about, about creative financing. Can you tell us more about some of the creative ways that we can actually buy a business?
- [38:03]
Cody Sanchez
Yes. So one of the most beautiful parts about buying a business as opposed to buying a house is when you go and buy a house, they want to know how much money you make, and they want to know how much money you make so that they can determine how big of a house you can buy. When you go to buy a business, they, meaning the lenders or the bank, they want to know how much money the business makes and if the business makes enough for you to be able to use the revenue and profits of the business to pay the loan back. Now, there's going to be some degree of them vetting you and making sure that you seem trustworthy. And you got to put together a little pitch to show that you are capable of buying a business and getting a loan. But the fascinating part is it's not on your salary. It's on the business's income. And because of that, we have a unique opportunity to outkick our coverage by buying a business that would be more than we could actually afford if we were only to look at the amount of money we have or our salary. So that's, that's one huge differential. The other is that we teach 21 ways in the book in order for you to buy a business using creative financing. But one of my favorites is seller financing. So you mentioned that 60% of all businesses bought are bought with some aspect of seller financing. And if you understand seller financing, I don't think you'll ever buy anything the same way again. Because what it basically teaches you is that you want to invest in businesses and buy them using some portion of the future revenue and earnings of a business. Now, this isn't to say you can run around saying, I'd like to buy your $5 million business owner for $0 down. How does that sound? You have to just like anything in life, you have to treat a business transaction kind of like treating a dating transaction with a woman. You got to get her to trust you. You got to get her to believe that she's going to be better in your hands than anybody else. You got to get her to, to see that you actually care about this business and you are going to make sure it succeeds. And if you do that, then you can get really creative, unfair deals that somebody running around throwing out offers left and right isn't going to get.
- [40:04]
Podcast Host/Announcer
And let's talk about the people that
- [40:05]
Nathan Latka
we're buying these businesses from. They're often, you know, about to enter retirement. They might be working in their old age. Why is it in their incentive to maybe take a seller financing opportunity?
- [40:20]
Cody Sanchez
Yes. So we have this whole section where we show three different graphs on seller financing. And once I understood how to pitch seller financing properly so that it was a win win, our ratio of people taking seller financing went up about 100%. And here's how I think about it. If I was going to a small business owner, here's the conversation that I would say. I would say, all right, small business owner. This is after you've gotten to know them, after they like you, after you really understand the business you've done. All of you know the early stage of dating. You're not asking to take the girl home on like your first coffee date encounter, Right. So after you do that, you're going to want to have a conversation that sounds like this. Okay, Mr. Owner, you want $2 million for your business. You think that's what it's valued at, Right. And you go, right, okay, let me show you. When I took your business to the bank, based on what you showed me, the bank said they would give you about a mil or whatever the dollar amount is. Usually businesses are not worth what the owner thinks banks it is. So you want to introduce a third party saying, sorry, we're not going to pay you for that. So we say, okay, the bank says that it's worth a million instead of two. Well, that means that I could give you a million dollars. Plus I got to pay like 8% to the bank because there's an interest rate associated with it. Plus I probably got to wait like 120 days for the loan to fully go through, maybe 90 at best. Plus you're going to have a higher tax burden because they're going to lump sum, pay you out right now as opposed to over time. We can't get very creative with your taxes. You're going to pay more in taxes also because we're going to go with this loan over time. I can't pay you any of the interest. I have to pay the interest to the bank now that Means that I can give you a million dollars plus these other negatives. Or there's another way that we could do this through seller financing. Would you want to talk about how we could structure it that way? And they'll probably go, okay, yeah, what do you mean? And you say, okay, other option, I pay you $1,500,000 instead of one, so you get another $500,000. Plus I will pay you the interest on the loan instead of the bank. Except I'll pay you 4% instead of 8%, which increases the likelihood the business succeeds because it's not as high. Plus you make another 4% every single month or year, depending on how you structure the deal. Plus we could get this done deal done in probably 30 days because we don't have to go through a traditional bank process instead of 120 days. And we will structure the payouts over time, which means you pay less because you're getting long term capital gains and distributions as opposed to short term capital gains and distributions. So you're getting 500, 100k more, plus you're getting 4% a year, plus you're getting better tax savings. Would you be interested in at least us discussing what that would look like? At which point the owner is going to say, probably yes. And so that's how you nail seller financing.
- [43:12]
Nathan Latka
Oh my gosh, that was like a master class right there. Anybody wanting to buy boring business, you could literally just transcribe that script and get your deal.
- [43:25]
Podcast Host/Announcer
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- [47:33]
Nathan Latka
So is it realistic to think that there's actually a lot of opportunity out there for these boring businesses? Like, when I think about this, I don't know. Like, I just feel like, how many people are really willing and ready to sell their business?
- [47:45]
Cody Sanchez
Yes. Let me tell you some data. So how many people actually will sell you a business today and use some version of seller financing? Well, one, I bought a boring business that was a business marketplace called biz scout and then plowed a couple million dollars into it. Bizkout is now a marketplace where people buy and sell businesses. When we first launched, which was maybe four weeks ago, six weeks ago, we had 30,000 listings on the platform. Today, we have 45,000 listings on the platform. At BizCout, there are 45,000 people publicly listed that want to sell their business. Plus, the other interesting part about Bizkout is we have this backend scraper where we scrape all small businesses. So you could say, I want to buy a, I don't know, sales company in Atlanta, Georgia. I want to buy a car wash in Piedmont, North Dakota. And you could go and see all of the listings of those there and reach out to the owners individually. So that would mean millions and millions and millions of businesses. So I know firsthand there are tens of thousands of businesses ready to sell right now. Today. The numbers grow in every single day. And then there are millions where the owners don't even realize they could sell. So this is happening all over the place. Now. Here's what you're going to hear from people that is great for you and me, and I love every moment of it. You're going to hear people go, there's no businesses for sale. It's all trash on those sites. Nobody good would sell a business like that. And I go, perfect. Just stay in your lane. You know, just stay in your lane. This is always finance bros who do this, by the way, and they'll be like, no way would this business sell for that. And then I just go, scoreboard, like, bought and sold this newsletter business Bought and sold pinks. Bought and sold that one painter. Bought and sold Garage Up. Bought and sold a brand new roofing company we're going to launch. You know, there are businesses all around. We're doing it every single day. In our community called Contrarian Community, people have done $260 million of deals that we've tracked.
- [49:40]
Nathan Latka
Wow.
- [49:41]
Cody Sanchez
Hundreds of small businesses transacted. So. So while other people will always tell you no, you can be the person that makes the money while they sit on the sidelines. Again, always harder than it looks and is going to take work. These businesses are all around you guys and anybody that's telling you they aren't either wants to buy them for themselves or wants to sound sophisticated because the sophisticated sound, the negative sound smart and the positive make all the money.
- [50:11]
Nathan Latka
So when people are thinking about boring businesses, because you've been talking about boring businesses for a few years now, I feel like it's sort of synonymous with vending machines and laundromats. But you actually say some of your favorite boring businesses are digital businesses and professional services. So talk to us about some of the little known boring businesses out there and why they're so lucrative.
- [50:32]
Cody Sanchez
Yes. Yeah. If you go to MSM book, where the book's going to be located will be giving away a bunch of things with the book. And one of them is a list of 130 of my favorite businesses that I love to buy. So let's rattle off some of those 131. I use laundromats as an example because they're easy to understand and people, it kind of like opens people's eyes. They go, oh, I've seen those before. Oh yeah, there aren't a ton of employees in there that could make sense for me. So that was rule one. I wanted to open people's eyes. But really what we teach is what's called deal clarity. So how do you figure out the right business for you? Specifically, what's the right business for you or your audience? And so those might be things like for instance, I bought a podcast production company back in the day. I bought like 49% of one called Strike Fire Productions. That was a great business. I think I bought 49% for 10k and we profited 5 or 8 or 10k a month off of it for about a year before I sold it back to the owner of the business because it wasn't a big enough business for us anymore. So podcast production, I've bought a video production company before that's called Viral Cuts. That's Another online business, we've invested in a tax and LLC business. So it's kind of cool. They take like accounting, old school accounting practices, kind of sex them up, make it really easy for people to access them. That's called Doula. We invested in a company that's called Sense. So it's software for the laundromat industry. So, you know, everywhere you have a boring business, you have digital businesses that support them. You have advertising businesses, marketing vendors, software providers, sales systems. And those are businesses you can buy just as simply as you can buy a brick and mortar main street business.
- [52:23]
Nathan Latka
So, so should we diversify our businesses? For example, like I own several businesses now. I have my podcast itself, which is a business. I have my social media agency, number one LinkedIn marketing agency, and I have the number one business, Self Improvement Podcast Network. So I have three businesses. Should I like stay in my lane and go buy podcasts and social media businesses or is it better to actually diversify and think about other lanes?
- [52:48]
Cody Sanchez
It's a good question. So if you already own businesses today, there's two ways to think about acquisition strategic acquisitions or diversified acquisitions. So strategic acquisitions, I think are the easiest for business owners to buy. That would be like, can you buy another agency that has talent that you're having a hard time hiring and can you insert that talent inside of your agency so you can increase your capacity and so you can sell more? Amazon is notorious for the this. And I would say the great thing about strategic acquisitions is you understand the business better. You're going to know if this is a shitty agency or not because you already run it. You probably already know them and have target acquisitions because you know your competitors. You also have a much higher ability to increase the revenue of that company because you're already doing the thing. And so I think strategic acquisitions are the best for current business owners to think about. If you want to create a portfolio in a holding company like I have, because my skill set is finance, right? Like I knew how to create a portfolio and holding company because I ran a private equity firm. But if I was a great business operator, I would do more strategic acquisitions than I would diversified acquisitions. And the reason is because you're going to have such a higher likelihood of success and you're going to be able to increase the value of those businesses so materially. So if I was you, I'd be saying right now, and you probably have some in your head, head. Even as we're talking about it, you're like, oh, these competitors. Oh, I hear she's Kind of unhappy. I think they might shut down their business. They're growing really fast, but man, they don't have X that we have. And those are your target acquisitions where you can even overpay a little bit or use potential future revenue that you drive them to pay for those companies and close a deal faster than you ever could due diligence in a laundromat. That, for instance.
- [54:44]
Nathan Latka
Yeah, you've really opened my eyes. Like I never really had thought so much about acquiring companies, but now I'm like thinking, I'm like, oh, like we could acquire, you know, this X team. So that makes sense.
- [54:56]
Podcast Host/Announcer
It's kind of what I did actually
- [54:57]
Nathan Latka
with my business partner Jason. He had a production company originally and then I actually brought him on as my business partner and kind of absorbed him. So I guess I did do that in a roundabout way.
- [55:08]
Cody Sanchez
It's called an aqua hire.
- [55:09]
Nathan Latka
Yeah.
- [55:09]
Cody Sanchez
And the cool part is if you start using the terminology. That's why I like people to learn deal making.
- [55:13]
Nathan Latka
I didn't even know that.
- [55:15]
Cody Sanchez
Yeah, you can sweeten the deal. So let's say, you know, in this case you might have been saying, God, I need better production and I want somebody who really cares about it. So I want a partner. I want them to be invested in it. I want them to be a pro. I don't want to have to pay pro salary right now because maybe my biggest, my business isn't big enough. I want them to share my vision long term so they take some risk with me. Okay, that means you want an acqui hire. So you're like, huh, I'm going to buy aqui hire Jason's company. And I'm really just going to use Jason's salary, which I pay over the course of the year, just like anybody else's salary to acquire his company. Jason, congratulations. You got an exit from your business. I am going to acquire and integrate you. You also get to say, I've already done one acquisition because we did it this way. You did an asset sale potentially if you bought any of his assets and you did an aqua hire because you bought him. And so a lot of the people in Silicon Valley use this term all the time. They'll be like, I sold my startup to so and so they got acquihired. And we, like normal people don't use that same terminology. And so we don't sound as sophisticated, but we're doing the exact same thing. So I would keep your eyes open. I think, you know, one of the things I've been obsessing on lately is that rich people do not think the same as poor people when they think about problem solving. Poor people, when they have a problem, they say, how do I fix this problem? How? How, how, How? Relatively wealthy people think I have a problem. Who could fix this problem for me? Who? Not how. Rich people think I have a problem. How could I buy an almost guaranteed solution to this problem? Buy who? How? And you can start when you have a problem in your business going, all right, pause, don't go to how. Pause, don't go to who, Pause. How could I buy the solution? I need more revenue in my business. I need to come up with a brand new product that I could sell. Do you? Or is there something else out there in the market that you know your audience would love and you could acquire part of that company, do no fulfillment, not guess what a great product is, but know because people are already buying it and you already use it and just integrate that into your revenue line. And, and the truth of the matter is I forget my own homework all the time. I revert back to the how constantly. And I should obsess on the buy more often too.
- [57:35]
Nathan Latka
Oh my gosh, that is so smart. I love that advice so much. Okay, so buying a business, we're of course going to be looking at the financials to some degree, right? So what are you looking at personally when you are trying to buy a business? And then also if we need to hire people, hire an operator, what do we need to consider in terms of the first financials?
- [57:56]
Cody Sanchez
Yeah, a couple things. We have a framework that we look at for every time you buy a business, what does it need to have? I think about it as two words. An income stream. You're buying a business because you want to make money, not because you're doing charity. And so when it comes to an income stream, an income stream has to cover a few things. It has to cover the interest expense on your loan. So whatever that costs for how you bought the business, it has to cover your income so how much money you want to make from the business. It also has to cover some version of an operator's salary so you don't go crazy. You have a manager, you don't buy a job, you buy a business. And then it has to cover working capital. And that means a little bit extra money in case anything goes sideways or to grow the business. That is those four things, if you remember, that will help you buy a profitable business. And we have a structure that breaks that down a little bit more in the book. But. But at A high level. That's it. The second thing that I really want you to think about if you're thinking about buying a business overall is very, very high level. You don't want to make acquisitions too complex. You want to see what do the financials tell you, is the business profitable or not. We don't buy unprofitable businesses to start that is asking for pain. So we want a profitable business according to its financials. That means it's P and L. We want the financials and P and L to somehow match the tax return or decrease the price so that the tax return is your de risked price. And then we also want a breakdown of our due diligence file, kind of looking at where's the risk in the business, how many employees are there, what kind of assets do we have? So we have a full due diligence list that we use for this, which is important. But you want to start high level with the financials.
- [59:42]
Nathan Latka
And the tax return return is really about like tweaks to grow the business. Like what do you usually see of like the small tweaks that you can do to like really just grow the business when you're looking at these boring businesses?
- [59:55]
Cody Sanchez
Yeah, we gotta come. I'll come back on a different time and talk to you about the next book I'm writing which we're creating some portions of it. It's. It's about an operating system. How do good companies scale from 6 to 7 to 8 to 9 figures? Yeah, and I came up with something with one of my friends whose name is Eamon, called nine Steps from Steps to nine Figures. And don't take the nine figures literally. You don't have to create a nine figure business. But the idea is a business so big that it, it makes profitable money for you, is fun to run and is trusted in that it will continue to make more money. So trust fund profitable. And there's really a few steps. First, if you want to have a profitable fun to run business, you got to know who you're selling to. This is what we call Persona. So you need to be able to name and label your target market. Then you got to think about what problem are you solving for that person? Where is the pain or the nail in the foot we call it. That is the problem you're solving. Then you got to obsess on product. So what product are you selling this person in order to fix their pain that this person in particular really, really wants? Then I like to talk about performance. So where in your business are you tracking if you are winning or losing, and what does winning look like, Then you want to have a scoreboard or operational system. How can I consistently run a business without a bunch of question marks and games? Because I have an operating system I run on, and then we want to have people. So finally, and maybe most importantly, in many ways, who are the people inside the business that I am hiring, firing, and what does our culture look like? We have nine steps, but those are like the first seven that are so important. Because if you have the Persona, the problem, the product, if you have the performance, the operating system, and the people, then you can run a sustainable business over time. And sometimes you don't even have to have the people if you have a solo business as well. So those things are necessary for scaling a sustainable business.
- [61:56]
Nathan Latka
Okay, so let's say we've got our boring business in place, things are rocking, we're making a profit. Is there any point where we should think about exiting this business? Like, what are the criteria to, like, think about exiting a business?
- [62:09]
Cody Sanchez
Yes. So the end of the book starts talking about the exit. And the reason why is because the first business that you buy probably isn't going to be the business that you have forever. You should do your first deal. Just kind of thinking like, you did your first job, you know, you didn't plan on staying your first job forever. You're like, I want to be here for two to five years, something like that. I want it to make me money. I want to learn from it. And I either want to scale up or I want to scale out. Right? I want to move up to the C suite position or I want to go on to my next job. And it's the same with the business. So the first deal that you do should not be your last deal, in my opinion. It wasn't for me. So since we know that, we want to start planning for the exit and the ability for us to eventually sell our business to make more money. The cool part is, most of the money in buying businesses and building businesses is made on the sale. So, you know, if you have a business that does $100,000 in profit in small business land, you can sell that business for 3 to 5x on average of the profit. So $100,000 business sells for 300 to $500,000. To overly simplify, that means that if I buy a business for $300,000, that makes $100,000 in profit, but I am able to increase the profit to $200,000. Well, now I'm selling this business for somewhere between $600,000 and maybe $800,000. So I have taken multiple years of potential future revenue and fast tracked them and I moved them up. And so. So when it comes to thinking about exiting your business, there are really only three levers that matter. And the three levers are, can I increase the profits, can I increase the revenue of the business? Can I decrease the risk in the business? And can I increase the systems, processes and people in the business? And if you can do those four things, then your business can be worth more when you sell it than when you bought it.
- [64:11]
Nathan Latka
Mm. So, you know, as a founder, I feel like very emotionally attached to YAP Media, right? Like I really couldn't imagine selling it, at least for a really long time, right? I really couldn't. But with these boring businesses, I feel I could like buy one, fix it up and then have no emotional attachment to just sell it. So do you feel like there's something there? Like it's just like easier to kind of just buy and sell these boring businesses because there's less emotional attachment?
- [64:37]
Cody Sanchez
For sure. I mean, your yap, for you and any content creators listening, that's your distribution mechanism. You know, YAP is your ability for the rest of your life to sell varying things to your audience without using a ton of capital. So you might want to keep YAP forever and layer on top of it different products to sell, layer on top of it different services to sell, layer on top of it owning part of another content creator who maybe you help distribute, but you take a percentage of future revenue from that content creator. So this is how we build big conglomerates, right? You could do what most media companies did, which is they acquire assets. Back in the day, Ted Turner was famous at Turner News Network for acquiring assets. And he did it the old fashioned way, which is acquire radio stations here, acquire television rights here, acquire distribution rights here. And he used to be talented and he worked his way all the way up to complete ownership and chairman. And so the way to do that in the 21st century version is what like Alex Cooper's doing right now with Call Her Daddy and unwell, she acquired part of Alex. What's the other Alex's name? Do you remember?
- [65:46]
Nathan Latka
I have no idea. I don't want faith. I only pay attention to the business self improvement world. I'm so like call her daddy who?
- [65:52]
Cody Sanchez
I know, I know, but I mean not, not typically what I talk about her topic, but brilliant business mind. She looked at Dave Portnoy at Barstool Sports and said, why doesn't this Exist for women. I'm going to build it. Dave sold his company for what, 600 million or something like that? She was like, yeah, I'm gonna do the same thing. And so she started acquiring up other talent. She also acquired and built part of a pop up and a tour company. You see her doing tours right now all over the place. You see Alex, Alex Earl, that's the other one's name, doing the same thing. Those are smart business women. Like, don't let the sex talk fool you. They are sharks, and I'm here for it. And that could be the way that you do it. And then at some point, you might do what barstool does or some of these big media companies do, which is you might say, all right, talent. You want to buy back your rights? No problem. You buy back your rights. That doesn't mean you sell. Yeah app, but you sold one of your assets and that's how you kind of delink your personal brand to your business.
- [66:57]
Nathan Latka
I love that advice. Okay, so people are afraid of failing, right? A lot of people don't actually take the leap into entrepreneurship because they're afraid of failing. I'm sure I have plenty of listeners right now who want to be entrepreneurs, who listen to an entrepreneurship podcast, who haven't become an entrepreneur because they're scared of failing. They've got golden handcuffs. They probably work a nice corporate job. I've got smart listeners. How can Main Street Millionaire help them overcome their fears into becoming an entrepreneur?
- [67:28]
Cody Sanchez
Well, first of all, Main Street Millionaire is peppered with stories of people just like me and just like you who worked in corporate for a long time and leveraged the best form of money there is, which is a salary somebody else pays into the future ownership of your business. So, one, you are exactly where you're supposed to be. If you're already making revenue by a salary, that's incredible. You can use that to acquire your company in our community. And in Main Street Millionaire, I would say 40% of the people in our community where we teach business buying are W2 employees. Well paid W2 employees that are buying their first or their second business. What Main Street Millionaire will teach you how to do is two things that I think are invaluable. One, negotiate with the company that you work for or with vendors that you work for for part of businesses you already fully understand. Understand partial equity. That could be your first tiptoe into ownership. Number two, it will teach you how do you layer on acquisitions using operators. Family, for instance, like my husband runs one of our companies. My mom ran another one of my our companies. My brother and I co own another one of our companies. So how can you use the people around you who maybe don't have your same salary for ownership? I think it's beautiful to do for husbands and wives lives. The last thing that a book like Main Street Millionaire will teach you is when it comes to seeing a deal in front of you that feels so unfair, it is an absolute fuck yes. You will be able to jump on it. You know Baron Rothschild said buy when there's blood in the streets especially and even when the blood is your own. He was one of the titans of American history, one of the richest men ever to live. And what's interesting I think is if you at all are scared about the economy, the recession, your job, your future, there is nothing better than a little shake up in the market to get better deals. And so what I want you guys to be prepared for is that when that comes, you will already know and have turned on your reticular activating system in order to see these businesses all around you and do a smart deal.
- [69:34]
Nathan Latka
So my last question to you before we close out the show is really about like future predictions. I just interviewed the CEO of Microsoft, AI, Mustafa Soliman. He was the founder of DeepMind and he told me something like mind blowing. He's like listen, like AI, everyone's going to have their own personal AI. People are going to be going to job interviews with their AI and having to develop their AI. People are going to co found businesses with their AI and that just like sort of blew my mind. And so I'm curious to understand like how do you see like these mom and pop boring businesses really evolving in the next 5, 10 years because of AI?
- [70:13]
Cody Sanchez
Such a good question. Let me tell you what I think about AI and mainstream businesses. Which is the first jobs that AI took were graphic designers, artists, copywriters, maybe even singers in some way. They were online jobs. Why? Because AI lives online. Because it's very easy for quote unquote, online digital robots to take over jobs that are mainly online. So if right now you have a job that you can do completely from Zoom, that has a lot of automated processes in it, where sometimes you feel like you do a lot of automated tasks, be wary of AI because that will come for you first, as it already has for many people in the digital world, you know where AI is going to take longer. Painting companies, roofing companies, plumbing companies, the hardware is going to take longer to catch up than the software will. And so I feel very strongly that the trades are going to flip as one of the more powerful industries in the world, just in the same way that people are no longer paying graphic designers the same amount because we have AI tools that we can use to augment their work. And so think long and hard about AI in the fact of where can I have a moat built around me where it is not as easy for a digital component to take over? And that's what I think about it. And the only other thing I'll say there is I'm a techno optimist. I think by and large, our world is better mathematically because we have more technology today, not with technology hurting us. It has helped increase longevity. It has helped decrease poverty levels. And I think you can make a very hard argument, except perhaps in the US with anxiety and depression rates, that technology is largely good. So I think AI will continue to be really useful for us. And with the businesses out there, man, think about how much we're going to be able to increase our profit margin by using AI right alongside us.
- [72:13]
Nathan Latka
Yeah, totally. And Mustafa actually told me something about that loneliness factor. A lot of the AI that's being developed is actually developing as emotional support. And so this AI will help you do your work, but also, like, be your therapist. And something that he said was, like, really interesting. I just thought you might think it's interesting is that he felt like it's going to really help underprivileged kids. Because he said that it's almost like every underprivileged kid would have, like, a mother or a father who was guiding them. So I just think it's going to be really powerful.
- [72:43]
Cody Sanchez
Interesting. That's horrifying to me.
- [72:45]
Nathan Latka
It's horrifying, but it's also like, who knows? Hopefully we can steer it in the right direction.
- [72:51]
Cody Sanchez
Yeah, hopefully we don't have ads just straight mainlining into our brain.
- [72:56]
Nathan Latka
Most likely that will happen. Okay, so I end my show with two questions that I ask all of my guests. You can ignore everything that we just talked about. Just answer it from the heart, wherever it comes from. You don't have to worry about the topic that we just spoke about. So what is one actionable thing our young and profits can do today to become more profitable tomorrow?
- [73:18]
Cody Sanchez
One of my favorite mentors, Bill Perkins, told me why he thought he was so successful. Where did his billions come from? And he said that he does one thing differently than everybody else. He moves fast. By the time that other people have thought about an idea, brought it up to their friends, considered it, Bill has already taken action, made three mistakes and found a better way. I think the faster you move, the more money that you make. The faster you move, the larger your bank account. So whatever you're going to do, take action more often than you think and quicker than. Than you think.
- [73:53]
Nathan Latka
Very good. And what is your secret to profiting in life? And this can go beyond business and money.
- [74:00]
Cody Sanchez
The best deal I've ever done was the one I did with my husband. It sounds cheesy, except it's true. And so I think, you know, you are going to spend the rest of your life with one human. And I wish I would have known earlier how important it is to choose somebody who had a growth mindset, wanted to continue to progress, and that profit come from profitable relationships done well. And so especially if you have young women listeners, I think obsess about becoming a better human. So you attract better humans. And two people is so much more powerful than one.
- [74:39]
Nathan Latka
Cody, this was such a great interview. I love learning from you. Where can everybody learn more about you and everything that you do?
- [74:45]
Cody Sanchez
I think most important is Main Street Millionaire. That's the name of the book. You can find it@msmbook.com the idea is we're gonna put tons of resources and tool for anybody who picks up the book so that we can all become a little bit more unemployable and have control of our life. That's the idea. Anyway.
- [75:02]
Podcast Host/Announcer
I love it, guys.
- [75:03]
Nathan Latka
I read the book, I got an advanced copy. I absolutely devoured it. So I highly recommend it. We'll stick the links in the show notes. Kody, thank you so much.
- [75:11]
Cody Sanchez
Thank you. You'll have to tell me if you buy a business. I'll help you any way you need.
- [75:14]
Nathan Latka
Thank you.