#88 Why Playing Small Is Keeping You Broke

0:00This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. The best way to do deals is to do what we call a f***ing ass deal. Welcome back to the Big Deal Podcast. I'm Cody Sanchez.

0:37This week, I sat down and talked with a thousand creators about how to make their first million dollars. The business needs to be so simple I can explain it to grandma. These people flew all the way out to LA to listen to this. People say, find your profit from your pain? No f***ing thanks. And some of them told me it was the best talk that they had heard that entire weekend. Terms control the price. And so if we understand deal making, it's like we speak a language of finance that most people don't. So I thought, let's give it to you, my podcast fam, for free 99 without a plane ticket. And let's teach all of you how to make your millions.

1:10I'm going to make so much money that I can buy whatever I want, whenever I want, no matter what. This is only for those people who want to grow on social, care about attention, who want to figure out how do I do deals and how do I do it when I am maybe my own little solopreneur or business owner. Here is how to turn attention into cash. If I was you, I would say, learn about the language of business so deeply that it becomes a fluency. My rules for this are...

1:40Give it up for Cody! Thanks, guys. We know that women currently only make up 2 % of the business acquisition buyers in America, despite 40 % of women actually owning businesses. So I wanted to kick off understanding what your opinion of why that is and how you think we can change that number. If I was like the big sister who's maybe made a few more bills than you have and has the wrinkles to prove it, I would say this. women on average if we don't play victim mode we're super super powerful i think the problem often is we tell ourselves really negative stories so we tell ourselves that we shouldn't negotiate that it's some like guy's fault that we're not getting what we want that the boys have it better than we do and so when you say all that stuff into the universe like it comes back and so one of my biggest push points for women in general so we got to stop that we got to start saying that it's super powerful to be a woman, that actually men are on our side, that we are going to all grow together, that you're going to make a massive amount of wealth.

2:47And it starts with like kind of the touchy feely nonsense that is actually true. And then the second part of it is, if I was your big sister in business, I would say we play a little small women often. We pick that, and I see it because you guys, I probably see five, 6 ,000 businesses across our investment firm a year. We have a venture capital firm and a holding company. So I have a bunch of people that pitch me nonstop their businesses. I actively look for women to invest in. And I have a really hard time finding women who are building big enough businesses. A lot of us build lifestyle businesses, right?

3:22We build businesses that we think are safe and small. And I don't really know why, except that maybe people told us that that was the only thing that we could do. And so I think that 10x is often easier than 2x. that actually if you try to build a really big business, you are going to bumblefuck your way at least into a lifestyle business. But if all you try to do is build a lifestyle business, you're going to end up building either a business that is a job or not make enough money and have to work for somebody else. And so if I was to give us really hard feedback, sure there's historical precedent.

3:56Sure, of course we've had voting later. There are all these realities about being a woman that are real. And I don't want to push those to the side, but we can't fucking change them. Like, I can't go back in history. I can't change that stuff. So let's focus on the two things we can control. The first thing we can control is our input, which is what are we thinking? How are we talking about ourselves? What do we think will happen in our lives? And the second thing that we can control is how big of a business are we shooting for? And, you know, I fall into it all the time. Yesterday, I was with this guy, Amjad Masson, who runs Replit.

4:27Do you guys know what Replit is? Okay, a few. If you don't, and if you're not, this can be like a whole different subject, but if you're not playing around with AI and you don't know what Replit is, like I would jump all the fuck over that. I think there was a world before I understood what AI could do for us and there's a world after and my world has completely changed. And Amjad wants to create 1 billion coders, 1 billion. And when he said that to me, I was like, nah, that sounds like tech bro speak, right? I'm like, yeah, yeah, sure, 1 billion coders. But then he goes, why are you only trying to create 1 million owners?

5:01and I was like what do you mean that seems like a fuck ton and he's like why is it not a hundred million why are you not actually thinking bigger and so you need a buddy maybe one of your buddies can be here and that buddy needs to be able to be the person that says to you you're playing too small that's not big enough go bigger go harder you've identified something you see there's like a spark there's a business that you like what actually turns that into a like yes I'm going to actually make an offer and buy this business what's your decision making framework the only thing that really matters in due diligence is two things if you're buying a company.

5:30Are the numbers real? Because we don't buy hopes and dreams. We buy realities and cash flow. And two, does it seem like the numbers that they gave me will continue? So like, do I believe what they're telling me? And is what they're telling me today going to continue in the future? Because we want to buy predictable, enduring, longstanding, profitable businesses. And if we do that, then it won't matter if we're not influential on the internet because laundromats don't care. They just pay you cash flow anyway. Sign me up. I'm going to be doing that due diligence course. Woo. I feel like a lot of people probably ask you about like what you're buying, what you're interested in.

6:07You know, I was just doing that backstage. That was kind of the natural instinct to ask you that. But I want to ask the flip side of how do you know when to walk away from a deal and when something actually is a no? And specifically, you know, maybe it looks good in a spreadsheet or maybe like you've got a bit of a gut instinct that it is good, but something made you just hard no. What is the no criteria? Well, for your first deal, you never want to buy the beat up house on a really nice block and try to turn it around. Because how many times have you guys, if anybody's done construction or done a house flip or renovated something, how many times you renovate something and it is on time and under budget?

6:47That doesn't happen. It doesn't happen with men either, right? You're like, I'll fix him. No, you won't. And so, so it's the same thing with deals. So we don't buy, we don't buy beat up houses. We don't buy beat up boyfriends. We just, we buy people who are already sort of going to continue to cashflow. These are profitable businesses. So my rules for this are the business has to be in existence for more than five years. That decreases the likelihood of failure by more than 50%. The business has to be profitable, profitable cash flowing day one. The business has to have a leverage component to it, meaning I don't want to use all my own money.

7:24I want to use some seller financing. I want to use some bank loans on top of it. The business needs to be so simple I can explain it to grandma. I don't want a complicated business that's not in my expertise for my first deal. And the last thing is I want to make sure that my business is something that I'm going to be curious enough about to get kind of obsessed about for at least a few years. I don't want to buy a business. Like people say, find your profit from your pain. no fucking thanks. Like, I don't want to. I want to find a business that I'm curious about and I'm interested in growing and I think that's totally feasible.

7:57So that is what I would look for in a business. The anti-signal would be, hey, this business doesn't make me any money right now, but it's going to grow a ton, I promise. Hey, there's proprietary patent pending technology on this business, but I can't really understand it. Hey, this business is something that like, I really don't want to do. Like, I'm going to buy an accounting firm because I hate accounting in numbers. No, don't do that. So those would be the things that I would not do on a deal. And then the only thing I'll add is like the best way to do deals is to do what we call a fuck yes deal, which means because you are so good at deal making and you understand terms, you can manipulate the price in almost any deal.

8:36And let's play a game. Who here owns a business? Raise your hand if you own a business. Okay. Keep your hand up. Who here would sell your business at the right price and the right terms. Every hand stays up, one in the back, she's new. Every business owner has this because you know, if I catch you on the right day, like Monday, Tuesday, Wednesday, Thursday, Friday, like you could be like, fucking take it. Yeah. If it's a big enough check and if the terms are right, fine. And so when we know that, we know that we can manipulate price because we control the terms. And let me give you an example.

9:10Like, do you own a business? You look like you do. She looks great. Okay. Let's, how big of a business is it? Give me some metric. Just starting? Okay. So let's say that your business right now makes a million dollars a year. I'm just going to put out a number so we don't, we're not the IRS here. Okay. So your business makes a million dollars a year. And if I came to you and said, hey, I want to buy your business for a hundred million dollars, what would you say? She'd say, yes. She goes, fuck yeah. Now I just, I barely started it, but take this thing off my hands, right? Okay. So I get her to sign the deal.

9:47We're good to go. Great. Small problem. The fine print, the terms say, I'm going to buy your business for a hundred million dollars by paying you$1 a day for the life of the hundred million dollar offer. Do you still take the deal? Of course not. So what we don't realize as women is that terms control the price. Pros obsess on price, pros obsess on terms, amateurs obsess on price. And so if we understand deal making, it's like we speak a language of finance that most people don't. And so that is a really fun part of a deal. You can have a person you don't trust, a shitty deal you don't really like, something that doesn't make any money.

10:23But if you control the terms, you almost control the entire deal. I love that. This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome.

11:02You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18+. Go you. If you've ever thought about buying a business, we've built what I think is the best acquisitions in business buying community and education curriculum in the world.

11:34If you've ever thought about wanting to buy or own a business, or if you want to add more businesses to the mix, it's called the Contrarian Community. And what this is, is the goal is we give you the three things that the best business buyers use, your own advisory team, your own investment committee, and a deal team. We get together each week to review deals live and beat up all the deals that you're currently looking at while you simultaneously learn the best way possible, which is called modeling by seeing other people put together deals. This is how private equity buys businesses. This is how investment teams work.

12:06And we're stealing the methods from Wall Street and giving them to you. If this is interesting to you, go to click the link and you can actually talk to my team direct about if this is a fit or not. We can help guide you. The link is in the show description. Is there a story that you can tell us about a business or acquisition where it didn't go the way that you planned, either for good or for bad? Yeah. I mean, there's a saying in asset management, I remember one of my first mentors back in the day in private equity said, you never want to invest with somebody that hasn't invested at least a couple hundred thousand dollars.

12:40His line was really a million bucks. He's like, I never want to be somebody's first million bucks that they invest because the first million bucks is for losing and learning. And I was like, God, that doesn't sound that great. And so the truth of the matter is that most people will lose money when you do deals. It's just natural. It's the game of business. So if that's the case, I want to make sure that every deal I do is a non-bankruptible deal. So I don't want to go through bankruptcy, although it's not the biggest deal if you do. Plenty of people go through that, actually. And I want to make sure that my first deal is not my worst deal.

13:15If your first deal is your worst deal, you'll never do a deal again. Because it'll scar you and you'll think that deal making is bad, not just that you had stuff to learn. And so, you know, I've had so many instances. But I'll tell you one right here in the state of California. I invested in a cannabis business, which I highly don't recommend, by the way. And this cannabis business, we had just given them$25 million. And it was me and some partners. And this business was like rocking and rolling. They were making maybe$60,$80 million that year in revenue. And about three weeks later, I get a phone call from the founder.

13:50And the founder says that they're out of cash. We had just given them$25 million. Like I think we had given them 15 million of the tranched investment that we were going to give. I was like, wow, that was like a pretty quick turnaround of my 15 mil. You know, what happened? And essentially they had completely financially cooked the books. The guy had like not one, but two mistresses, which is like kind of impressive. I was like, Jesus, you got time. I don't, I can't imagine having more than one husband. Anyway, and they had blown through this cash. And this happens like very rarely where there's this level of fraud.

14:25So the accountants were in on it. The regional banking partner was in on it. We were able to pull back some of the capital. We ended up turning the business around. But what I realized in this transaction was that, and I've never done it again since, that whenever I do a deal, I make sure three things are true. One, that there is no personal relation between the people on the cap table, the bank, and the accounting firm from my founders. We got to make it. It turned out he had like 47 cousins. they were all involved in the deal and they were all defrauding us. And so I want to make sure, like I believe in doing business with my family, but not, not yours.

15:01I don't know yours. And so that's one. Two is I only do tranched milestone based investing. I don't ever give that big of a chunk upfront again, because I want to see what you do with my first couple of million. And then three, you want what's called, you want what's called financial oversight. So basically I want when I do a deal to make sure that in my deal, it lists, like if you're going to do a big purchase, you have to check with me. I have daily bank account access. And so because of this, it's very easy. Money's a cruel mistress. She'll leave you if you don't pay attention to her. And so I want to have access into that bank every single day and make sure that if I'm investing in a third party, that I can watch my capital.

15:40But the truth of the matter is your first deal, there's going to be something that goes wrong. Many, many somethings that go wrong. And so all you want to do is protect your ability to persevere. You want to make sure that none of them are killers. You know, you can have mosquito bites. That's okay. But we want to make sure there aren't great white bites. And it'll happen eventually to you, but then you can get really big. And at that point, you figure it out. Did this guy go to jail? Yeah. No, he didn't go to jail. That sounds so hectic. But he did get sued into oblivion. But, you know, this happens a lot.

16:17You know, like if you think about it yourselves, you all have been online and you know the dark side of charisma, which is often there could be a little bit of narcissism in there, right? And we all have it inside of us too. Like I don't profess to be a perfect person at all. And so I think when you do deals, you can often find really charismatic founders, really charismatic partners, and you have to be careful that you don't get carried away. My dad always says don't fall in love with something that can't love you back. And so I never fall in love with a deal. And I think that's really important.

16:54Obviously, not everyone here is probably ready to buy a laundromat or kind of take that jump. but I think everyone is always ready to learn how to think differently when it comes to spending or saving. And so for women who are sitting here and they want that kind of practical next step that they can take tomorrow, this week, this month, what would you recommend to start thinking differently and to take those smaller actions? Yeah. I mean, listen, you can only save your way to zero. There is a bottom on it and you got to eat and you got to look cute like you guys all do. and you got to like go out and enjoy life.

17:28And so I don't like the obsessive focus on savings culture because I actually think it's much easier to earn than it is to save. And if you get better at becoming a deal maker, at doing better deals and at figuring out revenue, you will never have to focus on savings again. And I remember that because I didn't come from money. So like, I remember what it sounds like when you go to the grocery store and you're like, oh yeah, put it on the debit card. That one definitely works. and you're like, and you hear the beep that comes from it. It's like, no, it doesn't fucking work. I'm like, oh no, that one's old.

17:59Give me that one. And I fill it in with another one. Right? Like I remember that feeling. And my promise to myself was always, I would never want to have to check my bank account every single day to see if I can afford something again. I don't even want to care about prices. That's what I wanted because my entire youth was spent not being able to buy anything and being worried all the time that my bank account would go dry. And then I have like a little, I have a little PTSD from that. And so at some point I said, fuck it. I'm going to make so much money that I can buy whatever I want, whenever I want, no matter what.

18:31Right. I wanted that. Anybody here want like, fuck you, private plane, people hate you kind of money. Yeah, me too. Yeah, me too. And I don't actually want it because I'm that fancy. Like I'm not really that fancy of a person. I want it because I think it translates to freedom. And so if I could impress upon you one thing. It would be, have the fucking coffee. Buy the matcha. That's not going to stop you from being rich, and it sure as fuck not going to make you rich to drink the nice coffee. So ignore that advice. I think you guys are actually pretty capable and competent, and you have access to resources here in the U.S.

19:03that, like, I wouldn't say the same thing in a lot of other countries. But in this country, the only reason you guys cannot succeed and make a ton of money is because you're not willing to do what it takes. You only want to do what you want. And so if I was you, I would say, learn about the language of business so deeply that it becomes a fluency. Learn about dealmaking so deeply that you're schooling other people on what the financial metrics mean. Because it's actually not complicated. This stuff is not hard. It's just not taught. That's kind of why it's my entire mission. And so I would skip, like, do yourself a favor, spend 30 days becoming so obsessed with dealmaking and financial literacy and doing business deals that you set up the next 30 years.

19:52It's literally that simple. Let's say there's a woman in this audience who actually has 50 grand. She's got some savings. She wants to buy a small business. She wants to start that process. What are the questions that she's asking herself? What are the questions she's answering to herself? And what is that next step? Well, step one, go get the book, get it from the library. If you want to borrow it from a friend, get it on a discount rack. I don't care about that, but the answer's in the book. If you want to buy a business and here's the truth about buying businesses, you can lose money. This is not risk-free, right?

20:23It is risk-free to post a video on the internet by and large. It is not risk-free to do financial transactions. And so that is why I create all this infrastructure around it because that would be pretty shitty if I was like, you can buy a business, you can buy a business. How? Watch my YouTube. Like that's not enough. You have to go a step farther than that. So I would say one, get the book. If you want to go deeper, take the course. If you want to go even deeper, get in a community, whether it's mine or somebody else's. You know this to be true already and it's with everything in life. Are you going to be more fit if you hang out with CrossFitters all day?

20:54Or if you hang out with your friends that want to go to the club and want to go to brunch and want to do whatever, right? Probably the CrossFitters. Are you going to make more money if you're in a group with a bunch of other people who are obsessed with making money who already have what you would consider your dream day to be their Tuesday? It's just, it's so common sense and yet we don't do it. And so there's actually real studies that show that almost everything with humanity is contagious. Negativity, contagious. Actual fat, contagious, which is fascinating. So you are more likely to gain weight if your friend group is larger.

21:28You are more likely to lose weight if your friend group is smaller. You are more likely... I don't know what that means. One minute. Hi. Great, thanks. He's like... I'm like, bye. Hey. You are also more likely to make more money if your friend group has more money. And it doesn't mean we should leave people behind that aren't our aspiration. I'm not saying that. Bring them with you. but get a couple rich bitches in your group because it helps. All right, that's it.

22:25brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18 plus. Woo! I love that.

23:00Thank you so much. I read something recently that said women are the fastest growing cohort of millionaires and I absolutely believe it's because of women like you out there on the internet teaching us the stuff and telling us the terms. So thank you so much. Give it up for Cody Sanchez. Thank you guys.

23:19Only 13 % of you are subscribed to the YouTube channel and on native podcast apps. If you're not already subscribed, do me a huge favor. Subscribe now. That helps the show grow. So as my friend, Andy Frisella says, don't be a hoe. Share the show. Hey, if you're a business owner right now and you like the things you were hearing on this podcast, I have something that I haven't talked about publicly before that's just for you. It's called our SMB boardroom. This is for small business owners who want to grow. It is for business owners who are on their way to making at least seven figures a year. If this is you, hit the link down below.