Building a Multi-Million Dollar Empire with Sam Khorramian

0:00You had this idea, I think you were looking at maybe some other folks that were doing brokerages a different way. And then you just decided to declare publicly that you were going to start from scratch. And I'm curious because for a lot of people, I think it would be kind of terrifying to decide to go into a business that they had never done before. Even though you had industry experience, it was not at all related. The buying and fixing up and flipping a house is way different than having a real estate brokerage.

0:39Hey, everybody. Roland Frazier here with another episode of the Business Lunch Podcast. And today I am super excited because I have a very, very special guest, good friend and business partner, Sam Karamian, who is the co-founder and the CEO of Big Block Realty. And I think several other assorted businesses that have been acquired as a result of that brand, a SaaS, a mortgage company, an escrow company, all kinds of businesses. Sam, welcome to the show. Happy to be here, Roland. Thank you so much for bringing me back on the show and very excited to chat with you and have some fun. I like it. And I see you've got some of your young child's drawings from the refrigerator back posted up behind you there.

1:25You want to tell us about that? Yeah. So my young child that made these artworks, his name is Kaz, and he's one of my favorite artists that's still living. I've been collecting him for many, many years before all the hype, so they turned out to be some great investments as well. Super cool. Yeah, I love giving you a hard time about that. So let's talk a little bit about – let's just tell people a little bit about what you do. you know, kind of the, I'd love to hear like where you are now in the entrepreneurial journey. And then I'd like to kind of take some steps back. For sure. So today inside of, you know, my portfolio of businesses, I've taken a page out of Roland's book, which is not be in the business or on the business, but be above the business.

2:21And that has just been one of the best things that has happened to me as an entrepreneur. And it's allowed me to focus on big level, high level expansion growth through acquisitions, consulting, and just a bunch of cool stuff. So today, inside of our core business, which is Big Block, I'm really focused on doing a roll-up where we're acquiring multiple different real estate service-based businesses, brokerages, mortgage, escrow, title, et cetera, and gearing that up to ultimately roll them up and do an IPO here in the next few years. Very, very excited about that. And just being in your world and understanding everything that is available to entrepreneurs like you and I doing a lot of consulting for equity, acquiring businesses outside of the real estate space, working on a few roll-ups with you, and just loving every moment of it.

3:29I love that. I love it. Let's talk a little bit about, because I've known you since before you started all of this, when you were kind of in the process of evolving your entrepreneurial vision. And I think it was 2014 when we first met at Traffic and Conversion Summit when you were working with Deanna on helping us out with sales there. Is that correct? Yeah, so I was working with Deanna. For 10 years in? Yeah. I was working with Deanna for many years before that. And I always knew of this mythical human named Roland Frazier. And Deanna called and said, hey, do you want to put a team together and help with sales and traffic and conversion summit?

4:17And of course, we said yes. And after being a part of that, I was like, man, I got to be a part of Roland's mastermind. So made the decision to kind of jump in and I joined the mastermind at that time. I think I told you this with two goals. One was being in the right room with the right people, learn some good stuff that can help grow our business. And two was I'm going to figure out some way to be business partners with Roland Frazier. And fast forward now, 10 years later, all of that has happened. We ended up on the Inc. 500 list, 26 fastest growing company in America a few years after taking all the genius that comes from you and the communities you put together and kept that rolling for several years on the Inc.

5:07500 and now business partners with you on several ventures and life is great. Hey, Ryan Dice here, co-host of Business Lunch. And before we get to the show, I have an exciting invitation for you. My business partner and Business Lunch co-host, Roland Frazier, and I are hosting a live in-person event. And if you're a bootstrap business owner who wants to build a 10 million and even a hundred million dollar business in the next three years, you need to be there. This event is called Get Scalable Live. And over the last four years, it has transformed from a small gathering of entrepreneurs into the largest bootstrapped entrepreneurship conference in North America.

5:45Now, I know what you might be thinking. You're probably thinking, Ryan, really another business event? Is that really what we need? But trust me, this isn't just any other event. You see, unlike most conferences at Get Scalable Live, you'll have dedicated time to take action and actually work on your business instead of just in your business. Over three days, you'll work shoulder to shoulder with like-minded entrepreneurs to implement what you're learning and get valuable feedback that you're just not going to be able to get during the normal day-to-day. You're going to be immersed in fresh ideas, strategic insights, and you're going to get the support and guidance that you need to actually reach your business goals.

6:21So, this is your opportunity. This is your chance to step out of the day-to-day to eliminate the noise and finally work again on your business, not just in your business. And if you implement, I'm confident about this, if you implement just one or two key insights from any of our sessions into your business, you're bound to see a return on investment much higher than what we could ever charge for admission. And by the way, speaking of admission, right now, Business Lunch listeners can save an additional 10 % off of our already low early bird ticket pricing. So just head over to GetScaleableLive.com and use promo code LUNCH at checkout.

7:02Again, that's GetScaleableLive.com promo code LUNCH. It is truly amazing what can happen when you step out of the day-to-day and spend just a little bit of time surrounded by other powerful business owners. And since this opportunity only comes around once a year, you don't want to miss it. Again, the link is getscalabellive.com and don't forget to use promo code LUNCH at checkout to save up to 67 % off the full ticket price. That's all I got. I'll see you in Austin. All right, back to your regularly scheduled programming. I love that. Love it. And so you were, um, So did you join that mastermind before Jason's or same time or how did that work?

7:47You know, so Jason's was before that. So I had like this transitionary period where prior to when I met you, I was an investor. I was flipping homes. So the first mastermind I was a part of was that. And it worked really well for me. And then as that, you know, the markets were changing, I didn't know what I was going to do until we started Big Block. And then that's when I had the fortune of, you know, coming into your world. So you had this idea. I think you were looking at maybe some other folks that were doing brokerages a different way. And then you just decided to declare publicly that you were going to start from scratch.

8:38And I'm curious because for a lot of people, I think it would be kind of terrifying to decide to go into a business that they had never done before. Even though you had industry experience, it was not at all related. Like the buying and fixing up and flipping a house is way different than having a real estate brokerage. So how did you how did you conceive of that? And then and what were the fears and and concerns that you had about going into it? And how did you get yourself to move past them and move forward? Yeah. So. Being that I was in real estate and I was phasing out of the flipping of homes, I asked myself, like.

9:25actually let me remind real quick in the mastermind the the market was changing so all the investors started talking about instead of flipping homes they're going to go buy large multi-family assets and they kept talking about residual income and and that was a new new concept to me back then so you know i didn't have the pockets that they had um at least i told myself I couldn't do that. And I thought to myself, well, you know, I have a lot of relationships in real estate. And what can I do that can give me residual income that could be innovative and kind of change the way things are working in whatever industry or sector I decided to go into?

10:12And what can I do that really has the opportunity to be something very special? And I thought to myself, man, most of the deals I'm getting as an investor are coming from real estate agents. And I've never met a real estate agent that doesn't want to make more money. So I thought to myself, man, I bet you if we did a real estate brokerage and instead of putting agents like they traditionally were on a 70-30 split or whatever the number is, man, I bet you if we gave them 100 % commission and they paid us, let's say, 300 bucks a month, I bet you I could get a few hundred agents to do that. And I quickly, you know, inside the mastermind, I popped up.

10:56I said, I'm going to do this. And half the people thought it was smart and the other half thought that I was losing my mind. That's how you know you're on the right track. You need at least a few people that think you're crazy or it's not going to be innovative enough. Absolutely. Absolutely. So that was kind of like the thought process. And I'll tell you the, what I remember the most, and you kind of hinted to this was, I had so much imposter syndrome, because I was like, man, I've never owned a brokerage. I've barely done work as an agent. And who am I to have agents that are twice my age come work at my company?

11:37And, you know, is this going to work? And so many people told me from my competition to my friends, man, you can't make money in a hundred percent commission brokerage. But I just felt it in my bones and I, and the numbers, the pro forma, it added up. So I decided to go full force. And, and this is before I was really even into any sort of digital marketing. So I did what I knew best, which was just pick up the phone and get in those reps and make calls and grew the company pretty good in the first couple of years. And then once I joined your mastermind, I was at the time one of the only brokerages that was marketing on digital platforms to recruit agents.

12:25And that completely blew the company up because we just had our acquisition system down and we were recruiting like crazy. And then that evolved into, man, now we have the brokerage, right? And the brokerage has a bunch of agents and the agents are working with clients that are going to end up using an escrow company and they're going to end up using a property management company and a mortgage company. So all of a sudden we thought, man, here's the hub. We built a great hub. How can we figure out how to make more money off the things that we're already doing? And that's what spawned into the conglomerate of all these different sectors inside of the real estate service business.

13:14So you started by adding some of those things, but also then you multiplied that dramatically when you decided to own the back office as well. Will you kind of talk about how did how were you thinking about that and how did that come around to get Sweet Assist involved into the mix? Yeah, so it happened by chance where I knew a guy that was funny enough in the mastermind with me, the prior one. And that's the power of these masterminds. You just don't know. Yeah, never know what's going to come from it. He had started this software company and originally was designed to be ultimately like a marketing solution for realtors.

14:02and he came to me to be an investor. And I said, hey, I'm happy to play with you. Let's figure something out. And I was currently at the time, I was spending about$10 ,000,$11 ,000 a month on the software that I was using to run my brokerage, the back office. So I said, hey, yeah, I'll invest, but I'm not going to pay you up front. I'm going to pay you$7 ,000 a month. And what we're going to do is we're going to reprogram this thing to be a back office solution for real estate brokerages. Because I know the back office. No, at the time it was like a, almost like a CRM. So I said, I will, I will invest.

14:51And originally it was just, I forget, maybe like 10 or 15%, but it's going to be over terms and the payments start as soon as we have helped you turn this into a real estate back office solution. And that ultimately helped me get my first position in the company with not only not any money down, I was actually saving money because the software that was costing me$11 ,000 was now going to$7 ,000 a month payments for my original tranche of equity in the business. So I was saving$4 ,000 a month and created a solution that helped us become more profitable as well as another vertical for us to go offer this as a service to other real estate brokerages.

15:41And then the other thing that you did was you decided to really use that platform to radically expand the number of other relationships that you could bring to help your agents make more money, but also create more revenue for you and generate more deal flow for more companies to acquire. Yes. Could you share a little bit about that? A hundred percent. So something, again, that has always stuck in my mind, especially hanging out with you, is I found that the wealthiest people oftentimes get to where they are because they figure out how to make more money off of the things they're already doing.

16:19And to me, it was amazing coming from understanding the affiliate marketing world to how agents aren't making any revenue on promoting a handyman, promoting an electrician, promoting, the list goes on and on. So we built inside of the software the ability for agents to create additional revenue by promoting different services and products that either they were buying or their clients were buying. So it helped us take an agent from the place where they were only making money on the real estate sales commission to expanding their earnings by promoting other goods and services. And we were one of the first and still one of the few people that kind of really leaned into that.

17:10And then as we decided to get into the acquisition space of buying brokerages, we started to sell the software to other brokerages as a service, right? And when brokerages sign up immediately, we know their aging count, we know their volume, their books, it has integrated with QuickBooks. Like we had a good snapshot of a company's DNA. And that ended up being a really good, you know, Trojan horse, if you will, for us to have good lead flow for different brokerages, that could be a good component to our roll up. So not only did it turn into owning a software company, not only did it turn into creating more revenue from the ancillary services, it also turned into a great, you know, lead flow for us finding different companies to roll into our roll-up.

18:10I love it. So now let's talk about that roll-up because it's something that I don't think we've ever shared with our audience here. We've talked about it a few times with our Epic audience, but would you kind of walk through the full evolution of that? Because it started with an offer or at least a potential offer for someone to acquire the company, I think it would be great just to run through that and share that with everybody. Yeah, happy to do so. So naturally, as the company started to grow and you end up on the Inc. 500 list a bunch of times, everyone tries to buy you. And at this point, you were already a partner.

18:51You came in on a CFE with us. And we finally had an offer that was exciting enough for us to start to consider it. And you helped us with negotiations up front. And we got to a number where we're like, all right, well, we're at least going to give this a serious, you know, serious go and explore it. So the gentleman that was putting this deal together was buying six of the biggest 100 % brokerages around the country and rolling them all up. And then his plan was to go public. So we go out and he had a meeting with all six companies in Colorado. And he explained what the plan was. He's like, we're going to be buying you guys at a five, six, seven, eight multiple, depending on your size.

19:52We're going to bundle it all together and we're going to IPO. And the average publicly traded real estate company at that time was trading at 92 times multiple. So PE ratio of 92. And in Epic, we talk about multiple arbitrage, right? Buy it for 3X, get it bigger, sell it for, let's say 12X. So I remember I'm like, oh my gosh, like I see what he's doing and it's genius. And I had a few thoughts and then I called you. So I call you and I say, Roland, oh my gosh, what this guy's doing is genius. He's going to buy all these companies at 5, 6, 7x. He's going to roll them all up and IPO at, let's say, 30, 40, 80, 90x.

20:37And he has that arbitrage. And what's amazing to me, and that's what I'm telling you on the phone while I'm out there, I'm like, what's amazing to me is he's never been in real estate. He has no connections in real estate. And he's kind of just a jerk. Like I don't like the guy. And I can't imagine having to work for someone like that in this, you know, this new plan he's building. And you said at the time, you're like, yeah, that's really smart. You know, I love those models. And you said, just imagine if we knew someone that was likable and did have connections and was in real estate. Imagine what we could do.

21:20And at the time, it goes right over my head. I'm like, yeah, that'd be cool if we had someone like that. And naturally, you were hinting towards me. So after I really started to unpack what he was doing and brainstorming with you, it kind of hit me. We had our final term sheet. We met with you. And, you know, you were very strongly advising us to not take the deal. And at this point, I still not connected the dots of what you were saying about, man, if we had someone that could do all that. So we turned down the deal. I'm driving home. I'm using a lot of special words in my head about you. I'm like, oh, this guy just turned down this deal.

22:09But, you know, success leaves clues. I'm going to follow Roland's advice. And I legit that night woke up in the middle of the night and I'm like, oh, my gosh, he was talking about me. And we can do this way better than unlikable guy is doing it because he's trying to find the best companies and buy them at, let's say five or six X. And the problem that creates is good companies are in hockey stick mode. And they want to, as you advise us, they don't want to leave money on the table. And then the problem for him is he has to go raise hundreds of millions of dollars to actually put this deal together.

22:52So I thought to myself, man, there are so many brokerages like me that, yeah, maybe a 7x is exciting, but it's not like life changing. And you kept saying that to me. You're like, dude, it's good money, but it's not like you're set for life money. And I started to think, man, if we did a roll up and instead of playing the game of going and buying them for cash, we could do like a cooperative roll-up where we can go to brokerages and other real estate companies and say, hey, as example, you have, let's just say$1 million of EBITDA, net income today. And if you were to sell privately, maybe you will get a Forex.

23:40Congratulations, you have$4 million, but really you're probably going to get$2 million up front if you're lucky, and$2 million on an earn out, you're going to pay taxes and you're back to having to find another opportunity. But if you could go public and forget the average being a 92X, let's say we could just hit a 30X. If you could go public, that$1 million is now worth$30 million. So what we did is we started to bundle companies in a cooperative roll-up. And instead of buying them, we're letting them roll in with us. And when we IPO, we're taking 30 % of the shares of the holding company. So to kind of color that all in, our stretch goal is 300 million of combined EBITDA.

24:29So 300 million of combined EBITDA that we didn't pay any money for at a 30 PE ratio. So 30 X is$9 billion and a 30 % management fee for a lack of better terms for us is$2.7 billion without having to put money out, et cetera, et cetera. So I had the idea and I called you, you were actually in Paris at the time. and I'm like, hey dude, tell me if I'm onto something or I'm crazy. And I remember you said, you're crazy if you don't do it, but call Grant. I called Grant, said the same thing. Tell me I'm crazy or tell me I'm on something. And he said, you're pretty much crazy if you don't do it. This is it.

25:17This is real. You can do it. And then we just kind of hit the ground running and, And it's been a fun ride for sure. And if it wasn't for the markets being where they are, we'd probably be in the position to do the IPO now. But naturally, we're going to wait until the next bull run to pull the trigger. Love it. It's so much fun to me to have. Can you turn the volume down on your speaker because it's echoing back? How's that? There we go. That's better. So, yeah, it's just so much fun to be able to do business together with somebody that you like and have the ability to think creatively. And, you know, the money's not terrible either.

26:01But so you already had a successful business that was one of the fastest growing, won all these awards, had all this revenue and all this profit. Why? Why do more? What why why is you know, why wasn't that enough? And what's driving you to do more? Man, there's a lot there. I'll start by saying I've always just wanted to be a billionaire. So much, in fact, that I have three commas, as you know, tattooed right here on my hand to remind myself, you know, I'm going to get there. um yeah and i'm my motto in life has always been i'm grateful but not satisfied right like i'm grateful but i'm still hungry and one of the biggest impacts in my life and i'm not just saying this because i'm on your podcast is getting closer to you and seeing this man that you know is always smiling always happy you know I always I always make the joke that it's like Roland doesn't walk he just kind of floats he like hovers and he's just you know he's got that that happy successful man glide uh and when I started to like ask you questions really understand more of how you are what you are it's because you don't do anything you don't like to do and you focus on really big projects without you having to necessarily be in the weeds.

27:38And that's what motivated me to, one, get above the business as opposed to in or on. And it really put me in the position that, man, I can do a lot more as long as I have the right infrastructure, the right integration, the right management. in. So, you know, the answer is, you know, I came out to shoot a special type of crazy in the sense that I want it all right. Like people are billionaires all the time, become billionaires all the time. Like I want to do that. And I want that legacy and I want the nice things that come with it. And, you know, I'll finish with this. I am I'm so passionate about building and I'm so passionate about growing things and helping people that I feel like I wouldn't be satisfied internally if I just stayed where I was and just kept riding that gravy train as far as it went.

28:41I didn't want to be 90 years old and think, man, if I had only tried more or thought bigger or took more risk. That is one of my biggest fears is, is not swinging the bat as hard as I can before I can't swing anymore. Yeah. Yeah. I think that's really cool. And how does your family feel about that? Because you, you did have to have some tough conversations with them and your business partner about turning down, you know, they were all picking out all the, all the fun things that they were going to buy with the money. And then you said, you know what, I'm going to go for the next level. How did that work?

29:25And also, well, actually, how did that work first? So, you know, you and I were leading the negotiations and my partners and my family and everyone was like, it was like every day, Roman, what's up? When are we closing? Where's the check. My wife's already spending the money. You know, everyone's house shopping, car shopping, jet shopping, all the, all the, all the shopping. And I remember, um, the day that we decided to turn it down, I was the most concerned about telling my dad because, you know, he's, he's my dad and he's been so supportive and he was so proud that his son was about to achieve this.

30:13and I called him and I said, Hey, I'm going to tell you something. And I'm really embarrassed to tell you what I'm about to tell you. Um, but we turned down the offer and here's why. And it was one of the first times that my dad actually got emotional. And he said, he said, you know, son, I don't care if you sell the business or not. I'm just so proud that you have the ability to think past those numbers that you saw in that paper. And I'm so proud that I raised a son that can, that can think bigger and, and keep pushing. And then there was the business partners and my business partners. I said, Hey, like, we're going to turn this down and here's why.

31:01And when I told them the why, the first thing they said is, well, what did Roland say? I was like, Roland said we're onto something. So they, you know, they bought in my wife, mostly bought in. She was obviously a bit disappointed because she, you know, she was thinking about what our life was going to be like, not just financially, but just as like me as a husband and a dad being more present. Right. But when I told her the vision, She totally rallied behind me. And I made it a lot bigger in my head of what people's reaction was going to be than the reality of what it was, which I think is the case for most things in life.

31:46But, you know, the conversations were I was scared to have them, but everyone got it and they saw it. And and we're all much happier now that that we decided to go this route. That's fantastic. In wrapping up, is there anything that you think you would like to share with people either about the deal, about things that you've learned as you've gone through the process of this pretty large thing or anything else? Oh, man. You know, I'll tell you that to me, the reason I am where I am and working on the things I'm working on and been able to, you know, get to the level of where I'm at in business and success.