He Got Fired By His DAD… So He Built a $60M/yr Empire

26:06and we knew then we had a winner did you like make a joke about the fact that you're new to this or or were you like more professional but you're like no i mean i didn't make a joke about no but we i mean like we were very transparent about the fact this was a not a joke not a joke but being light-hearted you're like who knows what's gonna happen i mean ultimately sam it's about we recruit recruited people that actually had experience and during you know the development the master planning community there are groups that actually take on a lot of the burden to do the work that you need to build these things it's not as if i'm having to 1500 acres is a huge project you're not going to do that yourself you're going to want teams to deal with zoning issues environmental issues engineering issues and we brought in airport planning to uh consultants we brought in um uh development consultants and so it's not as if i'm doing all this work myself i have a whole team, you ask who's running these projects, I have a team that's running them that's managing all the different pieces of it.

27:08And people wrote in and they basically said, if you're able to build this, count me in for buying a$800 ,000 home on that property. No, that's the lot. So 600 ,000. So the homes are probably$2 million to$3 million. And did they sign? What did they give to you that the bank took as... They signed a contract and they put a deposit. So$40 ,000 an acre on a$600 ,000 purchase price, but they put$40 ,000 in per acre or$10 ,000 per lot. And was it like you basically, quote, pre-sold, was it like$15 million worth of these properties? Yeah, we actually got up to about$28 million in total bookings, total reservation deposits.

27:53But we thought we were going to get through this process for environmental approval, quick zoning approval. We actually thought we'd break ground by the end of 22. So we had some churn out. We've refunded their money because these are refundable deposits. It's not as if they're giving you money that you get to hold on to. It's no different than if you bought, you put a deposit on an airplane or put a deposit on a car. These are fully refundable, but we're about$15 million in total reservations right now. So this project alone is awesome. But then it gets even crazier. And I'm just fascinated by you because I view you a little bit as a peer in that we're both media nerds.

28:32But the way that we're different is that you're doing great with risk. You're taking more risk, I think. But it's all working out. And this is where it gets interesting. You're like, all right, this thing worked for Flying Magazine. What happens if I go out and get more of these titles and do this whole content to commerce thing? and did you raise money for that? Not initially. So I have not raised any. My father invested when he sold his trucking business last year. So he's my only outside investor other than the initial round. Everything was done by myself. And I was just using bank debt, frankly, borrowing money from banks and liquidating my portfolio because I felt like I would rather invest in myself than invest in the S &P.

29:22I think the difference between Sam isn't necessarily that I'm like, I am willing to take more risk. I'm also willing to take more shots on goal. I just think fundamentally, like an asymmetric mindset that I have is, is I may lose, let's say the real estate project went to zero. I'm going to lose three and a half million dollars. That sucks. But you know what? I had been, my dad cut me off. My dad fired me in 2014. I had basically like no job, nothing. I was, for all intents and purposes, on my own at rock bottom. I had to figure it out. I've done that before. And so I'm not afraid of losing it all.

30:01And I know that I can get it back. And so we've applied that rule to everything that we've done. And we make acquisitions under the philosophy that it's asymmetric risk. is like, let's say that we buy a business or buy a magazine. We spend half a million dollars or a million dollars. And let's say it goes to zero. Let's say that we're completely wrong about a thesis and the thing is just a dog. Well, then we write off that half a million or a million dollar investment. But if we're right and we get a three or five or 10X multiple on that business, that creates an enormous amount of value for us.

30:33And so that's how we've approached our acquisitions. And I'm willing to take bank debt because bank debt is frankly pretty cheap. By the way, I think about money differently than you. And I think it's cool to hear your perspective because I think I should do it more. But the way that I think about it with privately, as an entrepreneur or private companies, I think if most of my money, if most of my net worth is illiquid, any liquidity that I get, whether it's annual cash flows or it's from selling, I sold one of my companies, I take all that money and I stock it away in a safe thing where it's like, if all else goes to shit from whatever I have, that is enough forever.

31:13And so that's how I view it. So whatever, how much money I have, I stick it away. And I'm like, that doesn't exist, basically. And I'm going to go and use a very much smaller sum to go start more companies. And I'll try to live off of my income from those companies. And if they sell, great. If they don't, hey, I still have this other thing that I have. What you're doing is different than me. And I like what you're doing because I think it's bolder. And I think it's probably a bit more fun if it works, which is you're like, even though I've got this private, this other private company that it's doing quite well, so it's not going to go out to nothing, but I have some liquidity.

31:48I'm going to pile that liquidity into more interesting, but potentially risky things. Well, I like freightways at some point will sell. Like it will show it will do be an exit. That to me is the nest egg, like for, for my long term. Like I know it's going to sell, who knows what it sells for, but there is value, fundamental tangible value in the business so for me and it's big enough that it's slightly de-risk or very de-risk yeah i mean it's it's totally de-risk and and there's a lot of value in that business and i have a salary it's not as if i i'm not like the board takes care of me and i so for me i have that asset everything else is that will set my family up for general you know for at least a generation like my kids would be able to college be able to buy a house and so forth so i'm not worried about Like my ability to survive if everything else falls down.

32:39But I do think diversifying my risks through all these other projects actually enhances my long-term returns. Particularly if I'm using my balance sheet to borrow money from the bank at frankly relatively low cost. But what about diversifying your time? That's probably... Well, that's what teams do for you, right? Like you hire people to run it. Like Preston Holland, who I think you know, we brought Preston in to initially run Flying. He's now running a finance business that we've got that is doing aircraft financing. We brought in a team to run. We have Reese that's running our real estate project.

33:14So again, and I fired myself from almost every functional role I had at FreightWaves. Oh God, are you chairman or CEO of FreightWaves? I'm CEO, but the day-to-day functions inside that business, I have Spencer Pyland, who's my CFO and COO, is running most of the day-to-day. Most of the day-to-day decisions are going through them. I'm working through strategy and thinking about the long-term prognosis of the business. So I can run and do deals and look at additional ways to lever this business up without getting caught up in the individual sort of minutiae of running a business. So how many titles has Firecrown acquired at this point?

33:54We're about 54, I think, is the number. Did you buy them in batches? like you bought like you typically i mean publishers in the magazine business it's hard to get scale with one title just because there's a finite audience that will care about that content and so typically a publisher and here's the thing about magazines is that only 25 of the content or 25 of the operations of that business actually is value added to a customer you have audience development you have magazine uh production you have layout like a customer doesn't experience that they only about 25 % of the cost structure is the editorial product or the photography.

34:32So you need a lot of infrastructure to run a successful magazine or frankly, media business operation. I think, you know, the media side magazine. It was insane. Basically the hustle, we could have, I mean, we were at about 2 million subscribers when I sold. Now I don't know what it's at, let's say three or three and a half, basically three people on editorial, if we were selling ads. So when I ran the company, three people on editorial and 37 people selling ads and managing ads and making it grow. Yeah. And those three people bring all the value. It's crazy, right? I mean, it's just how these media businesses work is you have a couple of people that are upfront and the rest of it is infrastructure.

35:15And so what you typically see when we buy a magazine is we're buying a portfolio. We're buying not just one title, but three or four titles that come along with it. And so we've done maybe 20 different acquisitions that have made up that portfolio, but some of them have been really big. We bought Bonnier, which is like the largest publisher in Sweden, the sort of a Rupert Murdoch family of Sweden. And they owned a bunch of boating titles, which we bought last fall. And really we owned boating, yachting, Selling World, Saltwater Sportsman. And so really this large marine title and aviation, we bought a number of aviation titles through various portfolios.

35:59And then we just recently bought model trains, a bunch of railroad titles and astronomy titles. So bringing that all together, that puts us the whole portfolio. Just whatever 12 year old Craig is into boats, planes, RC trades. So it's almost like my five year old's like dream. So I mean, think about it as boats, it's airplanes, it's trains and space. It's pretty cool for a five-year-old boy. It's pretty magical. But what we're buying are these audiences that love the content. They're enthusiasts. And effectively, by owning the magazine, which we finance through the P &L of the magazine itself, subscriptions and advertising, we make money in media.

36:42But we're ultimately buying the audience itself to offer some other product or service to them. Yeah. So let's walk through this playbook. so the playbook is to acquire customers profitably and you do that by having a media arm that its own business or having a media company that is its own business and make the profit via subscriptions and advertising step two is to make sure the audience i imagine you'll have to correct me if you're you're doing something in your head of like will they spend a lot of money on something is that right yeah essentially but if they're if they're enthusiast if a category is big and they're enthusiastic about the category, then the answer is pretty much yes.

37:25I mean, the thing to remember about magazines, and particularly magazines that are decade-old magazines, is these things have survived, potentially the great, we know magazines that are over 100 years old. They've survived multiple wars. They've survived multiple pandemics. They've survived the Great Depression. Like, the audience truly cares about the content enough to subscribe. And if these magazines have survived the internet age and multiple phases of it, they're going to be around for many, many years. And so essentially we're buying it because they care deeply about the content. And then ultimately they can buy another product or service.

38:01And then is step three like raise prices and sell ads better? Do you think about that? Well, I don't think we look at it in the same step, right? So like we do, we treat these, we have a media business which runs the media operation. And then as we go find commerce, so let's say aircraft finance, we find essentially an executive, a CEO, if you will, that can run that business through its own P &L that's separate than the media business. But in order to finance that, these people wouldn't be selling you these businesses if they were kicking ass. But you've been able to make them kick ass a lot better.

38:39And so you must be doing something just on the media side that they didn't do. What are those things? Yeah. I mean, effectively, you're fixing a lot of their cost structure and looking at it in terms of the spend opportunity of that audience and create data that can really look at data from the perspective of intent for someone that wants to buy a product. So if you're reading Flying Magazine, you're either a pilot, an aspiring pilot, or an aircraft owner, or somebody who wants to own an airplane. It's the forefront. I mean, there's people who read Flying because they like airplanes, but it's a small piece of the audience.

39:18And so we know each of those categories are going to spend some money in each of their outcomes. So a student pilot is going to take flying lessons. It's going to cost him$10 ,000. If he's going to be a career pilot, he's going to make$15 million over the course of his career. A lot of opportunity to help him along his journey. If they're an aircraft buyer, a prospective buyer, they're going to buy an airplane. They're also going to buy insurance and finance out of that. They're also going to have a lot of expenses to own that aircraft throughout their life. And so these are the journeys that we have.

39:49And that's ultimately what we're doing is we're optimizing the magazine, the advertisers based on intent, not based on the fact that this is a number. And what we've explained to the owners, the advertisers is, wouldn't you rather reach the 100 people that are going to buy your airplane versus the 100 ,000 people that 99 % of those people are never going to buy any of your products? That's what we need to do is actually get into that intent data. And we do that through digital. Print is just one aspect of what we do, but it's driving intent data to actually be able to demonstrate to them there's a value to that customer.

40:26That was a very good pitch. Hey, quick message here, because you know that feeling when you send a wire and it actually works? No friction? Well, I've used Mercury for years now, and let me tell you, it just works. And that's why I use it for not one, not two, but eight of my companies. From credit cards to invoices, I have everything in one place. There's no janky dashboard. I'm never told, please visit a local bank branch. None of that tomfoolery. And a few months ago, I landed a big client. The first thing I did, I sent them a clean, branded invoice. boom, deal closed, cash in the door. That's the kind of banking experience I want.

40:59And that's why I use Mercury. So if you're running a startup and you want banking that feels like it's built in this century, well, go to mercury.com and get started in minutes. Mercury is a financial technology company, not a bank. Bankless services are provided through Choice Financial Group, Column N8, and Evolve Bank & Trust members, FDIC. And then when you hire these guys to create, so I guess airplane financing means you help people get loans to buy a plane. And then I think you have like a classified section. So people selling planes. And then now you have the real estate one. I don't know what you've done with the other titles, how you've done the same content to commerce type of play.

41:38But I want to hear more about what those are. But when you're hiring people to build these businesses on top of an audience, so do you hire, how much do you decide to invest in them until, to invest in their new business until they're able to make a profit? You know, we have a, We're pretty patient. I mean, it depends on the business itself. If it's growing and it's hitting its KPIs, then we'll continue to support it. Every business is different. Obviously, the real estate business has, we haven't broken ground yet. So that is going to take many years to sort of generate a profit. It has its own sort of journey.

42:11The finance business is a finance brokerage business, and it should generate profitability much quicker than some of the other projects. We buy e-commerce businesses. We've now owned six e-commerce businesses. What are you selling? We own the largest NASA or the largest space merch store on the internet called the Space Store. So it's like collectibles. The aviation nerds and the space nerds are... The Venn diagram for both of them is pretty tight. So if you want a model of a rocket or a patch from one of the missions, we can sell that, whether it's SpaceX or NASA. And so what are some of the...

42:45What are you going to do with boating? Are you going to build a harbor? No, I don't think we'll do real estate because I think real estate's a... Like the arbitrage in aviation is that you're taking a piece of land that has beauty. It's a beautiful piece of land, but it's not next to a body of water to build a lakefront home. And so essentially what you're doing is you're taking this land and you're arbitraging because the runway itself is the arbitrage. Right. The fact that pilots want to be there. And so with boating, it's not as if I can arbitrage a lakefront property or an oceanfront property.

43:19Because that's already awesome. Exactly. Exactly. And the market's already priced that in accordingly. So for us, we're looking at financing. We're looking at e-commerce. We're looking at other categories that we think we can be successful. So probably won't be real estate, but it will be in other categories that we'll look at commerce. I think you said 40 million that you've raised for this whole thing? Yeah, I hadn't raised. I mean, my father has invested the money into it. We haven't used outside capital, if you will, through a family office. Of that 40, how much have you spent on acquisitions?

43:53That's been the predominance of the investment. It's been through M &A. But you're going to do$60 million in revenue this year. I think on the tweet you said 10 or 15 % profit? Our profit in March was 18%. We think we can sustain 20 % and we think ultimately it levels out around 30%. So you're going to do 60 million in revenue I think you said so that means 12 million in profit yeah remember that's a run rate number so that's not run rate but yeah 60 million in revenue revenue a little bit over 60 with 20 % margins and then what do you think that would be worth you know if you look at sort of public comps you're probably talking 12 to 15 times earnings it's probably what if it was a public our goal is to get to a billion dollars I have no plans to sell this business I like having cash flow Sam I do appreciate cash flow so it's not just taking risk I actually love cash flow you know it's funny as a venture-backed founder um you're kind of jealous you I've heard this you've talked about this on your podcast before is you get jealous of the cash flow guys yeah the cash flow guys get jealous of the valuation and venture and the venture guys almost every founder that I know are super jealous of the cash flow guys because like wait we built this fantastically high uh valued business but we don't see any of that money it goes you know ultimately until exit so but you you have both at this point but you have so on 12 million in profit 10 times is 120 is or no sorry you said uh 12 times 12 i mean like you can look at if it was a private trade probably 10 times is a fair number um so the business is worth at 60 million run rate 12 million profit i don't know if it's trailing 12 months revenue whatever but roughly 120 million to$180 million.

45:40Yep, that's right. That's what the business is worth. And you started this in 22 or 21? 21, yeah. That's awesome. Okay, and then you said, I think this is going to get to a billion in revenue by 2030. Is that what you said? That's our goal. And we can do that through both organic and organic growth. I mean, here's the reality is there's 4 ,500 magazine publishers in there and say there's no exit for these guys. I mean, a lot of them are, they're either owned by large corporations, which frankly want to divest their print products because public comps are challenging for them. Or they're family-owned businesses where they've been running the business for multiple generations or perhaps they started it 50 years ago, whatever.

46:23And they don't have an exit. And so we can go find, I mean, we're doing a deal right now where it's in a business, about a million and a half revenue, about$600 ,000. And when you take out all the expenses, all the owner expenses, about$600 ,000 a contribution, we'll pay less than one time for that business. And so there's just not a lot of folks buying in this category. And ultimately, you're buying the audience. I mean, that's really what it's all about is, yes, we own and generate profit, and that's great in cash flow. But ultimately, so I like to say we're a private equity business meets venture capital, because ultimately, VCs want the asymmetric 100x return.

47:03We're going to incubate businesses that can potentially bring those high-level returns, but using the audience, which we already own. And so, I mean, e-commerce is never going to hit that mark. But you have an aircraft finance business. You have a real estate project that very well could. And we'll find other business models as we grow. You're basically building a Hearst-style company. So Hearst, have you read The Chief, the biography of William Randolph Hearst? I have not. You should, man. It's awesome. So William Randolph Hearst, he had a successful father. His successful father was a miner, I think, or like gold.

47:41And in a gambling bet, he won, I think, the San Francisco Chronicle. And he goes to his son and he goes, well, William, you've got the Chronicle. Hopefully you can make it into something. You've got a year to make it not lose money. And so he does that. And he does it by creating what's called yellow journalism, which is like clickbait of the late 1800s, early 1900s. And he kicks ass and he crushes it. And he starts buying another thing, another thing, another thing. He starts buying all these titles and he's killing it. He's crushing it. This is like a cable business before cable where it's recurring revenue subscriptions, massive margins.

48:22And then they get so big. So they do a bunch of things. One, they invest in this new sports network called ESPN. So now Hearst owns something like 30 % or 40 % or 50%. I forget the number of ESPN. They've made a billion off of that. Then they buy Finch Ratings, I think, which is a data business, which is exactly what you're in. And they start buying all this stuff. At this point, Hearst is owned by the family. It's one of the largest family-owned businesses in America. They own this massive building right in the heart of New York City. My in-laws live literally on my wife's bedroom that she grew up in.

49:03And I can reach out the window and touch the Hearst building. And I remember that was funny because I almost sold my company to them. And I was sleeping in that room when I was visiting New York City. And anyway, they own this massive building that I don't think they got a loan on. I think they own this multi-billion dollar building. They own a ranch in Wyoming or something like that. They own everything. And it's owned by this family. and it's kind of sick and it's been around for a hundred years. That's sort of what you're doing. You know, Hearst is amazing because it's 10 billion or 12 billion of revenue.

49:33No debt. Like that's what's pretty astounding about Hearst. Not even on the real estate. They, they, they're, they're no debt. They actually have a very large venture capital portfolio. Yeah. They're an investor in Freightways, by the way. So that's one of the reasons. Oh, so you know all about them. I met, I forget who I met with there, but I learned a lot about them. But they're like older guys. They're like, they wear suits. They're like the Mad Men era where they like, you know, so it would have been a bad fit, but that's what you're building. And it's awesome. Look, I think media businesses are underappreciated.

50:02I think what's happened is the, you know, Hearst is they own a bunch of newspapers as well. But I think what we're seeing now is this, if you own a strong sort of thesis around a media asset and you can build products that take that audience, that's ultimately the playbook is like, I, we have these audiences, they love the content they're subscribing and paying for a product which is a print magazine or a digital experience they're already the audience we can offer them products and services that they naturally would buy anyways yeah that sounds like when you say that I'm like yeah that's so obvious but like everyone not everyone a lot of people have tried this few have succeeded Hodinkee I think is succeeding there might be a couple others but like when BuzzFeed says they're going to do it it's shit it never works out i think it doesn't work out because they have like a committee deciding on these things whereas you could be a bit more of a kind of a monarch where you're like this is what we're gonna do well i think buzzfeed along with a lot of other publishers have sold out to programmatic and and have relied upon the the platforms the facebooks and the and no one really like loves them too much uh what is buzzfeed anyways it's like yeah there's like I think the difference is that we're buying magazines and media properties that had been around for decades, where the audience, the people talk about their father or the grandfather reading Trains Magazine or Model Railroad or Flying.

51:36It has a lot of affinity to it. and then effectively we just have to find services so we make money in media but then we have to find services that we can offer on top of that uh how many hours a week you working no i don't i don't count my hours you think but like maybe like a normal nine to five 40 hour week no i mean i i do when i wake up at six in the morning because my kids wake me up till midnight i'm pretty much either with my kids or or working on the businesses so that's not work to me man like like i to me this isn't work these are this is a game in some ways i mean you're still you're in grind mode it's not like this is all like awesome you're like beach like i i do it to myself too like i end up getting overwhelmed but then i'm like i don't have myself to blame what's your goal to you want to be a billionaire you want to just do cool shit you want to create something that lasts for 100 years what's what what no i mean one of the reasons i like media businesses because you're always learning something new and you get intellectually stimulated by a new challenge.

52:43It's a new audience. It's a new product. I don't know. To me, it's... You don't want all the power, fame, sex, and drugs that comes with owning spacemagazine.com. Trains Magazine is going to give me the lowest amount of power. Yeah. Or model rail rider. No, it's not that at all. And it's not even the wealth. It's more of the chase. It's the putting up the score in some ways of solving problems and learning about a different... I mean, we have a business that I paid$10 ,000 for. It's called Aeroswag. It's an e-commerce business. It will do$100 ,000 this year. I spend more time on that business proportionally than any other one just because I think it's cool.

53:22It's a print-on-demand t-shirt shop for pilots. I frankly should not be spending as much time as I do, but I enjoy the... To me, it's a hobby. It's a tinkering kind of thing. I bet it feels awesome to make your dad regret firing you. it was fun proving that i could make it work but i had a lot of that i mean a lot of doubters when we first started the business yeah look behind most successful people is a girlfriend or boyfriend that broke up with them or a father said no that made like one rude comment or like in my case it was a media executive who like he like half hazardly like in passing was like man these newsletters will never make more than a million dollars a year and like i was like you motherfucker And you thought about that every day, right?

54:06Every day. And I see this guy sitting at floor seats at the Knicks, and I'm like, you son of a bitch. So I would say the best thing to give a founder is an enemy. So at Freightways, I had a guy, he was a CEO of our largest competitor, and he really pissed me off because he told me I couldn't compete against him. He was like, I like to see you try whatever products. And I woke up every day thinking about him. but he got fired. And I tell you, the motivation, it wasn't as fun anymore because I needed him to be the guy. All of a sudden, the company became nice to me and it was like, no, I want you assholes.

54:43Like, please go back to being assholes because it's like, I wake up more, slightly more motivated every day. I was like that with the founders of Morning Brew. I was like, I want to kill you. I'm like, if I see you in public, I want to like get in a fight. Now they're like my, they're family to me. They're like my best friends. Well, you are doing a, you're hosting a one of the podcasts on their platforms uh you know people say uh uh you know don't don't be hateful towards this person and in my head i'm like your rage is like the greatest fuel ever it completely i don't you know someone once told me if you got hate in your heart let it out i'm like no i'm burying that deep let it go nowhere that's fuel i need that sam you know it's also it's good for the team because if they also have the hatred of the enemy then they will they'll go much further and and fight harder than if than if you don't yeah i love that and it's sort of like a sport where you know like uh once once the whistle blows you're like anything goes but once the game's over like it's like all right nothing but love nothing but respect but while we're in between those the the lines like we're getting after it yeah exactly and so i think it's good.

55:54Dude, thanks for doing this. Yep. Enjoyed it. Craig Fuller, that's the pod. I feel like I can rule the world. I know I could be what I want to. I put my all in it like no days off on the road. Let's travel never looking back.

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