How to Get Rich Buying Boring Businesses with Codie Sanchez (PFP Vault)

0:00If you've watched the video version of this podcast lately, you've probably noticed the wood slat wall behind me here. Now, that's actually one of my favorite upgrades we've made, and we got it from Wayfair. I wanted something that looked clean, professional, without spending a fortune or making the project overly complicated. And the slat wall completely changed the look of the studio, and it's now the backdrop for every single episode we record. You're probably looking at it right now if you're watching it on video. And one thing I appreciated was how easy Wayfair made it to compare options.

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1:08When 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. On this episode of the Personal Finance Podcast, we're going to talk about how to get rich buying boring businesses with Cody Sanchez.

2:01What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co, and today on the Personal Finance Podcast, we're going to be talking to Cody Sanchez about buying boring businesses. If you have any questions, hit me up on Instagram at MasterMoneyCo, and follow us on Spotify, Apple Podcasts, or whatever podcast player you love listening to this podcast to. And if you wanna help out the show, leave a five-star rating and review on Apple Podcasts. And don't forget to check us out on YouTube as well at Master Money over on YouTube. Now today, we're gonna be talking to Cody Sanchez.

2:44And you guys have heard me talk about boring businesses in the past because I think there's a major opportunity with boring businesses. There's a ton of baby boomers who are going to retire and a lot of their children don't want to take over their businesses. And so what they have to do is go out and sell those businesses. And as you're going to hear, Cody's going to talk about the multiples that you can buy these businesses for. And it's absolutely amazing the deals that you can get with boring businesses. Now, this is something that there is a tremendous amount of opportunity out there. And the opportunity is everywhere.

3:14I've looked all over the country and I've seen it all over the place where there's opportunities to buy boring businesses like car washes, laundromats, or you could look at things like plumbing companies, air conditioning companies, electrical companies. There's so many different types of things that you can go out and buy. You just have to look in your local area. So today we're gonna be talking to Cody who is the queen of boring businesses. She owns dozens of these boring businesses and has a system where she buys them up and has other people manage them for her, but she is the actual owner.

3:43So today we're gonna be talking about that and we're gonna be talking about car washes, laundromats, how you can build mailbox money. We're talking about vending machines, how to get financing for these deals, which is extremely important, and then how she actually manages multiple businesses. We're going to talk about so much more as well. Let's welcome Cody Sanchez to the show. Cody, welcome to the Personal Finance Podcast. Thanks for having me. Excited to be here. We are so excited to have you today because you are one of my favorite followers on the internet because you talk about some incredible ways to build wealth from buying boring businesses.

4:17And you also have one of my favorite newsletters to read every single week that I think everybody should be reading. We'll link it up down below as well. But tell us how you got started buying businesses and what drew you to that market. Yeah, so I was in finance for a long time. I've been in private equity and investing for most of my career before I was a journalist. And so basically what I realized one day is that I was doing deals and making money for our firm at the time in the private equity space. and these deals were buying businesses and we were crushing it like for the firm. And I remember sitting there one day and thinking, wait a second, you know, the main partners on this deal are making like millions off of every single deal.

4:58I'm not making millions off of every single deal. And yet I'm doing all the work on it. Why couldn't I just start doing this for myself? And so if anything ever went sideways in finance, I could have these businesses on the side. And so that's basically what I did is I just said, hey, there's no real big difference between a giant LBO, which is a leveraged buyout that like KKR or any of the large private equity firms do, and the small, boring businesses that I buy, they're materially pretty similar. And so why don't I just start accumulating some of these from my own portfolio, and I'll use the money I earn to start investing in them.

5:31And so that's what happened. I love that idea. And I love the idea of buying boring businesses, because I think there's a lot of baby boomers that are going to be retiring. And I think there's a lot of those deals available right now. And I think it's a really cool market to focus on, especially when people are looking at real estate markets or things like that, where they're over leveraged. I think buying these boring businesses are a really incredible deal right now. And they're everywhere. So what are some of the pros to buying boring businesses? And why would you want to buy a business instead of starting one from scratch?

5:57Lots of reasons. One, when you start your business from scratch, you're basically betting on hopes and dreams and you're paying for the future hope of cash flow. costs money to start a business. And so I don't love not making money on day one. I especially don't love not making money on day one and paying for potential profits in the future. Don't love it. And so if what I'm starting a business for is actually to make money, not because I have a dream inside of me that has to exist, not because I couldn't live except for building this business, but as an income source, I would rather buy a business where I could have profits the second the deal closes and use a business for that reason.

6:36And I think there's room in the world for both of those. But I like the idea of like, I don't really believe in the, you know, starving artist, starving startup entrepreneur. I actually think you should give yourself some space. If you want to go build the amazing thing that you want to do, create some free cash flow so that you can be a smart, non-fear based, non-scarcity entrepreneur, as opposed to stressing about your startup nonstop. So that's why I think you should buy instead of build. The other thing is you can't really use too much leverage when you're building, meaning you can't really get loans for something that doesn't exist.

7:08You really can't get grants. You can get people to give you money for it, which would be startup fundraising, right? But only for pretty crazy ideas and at kind of tough multiples to the business. It's one of the most expensive forms of money you can get. And so I don't really love that. And that's why I sort of say, I think you should buy every chance you can instead of build. And that's the thing I love about it too, is just that you can put dollars down. And we'll talk about that a little bit later on how to do it. But you can put dollars down to actually buy something that can cash flow hundreds of thousands of dollars if you want to, depending on the deal.

7:37So it's something that's incredible that you can do and you're buying that existing business. That's right. I mean, the only thing I would add to that is we talk about this a lot. And I'm not saying that this stuff is super easy. It's hard work, but it is relatively simple. So like that is people hear that and I think, no way can I make hundreds of thousands of dollars for one deal? You absolutely can. Now, can you do it if you're a terrible operator and you've never run a business before and you don't really want to work whatsoever and you just want to buy the thing and cut a check every month?

8:03Probably not. But if you were willing to put in work into your startup, I don't see why you couldn't also put in work into a business that exists. So yes, I agree with you. Absolutely. And one big business that you talk about all the time is laundromats. And I think it's one of the most simple businesses to understand for a lot of people. And you recently released a really cool YouTube video on one of your laundromats. So tell us about some of those projects and why laundromats are some of the best businesses out there. You know, I like talking about laundromats for exactly the reason that you said.

8:30It's because laundromats are easy to exist. I have dirty clothes. I knit them cleaned. I put some coins in a machine and there's not employees on property all the time. It's a relatively straightforward business. That said, I don't always think they're the best business to start. In fact, it's really hard to get a laundromat that can do millions of dollars a year. We have one group of them that can, but it requires a lot of employees and a wash and fold service. The reason that I talk about laundromats is you nailed it because it's a gateway business. So I call businesses that allow people to start understanding acquisition gateway businesses, which basically mean you get a little taste and then you get hooked.

9:05You get hooked on this idea of deal making and acquisition. And I think laundromats are a great way to do that, which is why I start with those types of business. Similar for like vending machines, ice vending machines. They're not incredibly expensive and they're simple. And the worst thing that you can do is have your first deal go sideways. You don't want that. You want your first deal to go pretty smooth because then you'll continue executing on them and do bigger and more complex deals. If someone wanted to get into some of those deals and look at starting small, maybe with something like a laundromat, what would be the best way to get started running due diligence and running the numbers on that?

9:37So I always talk about learn, earn, invest. That's the three steps. So before you do anything, if you're watching videos on Instagram, TikTok, online, whatever, I think what you should do is start with learning. The reason why is even if you buy a laundromat tomorrow, the amount that you can earn on it is capped. It has a limited upside, like most businesses do. Your ability to earn is unlimited as a human. And so I like investing in yourself first. That's why we created an education company. So the first thing that I would do is I would go sign up for our free newsletter at Contrarian Thinking.

10:08I would sign up for our free newsletter at Unconventional Acquisitions. We have a course there if you want to learn about business buying. You could also just sign up for the free newsletter. No pressure either way. But I would make sure that you spend 30 to 60 days sort of immersed in this idea of doing M &A. The cool part is, say you never buy a business, the ability to negotiate and do deals and think about structuring and equity is something you're going to thank me for for the rest of your life. So you don't actually have to do a deal to get an ROI on this. So that's where I would start. And I think you kind of want to get obsessed about your curiosity for that 30 or 60 day window.

10:42And then once you have the framework for how to actually buy these businesses, you've done the course or you've compiled your own learning methodology online, then I think you can get into the actual numbers and tactics. But first, you've actually got to understand the foundation. Otherwise, you'll be set on a wobbly hill. Absolutely. And one of the things that you talked about is some of the ways that you can accelerate the cash flow in your laundromat. You talked about that in one of your articles, the seven income streams that you added to your laundromat. So what are some creative ways that you can actually accelerate that upside that you were just talking about?

11:11Yeah, you know, I think this is a fascinating part about businesses. Like if you wanted to increase your income on your real estate property, it'd be really hard, right? Like the market's got to go up. I get, you know, you could upgrade the property to some degree, but you can't really go crazy. And so it's kind of out of your control. You just have to play the waiting game or the fix it game. And then, you know, there's still some sort of cap. With a business, there's more options than you can imagine. So for some of our laundromats, for instance, like we're putting in vending machines into one.

11:38So you can do vending machine ads. You can do ads of different types of services. Like the Fold has traditional laundromats that you go in and do yourself. They also have a done for you model, which is like, you know, they pick up your laundry, they wash it, they fold it, they send it back to you. You could add a partnership with the dry cleaners. I typically don't recommend buying dry cleaners. There's a lot of issues with like remediation of dry cleaning facilities. So that's a different subject, but you could add a partnership with a dry cleaner. You could buy more laundromats. So if you have one, like we do, you can add a few more to it.

12:08You could buy the software that underlines the laundromat machines, or you could invest in the laundromat machines. You could add coin machines to it. It's like somebody reached out to us for a Bitcoin ATM to put in our laundromat. So I think there's about 72 ways you can add revenue streams to even a simple business like laundromats. And I absolutely love that because you're right. If you're managing a rental property or something like that, the only thing you could do is maybe add on to it. It's really expensive, but there's a lot of inexpensive ways to really increase your cash flow in these businesses.

12:37And there's a lot of ways to get creative with it as well. It's very cool. So another really cool business that you profiled was the ice vending machine business. And I had one in a small town I grew up in. I remember seeing it all the time. And we're in like on the coastal area. And we would always get our ice when we go fishing and on the boat and stuff like that. And I never thought about the business side of that. But you profiled one. And I thought it was incredibly cool. So tell us more about that ice vending machine business. Yeah, it's a similar idea to a laundromat, which is how can you have a business that works for you without you working on it constantly?

13:06and with a minimal amount of employees. Because when you start, employees can be really tough to manage. And so I like high margin, low people businesses. And then as you grow, people become a different type of leverage. But I think to start out, it's better to not have a giant team for you to manage. And so these ice vending machines are fascinating, but essentially you see them on roadsides at gas stations by like national parks next to lakes. And basically you go up to them and you fill your ice chest with a bunch of ice. And they're not the ones with the bags of ice. They're the ones where the ice just kind of comes out of a chute.

13:41And essentially the part that I like about this business is no employees, again, relatively little maintenance and overhead. They cost anywhere from 30 to$130 ,000, but you can finance them and you put them on a property that's either yours or leased pretty cheaply. And you can cashflow. I mean, the numbers are all over the place, but let's say anywhere from $20 ,000 to$40 ,000 a year per machine. And if you add a few of those, it actually becomes a nice little income stream in which you could actually profit to the tune of tens of thousands a year off of something that you only paid 30 to 150 ,000, let's say.

14:15That would be really hard to do with real estate. Absolutely. It's just frozen water. You're profiting off that frozen water. And I've seen them in some cool areas like really busy grocery stores and stuff like that as well. I love that. And then another really cool one that you profiled was your friend, Lisa, who started the mini mailboxes business, as you called it. And I think it's a really, really cool business. And that's a great article. I'll link it up below as well. But tell us about that business and how Lisa got started. Yeah. So Lisa is sort of similar to me. She has lots of different businesses that she does.

14:42She's always looking for ways to one, add back to her community in Las Vegas, and two, find ways to start businesses that are pretty inexpensive, that have some sort of recurring revenue. Lisa is more of an expert in real estate. So she owns now the Engel Filkers franchise in Vegas. But she was like, you know, looking at storage. She was looking at multifamily. She was looking at single family. And then she came across UPS franchises and essentially was like, yeah, maybe I'll do a UPS franchise and I'll have one of my friends run it. And what she realized is the UPS franchise business is really all about the PO boxes where people go and they have their business and they get their mail sent to there.

15:21But UPS limits the amount of mailboxes you can have in your store. And so she was like, actually, it'd be better to open up my own store, let's call it Lisa's Package Ship, and have a ton of these PO boxes. And basically, it's like a little mini storage center. Now you got to have somebody run the actual location, you have to have somebody send out the packages. So there is work here and there are employees. But I love the reoccurring model of these tiny PO boxes. It's like mini real estate. Exactly. That's the coolest part about it is it's like little mini real estate. I have one of those at the UPS store, and it's like 500 bucks a month.

15:54And if you have a bunch of them, the cool thing about, I think that article that you were talking about is Lisa could get more into those by just creating her own business instead of having the UPS business, which is really interesting. Yeah, that's exactly right. I always try to ask myself, and Lisa's the same, like, how would I do this if it was easy? If I really wanted to make income, but I wanted to do it in an easy way, what would be the easiest path to my goal? And so that's how she got to that answer instead of the UPS franchise. Exactly. That makes complete sense. That's awesome. And another cool one that you profiled was Quinn and his vending machine business.

16:24And I think that's one where you can really start with a low cost. So tell us a little more about that business as well. Yeah. So Quinn's a friend of mine and Quinn started a vending machine business after being a software sales guy. So I mean, making six figures doing well in California, but working like crazy. I'm sure a lot of people can relate. And he basically was like, how could I do something on the side that I could scale up that would make some money for me, but wouldn't be hyper time intensive. And so he ended up buying some vending machines, sodas, snacks, et cetera, placing them at locations around San Diego and essentially cash flowing on those vending machines.

17:00The part that's interesting is I think people think about vending machines as a logistics business, but it's also a sales business. Since he's a good sales guy, he calls up these locations and talks them into why he should be the one to be there and often negotiates better deals for him to get located on their property. And then, you know, now he has, I don't know, 15, 30 machines, something like that, and does anywhere from 15 to$30 ,000 a month. And that's from vending machines. It certainly didn't start there. But, you know, and the other thing I would say is a lot of people in the vending machine world are like, oh, you know, it's going to cost you$3 ,000 for a machine, or it's going to cost you$5 ,000 for a machine.

17:35then the truth is it can. But again, ask yourself, what if it was easy? What if I didn't want to spend$3 ,000? And that's when you go and look for refurbished machines online. That's when you go and look for vending routes that you can purchase. And you try to think about whatever your goal is, is there an easier mechanism or a cheaper mechanism to achieve it? And I've seen even people on Twitter just finding these vending machines where people just want them out of their hair and they get these vending machines, they repair them, and then they start to make money off of these free machines that they built up.

18:04and then they started to build a larger business around it. So it's a very cool way to get started inexpensively, I think, especially with some of these types of businesses. I totally agree. So if someone's listening to us and they say, this is a really cool idea, I want to get started buying boring businesses, where should they go and look for them? Should they look at biz, buy, sell? Should they call owners? Are there other creative ways that they should start looking for businesses? Yeah, I actually think the best way to do it is to look to your personal network. I call it my personal P &L strategy.

18:30So that basically means like in the unconventional acquisitions course, I think we have 13 different mechanisms to go and find a business to buy. Yes, you can go to BizBuySell, but just like MLS, except on steroids, the worst businesses are usually the ones that are publicly listed. And so what you really want to do is you want to talk to the people around you. You want to talk to your landscaper. You want to talk to your video production guy. You want to talk to your dad's friends or your mom's friends. You want to talk to your boss's friends. You basically want to just start telling people that you're interested in either buying or running somebody's sort of everyday normal business.

19:01And the more you do that, the more you realize most business owners have a dollar amount in their head, where if somebody offered it, they'd sell them right now because they're tired, because it's hard, because they're ready for the new challenge, because they want to retire, whatever it is. And so that's the way that you should actually do it. It takes more work than plugging in car washes onto a site like BizBuySell, but you'll have an infinitely higher likelihood of outcome. Absolutely. And I'll even give you an example of that where we bought a coin operated car wash and we were looking at it and it looked like it was worth somewhere around 120 to 150.

19:34So we made the offer on it. We knew they wanted more than that. It was on biz buy sell. We made the offer on it and they actually accepted it. We just did what it was worth and then that was it. So it's a really cool way to just offer what the numbers are actually showing you and then you can go from there. I love it. Exactly. So it's awesome. But say some people are listening and this is their aha moment. They want to start buying these cash flowing businesses and create wealth. So how would you recommend that they structure these deals? Should they do seller financing or should they go get an SBA loan or what's the best way to do that?

20:00I think it depends on what you want to do. I think the best deal is always seller financing if you can get it. So anytime you can get somebody to give you a business for future profits at a low interest rate for an extended period of time, that's a win. Unless you can do even better, which would be like a rev share, buy a business that somebody doesn't even want to have, like my friend Drew Sinaki does, and say, hey, we'll buy your business for$1, but we'll give you a cut of all future revenue. That would be a pretty good deal. I mean, you could certainly go raise capital for any of these deals.

20:30So if you didn't want to put your own personal loan, you know, or personal guarantee on the line, which you have to do for an SBA, you could raise money from other people and let them take on the risk. Or you could go to the SBA and get a loan from the government for, you know, 70 to 90 % of the price of the business. So I think those are all ways that are actually really accessible. I'd say SBA loans are probably the most annoying to do, but more common than the other two. Absolutely. They seem more accessible at times too, which is interesting as well. But the seller financing is one of my favorite ways to do it because I think it's just one of the easiest ways to go about it, especially if you're working with a seller who really wants to creatively sell or they want some cashflow for their retirement or whatever else.

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