Podcasts > On Purpose with Jay Shetty > Codie Sanchez: How to Make Money if You Don’t Have Money (4 Step Process to Make Money Today)

Codie Sanchez: How to Make Money if You Don’t Have Money (4 Step Process to Make Money Today)

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On this episode of the On Purpose with Jay Shetty podcast, Codie Sanchez emphasizes the wealth-building potential of business ownership and acquiring equity stakes in companies. She advises adopting an "owner's mindset" and proactively seeking opportunities by leveraging relationships and structuring win-win deals.

Sanchez highlights the prospect of acquiring businesses from retiring baby boomers, even in seemingly mundane industries like plumbing or roofing. The discussion challenges the notion that wealth stems only from innovative sectors, underscoring the financial upside of Main Street service businesses. Sanchez's insights provide a framework for aspiring entrepreneurs to build wealth through calculated business acquisitions and ownership.

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Codie Sanchez: How to Make Money if You Don’t Have Money (4 Step Process to Make Money Today)

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Codie Sanchez: How to Make Money if You Don’t Have Money (4 Step Process to Make Money Today)

1-Page Summary

Developing an "Owner's Mindset"

Codie Sanchez stresses the importance of adopting an "owner's mindset" for building wealth. She notes that 70% of millionaires are self-made and 68% own equity in businesses, underscoring how business ownership provides long-term upside and control that jobs and investments alone cannot match.

Getting "Skin in the Game"

Sanchez emphasizes that the wealthy tend to be business owners and dealmakers, not just employees or investors. She advocates negotiating for equity stakes, or "skin in the game," even without upfront capital. Jay Shetty shares how sharing profits with a partner supported his business's growth. Sanchez advises starting with manageable deals, even pooling resources to acquire stakes in businesses.

Finding and Evaluating Deals

Building Relationships

Sanchez highlights actively seeking acquisition opportunities by building relationships and fostering a "reticular activating system" to spot potential deals.

Structuring Win-Win Deals

She advises objectively evaluating deals based on value alignment with personal goals, structuring compelling "win-win" deals with milestone-based risk mitigation. Sanchez cautions against partnering with someone not fully invested.

Potential of "Unsexy" Businesses

Wealth From Main Street Businesses

Sanchez educates on the opportunity in acquiring businesses from retiring baby boomers. She notes many wealthy individuals made fortunes from seemingly "boring" service businesses like equipment rental or plumbing companies.

Overcoming Bias Toward Glamorous Industries

Sanchez references the Forbes wealthy list having many who made fortunes in stable, mundane industries like roofing. She and Shetty advocate overcoming the cultural bias that wealth only comes from innovative, exciting businesses.

1-Page Summary

Additional Materials

Counterarguments

  • While 70% of millionaires are self-made, this statistic may not account for the advantages of education, initial capital, and networking opportunities that can significantly impact one's ability to become self-made.
  • Owning equity in businesses does provide potential for wealth, but it also comes with significant risk, and not all equity stakes lead to millionaire status.
  • Business ownership offers control, but it also requires a high level of responsibility, stress, and risk that is not suitable for everyone.
  • Being a business owner or dealmaker is not the only path to wealth; many individuals achieve financial success through careers in various fields, including arts, sciences, and education.
  • Negotiating for equity stakes without upfront capital can be challenging and is not always possible, depending on the industry and the business's financial situation.
  • Sharing profits can support business growth, but it can also lead to complex partnership dynamics and potential conflicts over business direction and profit distribution.
  • Pooling resources to acquire business stakes can be a good strategy, but it also involves shared risk and the need for strong partnership agreements to prevent disputes.
  • Building relationships is important for spotting deals, but not all relationships will lead to profitable opportunities, and networking can be time-consuming and resource-intensive.
  • The concept of a "reticular activating system" for spotting deals is more of a psychological framework than a guaranteed business strategy.
  • While "win-win" deals are ideal, in practice, negotiations often involve concessions, and not all parties may feel the outcome is equally beneficial.
  • The potential of acquiring businesses from retiring baby boomers is significant, but it also requires specific knowledge of the industry and the ability to manage and grow a business effectively.
  • While many fortunes have been made in "unsexy" businesses, these industries often require specialized knowledge and may not be as scalable or adaptable to changing market conditions as more innovative sectors.
  • Overcoming bias toward glamorous industries is a valid point, but it's also important to recognize that some industries have higher growth potential and can offer more significant returns on investment.
  • Wealth from stable, mundane industries is possible, but these industries may also face disruption from technological advancements and changing consumer behaviors.

Actionables

  • You can start recognizing business opportunities in your daily life by keeping a journal where you note down every small business you interact with for a month, detailing what they do well and potential areas for improvement or growth. This practice will train your mind to spot opportunities in everyday situations and understand the operations of various industries, which could lead to identifying acquisition targets or partnership possibilities.
  • Develop a habit of asking business owners about their exit plans whenever you receive good service or have a positive interaction with a small business. This approach can open up conversations about potential acquisitions or partnerships, especially with retiring owners who might not have a succession plan in place.
  • Create a simple spreadsheet to evaluate different industries based on stability and necessity, rather than glamour, to identify potential investment opportunities. By scoring industries on factors like demand consistency, entry barriers, and market saturation, you can objectively assess where a "boring" business might offer a stable and profitable venture, aligning with the idea that wealth can come from mundane industries.

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Codie Sanchez: How to Make Money if You Don’t Have Money (4 Step Process to Make Money Today)

Developing an "owner's mindset" and getting "skin in the game" through business ownership

Codie Sanchez illuminates the importance of developing an "owner's mindset" and the wealth-building power that comes with having "skin in the game" in a business.

Adopting an owner's mindset rather than an employee mindset is critical for building wealth.

Owning equity in a business, even a small one, provides long-term upside and control that a job or investments alone cannot match.

Sanchez stresses that an owner's mindset is essential to acquiring wealth, as reflected by data showing that 70% of millionaires are self-made, and 68% have ownership in a company. This indicates that having control over a part of a business, even a small one, provides long-term financial benefits and autonomy that a job or investments alone cannot provide. Sanchez urges individuals to shift their perspective, fostering a positive and open stance towards money, aligning more with an "owner's mindset" that can ease the path to acquire wealth.

Sanchez implores those seeking financial freedom to start small in business, not to be daunted by inexperience or a lack of specific skills. She emphasizes the need to understand and leverage personal worth and outlines that accumulating "skin in the game" in a business, such as equity, over time is vital.

The wealthy tend to be business owners and dealmakers, not just employees or investors.

Getting "skin in the game" by negotiating for equity in a business, even if you don't have capital to invest, can be a powerful path to wealth.

Sanchez points out that wealth predominantly resides among entrepreneurs and investors who have taken calculated risks through business ownership or investments. She elaborates that one doesn’t need to start as an entrepreneur to gain ownership; rather, focusing on acquiring "skin in the game" is the crux of wealth-building.

Jay Shetty shares a personal anecdote, explaining how opting to share profits with a business partner enabled their vested interest, ultimately supporting his bus ...

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Developing an "owner's mindset" and getting "skin in the game" through business ownership

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Counterarguments

  • Not everyone is suited for or interested in business ownership, and there are alternative paths to wealth that may align better with an individual's skills, values, or lifestyle.
  • An "owner's mindset" can be beneficial, but it is not the only mindset conducive to success; for example, a collaborative or community-oriented mindset can also lead to significant achievements and fulfillment.
  • Equity ownership carries risks, such as business failure, which can lead to financial loss; it is not a guaranteed path to wealth.
  • The statistic that 70% of millionaires are self-made does not account for systemic barriers that may prevent certain groups from achieving similar success.
  • The focus on individual wealth-building can overlook the importance of systemic changes needed to address wealth inequality.
  • Not all employees or investors are excluded from wealth accumulation; strategic investments and high-paying jobs can also lead to significant wealth.
  • Negotiating for equity is not always possible, especially in industries or companies that do not offer equity to employees or where power dynamics make such negotiations difficult.
  • The strategy of pooling resources with friends or family ...

Actionables

  • You can start by evaluating your daily purchases and considering investing in those companies. If you frequently buy products from a particular brand, research if they have a direct stock purchase plan or if you can invest in them through a brokerage account. This way, you're not just a consumer but also a part-owner, aligning with the owner's mindset.
  • Create a side project that solves a problem you're passionate about, even if it's small scale. For instance, if you're good at organizing, start a personal organization service for friends and family. Charge a small fee and reinvest the earnings into expanding your services. This approach helps you understand the value of ownership and profit-sharing firsthand.
  • Engage in peer-to-peer ...

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Codie Sanchez: How to Make Money if You Don’t Have Money (4 Step Process to Make Money Today)

Strategies for finding, evaluating, and negotiating deals to acquire or invest in small businesses

Codie Sanchez shares insights into better dealmaking practices when acquiring or investing in small businesses. She underscores the importance of diligence in evaluating potential deals and partnerships, advocating for a methodical and relationship-driven approach to business.

Building relationships and actively looking for acquisition opportunities, rather than waiting for them to come to you, is key.

Codie Sanchez emphasizes the importance of building a network and actively seeking out business acquisition opportunities. She played a game when she was young where she would 'collect mentors' by asking them questions without expecting anything in return, fostering relationships that could lead to opportunities.

Developing a "reticular activating system" to recognize potential deals all around you takes practice but can pay off.

By engaging with the business world and nurturing an interest in deals, one’s brain becomes better at spotting potential business opportunities, Sanchez explains. She likens this to developing a “reticular activating system” in the brain, training it to recognize useful details in one’s environment like those related to business deals.

Evaluating potential deals objectively based on value, not just emotions or gut feel, is critical.

Structuring "win-win" deals that benefit both the buyer and seller, with appropriate risk mitigation

Codie Sanchez explains that one should objectively evaluate potential deals based on their inherent value and alignment with personal business goals outlined in a "deal box". She suggests structuring compelling "win-win" deals and using milestone-based deliverables for risk mitigation to ensure the deal is beneficial for both parties.

Sanchez advises being tactical when raising money for investments and stresses the importance of negotiations as a common practice among the wealthy. She also cautions against partnering with someone who is not fully invested or is distracted by multiple ventures, emphasizing the focus required for success.

San ...

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Strategies for finding, evaluating, and negotiating deals to acquire or invest in small businesses

Additional Materials

Counterarguments

  • While actively seeking acquisition opportunities can be beneficial, it can also lead to a bias towards action where due diligence might be compromised in the eagerness to close deals.
  • The concept of a "reticular activating system" for deal recognition is metaphorical and may oversimplify the complex process of identifying valuable business opportunities.
  • Objective evaluation of deals is important, but it's also necessary to acknowledge that intuition and experience can play a significant role in decision-making.
  • "Win-win" deals are ideal, but in practice, negotiations often involve trade-offs, and one party may have to concede more than the other.
  • Being tactical in raising money is wise, but it's also important to consider the long-term implications of investment terms and investor relations.
  • Negotiations are indeed important, but focusing too much on negotiation tactics can sometimes strain relationships and lead to a loss of trust between parties.
  • Partnering with individuals who are fully invested is ideal, but diverse portfolios can also indicate experienced investors or partners who can bring a breadth of kn ...

Actionables

  • You can enhance your deal-spotting abilities by creating a daily habit of reading diverse industry news and summarizing potential opportunities in a journal. This practice sharpens your ability to spot trends and recognize opportunities that align with your interests. For example, if you're interested in real estate, dedicate 30 minutes each morning to reading real estate news and jot down any unusual market movements or properties that seem undervalued.
  • Develop a method for objective decision-making by designing a simple scoring system for evaluating potential deals. Assign points to key deal aspects such as profitability, scalability, and risk. Before making any investment decision, use this system to score the opportunity and only proceed if it meets a predetermined threshold. For instance, if considering a franchise opportunity, you might score it based on location, brand strength, initial investment, and projected cash flow.
  • Bui ...

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Codie Sanchez: How to Make Money if You Don’t Have Money (4 Step Process to Make Money Today)

The value and potential of "boring" or "unsexy" businesses as sources of wealth

Codie Sanchez and Jay Shetty discuss the often-overlooked potential of small "main street" service businesses as reliable wealth generators.

Many of the wealthiest people have made their money from "main street" service businesses, not high-tech startups

Sanchez educates youth on the importance of seizing the opportunity to take over baby boomer businesses. With baby boomers owning 60% of all small businesses, totaling $68 trillion in wealth in the US, there lies an evident potential for wealth transfer to younger generations. Sanchez emphasizes that while younger individuals are drawn to day trading stocks, NFTs, and cryptocurrency speculation, a more stable and lucrative alternative could be investing in small service businesses.

She introduces the concept that "boring businesses," such as a vending machine business, applauding their surprising profitability. Sanchez argues that these ordinary businesses often have stable cash flows, low competition and can be acquired or grown relatively easily, countering the misconception that wealth is often created in more "shiny" industries. She references her family member’s success with an equipment rental company as a prime example of obtaining wealth in what many might consider a dull industry.

Overcoming the bias that wealth only comes from exciting, innovative businesses is important

Sanchez points to the Forbes 100 list, where many of the wealthiest individuals made their money in stable, if mundane, industries. The richest woman in the world, as per the 2022 list, began a sizable roofing company, dismissing the notion that only "glamorous" industries bring significant wealth. This is further emphasized by Sanchez's observation that private equity firms are purchasing these businesses more frequently, moving from owning 4% of US companies in 2000 to 20%.

Shetty underscores the need for a cultur ...

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The value and potential of "boring" or "unsexy" businesses as sources of wealth

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Clarifications

  • The Forbes 100 list is a prestigious ranking of the wealthiest individuals in the world compiled by Forbes magazine based on their estimated net worth. It showcases the top billionaires and influential figures across various industries and regions. Being featured on this list is a significant recognition of financial success and influence globally. The list includes prominent business leaders, entrepreneurs, and investors who have amassed substantial wealth through their ventures and investments.
  • Private equity firms are investment management companies that invest in private companies to make a profit. They raise funds from various investors and use these funds to acquire stakes in companies, aiming to enhance their value. Private equity firms operate through different strategies like leveraged buyouts and venture capital, contributing to the growth and development of businesses. These firms have faced criticism for their profit-making practices and large-scale acquisitions.
  • Day trading involves buying and selling financial instruments within the same trading day to capitalize on short-term price movements. Traders aim to profit from fluctuations in the market by making quick trades. It requires fast decision-making and trade execution, often utilizing specialized software for efficient trading. Day traders may use leverage and must adhere to specific regulations, such as maintaining a minimum equity in their trading accounts.
  • Cultural reevaluation involves reassessing societal norms and values to give importance to different aspects of life or industries that may have been undervalued or overlooked. It calls for a shift in mindset towards recognizing the significance and potential of certain sectors or practices that are not traditionally seen as glamorous or prestigious. This process aims to broaden perspectives and promote a more inclusive and diverse understanding of success and wealth creation. By encouraging a cul ...

Counterarguments

  • While "boring" businesses may offer stability, they might not scale as quickly or as large as tech startups, potentially offering lower overall returns.
  • The success of small service businesses often depends on the owner's direct involvement and expertise, which may not be suitable for all investors, especially those looking for passive income.
  • The landscape of small businesses is changing with technology, and what was once a stable industry could be disrupted, leading to potential instability.
  • Private equity firms acquiring these businesses could lead to consolidation, which might reduce competition and negatively impact consumer choice and prices.
  • Not all small service businesses will have low competition; some markets may be saturated, making it difficult for new entrants to succeed.
  • The transfer of wealth from baby boomers to younger generations assumes that the latter have the interest and capability to run these businesses, which may not always be the case.
  • The assumption that there are few new entrants in "boring" industries may not hold true universally, as entrepreneurial trends can shift and new competitors can emerge.
  • Cultural reevaluation of business success may be challenging to achiev ...

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