Podcasts > The School of Greatness > The #1 Financial Freedom SECRET Rich People WON’T Tell You! | Codie Sanchez

The #1 Financial Freedom SECRET Rich People WON’T Tell You! | Codie Sanchez

By Lewis Howes

In this episode of The School of Greatness, guest Codie Sanchez presents a wealth-building mindset focused on increasing earning potential over mere saving. She advocates acquiring existing businesses rather than starting new ones, and outlines a structured process for successful acquisitions.

Sanchez also explores the importance of cultivating meaningful relationships and carefully managing one's inner circle as success grows. She shares insights on balancing professional connections with personal bonds, highlighting the value of loyal friendships beyond business ties.

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The #1 Financial Freedom SECRET Rich People WON’T Tell You! | Codie Sanchez

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The #1 Financial Freedom SECRET Rich People WON’T Tell You! | Codie Sanchez

1-Page Summary

Mindset and approach to building wealth

According to Codie Sanchez, the key to building wealth lies in increasing one's earning potential rather than merely saving. She believes that while saving is helpful, truly wealthy individuals focus on expanding their earnings through negotiations and obtaining equity stakes in businesses.

Codie advocates for shifting the mindset from concentrating on saving to actively pursuing higher earnings. She compares making money to an enjoyable game, emphasizing the importance of loving the process and seeing it as a competition to be won.

Strategies for business and entrepreneurship

Acquiring existing businesses over starting new ones

Codie advocates purchasing established, cash-flowing businesses over starting new companies from scratch. She criticizes startup culture and highlights the stability of proven franchises and vertically integrated businesses.

Codie's 10-step process for successful acquisitions

Sanchez outlines a comprehensive 10-step approach to acquiring a small business, covering deal origination, financing, negotiation, due diligence, and post-purchase integration. She emphasizes thoroughly understanding the process to avoid pitfalls and learning from each deal, even if it doesn't go through.

Codie suggests starting with smaller acquisitions like laundromats to gain experience. She differentiates between online and physical businesses, favoring the latter for their customer stickiness and long-term sustainability. Deal structuring is vital, and Codie introduces "the contrarian way" for business analysis and integration.

Importance of relationships and social connections

Being selective with inner circles

As one becomes more successful, Codie Sanchez stresses the need to curate one's inner circle carefully. She cautions against surrounding oneself with insincere people and emphasizes the importance of having truth-telling friends over sycophants.

Balancing different types of relationships

While "deal friends" provide professional value, Codie believes maintaining "useless friends"—those without business ties but who bring joy—is equally crucial for overall happiness and balance.

Codie advises being straightforward in relationships and valuing loyalty over popularity. She shares examples from her own life, highlighting the need to separate business from personal connections and the strain caused by mishandled situations.

Overall, Codie underscores proactively nurturing meaningful relationships and cautiously managing one's circle of influence to support both professional success and personal fulfillment.

1-Page Summary

Additional Materials

Clarifications

  • Equity stakes in businesses represent ownership interests in a company. When individuals hold equity stakes, they own a portion of the business and may benefit from its profits and growth. Obtaining equity stakes can be a way to build wealth as the value of the stake can increase over time, providing a potential source of significant financial gain. Equity ownership can also come with voting rights and a say in the company's decision-making processes.
  • Startup culture typically refers to the environment and practices associated with newly established businesses or ventures. It often involves characteristics like innovation, risk-taking, agility, and a focus on rapid growth. This culture is prevalent in tech hubs like Silicon Valley and is known for its emphasis on disruption and scalability. Startups are known for their dynamic and fast-paced nature, with a strong emphasis on creativity and problem-solving.
  • Vertically integrated businesses are companies that control multiple stages of the production and distribution process for a particular product or service. This means they handle various aspects of the supply chain in-house, from sourcing raw materials to delivering the final product to customers. By integrating these different stages, companies can potentially reduce costs, improve efficiency, and have more control over the quality of their offerings. This strategy can lead to competitive advantages and increased profitability in certain industries.
  • Deal origination is the process of finding and initiating potential business opportunities or acquisitions. It involves identifying and sourcing deals that align with one's investment or business goals. This step is crucial in the acquisition process as it sets the foundation for further negotiations and due diligence. Deal origination can involve networking, market research, and leveraging existing relationships to discover viable investment prospects.
  • Deal structuring involves planning and arranging the terms and conditions of a business transaction to meet the needs and goals of all parties involved. It includes determining the financial aspects, legal framework, and operational details of the deal. Proper deal structuring is essential for maximizing value, minimizing risks, and ensuring a successful outcome in business acquisitions or partnerships. It often involves creative problem-solving and negotiation to address complexities and align interests effectively.
  • Customer stickiness refers to the ability of a business to retain customers over time, keeping them loyal and engaged with the brand. It indicates the level of customer satisfaction, trust, and preference that leads to repeat purchases and long-term relationships. Businesses with high customer stickiness often have lower customer churn rates and benefit from increased customer lifetime value. Strategies to enhance customer stickiness include providing excellent customer service, personalized experiences, and valuable loyalty programs.
  • Curating inner circles involves carefully selecting and managing the people you surround yourself with, especially in terms of personal and professional relationships. It's about choosing individuals who bring value, support, and positivity to your life while distancing yourself from those who may be negative or insincere. This process helps in fostering a supportive environment that can contribute to your success and well-being. By being selective with your inner circle, you can create a network of trusted individuals who align with your values and goals.
  • "Useless friends" is a term used by Codie Sanchez to describe friends who may not have direct business connections or professional value but contribute to personal happiness and well-being. These friends are valued for the joy and emotional support they bring rather than any specific business benefits. Codie emphasizes the importance of maintaining a balance between friends who offer professional opportunities and those who provide personal fulfillment. Balancing these different types of relationships is seen as essential for overall happiness and success.
  • Managing one's circle of influence involves being intentional about the people you surround yourself with, both personally and professionally. It includes choosing relationships that support your goals and well-being while minimizing negative influences. This practice often involves assessing the impact of individuals on your life and making conscious decisions about who to engage with regularly. By managing your circle of influence effectively, you can create a supportive network that helps you thrive and achieve success.

Counterarguments

  • While increasing earning potential is important, saving and investing wisely are also critical components of building wealth.
  • Expanding earnings through negotiations and equity stakes may not be feasible for everyone, especially those without access to certain markets or negotiation skills.
  • A mindset focused solely on earning more can lead to burnout or work-life imbalance if not managed properly.
  • Not everyone may find the process of making money enjoyable or view it as a game, and this mindset might not be healthy for all individuals.
  • Acquiring existing businesses comes with its own set of risks, such as inheriting hidden debts or systemic issues not apparent during the due diligence process.
  • Startups can offer innovation and growth potential that established businesses may lack, and they can be a source of wealth creation for entrepreneurs and investors.
  • The 10-step process for acquisitions may not be universally applicable, as different industries and markets may require different approaches.
  • Smaller acquisitions like laundromats may not be as scalable or offer the growth potential that other types of businesses can provide.
  • Online businesses can offer significant advantages over physical businesses, such as lower overhead costs and the ability to scale quickly.
  • The contrarian way of business analysis may not always yield the best results, as conventional methods can also be effective in certain contexts.
  • Being selective with one's inner circle can sometimes lead to a lack of diversity in perspectives, which can be detrimental to personal growth and understanding.
  • The concept of "useless friends" can be seen as dismissive and undervaluing the intrinsic worth of friendships that don't have a direct professional benefit.
  • Overemphasizing loyalty in relationships can sometimes lead to staying in toxic or unproductive relationships for too long.
  • Separating business from personal connections can be challenging, and a strict separation may not always be possible or desirable.
  • Proactively nurturing relationships is important, but it's also necessary to allow relationships to develop organically without forcing a specific outcome for professional gain.

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The #1 Financial Freedom SECRET Rich People WON’T Tell You! | Codie Sanchez

Mindset and approach to building wealth

Codie Sanchez presents a contrarian perspective on wealth-building, focusing on earning potential rather than mere saving tactics, advocating for a mindset shift to truly achieve financial success.

Codie believes that the key to wealth is not in saving, but in earning more.

Codie Sanchez reiterates that saving alone isn't enough to become rich. She states, "It's never gonna get you to rich. It's way easier to earn more than it is to save everything." She points out that once a person masters earning, they become unstoppable. Codie also says, "You can only save your way to zero," emphasizing that earning more is what unlocks true wealth.

Codie believes that really wealthy people focus more on increasing their earnings potential through negotiations.

Codie emphasizes that to accumulate substantial wealth, like reaching $10 million, one must look beyond just working for others. She suggests earning through skin in the game—investments and ownership that provide upside potential beyond mere wages or salaries.

Codie suggests that the mindset shift from focusing on saving to focusing on earning is crucial for building wealth.

Codie views money as a form of freedom, suggesting that with more money comes the power to exert your will upon the world. She encourages loving the "game" of making money, advising that one should enjoy making money and treat it like a scoreboard in a competition rather than a source of stress.

She emphasizes the importance of loving the "game" of making money and seeing it as a scoreboard to compete against.

Codie again stresses the importance of seeing money-making as a game that one should love playing — she compares it to a scoreboard in a competition. She implies that this type of perspective can transform the act of earning money into an enjoyable challenge rather than a burden.

Codie warns against the excessive focus on saving as it could foster a ...

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Mindset and approach to building wealth

Additional Materials

Counterarguments

  • While earning more is important, it's not the only key to wealth; effective money management and saving are also crucial components of financial stability.
  • Focusing solely on earnings potential can lead to burnout or neglect of other important life aspects, such as health and relationships.
  • Investments and negotiations carry risks, and not everyone may have the risk tolerance or opportunity to engage in these wealth-building strategies.
  • A mindset shift is important, but practical barriers such as lack of access to education, capital, or networks can impede one's ability to significantly increase earnings.
  • Loving the "game" of making money might not resonate with everyone, as some people prioritize job satisfaction or work-life balance over financial competition.
  • A scarcity mindset can be a result of systemic issues and not just personal choice, and it may require more than a mindset shift to overcome.
  • Owning your future and resisting external control are important, but systemic issues and inequalities can limit an individual's ability to achieve financial freedom.
  • Lett ...

Actionables

  • You can create a "Skill Amplifier" plan by identifying three skills you currently have and researching how to monetize them, such as taking an online course to improve those skills or finding freelance opportunities that leverage them.
    • For example, if you're good at writing, consider a copywriting course and then offer your services on freelance platforms. If you enjoy photography, take an advanced photography class and sell your photos online or offer your services for events.
  • Start a "Negotiation Challenge" where once a month, you intentionally practice negotiation in a low-stakes situation, like at a flea market or while purchasing a service, to build your confidence and skills for higher-stakes negotiations.
    • This could involve haggling over a small item's price or asking for a discount on a subscription service. The goal is to become more comfortable with asking for what you want, which can later translate into negotiating higher salaries or better investm ...

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The #1 Financial Freedom SECRET Rich People WON’T Tell You! | Codie Sanchez

Strategies for business and entrepreneurship

Codie Sanchez offers a comprehensive viewpoint on strategies for achieving success in business and entrepreneurship, advocating for acquiring existing businesses over starting new ones and outlining a detailed 10-step process for successful acquisitions.

Codie advocates for buying existing, cash-flowing businesses over starting new businesses from scratch.

Codie Sanchez criticizes the startup culture and the idolization of equity options, which often become worthless due to the high failure rate of startups. She suggests that investing in existing, cash-flowing businesses, such as franchises or businesses in a vertical one currently does business with, is a more stable path to wealth. Sanchez stresses the importance of cash flow and highlights the advantages of proven businesses, like franchises, which provide systems and a blueprint for success. She suggests that buying a business with an established track record and cash flow is a lower-risk path to wealth compared to starting from scratch.

Codie outlines a 10-step process for successfully acquiring a small business, including deal origination, financing, negotiation, due diligence, and integration.

Codie outlines her approach for acquiring businesses, emphasizing a thorough understanding of the process to avoid pitfalls. She explains that a bad first deal can be discouraging and stresses the need to learn the technical aspects of deal-making, such as understanding opportunity, deal clarity, selling yourself, origination, financing, negotiation, structuring, closing documents, due diligence, and what to do in the first 90 days after purchase. She further underscores the importance of due diligence, ensuring no deceit from the seller before finalizing a purchase.

Codie mentions the importance of being willing to walk away from a deal if it's not the right fit, highlighting Warren Buffett's quote about once-in-a-lifetime opportunities to emphasize that the business often turns out better than expected after closing. She also acknowledges that not all businesses evaluated will be bought and that it's valuable to learn from experience even if a deal does not go through.

Sanchez ...

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Strategies for business and entrepreneurship

Additional Materials

Clarifications

  • Equity options in startup culture are a form of compensation that gives employees the right to buy company shares at a predetermined price. They are often seen as a valuable incentive for employees in startups, offering the potential for financial gain if the company succeeds. However, the high failure rate of startups can lead to these equity options becoming worthless, causing disillusionment among employees who may have been banking on them for significant financial rewards. This idolization of equity options can sometimes overshadow the risks involved in startup ventures and the importance of other forms of compensation and stability.
  • Deal clarity in deal-making involves ensuring a clear understanding of the terms, conditions, and objectives of the transaction for all parties involved. Origination is the process of identifying and sourcing potential deals or opportunities for acquisition. Structuring deals involves determining the financial and legal framework of the transaction, including payment terms, asset allocation, and risk management. Closing documents are the final legal paperwork that formalizes the deal, including contracts, agreements, and any other ne ...

Counterarguments

  • Starting new businesses can lead to innovation and the development of new markets, which buying existing businesses may not always foster.
  • Acquiring existing businesses often requires significant capital upfront, which may not be accessible to all entrepreneurs.
  • The 10-step process for acquiring a business may not be universally applicable, as different industries and markets may require different approaches.
  • Cash flow is important, but so is the potential for growth and scalability, which some existing businesses may lack.
  • Due diligence is critical, but even with thorough due diligence, unforeseen challenges can arise post-acquisition.
  • Being willing to walk away from a deal is prudent, but it may also result in missed opportunities if too much caution is exercised.
  • Laundromats and similar businesses may have a high success rate, but they may not appeal to or be suitable for all entrepreneurs.
  • Brick-and-mortar businesses do offer customer relationship benefits, but online businesses can scale more quickly and have lower overhead costs.
  • The emphasis on profitability through res ...

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The #1 Financial Freedom SECRET Rich People WON’T Tell You! | Codie Sanchez

Importance of relationships and social connections

Codie emphasizes the need to be selective about who you allow into your inner circle, especially as you become more successful. Her advice highlights a proactive approach to creating and maintaining social connections that contribute to both professional and personal growth.

Codie emphasizes the need to be selective about who you allow into your inner circle as you become more successful.

Codie Sanchez and Lewis Howes discuss the importance of being cautious with social circles, especially in the face of success. Codie cautions against the dangers of being surrounded by "yes-men" and sycophants—a lesson she correlates with the historical example of the fall of Rome and Caesar's downfall. She stresses the need for a small group of loyal, truth-telling friends over those who are only there for personal gain.

Codie believes that "useless friends" - those who provide no tangible benefit but are simply enjoyable to be around - are just as important as "deal friends" for maintaining happiness and balance.

Codie and her husband Chris prioritize a balance between work and play in their relationship. They have structured their lives and relationships to support growth and ambition, while also making time for fun and recreation. Chris balances Codie's work-focused side by encouraging her to have fun. They play roles within their business interactions with Chris often considering potential downsides, which complements Codie's optimistic approach and creates balance.

Codie discusses the distinction between "deal friends" and "useless friends"—the latter being those who are there just for the enjoyment of the relationship and not for any material gain. These "useless friends" are crucial for maintaining happiness and balance, according to Codie.

Through discussions with Lewis Howes, Codie advises on being straightforward and honest in relationships, holding value in friends who will communicate the truth, even when it is uncomfortable. Together, they underline the importance of friendship based on loyalty and truth over popularity or avoidance of confrontation.

Codie illustrates that as one's success grows, the need for a more insulated and selective ...

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Importance of relationships and social connections

Additional Materials

Clarifications

  • Codie Sanchez distinguishes between "deal friends" and "useless friends." "Deal friends" are those who provide tangible benefits in relationships, often related to business or personal gain. On the other hand, "useless friends" are valued for the enjoyment and balance they bring without a direct exchange of material benefits. Codie emphasizes the importance of maintaining both types of friendships for overall happiness and well-being. Balancing these relationships helps create a supportive network that contributes to personal growth and success.
  • Whiteboarding sessions in the context of balancing work and personal life involve using a whiteboard to visually map out goals, plans, and visions for both professional and personal aspects of life. This practice helps individuals like Codie and Chris align their priorities, discuss aspirations, and ensure they are dedicating time and effort to various areas of their lives effectively. By visually organizing their thoughts and plans, they can maintain a clear focus on their goals and ensure they are making time for both work-related tasks and personal activities. These sessions serve as a tool for communication, planning, and accountability in managing the different facets of th ...

Actionables

  • You can evaluate your friendships by creating a "Friendship Portfolio" where you categorize friends based on their roles and contributions to your life, similar to how you might manage a financial portfolio. Start by listing out your friends and assigning them roles such as 'truth-teller', 'fun companion', or 'career ally'. This will help you see if you have a balanced mix or if you're over-invested in one type of relationship, allowing you to make conscious decisions about where to invest your time and energy.
  • Develop a personal code of conduct for business interactions that aligns with your values and stick to it during negotiations and partnerships. Write down your non-negotiables, such as honesty, transparency, or fair play, and refer to this list when making business decisions. This practice will help you maintain integrity and avoid situations that could harm your relationships or reputation.
  • Introduce a 'visioneering' practice with your significa ...

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