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Why Playing Small Is Keeping You Broke

My new book, Own Or Be Owned, is all about building a business so good it doesn't need you. It's out September 18, grab your ticket to the launch event here: - cs

Codie Sanchezhost

Aug 18, 202522mWatch on YouTube

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Transcript

25 min read · 4,677 words

0:00 – 0:59
Introduction
1. CSCodie Sanchez
  The best way to do deals [cash register sound] is to do what we call a [beep] best deal. Welcome back to The Big Deal podcast. I'm Codie Sanchez. This week, I sat down and talked with 1,000 creators about how to make their first million dollars. [cash register sound] The business needs to be so simple I can explain it to grandma. These people flew all the way out to LA to listen to this. People say, "Find your profit from your pain." No [beep] thanks. And some of them told me it was the best talk that they had heard that entire weekend. Terms control the price. [cash register sound] And so if we understand deal-making, it's like we speak a language of finance that most people don't. So I thought let's give it to you, my podcast fam, for free 99, without a plane ticket, and let's teach all of you how to make your millions. I'm gonna make so much money [cash register sound] that I can buy whatever I want, whenever I want, no matter what. This is only for those people who wanna grow on social, who care about attention, who wanna figure out, how do I do deals, and how do I do it when I am maybe my own little solopreneur or business owner? Here is how to turn attention into cash.
0:59 – 2:15
Challenges Women Face in Business Acquisition
1. CSCodie Sanchez
  [cash register sound] If I was you, I would say learn about the language of business so deeply that it becomes a fluency. My rules for this are... [cash register sound]
2. SPSpeaker
  Give it up for Codie.
3. SPSpeaker
  [cheering]
4. CSCodie Sanchez
  Thanks, guys.
5. SPSpeaker
  We know that women currently only make up 2% of the business acquisition buyers in America, despite 40% of women actually owning businesses. So I wanted to kick off understanding what your opinion of why that is, and how you think we can change that number.
6. CSCodie Sanchez
  If I was, like, the big sister who's maybe made a, a few more bills than you have, and has the wrinkles to prove it, um, I would say this. Women on average, if we don't play victim mode, we're super, super powerful. I think the problem often is we tell ourselves really negative stories. So we tell ourselves that we shouldn't negotiate, that it's some, like, guy's fault that we're not getting what we want, that the boys have it better than we do. And so when you say all that stuff into the universe, like, it comes back. And so one of my biggest push points for women in general is we gotta stop that. We gotta start saying that it's super powerful to be a woman, that actually men are on our side, that we are gonna all grow together, that you're
2:15 – 4:50
Mindset Shift: Thinking Bigger in Business
1. CSCodie Sanchez
  going to make a massive amount of wealth. And it starts with, like, kind of the touchy-feely nonsense that is actually true. And then the second part of it is, if I was your, you know, big, big sister in business, I would say, um, we play a little small, women, often. We pick the... And I see it, because you guys, I probably see 5, 6,000 businesses across our investment firm a year. We have a venture capital firm and a holding company. So I have a bunch of people that pitch me nonstop their businesses. I actively look for women to invest in, and I have a really hard time finding women who are building big enough businesses. A lot of us build lifestyle businesses, right? We build businesses that we think are safe and small, and, and I don't really know why, except that maybe people told us that that was the only thing that we could do. And so I, I think that 10X is often easier than 2X, that actually if you try to build a really big business, you are gonna bumblefuck your way at least into a lifestyle business. But if all you try to do is build a lifestyle business, you're gonna end up building either a business that is a job, or not make enough money and have to work for somebody else. And so if I was to give us really hard feedback, sure there's, you know, historical precedent, sure, of course, we've had voting later. Like, there are all these realities about being a woman that are real, and I don't wanna, like, push those to the side, but we can't fucking change them. Like, I can't go back in history. I can't change that stuff. So let's focus on the two things we can control. The first thing we can ch- control is our input, which is what are we thinking, how are we talking about ourselves, what do we think will happen in our lives? And the second thing that we can control is how big of a business are we shooting for? And you know, I fall into it all the time. Yesterday I was with this guy, Amjad Masad, who runs Replit. Do you guys know what Replit is? Um, okay, a few. I- if you don't, and if you're not, this can be, like, a whole different subject, but if you're not playing around with AI, and you don't know what Replit is, like, I would jump all the fuck over to that. I think there's a world before I understood what AI could do for us, and there's a world after, and, and my world has completely changed. And Amjad wants to create one billion coders. One billion. And when he said that to me, I was like, "Nah, that sounds like tech bro speak," right? I'm like, "Yeah, yeah, sure, one billion coders." But then he goes, "Why are you only trying to create one million owners?" And I was like, "What do you mean? That seems like a fuck ton." And he's like, "Why is it not 100 million? Why are you not actually thinking bigger?" And so you need a buddy, maybe one of your buddies can be here, and that buddy needs to be able to, to be the person that says to you, "You're playing too small. That's not big enough. Go bigger, go harder."
2. SPSpeaker
  You've identified something. You see there's, like, a spark. There's a business
4:50 – 5:35
Decision-Making Framework for Business Deals
1. SPSpeaker
  that you like. What actually turns that into a, like, "Yes, I'm gonna actually make an offer and buy this business"?
2. CSCodie Sanchez
  Yeah.
3. SPSpeaker
  What's your decision-making framework?
4. CSCodie Sanchez
  The only thing that really matters in due diligence is two things if you're buying a company. Uh, are the numbers real? Because we buy, we don't buy hopes and dreams. We buy realities and cashflow. And two, um, does it seem like the numbers that they gave me will continue? So, like, do I believe what they're telling me, and is what they're telling me today going to continue in the future? Because we wanna buy predictable, enduring, long-standing, profitable businesses. And if we do that, then it won't matter if we're not influential on the inter- internet, because laundromats don't care. They just pay you cashflow anyway.
5. SPSpeaker
  Sign me up. I'm gonna be doing that due diligence course. Whoo.
6. CSCodie Sanchez
  [laughs]
7. SPSpeaker
  I feel like a lot of people probably ask you
5:35 – 10:05
Red Flags and When to Walk Away from a Deal
1. SPSpeaker
  about, like, what you're buying, what you're interested in. You know, I was just doing that backstage. That was kind of the natural instinct to ask you that. But I wanna ask the flip side of, how do you know when to walk away from a deal, and when something actually is a no? And specifically, you know, maybe it looks good in a spreadsheet, or maybe, like, you've got a bit of a gut instinct that it is good, but something made you just hard no. What is the no criteria?
2. CSCodie Sanchez
  Well, um, for your first deal, you never wanna buy, uh, the beat-up house on a really nice block and try to turn it around, because how many times have you guys, if anybody's done construction or done a house fli- flip or renovated something, how many times do you renovate something and it is on time and under budget? That doesn't happen. It doesn't happen with men either, right? [laughs] You're like, "I'll fix him." No, you won't.
3. SPSpeaker
  [laughs]
4. CSCodie Sanchez
  And so, so it's the same thing with deals.
5. SPSpeaker
  Right.
6. CSCodie Sanchez
  So we don't buy, uh, we don't buy beat-up houses, we don't buy beat-up boyfriends. We just, we buy people who are already m- uh, sort of going to continue to cashflow. These are profitable businesses. So my rules for this are the business has to be in existence for more than five years. That decreases the likelihood of failure by more than 50%. The business has to be profitable, profitable, cash flowing day one. The business has to have a leverage component to it, meaning I don't wanna use all my own money. I wanna use some seller financing. I wanna use some bank loans on top of it. The business needs to be so simple I can explain it to grandma. I don't want a complicated business that's not in my expertise for my first deal. And the last thing is I wanna make sure that my business is something that I'm going to be curious enough about to get kind of obsessed about for at least a few years. I don't wanna buy a business, like people say, "Find your profit from your pain." No fucking thanks. Like, I don't want to. I wanna find a business that I'm curious about and I'm interested in growing, and I think that's totally feasible. So that is what I would look for in a business. The, the anti-signal would be, "Hey, this does- business doesn't make me any money right now, but it's gonna grow a ton, I promise." "Hey, there's proprietary patent pending technology on this business, but I can't really understand it." "Hey, this business is something that, like, I really don't wanna do. Like, I'm gonna buy an accounting firm 'cause I hate accounting and numbers." No, don't do that. So those would be the things that I would not do on a deal. And then the only thing I'll add is, like, the, the best way to do deals is to do what we call a fuck yes deal. Which means because you are so good at deal-making and you understand terms, you can manipulate the price in almost any deal. And, and let's play a game. Who here owns a business? Raise your hand if you own a business. Okay, keep your hand up. Who here would sell your business at the right price and the right terms? Every hand stays up. One in the back. She's new. Um-
7. SPSpeaker
  [laughs]
8. CSCodie Sanchez
  Every business owner has this because you know if I catch you on the right day, like Monday, Tuesday, Wednesday, Thursday, Friday, like, you could be like, "Fucking take it. Yeah, if it's a big enough check, and if the terms are right, fine." And so when we know that, we know that we can manipulate price because we control the terms. And let me give you an example. Like, do, do you own a business? You look like you do. She looks great. Okay. Um, let- let's... H- how big of a business is it? Give me some metric. Uh, it's just starting, but- Just starting? Yeah. Okay. So let's, let's say that your business right now makes a million dollars a year. I'm just gonna put out a number so we don't... We're not the IRS here, okay?
9. SPSpeaker
  [laughs]
10. CSCodie Sanchez
  So your business makes a million dollars a year. And, um, if I came to you and said, "Hey, I wanna buy your business for $100 million," what would you say? She'd say yes. She goes, "Fuck yeah. Now, I just, I barely started it, but take this thing off my hands," right?
11. SPSpeaker
  [laughs]
12. CSCodie Sanchez
  Okay. So I get her to sign the deal. We're good to go. Great. Small problem. The fine print, the terms say I'm going to buy your business for $100 million by paying you $1 a day for the life of the $100 million offer. Do you still take the deal? Of course not. So what we don't realize as women is that terms control the price. Pros obsess on price... Or pros obsess on terms, amateurs obsess on price. And so if we understand deal-making, it's like we speak a language of finance that most people don't. And so that is a really fun part of a deal. You can have a person you don't trust, a shitty deal you don't really like, something that doesn't make any money, but if you control the terms, you almost control the entire deal.
13. SPSpeaker
  I love that. Go you. [laughs]
14. CSCodie Sanchez
  If you've ever thought about buying a business, we've built what I think is the best acquisitions and business
10:05 – 14:43
Lessons from a Failed Investment
1. CSCodie Sanchez
  buying community and education curriculum in the world. If you've ever thought about wanting to buy or own a business, or if you wanna add more businesses to the mix, it's called the Contrarian Community. And what this is, is the goal is we give you the three things that the best business buyers use: your own advisory team, your own investment committee, and a deal team. We get together each week to review deals live and beat up all the deals that you're currently looking at while you simultaneously learn the best way possible, which is called modeling, by seeing other people put together deals. This is how private equity buys businesses. This is how investment teams work. And we're stealing the methods from Wall Street and giving them to you. If this is interesting to you, go to click the link, and you can actually talk to my team direct about if this is a fit or not. We can help guide you. The link is in the show description.
2. SPSpeaker
  Is there a story that you can tell us about a business or acquisition where it didn't go the way that you planned, either for good or for bad?
3. CSCodie Sanchez
  Yeah, I mean, um, there's a saying in asset management. I remember one of my first mentors back in the day in private equity said, "You never wanna invest with somebody that hasn't invested at least, uh, a couple hundred thousand dollars." His line was really a million bucks. He's like, "I never wanna be somebody's first million bucks, um, that they invest because the first million bucks is for, uh, losing and learning." [laughs] And I was like, "Oh, that, that doesn't sound that great." And so the, the truth of the matter is that most people will lose money when you do deals. It is, it's just natural. It's the game of business. So if that's the case, I wanna make sure that every deal I do is a non-bankruptable deal 'cause I don't wanna go through bankruptcy, although it's not the biggest deal if you do. Plenty of people go through that, actually. Um, and I wanna make sure that my first deal is not my worst deal. If your first deal is your worst deal, you'll never do a deal again 'cause it'll scar you, and you'll think that deal-making is bad, not just that you had stuff to learn. And so, you know, I've had so many instances, but I'll, I'll tell you one right here in the state of California. Um, I invested in a, in a cannabis business, which I highly don't recommend, by the way. And, uh, and this cannabis business, um, we had just given them $25 million, and it was me and some partners. And this business, uh, was, like, rocking and rolling. They were making maybe 60, $80 million that year in revenue And about three weeks later, I get a phone call from the founder, and the founder, uh, says that they're out of cash. We had just given them $25 million. Like, I think we had given them 15 million of the tranched investment that we were gonna give. I was like, "Wow, that was, like, a pretty quick turnaround on my 15 mil. You know, what happened?" And essentially they had completely financially cooked the books. The guy had, like, not one, but two mistresses, which is, like, kind of impressive. I was like, "Jesus, you got time. I don't... I can't imagine having more than one husband." Um, anyway, and they had blown through this cash. And, um, this happens, like, very rarely where there's this level of fraud. So the accountants were in on it. The regional banking partner was in on it. We were able to pull back some of the capital, and we ended up turning the business around. But what I realized in this transaction was that, um, and I've never done it again since, that whenever I do a deal, I make sure three things are true. One, that there is no personal relation between the people on the cap table, the bank, and the accounting firm from my founders. We gotta make... It turned out he had, like, 47 cousins. They were all involved in the deal, and they were all fra- defrauding us. And so I wanna make sure... Like, I believe in doing business with my family, but not, not yours. I don't know yours. And so that's one. Two is, um, I only do tranched milestone-based investing. I don't ever give that big of a tr- a chunk upfront, again, because I wanna see what you do with my first couple of million. And then three, you want what's called, uh, you want what's called financial oversight. So basically, I want, when I do a deal, to make sure that in my deal it lists, like, if you're gonna do a big purchase, you have to check with me. I have daily bank account access. And so because of this, it's very easy. Money's a cruel mistress. She'll leave you if you don't pay attention to her. And so I want to have access into that bank every single day and make sure that if I'm investing in a third party, that I can watch my capital. But the, the truth of the matter is, your first deal, there's gonna be something that goes wrong. Many, many somethings that go wrong. And so all you wanna do is protect your ability to persevere. You wanna make sure that none of them are killers. You know, you can have mosquito bites. That's okay. But we wanna make sure there aren't great white bites. And, uh, and, and it'll happen eventually to you, but then you can get really big, and at that point, you, you figure it out.
4. SPSpeaker
  Did this guy go to jail? [laughs]
5. CSCodie Sanchez
  [laughs] Yeah.
6. SPSpeaker
  That's what I'm thinking.
7. CSCodie Sanchez
  Yeah, no, he didn't go to jail.
8. SPSpeaker
  That sounds
14:43 – 19:14
Practical Steps for Women to Build Wealth
1. SPSpeaker
  so hectic. Jesus.
2. CSCodie Sanchez
  But he did get, he did get sued into oblivion. But, you know, this, um, this happens a lot. You know, um, a l- like, the... If you think about it yourselves, you, you all have been online, and you know the, the dark side of charisma, which is all... Often, there could be a little bit of narcissism in there, right? Um, the... and, and we all have it inside of us, too. Like, I don't, I don't profess to be a perfect person at all. And so, um, I think, you know, when you do deals, you can often find really charismatic founders, really charismatic partners, and you have to be careful that you don't get carried away. My dad always says, "Don't fall in love with something that can't love you back." And so I never fall in love with a deal, and I think that's really important.
3. SPSpeaker
  Obviously, not everyone here is probably ready to buy a laundromat or kind of take that jump, but I think everyone is always ready to learn how to think differently when it comes to spending or saving. And so for women who are sitting here, and they want that kind of practical next step that they can take tomorrow, this week, this month, what would you recommend to start thinking differently and to take those small actions?
4. CSCodie Sanchez
  Yeah, I mean, listen, you can only save your way to zero. Uh, there is a bottom on it. And you gotta eat, and you gotta look cute, like you guys all do, and you gotta, like, go out and enjoy life. And so, um, I don't like the obsessive focus on savings culture 'cause I actually think it's much easier to earn than it is to save. And if you get better at becoming a deal maker, at doing better deals, and at figuring out revenue, you will never have to focus on savings again. And I remember that because I didn't come from money. So, like, I remember what it sounds like when you go to the grocery store, and you're like, "Oh, yeah, put it on the debit card. That one definitely works." And you're like... And you hear the beep that comes from it that's like, "No, it doesn't fucking work." I'm like, "Oh, no, that one's old. Give me that one." And I fill it in with another one, right? Like, I remember that feeling. And my promise to myself was always, I never wanna have to check my bank account every single day to see if I can afford something again. I don't even wanna care about prices. That's what I wanted because my entire youth was spent not being able to buy anything and being worried all the time that my bank account would go dry. And, um, and I have, like, a little, I have a little PTSD from that. And so at some point I said, "Fuck it, I'm gonna make so much money that I can buy whatever I want, whenever I want, no matter what," right? I wanted that f... Anybody here want, like, fuck you, private plane, people hate you kind of money?
5. SPSpeaker
  Yeah.
6. CSCodie Sanchez
  Yeah, me too. Yeah, me too. And I don't actually want it 'cause I'm that fancy. Like, I, I'm not really that fancy of a person. I want it 'cause I think it translates to freedom. And so if I could impress upon you one thing, it would be have the fucking coffee. Buy the matcha. That's not gonna, that's not gonna stop you from being rich, and it's sure as fuck not gonna make you rich to drink the nice coffee, so ignore that advice. I think you guys are actually pretty capable and competent, and you have access to resources here in the US that, like, I wouldn't say the same thing in a lot of other countries. But in this country, the only reason you guys cannot succeed and make a ton of money is 'cause you're not willing to do what it takes. You only wanna do what you want. And so if I was you, I would say learn about the language of business so deeply that it becomes a fluency. Learn about deal making so deeply that you're schooling other people on what the financial metrics mean. Because it's actually not complicated. This stuff is not hard. It's just not taught. That's kind of why it's my entire mission. And so I would skip... Like, do yourself a favor. Spend 30 days becoming so obsessed with deal making and financial literacy and doing business deals- That you set up the next 30 years. It's literally that simple
7. SPSpeaker
  Let's say there's a woman in this audience who actually has 50 grand. She's got some savings. She wants to buy a small business.
8. CSCodie Sanchez
  Yeah.
9. SPSpeaker
  She wants to start that process. What are the questions that she's asking herself? What are the questions she's answering to herself, and what is that next step?
10. CSCodie Sanchez
  Well, step one, th- go get the book. Get it from the library if you want to, borrow it from a friend, get it on a discount rack. I don't care about that, but the answer's in the book if you wanna buy a business. And here is the truth about buying businesses. You can lose money. [laughs] This is not risk-free, right? It is risk-free to post a video on the internet, by and large. It is not risk-free to do financial transactions, and so that is why I create all this infrastructure abou- around it, because that would be pretty shitty if I was like, "You can buy a business. You can buy a business." "How?" "Watch my YouTube." Like, that's not enough. You have to go a step farther than that. So I
19:14 – 21:52
Final Thoughts and Encouragement
1. CSCodie Sanchez
  would say, one, get the book. If you wanna go deeper, take the course. If you wanna go even deeper, get in a community, whether it's mine or somebody else's. You know this to be true already, and it's with everything in life. Are you gonna be more fit if you hang out with CrossFitters all day or if you hang out with your friends that wanna go to the club and wanna go to brunch and wanna do whatever, right? Probably the CrossFitters. Are you gonna make more money if you're in a group with a bunch of other people who are obsessed with making money, who already have what you would consider your dream day to be their Tuesday? It's, it's just, it's so common sense, and yet we don't do it. And so there's actually real studies that show that y- that almost everything with humanity is contagious. Negativity, contagious. Actual fat, contagious, which is fascinating. So you are more likely to gain weight if your friend group is larger. You are more likely to lose weight if your friend group is smaller. You are more likely... I don't know what that means. One minute. Hi.
2. SPSpeaker
  One minute. Whoop.
3. CSCodie Sanchez
  Great. Thanks. [laughs]
4. SPSpeaker
  [laughs]
5. CSCodie Sanchez
  Um-
6. SPSpeaker
  He's like... [laughs] I'm like, "Hi?" [laughs]
7. CSCodie Sanchez
  Um- [laughs]
8. SPSpeaker
  Hey.
9. CSCodie Sanchez
  You are also more likely to make more money if your friend group has more money, and it doesn't mean we should leave people behind that, that aren't our aspiration. I'm not saying that. Bring them with you, but get a couple rich bitches in your group because it helps. All right, that's it.
10. SPSpeaker
  [laughs]
11. CSCodie Sanchez
  [cheers]
12. SPSpeaker
  Whoo. I love that. Thank you so much. I read something recently that said women are the fastest growing cohort of millionaires, and I absolutely believe it's because of women like you out there on the internet teaching us the stuff and telling us the terms. So thank you so much. Give it up for Codie Sanchez.
13. CSCodie Sanchez
  Thank you, guys. [cheers] [upbeat music] What a way to make a living. Only 13% of you are subscribed to the YouTube channel and on native podcast apps. If you're not already subscribed, do me a huge favor. Subscribe now. That helps the show grow. So as my friend Andy Frisella says, "Don't be a hoe. Share the show." Hey, if you're a business owner right now and you like the things you were hearing on this podcast, I have something that I haven't talked about publicly before that's just for you. It's called our SMB boardroom. This is for small business owners who want to grow. It is for business owners who are on their way to making at least seven figures a year. If this is you, hit the link down below. Talk to our team. This is the place that can be your late-night emergency call for the things that go bump in the night in your business. If right now you feel like you're plateauing or you feel like you don't know how to handle your growth, we got you. So click the link below, SMB boardroom. We just built it for you builders. Kind of obsessed with it, and I think if you are a builder, there's no place you're gonna wanna be except here.