This is an auto-generated transcript of Never Enough Podcast Episode 6. It may contain minor errors.
I think the biggest lie we were ever told was that a unicorn looks like a tech VCB startup where you don't make money from 3 to 5 to seven years you have to sleep on your basement to start it you have to pour everything into it and at the end you might get your face on the cover of Forbes I can understand why that's a beautiful story for Hollywood but for most people it's a miserable existence when you're small and you don't have a lot of money to invest and you think that that's bad it's not it's actually great I buy realities not dreams they have to be profitable businesses I don't do turnarounds and I want to be able to explain the business to my grandmother and if I can't do those four things I'm going to pass
how's it going Cody what are you up to today I have a day that would be your nightmare which is too many meetings too much going on and this is the highlight of it so I'm excited to be here for this at least right on I feel you I'm doing a book launch and I'm doing these podcasts almost every single day so I'm living the life of Cody Sanchez in a way how have things been since I saw you in Austin things still totally crazy yeah there you know it's self-inflicted right so I think one of the things I loved about our chat was you basically said all right I can kind of see in your future
I've been where you are and you know I'm a few years older than you I got a few more commas to my name and I can see what's going to happen in the next year and like report back see if that was true and I think you were right you know it essentially running all these businesses is a lot especially if anything goes wrong with your team so on one of our teams we had a big issue with the guy running one of the portfolio companies which mean my last three weeks were like nightmare Ville but you know it comes in cycles and now it feels slightly more bearable
yeah I did a CEO hiring master class on MFM I said like be careful what you wish for because I think that everybody fantasizes about managing CEOs and investing passively instead of operating businesses but the problem is that as soon as you scale past about five businesses suddenly you have five direct reports you know you got five CEOs to manage and at any given time you got to fire someone you got to hire someone new you got to negotiate a comp package you got to get involved in a problem and it's just more problems as you scale
I want to talk about like when we met you were at a fund and you're investing and you're kind of doing a little bit of Social Media stuff and that was probably 2018 or 2019 and now you have this huge social media business you've got a crazy operation I think you have 6 million followers when I met up with you you were all made up and you'd been filming all day tell me about the evolution like how did you go from working for someone else to now owning all these businesses
yeah well when we met it was I was a partner at the firm so there were five of us we came together on this private Equity Fund that we wanted to run you've done really well with Partners over time I do better hiring CEOs like I just haven't had the best track record with picking partners that want to go as fast and as far as I do so we do great for like the first one or two years and then I want to scale and usually in private Equity you can make a lot of money not growing your business like crazy
and so what happened in that business is I was like we need to grow here are the things we should do it's going to take a lot of work and one of my partners was like take the Yacht for the summer go to the Bahamas and I was like well that's not going to work and so we parted really amicably I still own a lot of that company basically it was an ultimatum I was like I want to do this they wanted a more lifestyle based business which is totally fair and so I needed to go do it on my own
and from there I had already bought a lot of these businesses on the side and the interesting part about that I think for people listening is people always think well you got to go all in you got to buy a business outright and I actually don't agree with that I think you should stay employed for a while and get ownership into parts of companies and start to learn about the game before you jump in entirely learn deal making take little bites don't try to eat the whole elephant
and so that's what I did but at some point it was like well either stagnate or leave and so I chose to leave and then covid hit and I wasn't traveling and doing Road shows and so at that moment I could handle a really big career change and that's when I finally pulled the plug and decided hey I'm going to start writing about some ideas that I have in my head and that writing first strategy led to a business by accident that's become a bit of an investor relations portal a deal flow portal and all these other things
if I had to summarize most of what you talk about is kind of the idea that boring is beautiful and that there's riches and niches can you talk to me a little bit about your car wash business because I think that's such a great example yeah I think the biggest lie we were ever told was that a unicorn looks like a tech VCB startup where you don't make money as the founder for anywhere from 3 to 5 to 7 years you have to pour everything into it and at the end of 12 to 15 years you might get face on the cover of Forbes
I can understand why that's a beautiful story for Hollywood but for most people it's a miserable existence and so when I say boring what I really mean is that you get to actually live your life while running a business it is not easy it is hard work but it is not the Relentless grind that is VC backed companies and so I started my first boring business I bought was a laundry mat and I bought car washes the car washes are interesting because those can scale laundromats are really tough to scale
the average laundromat makes $300,000 with outliers being 1 to 3 million car washes on the other hand you can actually scale Individual Car Washes and turn it into more of an active business and so there are individual car washes that do 3 to 7 million bucks so I start out usually when I buy a business I'm a wuss I don't like Risk I don't think you have to like Risk to be an entrepreneur so I started with self-served bays the old school ones you just go in and spray the car
can you lay out your business right now so we have three core components at contrarian thinking we have contrarian thinking media which is everything social the newsletters the courses the community the education business and then we've got contrarian thinking Capital which are all of our VC style small check investments and then we've got Main Street holding company and Main Street holding company would be where I own businesses outright our boring businesses we combine a lot of our family office stuff into that
and that one's mostly my money we don't have a fund or anything the core competency of all of them is I buy realities not dreams they have to be profitable businesses I don't do turnarounds because they're too much work and I want to be able to explain the business to my grandmother and if I can't do those four things I'm gonna pass the businesses with the lowest margins are often the businesses that everyone wants to get into that are quite sexy so for example restaurants or cafes
can you give me an example let's say somebody is interested in food and they come to you and say oh Cody maybe I'll start my own restaurant how would you redirect that energy to something profitable well first of all most people don't know what profit margin is Lord help you the average small business profit margin is somewhere between 6 and 15% Walmart operates at a four to 7% and so I think one realizing you can't understand if something's good or bad unless you have context
the second is if you want to start a business I think one of the best things you can do is instead of going around saying I make an incredible cheeseburger should I open a restaurant get dollars first like the best way to see if your idea is any good is go see if you can get investors to back you or people to pre-order your stuff and what you quickly will find is all those people who told you to go start your restaurant business because you're such an incredible cook do not want to give you a cent
and that is a really good indicator of if your idea is good or not so that would be the first thing I'd say you want to start a restaurant business awesome go look up how much it takes to start one on average somewhere between $200,000 and a million dollars can you get your hands on that money and if you can do that and people will give you money to do it maybe you should but I think people skip that first step often
yeah they don't understand that they're going to have to work in the business too and before they know it they basically have a minimum wage job and they've built Their Own Prison I saw a Tik Tok that you did where you were talking about a line painting business and I just loved that business it was somebody who just paints like parking lot lines and Road lines it was highly profitable what's the weirdest highly profitable business you've seen recently
yeah those are line stripers Killer Business the interesting part about boring businesses that people don't really think about is commercial contracts so the paint striping business is fascinating because those are largely government contracts and if you're a minority or a veteran and you know how to apply for government contracts you can actually make millions of dollars with paint striping
the weirdest there's this one business in the State of Florida this woman started a crime scene and hoarding cleanup business what's fascinating is the cost for that is pretty expensive you got to pay like somewhere between 5 and 20K to dump the toxic stuff and she built a business I think they were doing 12 million in annual revenue which is wild and then massive storage industry hoarding hoarding is huge in the US and there is a really big and expensive cleanup process for cleaning out hoarding houses
and so that business was fascinating to me big chunky Revenue with your only cost being some PPE equipment labor and a little bit of disposal costs and I love these are all businesses that are obviously not disruptable by AI how do you think about AI because for someone like me or people that own digital businesses we're all scratching our heads we're very concerned about it do you lose any sleep over AI risk in any of your businesses
yeah my attorneys will be out of a job before my plumbers are AI did the thing that none of us anticipated we thought it would take over the dirty the dangerous and the dull instead it took over design writing creativity why because those Industries do not have massive lobbying and governmental regulations behind them anything that is a standardized process with a lot of data that has clear constraints on it I think AI will disrupt aggressively and the last thing to disrupt will be boring businesses
I mean we invested in this company called Figure I do think that robotics will aggressively disrupt some Industries like single use very specific robotics for Warehouse employees but for the most part I don't worry about AI in my day to day I worry about it a lot in media content creation and the businesses who understand how to use it intelligently are just going to run so much cheaper than all the rest of us
I think intra industry I remember we bought a deli and we were the tech guys coming in buying the deli and we were all excited and we were like oh amazing We'll add the POS and we'll do an order tracking system and I just found it was very difficult to get buy in from the employees do you guys do any interesting stuff with tech or are you really just doing the basics
we have sort of three different types of businesses bond like businesses that make us 3 to 7% a year the tech we use is typically Hardware security cameras automatic locks card readers then there's minor growth businesses doing 10 to 15 to maybe 20% per year those we add low-level Tech service Titan job slack and then the high-speed tech companies those obviously use everything
one way or the other if you're going to play the game of buying other people's businesses you have to start with humility if you think you're going to buy a plumbing business that's existed for 15 years and you're going to come in and immediately be a better operator you're out of your mind and notion isn't going to save you but I do think the long game of playing with technology intelligently and integrating it will beat those who do not
what do you think about this idea so Chris and I were talking about buying businesses that are hard to disrupt we were thinking about okay what's going to exist in 40 years and we were like people are going to want to be cool in their homes right they're going to get HVAC systems installed so maybe we go into HVAC and as we were thinking about that we were going okay so self-driving cars will eliminate between five and 15% of jobs
one of the reasons why HVAC is a good industry is that there's really not that many people training on it not many people wake up in the morning and go my passion is to install ventilation systems one thought with AI is will the market for blue collar jobs get flooded with white collar people who are traumatized by the fact that they spent 10 years in University and it just went away what do you think of that thesis
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