I want to own a passive cashflow business!

Ok - then you need an operator my friend.

How we've hired 100+ operators (some amazing some spectacularly bad).

A 🧡
How to find this elusive human who will do all work while we cashflow?

Stop, no free lunches, expect skin in z game.

I started as an operator. Like a RE property manager.
They took $ risk, I took time risk.

Done right. You are giving only path to REAL wealth... ownership.
THE BEST PARTNER OR OPERATOR.

Always is one of two things:

- Potential talent - someone you know and trust or someone
OR
- Proven talent - who has done the job before
I don't like having people learn on our dime at the top.

If we can bring someone up in the biz that's ideal.
If not we go find a known commodity.
Our trick when we don't have a bench (rule #1 always have a bench)

We were looking for an automotive shop manager. Here's what we did:
Step #1: Call or Visit the TOP local franchises or Companies
- Become a client
- Asked for the manager
- Dropped a card or asked them to call me back in their off-time if they are interested in an opportunity to run their own garage.
- Only 1/2 of 10 will do it.
Step #2: Compensate well: Pay for Performance

Proven talent will cost more.
Consider a bonus-based pay or an earn-in or buy-in for equity.

β€œIf you think it’s expensive to hire a professional, wait until you hire
an amateur.” – Red Adair
A skilled laborer cannot always step up to lead.

Look for experience as well as leadership in their past.

The past is the best predictor of future.
Step #3: Look for military
- A military officer
- A leader in a past role
ie: @whatruss or @KKR_Co and search funds always snapping up SOF
Skill can be taught, but leadership often shows up on a resume prior to the hire.
Step #4: Or CPA's/Former Finance
- Oddly a LOT of former finance burnouts (this lady here included) who turn to SMB acquisitions
- If I can get one early to run a company for me I LOVE IT, they'll often be perfect for roll-ups
ie: @matthewghinson @sam_rosati etc
Step #5: Mind F' Em

I really mean, do a behavioral assessment. We use DISC.

There is a type you are looking for, don't deviate.
Step #6: Structure the deal for 3-5-10 year periods

- People change.
- Your business will change.
- Give them different payouts depending on how long they stay & how they perform.

Otherwise in 3-5 years you'll be pissed when they look to leave w/ 40% ownership.
I LOVE hiring ex military. Don't sleep on that one.

They served us, now is our chance to get them ownership.
TLDR:
- you bring $
- operator brings time
- steal talent
- pay WELL
- proven vs potential
- military
- CPA's & exfinance

β€’ β€’ β€’

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More from @Codie_Sanchez

15 May
WHY to RAISE A FUND or How to Get people to Give you $$$?

I've raised for big players (Goldman, SSgA, First Trust, EEC) to the tune of literally tens of billions...

(Hand slaps face for not getting more equity)...

A thread:
At @GoldmanSachs (should I name drop again πŸ™„) we were shown a study on generational wealth...

Almost 100% of the wealth was made 1 of 5 ways:

Lucky Sperm Club (ok it said Inheritance)

Owner of a Business

Marry Rich

Public Co C Suite Exec

Asset Management
The last one is intriguing...

Building a fund and then a fund family (a group of funds)
Read 13 tweets
14 May
This dude looks at 3000+ businesses a year.

And narrows down which to buy often in 30 seconds...

A 🧡 featuring my new homie @SievaKozinsky DD process:
How to go from 3,000 -> 1,000 deals
Narrowed down by looking quickly at these 4 things..
Know your parameters = save your time.
- Type of business
- Cashflow amount
- location
- profit

Only 1-3 hits those amounts rest.. (30sec review)
1,000 --> 500
- Financials (learn how to spot a healthy biz is largely in the #'s)

Oh, they're a mess & you're actually not profitable.

Bye (less than 30min to review)
Read 9 tweets
12 May
I wanna buy a business, but where do I start???

Good Q since: 91% of ppl with a net worth of $5M+ own their own biz

BUT - Sometimes it's better to start with what not to do.

Here are the most common MISTAKES in M&A & how to avoid them:
1) Don't listen to your Mom, not all Debt is bad

Leverage. I like to try to shoot for a similar to a mortgage.
10-20% cash down in cash, rest β€œseller-financed"

For example, a biz makes $100k profit, and they're usually valued at 2-3x profits
So you buy for $200k let us say bc you my friend r a killer negotiator.

- $20k down (20%)
- $80k paid end of year 1
- $100k end of year 2
If you fancy, u use profits from biz to pay for the purchase.

Rule #1, Don’t Buy with Cash. Rule #2, Don’t Forget Rule #1.
Read 11 tweets
11 May
How to get free $Money?

Stop. No such thing.

Well, except I think the SBA loan programs are pretty d*mn close.

A thread on OPM from the good ole' US government:
SBA loans... a quickie 😜
- Can get loans up to 90% of your qualifying biz purchase price
- Govt backs a portion of your loan
- Max usually $5M
- Loots of new benefits during Covid to read up on
They're basically copies of what big PE firms do with their partner lending firms.

Assets + Cashflow Potential+ Leverage = PE
Assets + Cashfow Potential + Leverage = SMB buy w/ SBA loans
Read 8 tweets
10 May
3 Rules for Deal Making that'll Teach you More than ANY PE MBA

Speak finance and earn finance like $ w/o the IBanking like hours.

I did the Goldman thing... believe me, you don't need to. A 🧡
πŸ“ Rule #1: Cash Isn’t King, Cashflow Is

I optimize for making $’s on my deals day 1.

When I close a deal personally (not through our VC funds), I want that deal to pay me that same day.

Greedy, maybe? Possible, unequivocally.
πŸ“ Rule #2 @ycombinator Term Sheets are for Amateurs

- Most sign term sheets straight from Y-Combinator.

- Have to when deals are super hot (theoretically).

But if I’m optimizing for cash flow, not potential 100x’s, no thanks. Instead...
Read 7 tweets
9 May
Cashflow through deal structuring.

I beseech thee... if you learn one thing, learn to structure deals.
Nothing else has made me more $

WARNING: This is technical - but I'm not here to entertain you, I'm here to mutually grow.

Let's go to school eh?
EVERYONE IS OBSESSED W/ The VALUE of a Business.

OMG - how much did @TheHustle or @MorningBrew sell for?
I guarantee that # is less interesting than the terms.
Devil is always in the deal details.

Know how to work the details, you'll own the deal.
Remember this:
Every deal has two aspects Price & Terms.
My saying, "You can have your price and my terms, or my price and your terms... but you can't have both.
Read 10 tweets

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