Codie Sanchez | The 9 Steps to Buying a Business

On this week’s episode of M&A Masters, we’re joined by return guest, Codie Sanchez. Codie is the Managing Director of Entourage Effect Capital Partners and one of the most sought out speakers in the cannabis business. She also co-leads Unconventional Acquisitions, an educational resource making the buying of businesses accessible to anyone willing to put in the work.

Codie says, “If you have the mindset to be an entrepreneur and to get to go and grind and build your own thing, you have the ability to be a deal maker, and to buy businesses, period.”

We chat with Codie about the abundance of opportunities to buy small businesses right now, as well as…

  • The commoditization of buying businesses
  • The timeline of businesses on the market
  • The Laundromat Model
  • The 9 steps to buying a business, including the mindset required to close the deal
  • The magic of “deal-maker glasses” and seeing opportunities everywhere
  • And more

Listen now…

Mentioned in this episode:


Patrick Stroth: Hello there. I’m Patrick Stroth, President of Rubicon M&A Insurance Services. Welcome to M&A Masters where I speak with the leading experts in mergers and acquisitions. And we’re all about one thing here. That’s a clean exit for owners, founders and their investors. Today I’m rejoined by Codie Sanchez, Managing Director of Entourage Effect Capital Partners, the first private equity firm to focus their investments exclusively in the cannabis industry. Long before legalization had taken hold they were there. You can find our original interview on Apple iTunes, or in the link to our show notes. 

I’ve asked Codie back to share with us her newest adventure, Unconventional Acquisitions. Unconventional Acquisitions is an online platform that teaches individuals how to acquire a business in a simple nine-step process. Here’s a question for those out there who either are or know an aspiring entrepreneur, why build a business from scratch, when there are literally millions of small, profitable underlying network profitable businesses out there just waiting to be acquired? This conversation is especially timely because even in the throes of a pandemic, there’s never been a better time to be in the acquisition game. Codie, great to have you back. Welcome to the show. Thanks for joining me today.

Codie Sanchez: Thank you for having me. Thrilled to be here.

Patrick: Codie, before we get before we get into talking about mergers and acquisitions, and acquiring companies, because that’s something that you’re going to be leading the way in on the micro and lower middle market space where there’s a ton of opportunity. Tell us what got you to this point in your career following the great success you’ve been already having in the private private equity space?

Codie: Oh, thanks. Well, um, you know, I think we have a little bit similar stories. And that, you know, from my background, I did very traditional Wall Street everything from asset management to alternatives and PE and hedge funds to investment banking, to product distribution. And, and what’s interesting is, you know, I started out as a journalist before any of that, and we did talk about this a little bit on the last one. 

And the interesting trait that a journalist has is we just asked a ton of questions, and we never associate asking questions with being unknowledgeable, or having an ego around not knowing something. And what I found in finance is in finance, people do you know, we like to pretend like we know everything all the time in finance. Oh, yeah, I already knew that. Like, this is, you know, I got this, I don’t need to ask you these questions. And yet the smartest dealmakers I’ve ever found are the ones that asked really smart questions. And so I was kind of amazed how much journalism played right into dealmaking investment banking, PNP. 

And, and venture capital, it’s really just can you ask a lot of really dumb, low level questions and get somebody to explain it to you at a very foundational level. And so I used that to get into finance climbed through a bunch of finance companies like Goldman and Vanguard and State Street and built up a pretty big asset management business in Latin America, and then sold out of it. And right about the time, I guess, about two years before I sold out of that business, I started realizing that, you know, may be similar to you, Patrick, like, why am I making all of this money for companies in my LPs, or investors? And why am I not taking this same idea and applying it to my own portfolio, I’m highly overweight, public stock markets in which I don’t have an unfair advantage. And I don’t have the ability to create some sort of arbitrage. And I’m underweight hugely on private sector. And the only private sector exposure I have is through private equity funds that you know, I have part of the gpn. And so that sort of led me to start thinking, Wait, I need to start questioning these tools that I use for big buyouts. And instead, why wouldn’t I apply them to creating my own portfolio? And that’s when I started investing. 

First, I did what most people do, which is angel investing super sexy, you know, you think you can go and get 100 x trade very binary, and then realize quickly that that’s a great way to lose a lot of money, and have fun and learn and support an ecosystem. And that’s fine. But that I didn’t like the, you know, you invest in 10 startups and eight fail or sort of flatline. And so I said, Why wouldn’t I instead do what we do in PE and buy small businesses? And so I started doing that and like, let’s call it 2000. And I guess it was it was like 2014 was the first year that I started buying these businesses myself, instead of doing mega deals for big Wall Street firms. And, and then I, you know, my strategy is very simple. It’s like buy hold forever. And so I invest in these companies that are very boring and continue to invest in them, put operators in them and run. And then that’s got us to where we are today, which is talking more about, you know, I’ve realized how simple this actually has to do with how pro programmatic it’s not easy. Like you have to do work. There’s no free lunch. But it is simple. There’s a process that goes to it.

Patrick: Well, in from this experience that you had you developed a couple of channels here, you had one, which is called Contrarian Thinking that’s out there, that is a regular newsletter, where you’ve got all these, I guess, business hacks and other ways around where, you know, you’re not trying to find. I don’t want to say shortcuts or the easy way, but you’re finding clever ways where you buck the conventional wisdom. And you go ahead and do that. There’s another venture that you came came in develop with called Unconventional Acquisitions. 

Now, when we hear your background and that you were Goldman, your State Street, and you had this great reputation, you train high end universities and so forth, that can be a little daunting for other people to say, Well, you know, of course, Codie, you can go buy a bunch of little businesses, and it sounds like they run themselves, you just plug and play. But I don’t have any experience. I don’t have the capital, I don’t have that. And so what do you say to those people about this? And how hard or easy is this to get started them walk into the process?

Codie: Yeah, well, first of all, I mean, I think there’s this, you know, we in traditional private equity, and, you know, hedge funds or alternatives. We’re, we like to overcomplicate things and make them sound scary, because then we get our two and 20. Right, which is how we make money. Yeah, exactly. So the more complex we can, I mean, I have this one graph I like to show which shows, you know, a pricing arbitrage theory, and it’s the algorithm that you use in order to get to this theorem, and it’s very daunting to look at. And then I explained that the graphic what it actually looks at, which is like, buy low, sell high, sell, sell high, buy low, you know, and basically, that’s all the theory is, and we don’t have to overcomplicate it. So, for buying a small business, you know, the couple things that you have to think of is this, if you’re destitute today, and you have no money to your name, you probably shouldn’t go out and try to buy a small business with debt, because you’re going to have to have some sort of assets or personal guarantee. 

But if you are a W-2 employee, you know, have some savings built up in some way, shape or form, it is exactly like buying a house or a car, except we get very comfortable buying a car or a house because it’s normalized in society. But if you think about it, the return that you get on buying an auto or a car is always it’s a depreciating asset by and large. And yet, you’re willing to take that kind of risk on that sort of investment, even though it’s a depreciating asset immediately. And the same thing with a mortgage, you go out and have a sum of money 15 to 20%, down, let’s say 10%, maybe in this environment, and you lever up to buy a house that you think you will not only get to live in and be able to afford, but potentially will have upside potential and sell. The problem is neither of those assets actually pay you. And so if you apply that same model of you can get a loan to buy a business, just like you can get a loan to buy a car or get a loan to buy a house, you can become sort of comfortable at a base level, it’s the same thing, then we have to get into operating the business that’s different. 

And so we do talk about, you know what that might mean. And there are some businesses that are very passive, and there are some that are very active. And so this is why more people don’t do this, because real estate is like, you buy the business at a set price. And you flip it or you buy the business at a set price. And all you have to do is get a renter in and the process is so normalized, that there’s no, there’s no variance, there’s no change really in one multifamily unit to another multifamily, or one single family unit to another single family unit and business. There’s various things are different between a landscaping company and the HVAC company. But the crazy part is they’re not that different. 

So my belief is, is that just like, today, we have sort of commoditized investing in real estate, we’ve commoditized investing in stocks, we’ve commoditized investing in funds and ETFs I think in the future, we will commoditize investing in small private businesses. And it’s the next evolution, it just hasn’t happened yet. Because the returns are double or triple what you get from investing in real estate with the amount of capital that you have to put down.

Patrick: It’s interesting that you come up with this give us a little bit of an example when you’re talking about this where you can go ahead and buy a business and it pays you I mean yeah, I would just for somebody that says Oh, I see this corner bakery and they want to get out of business or the owner wants to take off. Do I have to become a baker? I mean, yeah. paint a picture for us on on just working something like that.

Codie: Yeah, so I like to use Oh, even pull up one of the models that we have here, I’m one of the deals we did. But like, I like to use really simplistic models to start. So one of the first businesses that I bought was a laundromat. And now I’m not saying that you should go out and buy a laundromat because a lot of people doing that it’s a little bit more commoditized over the business. But if I look up the model right here, about how we bought that first laundromat, essentially a laundromat very simplistic right, you have the storefront, you lease out the storefront, you have the cost of utilities, water and electricity are the two biggest costs in tandem with rent, you have, you know, some sort of automated sensor for the door to open and close, you have a security camera, you have the machines in the system, and then you have a cleaning person wanted once a day a couple times a week, whatever the case may be, that is literally the business. 

And then you would be the one doing, you know, taking in the money theoretically on every other day basis a couple times a week basis. And you know, you need a bank account, and you would need to file your taxes each year. Let’s say this is a very simplistic business. And this business is one where you can be basically an owner investor in it, even if you don’t have an operator. So there’s two ways to buy business owner or investor meaning you own the business, you just invest in it, somebody else operates it, you have an operator, or you can be an owner operator, where you run the business and like you said, you buy the bakery, and you bake the cakes, right? 

Most people when they’re doing deals like you and I have done them a million times, we don’t want to be the baker. You know, we want to invest in a business. And we want to at least rev out of the business, something that’s meaningful for us. For me, I don’t want to do a deal unless I make 100K a year in profit. Ideally, I like a little bit more than that, because I want to have like 250-300K in profits. So I can pay an operator 150K to run the business itself. I step out, I take the 100K additional profit as a cash distribution each year and the rest goes back into the business. But for a laundromat, like what’s fascinating is, here’s an example of how it works. So like, and we can link to this. I wrote up a piece on this one that was public because it’s a deal I did it was a few years ago. 

There’s nothing proprietary about it anymore. But small businesses all trade at like two to three x their profits for the most part businesses below $5 million in revenue. These businesses by and large doesn’t matter the section two to three x profits. And you know, these businesses like a laundromat, the one that I was looking at was making like $67,000 in profit a year. Not a ton, right? But where are you going to get a real estate property today that pays you $67,000 a year profit? It’s going to be very hard to do. Right?

Patrick: Plus the headache too.

Codie: Yeah, well, and you’d have to put a lot of money down so you’d be putting you know your your cash on cash return or your ROI, your IRR would be really low. Because in order to get $67,000 in profit, you’d have to spend a lot now that so if this plate if this laundromats making 67K, that means it’s worth something like, you know, let’s call it 100. In this case, what it actually came out to was the valuation was $125,000 is what they valued the business at. So the purchase multiple amount of what something like 1.9 to two x something like that. And and the interesting part about this business is that, you know, like you mentioned, Pat, there’s 80 million Boomers retiring this year, or in the next couple of years. There’s 10,000 a day.

Patrick: Yeah, over the next 10 years, we got about 80 million Baby Boomers retiring, a large chunk of that, I wouldn’t say majority, but a large chunk are business owners.

Codie: Mm hmm.

Patrick: And so yeah a possibility where are they they’re they are incentivized to exit. They may not be exit exiting big so they’re not looking for that and they have no other place, you know, to send the business because their their children, or current employees aren’t interested in taking over. Now what do you take the car, just park it on a on a corner, leave the keys in it?

Codie: Yeah, well, or, I mean, it happened to my uncle and he had a business that was doing $5 million in revenue plumbing business. And it was doing about $1.72 million in profit. And he just wound down the business. It was old. You know, he was 67 years old. He had no idea he could sell it. He didn’t realize that was a thing. He didn’t go to college. He grew up a sharecropper. And so nobody told him so we wound down a business that would have netted him if it was 2 million bucks in revenue, let’s say could have been four to $6 million dollars, right? So anyway, but if you take the laundrymat, philosophy $67,000 in profits, let’s say it’s worth $125,000. 

The beautiful thing is you can go and get an SBA loan from the government for that $125,000, usually they’ll cover about 90% of the price in tax returns that have been shown to be in the profits over the last three to five years. And you can acquire an asset for very little money down, you do have to put a personal guarantee on it. But for very little money down, you can acquire $67,000 in revenue. And the case of this one, which I bought, we got a loan for like, I think we were able to get a loan for 100K, from the SBA. And then we did a an equipment loan for the other 25K. So and then we got the seller to finance two thirds of the deal. So I had $125,000, in my hand.

Patrick: And the seller was fronting the money for you, too.

Codie: And the sellers fronting the money. Yeah. And so you know, the breakeven is immediate with with the debt, or the breakeven is essentially, you know, two years without it. And those trades happen all day long. Every day, we have, you know, we just had five students close their first deals inside of 60 days at Unconventional Acquisitions, because this stuff isn’t rocket science. It’s It’s simple, but it’s not easy.

Patrick: Well we talked about this earlier reference with real estate, and I want to make sure that we are not falling into this trap, because it has the air of you can you can make profits with no money down and do the traditional house flip, just come to this hotel ballroom, give us give us 100 bucks, and we’re going to show you how to do it and everything. That’s not the case here. This is a real legit issue. That’s very dynamic. Okay. And I mean, if you can talk to that, how is different from that real estate flipping mentality first? And then secondly, you know, I just was thinking about why is this happening now, what’s different between pre 2014 other than maybe the, the financial collapse and recession in 2010. But what’s happening that’s making this easier?

Codie: Well, a couple things one, the SBA do does have a new loan program, it’s continually continuously gotten easier. We just had a call with the guy who implemented the most recent version of how the SBA does loans. But the thing that I really think has changed as it’s just the internet, it’s that for the first time, I mean, you’ve already mentioned the Baby Boomer generation. So there is a massive supply and demand change over happening here, where, you know, in real estate, you have a massive amount of demand across the entire industry, there’s basically no market that’s not at all time highs for real estate right now, except New York and San Francisco, some of the urban city centers, but in and then, you know, supply limited houses in San Diego where I am right now, we’re going like this, we’re trying to buy a place in Wilmington, Delaware, like we can’t get to there to see them fast enough, happening all over the country. 

But in small businesses, the average small business stays on on a listing for for more than a year, one in 11 businesses will not sell inside of one year. And so it’s because, you know, we weren’t taught this. I mean, I’ve been in PE for a decade plus, and I never thought to apply what we do at the mega scale to the micro. And I don’t know why. But now with the internet, with the baby boomer generation changing with interest rates at all time lows, with, you know, the ability for people to get debt from things like the SBA, and with more knowledge out there about the micro PE space. I think it’s starting to open up and change. So anytime there’s a supply and demand imbalance, I think the market wants to write itself. You know, and that’s, that’s what’s happening here. 

There’s, I mean, we talk about cannabis a lot because I invest in a lot of cannabis deals, but cannabis is hugely devalued. The only other industry that is devalued as cannabis is energy, but they have some systemic issues. And then you put small businesses down there is businesses, I mean, we’ve bought businesses for one x multiples, or we bought businesses for a percentage of their revenue for us coming in and helping them grow the business and optimize it, and no money at all. So there’s lots of ways to do this. And if you don’t believe it, then go chat with an entrepreneur of a small business like an old you know, 65-75 year old entrepreneur, go talk to your dry cleaners or your laundromat or your landscaper and and see how they feel. And you’ll very quickly ascertain that most of them are ready to pass the reins, but to your point, they don’t know how to and that’s where these buyers come in.

Patrick: I’d like to get into a little bit more information about the the Unconventional Acquisitions program that you have set up if you want to be an entrepreneur. or acquire businesses. There’s a particular mindset for that. And there are a lot of people that are probably withering away in jobs or in fear of insecurity where they are now. And they want to be free and go out and do this and going to be their own be their own boss, and so forth. But like you said, it’s easy, but it’s simple. It’s just not easy. What kind of mindset would you know, from your experiences is needed for this?

Codie: Well, it’s such a good point, because I think most of the reason why people don’t get deals done is because they’re, they’re scared. Well, it’s really two reasons why one, most people don’t take the first step to the people who take the first step, give up halfway through three, the people who don’t give up halfway through, don’t continue on the path long enough. And then for the winners are just the people who are left. And so you know that the game is largely persistence. Because like I said, I mean, you know, none of these businesses are rocket science, we’re not, we’re not telling people how to go and cure cancer, or invest in biotech or do these really complicated things. 

So I think you’re right, the mindset is basically, if you have the mindset to be an entrepreneur, and to get to go and grind and build your own thing, then you have the ability to be a deal maker, and to buy businesses, period. If you have the mindset to be an employee and execute on the things that you’re going to execute on and to be flexible. When things go sideways, you can be a dealmaker. And in fact, I think people are crazy these days, for, you know, continuing to work at jobs with one income stream only, I think it’s super dangerous. And I think you don’t have to leave your job to do all of this. But you should diversify your assets, you should have some real estate. 

And I think you should own some businesses that cash flow as a distinct asset class, even if you don’t want to leave your W two and go run it. So those are the two types of people, we have people who want to leave their W-2 or they want to get paid more. They want to own their own business, and they want to go in and own or operate. Or people like me who are like I run a fund. I like what I do. But I want more asset classes, and I want more cash flowing income. And so I’m an owner investor, but you’re right mindsets, so critical.

Patrick: And the way you have a setup, it’s, again, it’s not rocket science. And it’s just a matter of if you know what numbers to look at. You don’t get yourself in too big of a hole to go in, you can execute and again, you don’t have to be there on on the ground. And I can tell you just in the mergers and acquisition stage, some of these businesses that are being acquired are like you said, landscape it, where you just have somebody that bought one, you know, mow and blow outfit, and then just added another one added another one, add another one, you know, and again, this isn’t for everybody. But you know, within three, four years, that’s a $25 million venture that gets sold to a private equity firm and private equity firms you think are going after the next cutting edge fascinating, shiny new toy. There are a lot of lawns that need to get mowed.

Codie: Yeah. You’re exactly right. I mean, we have one student who works with us. So it’s hard. It’s funny calling him a student because he, you know, we I’ve known him for a while. So we have talked deals before. And when he came into the course and started working on some of it, his name’s Robert, he built up a landscaping company, exactly like he talked about was commercial, not residential. And the landscaping company built it up to $20 million dollars in revenue. And then you know, sold it to a private equity fund for six x their EBITDA. So you know, essentially their profits. And, and that business, he he didn’t, he did it himself, he built up the whole business. And now he’s come back and he was on garden leave, he had to take a year off. And now he’s like, I don’t want to buy I don’t want to build a business. 

Again, that was like brutal, excruciating work. Now what I want to do is I want to buy a couple landscaping businesses and roll them up and combine them. And I want to do it with a pest keeping business too. And I want to bundle this home services in my area. And so we’re working through that with him on how to do it. And he has like three LOIs out right now. The guy’s an incredible operator. He’s never done deals before. You know, he’s an immigrant from Ireland, he had no no financial background. And so that is I think, the differentiator if I could go back to my 15 year old Codie, and change my mindset of I’ve always built little businesses and then I’ve sold some and you know, whatever. 

But I wish that I would have bought more. Because the income that you can get with the not assurance because you got to be careful of that but buying a business that’s already doing 100,000 a million dollars in profits, you have a lot more wiggle room to mess up. You know, when you’re doing a startup, you’re funding it yourself for maybe years. But with this, you can use the funds in the business to really grow. So, yeah, I think there’s like nine steps to do this. You figure out those nine steps and and I think anybody who has that persistent grit that you talked about, has the capability to get after buying a small business.

Patrick: Well, let’s talk about those nine steps and Unconventional Acquisitions. This is a platform, we’ll we’ll link it to our show notes. But it is in your online guide, as a whole series of steps on how to do where you hold people’s hand all the way through. Let’s talk about that.

Codie: Yeah, so the reason we created this is because not dissimilar to you, I’m sure you get asked all the time. You know, when you’re a provider in the PE and M&A space, you just get asked to look at deals constantly, and you have a lot of the same phone calls. And so anytime that happens to me in any segment of my business, I try to create some guide that people can use to answer those questions, but so that I can leverage my time, so I don’t have to be on the phone all the time. So we created this originally, just to scratch an itch of mine, which was love you humans don’t have time to be on a phone call explaining all these deals to you. Here’s a guide you can do it will give all the proceeds to charity. And and then what happened is that the the guy did 50K pre launch. 

And so you know, there are a lot of people that wanted to learn this. And so then I was like, wow, there’s a business here. And maybe we can get this group of humans together. And then they can be a great deal flow source for me. So I can get more deals, they can get more deals, we can syndicate stuff together. But it’d be fun. You know, and I don’t like to sleep, apparently. But how the course works is the first is sort of the intro to the why that we’ve been talking about, you know, the opportunity in small businesses, what does it mean to be a small business that the size, scope sector? What’s a bad sector to be in? What’s a good one? What’s a bad business to buy? What’s a good one? So that’s sort of the intro, then it’s the what type of business and that means what type of business for you. So this is where you kind of gain some clarity around, you know, do you want to? Do you want to operate the business, you just want to invest in it? Do you want to make a million dollars a year? Or do you want to start out making 50? 

What what are the goals for you, then we give sort of like some guidelines and templates on how to do that. And then it’s, it’s deal origination is what we call it, but that just means finding in the business. So you know, going out and figuring out, okay, I have my parameters, I want a business that does 100K, I want it located in San Diego, because that’s where I am, I want the business to be, you know, low capital expenditures, and I want to have to have a lot of, you know, inventory and machines and whatever, wanted to be a pretty streamlined business. So we kind of narrow that down, and then you go find them, there are a bunch of different ways to find these businesses. 

The Internet helps a ton now, then it gets into how do you sell yourself to the owners? Because you know, if you’re like me, and they see me, I might look a little young and the 65 or 70 year olds are going to be like, what are you going to do my business? So it’s how do you sell yourself? Then you get into valuation? How do you value a business bunch of templates, you know, models that you can use that are very programmatic. Nothing like that creative that we have. This is pretty industry standard. If you’re in PE, and then you get to negotiating the deal. So how do you put together the term sheet? How do you talk to them about buying a business. And then finally, you get to find it. That’s the part that I always love, because you can get super creative. A loan from equipment. A loan from the SBA seller financing, you know, maybe you have an investor come in, there’s tons of ways to do it. And you can play it’s all a game in financing, and we tell you how to a bunch of different ways to do it. 

And then you can choose, then the last one’s legal and contracts. This is where we talk broadly about what they are, we give you some examples, but you really got to go get one done by an attorney in your area and the business. And then lastly, it’s the first 90 days, so you’ve bought a business. Now what and really, those are the steps. And if you follow them, you know, we’ve had students close deals in 30, 60 and 90 days. But they’re driven you know, they don’t just like, you know, they got you got to do some work to make this happen, just like anything else. But the returns, in my opinion are amplified.

Patrick: Well, there’s also the magic of you got to make sure that the target company that you want to work with or acquire, they got to be willing to play the game too. And you know, and there are a lot of cases I think if you’re well prepared, and you have a good game plan, you’re going to go a lot farther on the trust scale than somebody that just calls him out of the blue which private equity that happens all the time there haven’t been his death is a sexy way of saying you know, cold calling. But you’re right. The one thing I would ask about and this is just my insurance background kicking in your your unit on legal and contracts and so forth where you’re doing you are making a real recommendation, hey, find a good attorney. And, you know, here’s the game plan, but make sure they get to the point quickly.

Codie: Oh, yeah, no, no, I mean, what we basically tell you there’s, there’s like kind of seven key documents you need. But those key documents gotta have drafted by somebody, you know. And so we kind of break down like, in there, you can basically see, there’s like, you know, you need your, you need a standard NDA that they, you know, to protect them, and you and you need an LOI, that’s non binding, and, you know, then you might need a term sheet. And then you might need some, you know, liability paperwork, and then you might, you know, so we kind of walk everybody through what those are. 

And the goal is to say, these things, when I first started learning them in PE, they overwhelmed me, you know, it seemed like a lot, but then you realize, it’s just after you do a few deals, it’s all the same process. And as long as you have that good bend show of insurance, and accounting, and legal, then and your your banking institution, whoever your SBA loan originator is or equipment loan originator is, then then all these deals start looking very, very similar.

Patrick: It’s, I think this is akin honestly, to cooking a huge meal, the first time you do it, it’s so difficult, because you got to chop this much, you got to do this and add these ingredients. And you don’t know exactly how long to heat something up and you know, saute things and add them when you add them. How much oh, I forgot my measuring spoon, how much spice do I put in, and all these things you worry about, because you don’t know how it’s gonna come out. You know, and it’s even more stressful when you try cooking for a big family that are for an event for the first time. But if you prepare a particular dish a couple times three, four times, you don’t even have to refer to the recipe. And you can make little changes because you can kind of know the tweaks and so forth. I think that’s what you do is you outline all that, and then you give them the basics. 

And then if they want to leave something out, which I do with mushrooms and olives all the time, or put something extra in, you know, a little more spice. Those are things that you can do. And I think you lay that out really, really well. Codie, as we’re getting through this down, we’re on the on the backside. Hopefully we’re at the end of the beginning of the Covid 19 pandemic, as we’re speaking now we’re looking at 2021. What trends do you see, you know, in M&A in acquisitions of small businesses, just give us give us the Codie Sanchez contrarian view on what she sees out there for the world ahead

Codie: Well, you know, the biggest thing that we’ve been sort of obsessing about lately is, you know, something like 67% of all businesses on Yelp, that closed temporarily have now closed permanently. So there has been a massive blow to small businesses in the US. And it’s a tragedy, it’s a real tragedy, and the economy is going to struggle to get back from that. But wherever there’s a tragedy, there’s an opportunity. And so the opportunity in that is that business owners are more incentivized now than ever to sell. Especially if you think about the demographic of who is who is most impacted by COVID-19. It’s later generations predominantly, who are the same people who run these in person, brick and mortar businesses. And so, you know, we are seeing valuations at the lowest levels I’ve ever seen. 

And we’re seeing deals get done in ways that I haven’t seen in a long time to, namely, just because people are incentivized to move on. And anytime you have these sort of shocks to the economy, business owners get tired, they’re beat up, you know, they’ve been doing this game so long, even if it’s profitable, they just, it’s, you know, it’s been a 10, 15, 20, 25 year endeavor for them. And so there’s a real opportunity for new blood to come in and invigorate these businesses. And then the interesting part two, I think, is the closed businesses. We had one of the students in UA call me her name is Brittany, and she’s in our mastermind, and I love masterminds in general, because it’s just an excuse to only talk to people about the things that I’m interested in. 

And nobody wants to small talk with me. And there’s, you know, nobody’s talking about the weather or the kids, which just get to talk deals and nerdy finance stuff. And so, you know, Brittany, one of our students, she owns a gym in Dallas, and she was talking about how sad it is that all of these other gyms in Dallas, she knows the owners of closed. I was like, Brittany, you need to buy them. What are you doing? She’s like, I’m like you just call them and you tell them that you’re sad and you feel bad for like, No, no, no. She’s like, well, I don’t have the money to buy them. And they’re like closed. There’s nothing to buy. I’m like, oh, timeout, and that’s when I realized that these. 

Once you get the dealmaker glasses on you can’t take them off. It’s a beautiful thing. But you don’t realize that that happens. And then once you get the dealmaker latches on, you can’t walk into a place and not see an opportunity. It’s real weird. It’ll happen to you if you start learning this stuff. But with Brittany, I was like, Wait a second, I’m like, what you got to do is let’s call him immediately set up a phone call with some, like one of these people, I’ll just listen in, and I’ll sort of help steer you before the call. But you got to call them up and say, Hey, Sarah, I am so sad that your business closed, you know, it’s breaking my heart, I thought about you, because you know, your business is going under. And that means you won’t have an annuitized income stream. But but there’s value to your business, you have customers that were continuing to come in, you have instructors that have people that you know, love them and your gym to do personal training classes. So what we should do is, let’s do this, why don’t we annuitize over your customers and your instructors to my business, I’ll pay you a percentage of every customer that you bring over for a year. 

So you will still get to make some income, even after you’ve had to shut your doors and your clients, they have a new home. And so you know, I’m going to do with this with a few other providers. But I thought of you first because you’re a friend of mine. And I wanted to talk to you about it. And what is she done, she’s brought in four new gym owners, to her business. And she’s essentially bought out their revenue stream with a rev share agreement without putting any money down. And so these creative deals I think, are fascinating for business owners. And if you aren’t looking at them right now, you should be.

Patrick: Saying you provide that kind of platform, that forum with Unconventional Acquisitions, in addition to the modules for learning, you got that whole community you had, as people say, a tribe out there and it’s a deal tribe.

Codie: Yeah, that’s exactly right. Yeah. So that’s just out here looking at spreadsheets, getting excited about deals. But yeah, that’s exactly right. And, you know, the goal is, I have a goal I want to make 100,000 business owners in the next 10 years is the goal with UA. And we want to try to employ through those 100,000 people, a million people in the US. And so, you know, it feels like at some point, as you’re building wealth and doing things in your businesses, you know, you have to have more for that that comes from it than money. And so that part’s really fun for us is thinking about how to get America back to work, and how to get small businesses back in the game.

Patrick: I’ll tell you, one of the things that’s out there is there’s the concept of a finite game where you’re going out and businesses out there to win win win, and everybody’s a competitor. And then there’s the infinite game. It’s a book that I’ve recently read, where you’re not, there’s no edge, there’s just you know, we’re going to look for other opportunities here, look other objects, and you’re just opening up these new windows for a lot of people. And you can see there’s a natural multiplier effect. 

And you and I talked about this with mergers and acquisitions. It’s not just one company buying another company. And so some one company disappears, you got one left. It’s a group of people choosing to work with another group of people, short and long term. And together one plus one equals six. And I think I mean, what a great platform and this is your real true gift on giving back. And Codie I can’t. I’d like to say I’m very, very proud of you. We’ve known each other for a while, but this is just great. This is just literally blossomed. And I’m very excited for people to learn more about this is the unconventional acquisitions. Codie, how can our listeners find UA and and reach out to you?

Codie: Yeah, so you can go to or because apparently we love vowels, you can also go to, it doesn’t have so many vowels in it, either one of those and take you to the site, you can sign up for the newsletter there. I also talk about a lot of this on which is my newsletter, and then I’m just Codie Sanchez on all the social medias, and I’m pretty active on Twitter, Instagram and LinkedIn. So any of those spaces and pretty much all over there is like my email address. I respond to all the DMS. I don’t respond right away usually, but I definitely do respond. So any questions, let me know happy to show behind the scenes.

Patrick: Codie, thank you very much. Great racing with you.

Codie: Right back at you. Thank you for having me. This is fun.


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