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EXECUTION The Alchemist

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Velo

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Read Millionaire Fastlane
I've Read UNSCRIPTED
Nov 25, 2020
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So I decided to rejoin TFF as my "business ideas" from 2 yrs ago didn't gain traction and I had a long period of stagnation; now I am ready for take-off.

This year, I suffered from an autoimmune disease (psoriasis/eczema/whatever it happens to be - the doctors I visited never seemed to get it right), which is still problematic but I am ~85% recovered now. This experience was a true FTE moment, when I realized delaying what I NEEDED to do would spell disaster in the future.

To put it simply, when your body is attacking its own tissues/nerve cells and is in a constant inflammatory state, you are in no position to work 8 hours/day or be productive. It is extremely difficult and painful - now imagine you're trying to improve your health while, at the same time, you want to keep a roof over your head and food on the table.

Not a good outlook! And who knows if one of these "unforseen events" rears its ugly head again in the future.

Because my health is gradually returning, I am in good enough shape to resume, but I will rebuild and do it right this time.


Some background information to get started:


- I currently obtain income from "shitty" gig work that pays the bills so I am not losing net worth on rent, utilities, food, etc. every month. I am at breakeven point currently, factoring in wear/tear on my vehicle as well.

Yes, I can confirm Grubhub is 10x better than Uber/Lyft/Doordash. I had some days during the pandemic where I made > $250/day over an 8 hour period thanks to juggling GH/DD, which is pretty good for unskilled work.

- I plan on getting a job in sales after this X-mas is over, as my ability to sell, a critical component of entrepreneurship, is quite lacking. The sales job will not conflict, nor will it delay, the timeline to execute the plan below. 8 hours of work + 8 hours of sleep + 8 hours of execution per day is perfectly reasonable.


- I have approx. $60,000 in NW, $35,000 liquid. (Non-liquid in a traditional IRA)

- With the help of some personal connections, I estimate my initial investment into a business is $80,000 to $100,000. Difference between 80K-100K and my capital investment will be structured as a debt note to be paid over a period (e.g. 5 years), not equity. I am very confident this will go through with only a small amount of reasoning/convincing.



My Game Plan (to be updated continuously):


1) Re-read certain books, which happens to include TMF/Unscripted. Yes, I know, MJ mentioned "reading books" is not execution, and even called it "Action Faking," but I will refresh my memory in the span of about 12 days. I'd say it's well worth the trade-off since it will help me avoid costly future mistakes.

Once I finish reading all the books I need to, I will list the books in this thread and why they are useful.

2) I will begin the hunt for an interested investor, as opposed to a business partner - I am NOT looking for someone who will partake in day-to-day decisions of a business.

Ideally the investor will take accept a bond for 8-10% - if not, then equity proportional to initial investment is acceptable. As a general rule, business people hate giving away equity, so this is more of a "last resort" option.

However, I must retain the power of business decision-making (Commandment of Control).

3) Identify locales/locations where doing business is good. (I currently live in Utah and the winters are unbearable - I'm thinking Texas, Florida, North Carolina, and some other sunny places are ideal. Avoid small business-unfriendly places like the plague unless a deal is too good to pass up.)

Here are the preliminary metrics I have in mind for acquisition:

Revenue: > $1M
Cash Flow/SDE: $200K - $350K
Price: Ideally 3.5 - 4.5x SDE
Sector: Pretty agnostic about this, but I'd actually shy away from the latest fads like eCommerce stores, cannabis, food delivery, etc. as they are beaten and analyzed to death
Reason for acquisition: Transform the business using a startup-like mentality ("disruption") combined with CENTS principles


In case anyone's wondering about the metrics I mention...

1) Revenue: Companies with less than $1M revenue are not well-organized. The owner is often the one doing everything, which leaves little room/resources for GROWTH AND EXPANSION which = SCALE.

2) Cash Flow: Self-explanatory. I'd like to start with a minimum of $200K cash flow since a business will have difficulty expanding without sufficient resources..

If we assume the previous owner takes $70K as a salary and distributes $130K through an S-Corp to avoid FICA, the previous owner is almost certainly consuming all that after-tax cash flow on personal expenses that will make him or her the next "IRA millionaire" with a 3000 Sq Ft McMansion, but does not earn any actual "freedom" as dictated by CENTS framework.

Under my control, I would take something like $45K in salary (I need to eat/sleep under a roof) + $155K remaining. That hypothetical $155K will be 100% invested back into the company through marketing, sales, more personnel, investment in technology, etc. making it seem as though cash flow dropped from the sky into an abyss. But it will be a temporary move.

3) Price: If you pay 2x SDE for a Main Street business (laundromat, house cleaning business, landscaping business, etc.) you can expect a scenario where the owner does everything, and your ability to scale is extremely limited. LIMITED SCALE + YOUR TIME BEING CONSUMED on "day-to-day" work as opposed to high-level execution = BAD OUTCOME!

Likewise, a SDE greater than 5x means you're likely getting something of pretty high quality, but the potential for value appreciation is lower.

Your job is to IMPROVE and, to the best of your ability, find new "disruptive" channels to unlock greater value, not to sit on a cash cow as a CENTS entrepreneur. The cash cow stuff can wait once your NW > $5M, not when it's in the 5 or 6 digits.

4) Sector: Explained already


I will update this thread every 7-10 days. Feel free to comment and I will do my best to answer them. Best of luck to everyone - hope MJ reads this as well.
 

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Last edited:

Velo

New Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Nov 25, 2020
10
1
5
Question: Why acquisition?


When you start a new business from scratch, with the intent to succeed massively (and not just pay the bills, e.g. most Main Street businesses), you are essentially saying the market is wrong, and you are right.

No matter how good or skilled you are (I happen to think I'm quite average), that's a very bold statement. And while bold is indeed praiseworthy, it does not translate into CENTS success.

When you buy an existing business, you are not starting from zero. You are starting from the platform of an already profitable business, from which you can hypothesize, test, evaluate, and adjust as necessary. Of course, you should NOT run the newly acquired business on autopilot - you need to pay attention to every little detail and improve/innovate as much as possible.

But your chances of success are MUCH HIGHER if your platform for reaching customers (the source of your future success) already exists.

The rationale outlined here is encapsulated within the book, "Buy Then Build." It deserves its place alongside legendary business books like Unscripted, The E-Myth, How to Win Friends and Influence People, and The Lean Startup.
 

Velo

New Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Nov 25, 2020
10
1
5
12/2/2020 Update:

Finished (re)reading:

1) TMF
2) Unscripted
3) The Toilet Paper Entrepreneur
4) How To Get Rich (Felix Dennis)
5) The Lifestyle Business Owner
6) Buy Then Build

There are a few more books/resources I would like to read, but for now this should suffice.

#3 - #6 in a nutshell:

3: TPE basically tells you that if you have no/little money (think the beggar with less than $500 in the bank account and earns $10/hour), yet if you truly want to start a business, you will come up with out-of-the-box ways to get to where you need to be. Plenty of good examples, such as when the author himself and his wife/kid had to downsize into a $475/month lease in a senior living center because they couldn't afford anything else.

4: A goldmine of wisdom from a hundred-millionaire, who argues it's probably not in your best interest to "get rich." He defines "rich" as having $30M net worth or higher. Lots of brilliant insight especially regarding

- Why you need 100% equity, always
- Being smart does not make you more intelligent/talented than others; don't let "I'm rich" get to your head
- The #1 obstacle is one's own ego/pride - "How would I look in front of others if I failed?"
- The necessity of bootstrapping by borrowing money from "fishes" - other people who are NOT rich but are willing to loan $500 - $20K, which indeed adds up over time
- If you're serious about getting rich, get ready to duke it out with your competition; leave no man, woman, or child alive

Felix Dennis will always be a legend - though his lifestyle is probably the aspect you will not want to replicate.

5: Far more modest than MJ, the author argues that owning 3-4 businesses generating $100K+ each in SDE a year and spending 5 hours/week attending to them (to make sure they don't degrade), after you finish optimizing their operations, is the way to go.

This approach will obviously take longer before you get to your end goal of "FU" money, but there is a benefit of having this perspective - not everybody will achieve $500K+/yr in cash flow from their Fastlane business, whether it's because there's a ceiling on the business or the business owner is not competent enough to execute at such a level, so if this is a viable alternative to you, consider it.

Author also favors buying > starting from scratch.

6: Holy bible for acquisition entrepreneurs. Don't start from scratch, the author argues. He lists many examples of people who couldn't make it but succeeded once they bought a business as a platform to launch their "disruptive" or "innovative" idea (Elon Musk/Peter Thiel acquired Paypal after X.com payments startup failed), and then walks you through the steps. There's a lot of technical detail to ensure that your acquisition process runs smoothly and you don't get bogged down/"stuck" halfway through.

He does say it's possible to buy a business without a broker, which will save on costs, but you will have quite a bit more work to do in terms of NETWORKING.

TL;DR on business books

On one end of the spectrum, you have books like "Click Millionaires" and "The 4 Hour Workday" advocating that making $5K a month and living in some foreign country where you pay $250/month for rent while working 5 hours/week on some Internet business (affiliate marketing/blogging/digital marketing) will make you happy.

On the other end, you have books like "How To Get Rich" telling you what you need to do in order to get into the "very rich" club - $30M+. You will be ruthless and voracious.

For someone such as myself, I aim on capitalizing on an existing business opportunity and, whether through innovation/disruption or additional acquisitions (as mentioned in "The Lifestyle Business Owner"), I would like to earn a SDE of $1M/yr before I exit. It's very likely I won't be able to acquire a business that generates $200K/yr right off the bat, as my measly liquid capital combined with whatever money I can raise just won't be enough, but it means it'll probably take a bit longer to "get there."
 

Velo

New Contributor
Read Millionaire Fastlane
I've Read UNSCRIPTED
Nov 25, 2020
10
1
5
Forgot to update Post #3:

Next Step:

I will make a list of individuals and their emails/phones, and will be sending 700 to 1000 emails in the following days to targeted prospects using something like this:

=============================================================

Hello [name of prospect],

I'm looking for an established service or fast casual restaurant business to purchase in your state of Texas, as I plan on moving there in less than 3 months. I am willing to entertain any and all offers. If you have a friend or acquaintance who is thinking about or is already selling, please let me know! I will talk with the owner, take a look at the company, and, should a deal go through, return a favor to you.

I am NOT a representative of a private equity firm - I am an ordinary 30 year old who seeks to become an owner-operator and grow the business. My initial investment (or down payment) is flexible.

Thank you, and enjoy your day.

[My name]
 

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