🔑#1

Most people don’t consider themselves entrepreneurs.

But everyone can learn from Ulysses Lee Bridgeman’s journey. He made a healthy NBA salary in the 1970s (~$300k per year), lived below his means, and invested all of that money into fast food franchises.

His is an extremely successful outcome, but it’s a good lesson for the average person nonetheless.

Your goal should be to invest your salary in cash flow producing assets.

Save up and invest so you can “make money when you sleep”. That means whether you show up to work or not, you get paid.

When in doubt take on the immigrant mindset about saving and investing. That means: drive the cheapest used car you can find. Live in the cheapest apartment you can find. Don’t be ashamed about living with your parents or having roommates as long as possible. Your goal is to save up enough money to buy a cash flow producing asset (franchise, airbnb, apartment building, other small business). You can live a fancy life later. Delayed gratification will set you free.

Note: I’m not saying replace your full-time job. You can keep that. But you will sleep better at night knowing that you can fall back on the money your side business earns if you ever lose your job.

What are you waiting for? Create your investment plan and start saving today.

🔑#2

You can have a good outcome investing in a business that requires a lot of capital expenditures to grow, however, you are unlikely to have an incredible investment outcome in such a business.

Example of a large capital expenditure business → a business that rent cranes

• If you want to grow your business from $1M in revenue to $2M in revenue, you will likely need to double the number of cranes you own.
• Each crane costs $150k to $1 Million, which you can finance. But by getting a new crane you eat into most of your cash flow for the year.

Example of a low capital expenditure business → selling candy

• Let’s imagine you have a brand that sells candy. You can grow from $1M in revenue to $2M in revenue without major upfront expenses. You can simply order more candy from your manufacturer.
• Furthermore, your unit costs will go down with scale (scale production discounts)

I’m usually looking for businesses that produce a lot of real free cash flow. Ideally we can grow this business while still extracting cash flow from the business. I don’t want to have to wait for future profits.

🔑#3

I write a lot about the importance of investing in cash flow producing assets. Michael here shares the cold hard truth of buying into the wrong business.

Don’t listen to your friends, and definitely don’t listen to your gut when you’re thinking of buying a business. If you’re considering of buying/starting a coffee shop, you may be thinking “coffee shops have great margins!” or “I’ve never seen a coffee shop close, it must be a great business!”.

Side note, if you’re getting advice from someone who doesn’t own a business in the same industry, run the other way. Or at least run to find 5 people who do own this type of business and validate these claims.

Read the tweet. But if you don’t, here is the TLDR of issues you may face when you buy the wrong business:

1. you may be buying yourself a horrible job
2. a good price, does not mean it’s a good deal - be careful!!
3. understand your customer, or you may not have the ability to raise prices. If you can’t raise prices when you need to, your business will suffer (can’t hire good labor, can’t pay for marketing)
4. understand your location, or you may not have the ability to raise prices
5. is the juice worth the squeeze? Even if you had a very successful coffee shop with great staff…are you going to make enough money to make the risk and headache worth it?

Summary: make sure you’re buying into the right industry.

The only way to do that is to talk to, and have advisors who are owners in the same industry. Do the homework!

Reply to let me know if you liked Tweet 1, 2 or 3 most. 😊

Have a wonderful week!

~ Sieva

ps: has anyone here bought, or thought of buying a franchise? which one?

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