Owning a strategic choke point, such as a leading industry expo, can create lasting deal flow.

[09:26]

"Even a a bolt-on is a waste of time unless it has at least 1 to 3 million EBITDA, and many times the bolt-ons are 3 5 million EBITDA for big private equity firms."

[10:25]

"Come up with a criteria for what those companies would look like and then give them to your outsourced help uh through like upwork.com or something. Um and hire someone for, you know, $6, $12 an hour to build that database for you."

[34:47]

"So, they got to see the deal first and other investors didn't even know the deal existed. And a lot of the best deals close with 99.99% of investors never even know it existed."

Full transcript

The power of coming to events like this or Family Office Club Summits is that like you could meet one person and then you could meet 100 investors through them. One of our members met somebody who met who was a CPA and that CPA referred 43 investors to him. He was in the real estate space. Um Michael Scott who spoke earlier about the AI tools, um he runs a investor CEO founder network, a wealth velocity network.

He's kind of um growing that right now and and he came here, figured out how to raise $8 million after not having raised capital anymore, and then had a $100 million exit from his company. Um so exponential things can happen. It might take two events or six events or 16 events. Um but there is there are connections in the room with investor clubs, large multi-family offices, centimillionaires, etc.

Um so I encourage you to check out or talk to Michael about the Wealth Velocity Network or go to um also another investor club we're associated with is Due Diligence Club if you're here as an investor, duediligenceclub.com. Um so I thought that um her talk about simple summaries was important. We talked about that a lot. Trust equals traction as we talked about later today um and did earlier, being authentic, you know, Brian coming and speaking with his western shirt and his sense of humor.

That sets him apart from 95% of finance people right there, maybe 99%. Right? Both both are almost never seen on stage. So it's a it's amazing. Uh and no no fluff. So those are some of the notes I took.

Um earlier she was talking about next gen and I talked about the one-pager that I read every morning, uh that I travel with, etc. Um but I also have a one-pager for my kids. Um so I just wanted to show that real quick. What this is is our family values at the top. And then I read the Arnold Be Useful book to them and then we used AI to summarize the Arnold book.

I also had them do a YouTube video with me kind of summarizing the book. And then uh Success Principles by Jack Canfield is 52 principles to live your life by to be a successful person. And that way I can tell my kids, you could ignore everything your teachers tell you, everything that people say on TV, you can ignore everything in the world if you live by this one page, you're going to be ridiculously successful. It just kind of simplifies things.

And so, we have this at the breakfast table, we'll read a chapter from a book a little bit while they're getting ready for school, or go over one of these points. Um, and it's really helpful. And that just makes it simple passing on values, I think. All right, we're going to go over distribution now. So, we had the founders of Barefoot Wines come and speak at our event.

We did a fireside chat on stage with them. They basically found this distressed wine company, and they that they owed them a small debt. They were going to shut down the wine company, and they said, "Okay, well, we'll take the wine company." And they were able to grow that into the largest wine brand in the world, and it started in their laundry room.

Um, and then they had it taken over by private equity uh, on their way up. And what they said on stage is that you need to think, "Who gets rich when I get rich? Who are my partners? Who should I do a joint venture with that would change everything?" In just about every business, distribution is everything. Who has distribution on the shelf space at Costco?

Who has distribution in terms of deal flow, and gets to see deals first? Who has distribution of um, capital access? Who gets access to information first? To the data centers that are limited in supply, to the energy to supply their data centers. Distribution is is almost everything. And if you decide on a really amazing position, like we talked about in the last section on positioning, and you don't build up your distribution channels, you don't build up protection around it, you don't build up um, relationships, etc., then you're basically inviting anyone just to crawl into your sandbox with you.

And it might be a great niche, but then 500 other people join you because there's no barriers to entry. Um, what you really want is to have it look like this. So, somebody looks at your little niche, they say, "Well, maybe I should choose this other 7% because those guys have that locked down, at least for San Francisco, or at least for the state of Texas, and just do something slightly different, or want to work with you." And then you let the drawbridge down, they come inside, and they make the walls even higher cuz now you partnered with the blue chip publicly traded company, or a centimillionaire that has access to to things in Singapore, and you hadn't expanded there yet.

So, a strategic choke point is something I got from the book Mastering the Rockefeller Habits um from Verne Harnish. And it is an asset that once you acquire it and obtain it, it usually makes it impossible or hard for anyone else to. So, we talk about this a lot. If you've been in the club for two or three years, you've heard me talk about this quite a lot.

Every time I think about this and work on it, it makes my company bigger, and we make more money. And so, it is something I would encourage you to put a lot of time into. Um it's brought us millions and millions of dollars and made our company secure uh and stable over 18 years. Um and so, the mental investment into this, you will get a payoff, and I'll show you how to do that at the end of this section on distribution.

And it's essentially, look at what is your friction point? What slows you and all your competitors down? Is it deal flow, investor flow, research, information, energy? Um is it some sort of high cost or point of friction, some annoyance, something that's just the worst part of your business? Um figure out, could you acquire a small business, start a business, develop a tool that would flip that on the head, and now you are the TSA, and you also own the gift shop at the airport.

No one likes it, but they got to go through you, right? And so, figure out how how to obtain those things and strategically build them. Some don't cost anything. It just takes being there first. Some takes positioning, naming. Some is just a domain name.

Some is just writing a book. Some is a collection of omnipresent resources on a little niche. Other times it might be moderately expensive, but then you find someone else who would benefit from owning that choke point with you, and you have them fund 90% of it cuz you thought about it, you're going to run it, and they see the instant value once you explain the strategic choke point, and you get two to four like-minded like cooperators that other people consider competitors, and you take down that choke point together. We've done that many, many times, and the more we do this, the better we do.

Almost everything I present today is partially me talking to myself, knowing if I keep doing this stuff, then good things will happen. And that's why we want to share these best practices. The better you do because of things you hear here in the club, the more you're going to want to be in the club for the next decade. So, I win if you take this something away and uh write it down on your page 17 today and and uh take it away.

So, at the beginning of our business, we were able to grow our blog to getting 3,000, 5,000, 7,000 hits a day. I bought familyoffices.com. We made it the most visited website in the family office space. Uh wasn't a lot of competition back then on that, 2008. Uh we then got a book deal with Wiley. We brought our networking group online to LinkedIn.

We had about a million members on LinkedIn probably in 2012, '13, '14. Uh we had 42 groups then. We have 84 groups now on LinkedIn for networking. And then we had more family offices speaking at our event compared to any others. These are all little choke points where once we had the book deal with Wiley, people spoke at my event easier.

Once we had a million people on social media, now we got more deal flow, more investor flow, uh more connections, right? So, one choke point gave us momentum, and it's like the uh flywheel Jim Collins talks about. Like a 5,000 lb piece of metal on a slight decline, might be really hard to turn it over. But then after it starts rolling and has momentum, then it's hard to stop that flywheel.

It can crash through a wall of bricks. Even if there is something to slow it down, it's just going to have a lot of momentum. So, I would encourage you to try to think about your business in this way. Was there a choke point or big strategic move you made? I think this is so critical that every billionaire we interview, this is one of only three questions that we ask the billionaires.

Of all the smartest questions I could possibly think of, I asked him about this. What was the turning point, one move you made, or a strategic choke point which after you acquired it, everything went straight up? So, you can check out billionaires.com to see 45 answers from billionaires on this topic. We have a We're only talking about this for 3 or 4 minutes today.

Happy to take questions, but we do have a 1-hour webinar just on this topic, and we do have an AI tool called ChokePoint Coach. Um it's a newer AI tool for us. You can give us feedback if it works or doesn't work super well for you, but it is functional right now and inside the portal. Um but those are two things you can do to go deeper on this topic of choke points.

And also, I'd encourage you to check out Vern Harnish's book, and the chapter on choke points is is pure gold. So, I'd encourage you to check that out. Um any questions on this topic or on on choke points? Yeah, but I read ChokePoints. Oh, you were? Oh, let me hold it up for everybody.

I didn't realize you were reading it. This is what it looks like. And yes, he has a newer version called Scaling Up, which I don't like, so I don't recommend it. Um I mean, it's still a good book, but I think this one's even better. Thank you. Great.

Okay, so this is this is different. This is distribution, but this is for deal flow. So, this is especially helpful for any investors in the room, but also for anyone that is acquiring companies in your industry, or anyone that is building a real estate platform, private equity group, and you want to acquire assets, this is something that every billion-dollar-plus private equity firm does, and I've never met someone with under a billion AUM who doesn't. But it can only cost about $7,000 a year to run this process and a little bit of your time.

So, I'd encourage you to do it because the companies that big private equity firms want to acquire, when you manage a billion in assets, you can't mess around with someone doing half a million in EBITDA. Even a a bolt-on is a waste of time unless it has at least 1 to 3 million EBITDA, and many times the bolt-ons are 3 5 million EBITDA for big private equity firms. So, the great thing is this is a proven process. It costs almost nothing and none of your competition is using it cuz most people in here aren't running billions of dollars.

If you are, then you you probably use this process. Most firms have two to seven people doing this. It is basically like let's choose any any niche like manufacturing in Connecticut. Say you do like machine stamping manufacturing aerospace type stuff. Um you can say "Okay, we want to focus just on expanding in the northeast area. Let's look at four different states and only machine any manufacturing companies.

Let's just find 100 leads that are in the exact same niche or very related niche to what we're already doing. And it's hard to see their revenue. You really can't when you're just looking at a manufacturing company's website. You could look up some big data on them with ZoomInfo or Apollo or something and take a guess, but I wouldn't mess around with that.

It'll just slow you down. Come up with a 100 Come up with a criteria for what those companies would look like and then give them to your outsourced help uh through like upwork.com or something. Um and hire someone for, you know, $6, $12 an hour to build that database for you. Spot check it as they go to make sure it's accurate.

Then you script a one and a half line email, send it out to the CEO of each one saying, "Yeah, I run a manufacturing company in your same niche. I'm just an hour and a half drive away and I was looking to invest in or join the board of a couple of synergistic companies. Not sure if you'd be open to a strategic investment or a board member or an acquisition, but you know, I'd love to love to chat and talk shop if you'd like to sometime." And just a sentence and a half cuts through all the stuff coming in their inbox because um people when they get approached by private equity firms, they know that it's going to be a 180 page agreement with an army of 20 a lawyers.

That agreement's going to be very one-sided. This is entrepreneur to entrepreneur. I do exactly what you do and it works even better, of course, if you're able to say "You know, I just sold my manufacturing company to private equity. It took me 18 years to do it. Now I'm sitting around and and looking if I can invest in or join the board of a couple companies in the the niche.

You know, want to get coffee for 5 minutes?" They know they're going to learn something by going to coffee with you cuz you are who they want to be when they grow up. That's what gets you the meeting. No one else is emailing them with that offer. So, if you write that email right, um and you can use our investor the capital raising email analyzer AI tool to help you with that, um then you get on the phone yourself.

You can't have your team You can't have your team send the email, but you you're the one that handles the replies to the emails, and you get on the phone with everyone who wants to have a call or a meeting, of course. And then you identify those that that makes sense. So, in one of these processes, we um targeted 370 acquisition targets. I got on the phone with 70 of them.

Eight were investable valuations, and we got a couple of transactions done from that, and we have people following up years and years later saying, "Oh, you guys still acquiring people in our industry cuz we're ready to sell now." Um no one wants to do this cuz this is reading the software manual that Mark Cuban talked about. It only costs like $7,000 to get the virtual assistants to help you, but going super thorough, super laser focused. If your family made your money in auto dealerships, um so you have that expertise, but you also believe in the future of stem cells.

So, then you could say, "Let's make a database of 150 auto dealerships, 150 stem cell companies that are already revenue-positive, and then let's go after both sleeves." But, even multi-billion-dollar uh single-family offices that I know rarely have more than one, two, or three verticals where they try to do it in-house and be world-class and go super deep and own that own that niche or sandbox. So, I wouldn't go beyond two areas uh and go deep like this for for deal flow. But, any questions on this?

I'm I'm sure some of you do this already, but it's uh very rare to see. Is anyone in the room doing this like full-on all the time? One person. Awesome. One or two people. Um so, the one theme of today is the most valuable ideas none of you are doing.

No one wants to change their brand name. No one wants to do this process. No one wants to read 200 books authored by billionaires. Um but, that's why it works. If everyone was doing it, they'd just be table stakes. It'd be like telling you you need to get an email address and a website.

Like, okay, well, you do, but it's just table stakes. It's like the very, very basics. Yes. A question now. So, another way is sort of inbound funnel where let's say if your position, um, you know, on LinkedIn or whatever is saying that like I'm interested in this kind of deal. Right.

Yeah, exactly. Awesome point. So, the last section is all about the positioning, um, and his comment was that it basically if you're positioned well saying like I invest in dry cleaning chains and you say dry cleaner investor, strategic dry cleaning shop investor, etc., then people will find you when they're looking for sources of capital and that's amazing. But, the the best thing is if you say that and wear it on the sleeve, then when you email someone, your brand name instead of saying Wilson family office and no one knows what type of deal flow to send you first, you call your family office strategic dry cleaner capital and then people know what to send you.

If I If I see a dry clean deal, I'm going to send it to you first cuz I don't know anyone else that's buying up dry cleaners, right? Super deadly simple. It's not complex stuff, but no one does it. Um, and we had someone at our last event that was an NFL player. He's raised over a hundred million dollars.

He's spoken at a couple of our events and he is in the process of buying a soccer team in Italy that includes a private island because, um, he was at our events and then my friend is from Italy mentioned, um, that he's investing in the sports team. So, I just mentioned it to Kyle and then now they have the team under contract to to close on. So, we'll see if they close or not. It's not a deal that I'm I'm part of or marketing, but it's a deal example of exactly what you're talking about is just a unique thing and you connect it to the other unique point.

But, if you're not unique, then it just gets lost. No one sends it to you first, uh, if you're not unique. Any other questions on this process? Great. All right. So, here's four different million dollar questions you can ask yourself.

Who in your city or industry has all of the client leads, capital, or deal flow that you need access to. Where if you could joint venture with them, partner with them, reward them for helping you, then you would have everything that you need that is basically the choke point. Because if you can figure that out and you take that position of being their best friend in the area of accounting, and now they refer all the accounting leads to you from their law firm, why would they refer them to anyone else unless you lost that position? Now now it's harder to displace what you've built up.

Number two, how could you be thought of as first for something targeting a very specific type of client? So we have a book called Centimillionaire Strategies. It's one of the only books written for Centimillionaires. And it talks about the mental models and challenges they go through. So that's an example of a very unique position. Number three, how could you make it inevitable that you would have massive distribution?

Like if I partnered with the number one food expo in New York that has 60,000 visitors a year, and I gave them equity in my food company, and I got a booth in the front row, and I had people join my board from that, you know, you'd probably get deal flow. Or like if you're a strategic food capital is the name of your family office, that's where you made your money, and you want to get more deal flow, then buying part of the food expo in New York and buying 5% equity in them would get you a ton of deal flow. And everyone would want to be your friend cuz they think that you could get them exposure at the biggest food expo in the world, right? Number four, what is a wholesale platform ecosystem way to dominate distribution?

How do you create a whole platform, a community, an association, a club, um some sort of relationship-based network, or tap into someone who does to get things done? So the reason I I put it as these types of questions is that Keith Cunningham's book, The Road Less Stupid, he's built a couple hundred million-dollar-plus businesses. He gives some real Centimillionaire quality advice that I I would guess that nobody in this room does. Um he says that you should sit in a quiet room, ask yourself one of these questions, and just sit there for an hour with a pen and paper, no phone, nobody there to interrupt you, lock the door, and turn off notifications, and then just come up with 20 answers to one of these questions.

And it's the reason why Oxford says that brain rot was the name of it the word of the year last year because with everything going on and so many slacks and WhatsApps and text messages and emails and phone calls and and everything else going on, calendar invites, you know, masterminds going on. It's like it's hard to sit, focus, and just focus on one thing strategically for even 15 minutes. It would be really powerful. How many people do that for even 15 minutes one time in a whole month focus on one question in pure silence and just go really deep on that.

Sam Altman last week said that it should be a rare thing when a high-power CEO takes action because a lot of his energy should be going or her energy should be going into strategy, figuring out the right path forward, figuring out the right position, figuring out how to scale, and then you take action. Um so, I think that's that's really powerful to think about. And so, if the world is going to there's more pings and there's more data and information overload and there's more requests on your time every single day, I only got 800 emails a day 5 months ago. Now I get over 1,050 emails per day is what my email meter stats say.

So, every day more stuff coming at all of us. And if you're more successful, you have more employees, more K-1s, more LLCs, more requests, right? Better quality than last year coming at you. Um so, it's tempting to get busier and busier and busier, but then slowing way down to a complete stop to focus on what is super strategic.

It's part of why you're here today, but I would encourage you to be unique in that way cuz nobody does this. This is not natural. Uh and that's the benefit of it. Any questions on this or distribution? Yes. What does your environment look like when you do that?

Do you go somewhere also that like Yeah, good question. What's my environment look like? So, uh when I'm shaving in the morning, I read that one-pager and I try to think what I want to have happen today, like who I want to be in the world and what's like the number one thing. Every week for 14 years now on on Mondays, I do a a catch-up call with my friend Jason and we say what our one focus is for the week.

So, that helps. And then I use exercise sometimes for this cuz I do have a hard time doing it. So, I'll go on a run and be like, "While that While I'm on that run, I'll listen to music." But then have like one thought in my mind. And then there's a there's a little mini summit, like a thousand summit next to my house on this like cement military bunker overlooking Lanikai.

And I'll go up there sometimes and I'll bring like my uh frozen cherries or mango up there and I'll just chill up there for 15 minutes and either just relax or think about one of these questions. Uh but the airplane's a great place to do it cuz no one can interrupt you. And um yesterday, I tried to walk to dinner without checking my phone at all and then focus on my dinner, the whole dinner, not looking at my phone, put on airplane mode and just plan out our investor super intelligence program that we're that we're coming out with next week. And um on the way there, I couldn't do it.

There was something I had to check. I was like, I couldn't resist doing it. But during the whole dinner, I successfully did and then it was it was helpful, right? So, I'm not the master of the universe of this, but I feel like if I get better at it, then really good things would happen cuz intuitively, I find it productive every time I do it.

Anyone else? Any questions? No? All right, cool. Hopefully, a few of you found that helpful. Um so, today we've talked about AI.

We've talked about mental models are really fueling everything and we're really just transferring mental models from, you know, Brian, from Connie, from myself, etc. Over to you and like these are mental models that work for us and, you know, it's like a food buffet. You don't have to eat everything. Just pick and choose what looks good to you right now.

Otherwise, you get indigestion of all the ideas coming over. Um but this is an area that I think everybody could get sharper on. Every single person in the room could get sharper on this. And it's overlooked by the wealthiest people I know. Most centimillionaires have no idea how to structure deals unless they made their money in M&A and investment banking.

And so, it doesn't mean just because they're ultra-wealthy that they're masters of the financial universe. It just meant that they spent 30 years scaling up their merchant processing company, and they're masters of that universe. Right? And so, you can add You want to know how to add value to an investor? And it doesn't have anything to do with pitching them your deal.

It is helping them structure transactions better. Showing them like, "Hey, well, you know, maybe next time you do a deal like that, which maybe it's not even in your industry, you know, you might want to consider asking this or consider this structure." And just providing helpful suggestions on the fly is what shows them that you have expertise to share and that you're generous, etc. Um so, this is the um deal structure ninja AI tool that you definitely should check out.

I think it's one of our top three, uh top five, um AI uh tools in terms of just practicality. Cuz every time you go to negotiate a deal, there is always a way to structure it better, to be more tax efficient, to preserve equity, maybe to maybe the investor is capped at 3x cuz they're passive and you're doing all the hard work. So, you get to capture more of the upside, but they get de-risked first. Maybe you offer the investor capital, and for that, they're okay with a lower valuation cuz now they can sleep at night.

Uh etc. So, there's just so many ways to skin the cat, and it's um it's so overlooked, but it's so high-leverage. So, I ran this investor club for a decade before I started learning a lot about investor clubs. That's how long it took me. So, I'm trying to emphasize it so you don't run your platform for another decade if you're not already deep down the rabbit hole on this.

Um we have about 2 and 1/2 hours of content on our uh portal. If you look for a deal structure due diligence workshop within the portal membership, then you'll see a couple hours of content on this topic. And then, I like this area so much that um if you ever need to and you're you're looking at doing a deal, uh uh you really should send it to AI cuz they'll have a smarter answer than me. But if you ever want to bounce something off me, you know, shoot me an email say, "Hey, this is what I'm considering.

If you you see deals structured like this or is there some other strategy you'd recommend?" And I'm not an attorney. I know some great attorneys. So it's just kind of uh you know, in my experience, you might want to go down this path and ask your attorney to help you structure something like this, this, and that. Um, and happy to be helpful uh in those ways.

Okay, good. All right. So, what I encourage is to have a strong, rigid, very crystal clear position, but not a rigid deal structure. There's some groups out there that just bang the start of fund drum so hard they act like it's the solution to everything and it's the holy grail. A lot of investors want direct deals and not a fund.

Or a lot of investors um, won't go into a fund unless they know the person really, really well and don't like that they're blind to the deals in there. So, if you're going to do a fund, and some do amazing with them, I would also offer direct investments or co-investments co-investment rights for the fund investors. Or I'd let people invest in one, two, or three different indirect investments before they're gated and either have to come into your fund or not. After three deals, they either like you and trust you or they don't, I would guess, right?

That won't work with everybody. But even the largest private equity firms on planet Earth, um like Blackstone types, offer co-investments and direct investments because they know that that's what's needed. They have the most leverage in the world. They're the most credible private equity firms in the world and they know they raise more capital if they offer direct and co-investments.

So, keep that in mind. You're dealing with entrepreneurs and if you walk into a room saying, "Do you want to be an LP in this fund? Here's the terms. Take it or leave it." It's not going to go so well versus getting to know them, seeing how they normally structure deals, and saying, "Well, this is our normal LP structure, but you know, you're strategic.

You know, if you could take a quarter of this deal or fund the whole deal, we'll make it worth your while cuz you're making our life simple. Now we have two people on our cap table instead of 19. That'd would So, we'll give you a much better valuation if you want to make our life easier and we'll add in collateral that would cover half of the risk. So, very worst case, if we go completely out of business, I'm losing all the money I invested and and you're only taking a half haircut, etc.

So, I'd consider that. I would consider having multiple share classes. It's probably the number one thing is to figure out how do you design a custom structure um with your attorney, again. Um but you might have to come to with some ideas or her with some ideas. Uh and that rewards your biggest investors or someone taking the whole deal.

Super important. Um and the reason it doesn't happen a lot of times is you go to the average attorney and you go to them and they're dealing with the Rolodex of clients and you say, "Well, I'm going to I want to get this deal done. How should I approach this?" And if you don't know how to structure something, whether it's a direct investment or a deal, they're probably going to say, "Oh, well, the best practice is to do it like this.

Would you like to do that?" And like, "Oh, yeah, that sounds good. Best practice, you know, follow the herd." And it makes the lawyer's life easier cuz he uses some templates and he'll customize it and hopefully listen to you carefully and customize it well. But basically built off some templates and it probably makes his life way easier to use those templates instead of sitting down and saying, "Here's what I'd like to do.

How do we maximize this while not doing this and considering these three other things? What would be some custom structures you'd recommend?" If they're really good attorney, they'll off- they'll offer you a couple options. Um but many times they would much rather you just do it the best practice way. But then when you show it to an investor, it's going to look like everything else they look at and it's not going to sweat for you.

If your position is sweating for you, you get better deal flow, better follow-up, better um acquisitions done. Even as an investor, your position gets you strategic deals. The number one most profitable thing that an investor can take note of today, I think, is that if you get to see deals first, exclusively or at a better valuation, you're probably going to do amazingly well. Like Connie and her group probably get to see some deals pretty early on or first and at a better valuation perhaps because of the Kredits network could add value, right?

Um if Michael looks at a deal in the cannabis area or in like uh home services like gray tsunami area, and he can point to what he's done uh in the past, then and word gets around on that, then he's going to be able to see deals first exclusively and at a better valuation, and that changes everything. And if you're raising capital, and you show to an investor night and day how you're positioning, your distribution, your choke points, and your track record show that you clearly get deals that no one else gets to see, they're going to lean forward and say, "Oh, well, you want to show me the top 0.1% of what you see, or maybe even show me your throwaways, cuz you're just doing Texas, and we're actually open to Arizona, too." Or something of that nature, right? So, I hope that I hope that makes sense.

And a great structure doesn't mean cheap fees. It's just maybe the investor wants a lot of their initial capital de-risked before you get paid super handsomely. And it I think a lot of wealthy investors don't mind paying high fees, but they don't want to pay the price of a Rolls-Royce and get a Honda Civic with no air conditioning. They wouldn't be wealthy if they weren't savvy.

So, they want to make sure like, you know, you've got some money on the line, that you're super motivated, people are aligned, etc. So, we've used gross revenue royalties to structure many deals, probably 16, 17 deals now. Uh we've done deals where uh we've acquired a third of a company, and then we get like 8% gross revenue royalty. Um it's usually much lower than that.

Usually we're getting 1, 2, 3% gross revenue royalties. Um and it can change. So, you could get a royalty till you double your money. You could get a royalty till you get 1.2 times your money, and then exit eq- equity warrant. So, when they sell one day, you get a piece of that sale potentially. And if it's an exit equity warrant that can't get diluted, then you're getting that percentage when they sell one day, whether they raise more money or not, and it prevents you from getting diluted 19 times if you're not going to be putting in more and more money.

So, we love using gross revenue royalties, and each time we do one, we get it all a little bit sharper along the way. So, I'd encourage you to explore those over time. We also like when structuring a deal to say, "If I didn't make my money in the med spa space, or I'm looking to invest into a med spa, what would be the both the easiest way to raise capital and the best way to complete thorough due diligence?" I'll go to someone who runs five very profitable med spas, show him what I'm doing or her what I'm doing, and ask for some feedback.

And they'll naturally want to be part of it if it looks amazing. And then design a structure where they come in and take 20% or half the deal on some better terms and agree to doing a weekly or monthly phone call with the CEO. And it de-risks the deal, it helps the due diligence go faster, and then everyone else wants to invest after I have two med spa experts investing who took over half the deal, then everything else gets done pretty quickly, right? So, that's really a a shortcut.

One of my mentors, Sergeant Thomas, says that every time he raises 180, 300 million dollars for one of his private equity clients, he's raised about 3 billion dollars, he always goes for the anchor investor first that everyone else would respect. And after they come in, everything else goes quickly. And and Blackstone, founded by Steve Schwarzman, his book is one of the top 10 books I listed, and it's printed out. They are in front of you inside that workbook.

He said that he couldn't raise money from anybody for 9 months, and he got a Japanese oligarch to come in, and then two more Japanese oligarchs, and then the money poured in and they raised a billion dollars very quickly after the first strategic investor. So, if you're rigid, you might never get the rocket off the ground. But if you can do a creative deal structure, you could. I've had many, many deals where people told me to go away.

Literally, their exact words were, "We are never going to do a deal with you. Do not ever contact us again." Cuz I followed up with them for 12 years, poking them every 3 months to buy their asset. And then I said, "Well, what if we structure it like this?" And then they agreed to the deal and we got it done.

They said, "If you can do that in 5 weeks, we'll do it." And then we did it in 5 weeks, and now we own billionaires.com because I was persistent for 12 years. I shouldn't own it. Goldman Sachs or UBS or RSM or someone big should own it, right? We're tiny little small fry company. So, uh keeping after things and being creative, you know, in the investment world, a no sometimes just means no under that structure right now, in the mood I'm in now, at that price, at this valuation, in this economy.

Things change, might be yes next week or the next morning or that same day under a different structure. You can take a bad deal, make it pretty good with the right structure. And I can take an amazing deal and make it so I get all the collateral, all the cash flow, all the returns in your cap at a 1X return and make it horrible. The structure is is everything.

People go around thinking if I put high returns on my paper, I'm going to raise a lot of money. It's the best deal you've ever seen. And that doesn't really matter too much at all. It's all the context, trust, team, conviction, process, being authentic, keeping things simple, and having the right structure so that it stands out night and day from the other thousand things coming at them.

And people want a good return on their money, of course, but without without all those other things, they don't care at all what you put on your piece of paper. Totally irrelevant. Any questions about any of that? I went through a lot of different ideas quickly. Yes. Structure.

Structure. And the investor looks at it, right? Or rather their legal team looks at it. If it's a highly customized structure, which is way different to everything else, does that actually shut them down because they're like, this is way too hard to evaluate compared to everything else I see? Yeah, yeah. So, the question was like, if it's a really creative structure, does it shut them down cuz it's so different than everything else?

Um I've had a percentage of people say like, oh, I'm not really sure how to deal with that and we have to explain it and I've had it go well. I've had a few people where when it's creative, they say, "Nah, I just want a plain vanilla deal. I don't want the mental gymnastics of trying to figure that out and they don't want to be tricked, etc." Um I know when Michael spoke at our last mastermind, he said he went to a business owner of a a martial arts center cuz he owns some of those and he showed them the terms and it was a simple agreement and he took it to the attorney, and the attorney is like, "Oh, well, you know, this is a little bit different than a normal agreement.

I want to do this, and add this, and add this." And Michael sat down and was like, "Hey, look, this is either going to go well or not. Like, either trust me or not, it's going to go well. Whatever the paper says, it's really about us trusting each other and doing this. And the agreement captures the spirit of that.

So, if you want to, you can both spend a whole bunch of legal fees and make it super robust, and you know, uh super super thorough, but if you're okay with keeping it simple, like I'm going to do what I say I'm going to do, and let me show you, you know, come over to my martial arts center, and I'll show you who I am as a person, you know? So, um always when you do anything, when you order, when you do plain vanilla, you're going to lose some people cuz you're plain vanilla. You're creative, you So, the trick is not to lose too many people, right? Um but the deal structure ninja app will help explain each component of the deal if you want it to, and you can ask it for longer explanations to help de-risk that.

Cuz that is a problem sometimes. And some attorneys just won't want to work with you. They'll be like, "No, this is like too out there. You should just use a standard formula." But you have to question their motivations. Do they make extra money if that deal goes well for you and you make more money 5 years from now?

Do they make extra money on their legal fees if you raise the capital in half the time? No. Maybe they earn a referral if they're super helpful. But sometimes they're not the most aligned counterparties, I find. Yeah. Yes.

Goodbye. Dude, in that same vein, you you pretty much answered it. Okay. Great. Any other questions about the last couple slides or royalties? No.

Okay. Um for this raise, we thought of one family that would be strategic, um sent them the offering, and it was a creative gross revenue royalty um deal, and it had a little bit of collateral, and the first investor took it, and then the deal was done, like in 3 minutes. So, it's interesting because it's an example of structuring a deal in a creative way that someone accepted right away as soon as they saw it. Um but also, it's an example of why did that family get to see the deal and nobody else got to see it.

It's like, well, I knew they'd be good nice people to work with. I knew what they wanted. It fit what their needs were and they had communicated what their needs were. Um and I had met with them in person recently and so they were kind of top of mind. So, they got to see the deal first and other investors didn't even know the deal existed.

And a lot of the best deals close with 99.99% of investors never even know it existed. And the most amazing deals you can ever do are deals like at the extreme, you know, none of us are Oprah Winfrey, but if you're Oprah Winfrey or Warren, then you get deals on ridiculous terms because Weight Watchers wants Oprah's face representing them and her media empire and all that. But on a very small basis, you know, to make it more less lofty like the comment earlier today, um if you have built and then you sold your two gas stations for $12 million and then you meet someone who's looking to build a ground-up gas station or has one location and they want to get an investment to grow to two or three, they want you to be on their cap table. They're not talking to Oprah or Warren, right?

Like they you're probably the only person they know that's built a couple gas stations and sold it that's given them the time of day. So, you need to look for where you are in your path and then look for those earlier on the path cuz that's where you have the super deep expertise for better due diligence, more high conviction investments, opening doors, getting distribution, negotiating with suppliers, negotiating leases, avoiding all the expensive mistakes you've made. So, when we talk to an investor club that's doing a couple hundred thousand revenue, you know, we say, "Hey, uh we can help you scale. Won't you come speak at our investor club or let's just be investor club friends and share insights and speak at each other's events, etc."

And for some of them they're just starting, we are where they want to be in 18 years. So, we're able to get uh deal flow and access that we wouldn't be able to get otherwise. So, I'm doing the same thing in in my business. If there's any other questions, let me know. Um so, with uh Dan Sullivan, I got mentored uh from him and one one reason why I went in there is that he had so much helpful information on his niche that he was a preeminent expert um to get advice from on scaling a business as a founder and I'd already profited from his ideas, so I was fine paying $50,000 a year to get mentored by him because I already made way more than that off his ideas, so of course I would, right?

So if you reverse that flow when it comes to deal flow, getting meetings with people and you're you're helping them and you're transferring your ideas and expertise to them as an investor, as a CEO, as a founder, um or helping people in their family or referring clients to them, now it's like they at least owe you a meeting, they at least owe you a little bit of an audience or keeping you in mind cuz you're the you're like one of the more helpful people that they know. And having that having that um I would say that like um you know, I believe in uh karma and so, you know, putting out more and more good karma, it just comes around long term. It just it's good business. So structure Trump strategy, you can recycle cash or does cash go out to investors, right?

Is there alignment? Who wins first or does everybody win together? Do I get diluted or is there anti-dilution rights? Can I invest more money or am I not allowed to invest again? Like the idea of being able to invest another million dollars in the next 3 years that Brian mentioned, that's awesome. Stuff like that.

I think some of the smartest families I know with deal structures, they have creative terms that nobody else have ever heard of is doing and it's like a go-to mental model um and every time they do a deal, they put in a little mechanic that makes it smarter than the past deal that they did. So I'd love for you to get to that point as well cuz it can make a huge difference in how fast you raise capital, um how much money you lose on the worst deals, um how much sleep you lose at night, etc. Um Sam Zell in his book um in my being too subtle said that he was trying to buy up a block and they had spent hundreds of millions dollars buying the block and there was one little single family residential home from the 1960s there that would not sell and his team says, "We give up. We're just going to to around it and have a silly little home on the block in the middle of our apartment complex.

And it's going to create a nightmare for zoning and permits and everything." He said, "Well, let me go out there." So, he pulls up on his Harley in his T-shirt, goes in, has a cup of tea with this 84-year-old, and it turns out she's lived there forever, and her dog is buried in the backyard, and she didn't want to move. So, he said, "Hey, how about this?

You go on vacation, move all your stuff, we'll exhume your dog, rebury it in the new house that we'll pay for, and make it all painless, and respect the dog in the whole process." And then she sold. So, he actually took time to listen, and it wasn't about offering more and more money, right? Um so, that's really important.

With one asset, we were going to buy it, and they they said they'd sell it for $3 million. They're like, "Well, we don't want to pay $3 million. Why would you value it that highly?" Just like Brian said, a lot of times people value things ridiculous uh amounts, right? And they said, "Oh, well, we strategically think this part is super valuable to us, so we wouldn't want to sell that."

We said, "Okay, well, we don't care at all about that part. So, you keep that part, and we'll pay you $450,000, and then we can get a deal done." They said, "Okay, we'll do that deal." And then 6 weeks later, we we bought the asset from them. So, when people have a ridiculous valuation, you have to ask why, and sometimes you just structure it around that, and then you get the deal done.

But if you don't know how to custom structure things, you say, "Oh, okay, expensive, move on." And then the deal doesn't get done. So, super super helpful for those reasons. All right. Uh the alignment, we've talked about quite a bit already. Along with uh deal examples.

In one deal, you know, we put in a couple hundred thousand dollars, and then um we thought, "Who would take this deal?" Cuz it's a little bit of a weird niche in the medical industry. And we thought of one person um who was a centimillionaire who had at one time mentioned that they've invested in that niche. We went to him and said, "Hey, look, we've put this money in already.

If you'll risk almost twice that amount of money in the same deal, um we'll make it so that you get all your money out first, then we get our money out, and then we share in in profits." So, if we take a haircut, and the deal gets cut in half, now I'm bald, and he barely got a haircut at all. So, I take all the brunt pain up front, cuz I'm the one running the idea. If it turns out to be a dumb idea, it's 100% my fault that it was dumb.

It was my idea that I came and pitched to him. Um and so, that was a way we got the deal done, and again, went to one investor, got it done, papered and closed pretty quickly in a month. So, on small to medium-sized deals, that's easier than if you're raising 50 million, but we've also had billionaires from our investor club put 30 million dollar checks into things, 5 million, 8 million, 10 million, 30 million dollar checks into things. It doesn't have to always be a small-size deal, but obviously, it makes it easier uh if it is.

Um any questions on that? On the whole deal structure section? Yes. Aside from structure, how do you know when an investor is stringing you along? Right? I had that experience recently.

How do you know when an investor is stringing you along? Yeah. Now, that's a good question, because um sometimes, like one investor we've closed 19 transactions with is our most profitable investor to work with. Um it took us 6 years of getting to know him before we closed a single deal together, and then we closed 19 deals.

So, someone might have said the whole 6 years, "Man, this guy is stringing us along." But, he's our biggest investor ever. The smaller the check, the smaller the investor, the less long the process typically, right? No one's going to meet with you 20 times to get you to invest a thousand dollars in a crowdfunding campaign. They might send you 20 emails, but they probably never want to meet with you to raise a thousand dollars.

So, the bigger the check, the more patience you need, I think. And the more that it's a little bit out of place that they would give you 20 million, the more patient you would need to be, right? Like, let's say you're raising 20 million, and you're a startup, and you don't have the track record yet, you've no revenue yet. It's a big ask, so it might take more patience and follow up.

So, there's a Harvard Business Review article that said uh you can look it up, it's called uh Should I Trust My Gut? They said, "Well, it depends what your gut's made out of." So, if you've been doing it long enough to be like like one time Michael and I were on a call with someone and this guy talked a really big game, like way too big of a game. And in the first 10 minutes, I was like, I just don't like this guy like at all.

And I'm I I try really hard to always be really polite to people. So, I apologized to Michael after the phone call cuz he set it up and uh it only happens like once a year or something where I just failed to come off as polite. I was just like, I just can't, you know, I just don't think see us working together. Like the way you talk and the way you beat your chest so hard that you're king of the whole world.

Uh and he was saying things that just couldn't be true. And I was like, I I just don't see like a lot of alignment here. Uh so, sometimes you just have to call it and you can smell it early on and the faster you clip those off, the better. Like uh Dan Sullivan says that there's there's two types of pain.

There's short-term pain and there's long-term pain and you get to choose. For that employee, the joint venture partner, the bad deal, it's just going to continue to lose money. It's like you just got to cut that stuff off and get it out. So, that that'd be my advice to listen to your gut. More and more, if you've been doing something for a decade, I think you probably all learned that more and more you regret not listening to your gut more often than the opposite.

So, yes. Talking about gut, the most valuable thing I heard all week was a lady in LA who said she trains her gut every day. Right? So, what I found was my gut was actually mistrained. Um so, she actually said, "Okay, train your gut to actually get the outcomes you want." Train your gut to get the outcomes you want?

Interesting. Yeah, I mean um the reason why the one-pager works that I held up earlier, I think it's like one it just makes it hard to forget what your priorities are basically. But, the reason why it really works is because then you're basically putting this in your your front temporal lobe in your prefrontal cortex and saying like, "Look for this in the world." And then you go out in the world and then you pattern match.

And like Kevin spoke at our uh mastermind Q1, I think it was, and he said that all of business is pattern matching. You 10x what's working, you kill off what doesn't work after you're trying to fix it once or twice, and it's a lot easier to pattern match if you're learning from high-quality sources and really know what you should be doing next. So that's it's kind of related to training your gut. We're going to break for lunch in just a second, but any other questions before we do?

Don't forget to write a couple notes on page 17 on your worksheet. We're going to be calling on people later today and that's how you get an ROI out of being here today is actually taking actions, using the tools, using the ideas from today, figuring out unique positions, figuring out how to answer those million-dollar distribution questions, figuring out how you're going to upgrade your mental models from, you know, billionaires, pro athletes, people that are further down the path from you, getting way more high-quality deal flow with that private equity deal flow process, etc. So we've got three guest speakers after lunch. One's going to be a fireside chat.

I've got another two sections to go after lunch and one of the sections is one of the best investments of your time because it's how to protect your time. And the more time you put into protecting your time, then probably you're going to get an ROI on that. So hopefully you don't miss that after lunch. So Jimmy, for lunch are they just serving it around the corner next door?

Okay, so just next door there. We're going to start back at 1:00 p.m. Prompt. So just a 33-minute lunch break and then we'll come back here. Hope you're enjoying the event so far. Thank you.