Private investors should focus on one or two areas and meet dozens of operators before investing.

[15:19]

"So what you need to do is really focus on one or two areas typically at least to start with and meet with 10, 20, 50 or find someone who does that all of the time and basically say okay well after talking to 30 different self- storage independent sponsors I think these two are excellent"

[06:22]

"I used to always say wealth creation story, but to many people it's about adding value to everyone around them, to their employees, to their family, to their kids."

[36:59]

"So, by having a gross revenue royalty, what you're doing is saying, "When I invest for a 5% equity stake in your operating business, and you have a 20% profit margin on average, okay, well then for my my 5% equity stake,"

Full transcript

Great. All right, we're going to go ahead and get started. So, thank you for joining us here at the webinar. Uh the point of today is to go over 17 different strategies that are going to help you if you're a private investor. This is going to be most helpful if you are investing in direct investments, if you've just inherited capital, just sold your business, if you run a single family office, if you work with private investors day-to-day as an estate planner, a tax adviser, a wealth adviser, uh of some type.

It's going to be helpful if you're helping your father uh or your son in helping take over a family office or run a family office. So, we hope that by the end of this, you come away with over a dozen things that you hadn't thought enough about, you have never thought about or you know you now need to take action on. It's also going to be helpful to anyone who is looking to work with investors on the capital raising side. Maybe you're a real estate developer or a adviser of some type that consults uh on the capital raising process or investor relations etc.

So let's jump right into the content. First off I want to share that uh everything we talk about here at the family office club obviously is meant to provide a general overview a 10,000 foot view best practices models etc. The specific application of it in Singapore versus Seattle Washington versus Toronto could be different. So obviously consult with a legal counsel before implementing something real fast uh without thinking through all the consequences of your legal structure etc.

Uh if you're not familiar with us already uh the family office club has been around for 12 years and over that time we've hosted 118 conferences. We've had over a thousand private investors on stage at our live conferences. We've done about 40 of these live webinars in the past. And we are unique in that we have a platform where we have the number one most visited website, familyoffic.com.

The most downloaded podcast called the family office podcast. Not the most creative name I know, but easy to find if you want to follow us there and learn more about what we're up to. And then while we provide resources for those on the investor relations side, we really uh only do the engagement of advisory work on the family office side of things through our Centaillionaire Advisors LLC division. And through Centa Millionaire Advisors, we help set up single family offices and develop direct investment programs.

So, uh, enough on us really. Many of you already know who we are and that's how you got onto this live webinar or this live feed. And we've served clients at, you know, 15 million 30 million net worth. Uh, we served clients at $3 billion plus in net worth. Most of our clients are at the 50 to$100 million level up to say 700 900 million uh, in assets under management.

Those types of clients need a lot of help. Uh they need a lot of work, but oftentimes don't have a formalized family office in place yet and could do a lot to improve their processes day-to-day. If you're following along visually via the Zoom webinar software, you can see this page at a couple of those. The event schedule is always on the homepage of familyoffices.com.

All right, let's jump right into the 17 strategies and insights and tools that we're going to provide to you on this recording here today. Number one, uh, is that many people get hung up on the fact they learn what a family office is. They hear that a family office is a more holistic, a more complete, a more full balance sheet solution for their wealth. They get really hung up on whether they need a single family office or a multif family office.

Or they think, well, we have our holdings, we have a CPA, maybe we kind of do already have a single family office. We don't need anything else. And it's really not a an eitheror. It's really about how much of a single family office solution do you need in place versus how much do you want to rely upon a multif family office.

Part of that's related to the amount of control that you desire and require which relates to who you are and who your family is. And two of the other 17 insights are going to touch on those exact points. Uh but that is central. And even multi-billion dollar family offices use private banks, trust companies, and multif family offices to manage parts of their portfolio.

It could be cash management. Could be international banking help. It could be for helping with uh trust and estate planning or managing trust for the family, etc. If you didn't make your money in the stock market, does it does it make sense to have someone on your team who's picking stocks for you? Maybe, maybe not. Many times families are best off finding best-in-class for anything that is not something that they're really strong on.

If they didn't create their wealth there and they don't think they're uniquely strong on it more so than almost all the other families out there, maybe you shouldn't be keeping that in-house is how a lot of families have been moving. So, I just want to mention that and that's true at 30 million and it's true at three billion. So, for a lot of you here uh listening, I think that could be helpful to hear. Second insight is that you should develop a family office dashboard.

There's no reason not to have this yet almost nobody does. Uh it's basically a operational document uh a strategic plan and it's kind of what is going on in your family office. Everything from a monthly or quarterly improvement list to what deals are being considered by category of deals. We'll get to the three main categories later. Uh it's also should have information in there on who exactly is in your team and what the organizational chart looks like, critical service providers and allows you to analyze each component of your family office.

So you can constantly be improving it. So many people are unhappy with either their accountant, their tax planning, their estate planning, their wealth advisor, their direct investment program, couple members of their team. Almost everyone has something they're pretty unhappy with because it's not at a family office quality level. And you can identify those things through the family office dashboard that you develop.

You can also literally keep people on the same page. If they're helping you on real estate, maybe don't show them your whole dashboard. Maybe show them your family values part and your real estate allocation part. You can more of that way. No one's wasting your time bringing you stuff you've already seen, you don't want to see, and everyone's very clear in your focus.

Again, there's no reason not to have this. It's not a big expensive $400,000 software implementation. It's a planning strategic document. Uh and and you should start getting that in place right away if you don't already. At any level of being a private investor, you need that. Uh the third insight is to document your history, your family values, your wealth or value creation story.

I used to always say wealth creation story, but to many people it's about adding value to everyone around them, to their employees, to their family, to their kids. Uh lots of people talk about, hey, these business owners should give back. And some people don't mind using that term, but it comes with a lot of weight because a lot of business owners say, well, we serve our customers very well. We treat our employees very well.

We try to treat everyone with a lot of respect for the long term and add value to every situation we get in. And whatever your path has been to create wealth, documenting that by doing a video interview of the elders in the family by uh basically documenting the top five values, three to seven values, making sure everyone knows those so they can hire, fire, allocate based on them and knowing the wealth creation story can know who in the family could help with what and what types of strategies have worked with the family before and could be considered or used going forward. Uh this could be part of your dashboard. It could be a video asset.

It could be a photo book. You have on a coffee table. But being clear on this makes the family have a sense of identity, a sense of focus. You waste less time and you can let people go off your team and hire more quickly with more conviction once you have this. All right, insight number four, develop governance and ethical policies.

We're going to get to some very strategic, you know, nuts and bolts of investing, you know, really soon. It's not going to be all soft topics of having good ethical policies, etc. But I've seen that it doesn't matter how great your investment strategies are if you don't have ethical policies and governance for your current family and next generation because you'll just tear each other apart potentially stop talking to each other have misunderstandings, mismanaged expectations. Many times a son or daughter is in charge of managing the wealth and might not even be compensated for it.

Something might go wrong and now the family's wealth is cut in half. Now maybe no one talks to the brother or maybe the son uh hires someone who happens to be his college roommate who then loses capital for the family. Maybe that college roommate was very wellqualified and it was a good hire to make or maybe he was doing his friend a favor but the perception of it and did he follow any rules? Does the family have any rules?

Are there unspoken rules? Just you know most people would rather have their family intact uh than have all their wealth uh if they had to choose. You don't really have to choose though. Uh, and so wherever you are on that preference, uh, there's no reason not to have the governance and ethical policies in place because not only can it prevent families from getting torn apart, it can help the family be more aligned, uh, and get along better, be better communicating, and different family members with different capabilities can be more involved and engaged, even if it's part-time, because they know the rules of the game.

They know what to expect. They're not bitter, so they don't give their feedback anymore. They don't come to the family retreats. They don't get feedback on an investment that's pending, etc. So, this is more critical than it sounds, especially if your net worth is at 20 million or or 30 million and up. All right, insight number five.

If you're following along visually, I show a family office uh structure uh and all the different layers that could be components of it. Trust and estate planning, tax optimization, having a CEO or CIO or head of direct investments, governance, private bank, trust company or multif family office, good reporting, accounting, also uh operational excellence is something we're going to get to later. But having all that in place and being happy with those providers are constantly improving them and then having a very clear focus, connections with peers constantly. And then if you combine that with being part of a few organizations where there's family businesses, family offices like you or the type of deal flow you're looking for can be a really powerful combination.

So just having that 1,000 foot view looking at your family office and just thinking, do we have these components? Do we have constant refreshing of ideas because we're meeting with our peers? We're hearing from investment managers. We're hearing about the newest structures, strategies, fee models, etc. We're going to talk about a few of those here on the webinar.

It's an example of what type of value we try to provide. But if you want more of that constant refreshing of ideas, I encourage you to come to some of our family office club events because you're going to hear from 30 investors at each event you go to. And there's no way you don't leave without some new ideas and new approaches to your portfolio. All right, insight number six is common portfolio components.

So, if you're not following along visually, uh, that's totally fine. I'm just going to spell out what the three boxes show here on the screen for those who are, but essentially many people come and think about portfolio management or wealth management as one thing, one strategy, one approach. Who's going to be my wealth advisor? Who's going to be the person on my team who's a CIO?

Oftentimes things do need to roll up to one person who is overlooking different areas, but they perhaps shouldn't be making strategic decisions within all of the subcomponents of your portfolio. And you'll see why in just a second. So traditional wealth management is essentially a diversification game. Every wealth advisor has had it pounded deep into their brain that you diversify.

You get uncorrelated assets. You find things that are not going to attract the broader market or defend the client. And the goal is really to maybe track the market. Uh some clients want more income than others. Some want more aggressive stances than others, but typically it's to protect them when the market goes down and grow their wealth a bit as it goes up through a lot of diversification usually.

So that's traditional wealth management. But when you get to being ultra wealthy, when you start doing direct investments, when you're worth seven to 10 million, especially if you're at 15, 20 million, 30 million plus, 100 million plus, for sure, this is true. Oftentimes, families naturally evolve into trusting different brains and having different strategies for these three main compartments of their portfolio. So compartment number one is diversified market exposure.

This is traditional wealth management mindset defense. Of course, that defense could be aggressive or very very conservative based on who the family is. And everything we say on this webinar and all of our content obviously has to be uh listened to as inputs and then adapted to a very unique situation you have. Uh but that's compartment number one, diversified market exposure.

Uh compartment number two, conservative cash flowing real estate. So this could be single family real estate, it could be uh commercial real estate of different types. But in the diversified market exposure, unless a family made their money in the stock market or trading commodities or conducting due diligence on hedge funds, they're typically outsourcing that and they're finding a multif family office, a trust company, etc. Who's going to be executing on that one of the three compartments of their of their portfolio overall.

The second compartment of cash flowing real estate, families typically allow some of that to be done within compartment number one. They'll get exposure through some reads, maybe some real estate fund managers. But compartment number two is really about the direct investment cash flowing real estate. Almost all families that are at the 15, 20 million, 30 million plus uh are really going and buying some apartment buildings or self- storage.

Many want to do that and like to do that because they've been in control of their destiny and creating their wealth. So, it's completely backwards for them to say, "Okay, well, I spent 22 years building my manufacturing company or 19 years building my consumer products company. I sold it. Now, I'm just going to trust all my wealth to this one wealth adviser.

Hope they do a good job and I'm just going to sit back and retire." That's not their their nature. It's not what they typically like to do in my experience. So, they essentially would like to be picking out a property and just hiring a property manager to manage it. They didn't make their their money in property management.

Probably shouldn't be doing that or wouldn't be doing that themselves, but they might find an independent sponsor. It's called when you find someone who maybe does three deals a year, they might do 10 deals a year in just self storage or just apartment buildings in Indiana or they just buy office parks in the Midwest at a certain level to a certain level. And they're called an independent sponsor because they essentially are going out in the market and showing you things deal by deal. You might say what?

Yes to one of their 10 deals a year. You might say yes to two of their four deals a year or no to all of them in two years. You say yes to one out of the four. Uh the point is you don't have to invest in what's called a blind pool and say, "Hey, I only invest a million dollars in your fund.

I hope you invest in exactly what you promised me. I hope you're able to find good investments." Instead, as an independent sponsor, you get a little bit more control, transparency, and discretion and saying yes, no, yes, no to different deals that come to you. A lot of private investors don't even know the word independent sponsor. They never heard of that.

They don't know what it means. But worse yet is those who do know what it means. They've connected one through their golf club, two through referrals, one at some conference they went to, and they think, "Okay, I've got pretty good deal flow. I have some allocations going." That's even worse than not knowing what it is. Because in compartment one, you have someone who's best in class, hopefully managing your wealth.

But in compartment two, if you're trying to take more control of your real estate investments, then need to be doing a good professional job at it or in a thorough job at it. And if you only talk to seven independent sponsors or 20, what are the chances that they're going to be excellent, best-in-class, really great independent sponsors for you? Not great. So what you need to do is really focus on one or two areas typically at least to start with and meet with 10, 20, 50 or find someone who does that all of the time and basically say okay well after talking to 30 different self- storage independent sponsors I think these two are excellent and I'll still pick things deal by deal but you're picking the top two out of 30 not the top three out of five that you met with.

It's a big problem for private investors. They lose a lot of capital through rushing through this process and how inefficient the market is. So, we talked about compartment one, diversified wealth management. Compartment two, real estate. Compartment number three is identifying one or two industry niche areas that are hopefully related to where you created your wealth or where you're going to put a stake in the ground going forward.

Maybe you sold your chain of auto dealerships and you think that game is is half over because publicly traded companies are all over it and beating down the uh the opportunities to make money there. If that is your situation, you might say, "Okay, well, let's put a stake in the ground and only invest in stem cell companies going forward or we believe in the cannabis trend or we believe in a certain fintech uh trend. Let's let's go there and build expertise there." And in this third compartment, it's really where third parties might see it as the riskiest uh part of your portfolio.

It could or could not be the smallest part uh based on your family's needs. But the point is that by having maximum control and running the assets or owning 100% or having a majority control or being at least on the board with some rights in the company or maybe haveative rights etc. Uh then in this area can really use your passion, your experience as an entrepreneur, add strategic value day-to-day, get deals exclusively, get deals first, get them at a better valuation and help derisk the operations of that deal because that is an area that you know very well. You can open doors, get them distribution, combine it with other assets in your portfolio, take a platform strategy approach, acquire choke points that'll help drive the business forward or all of your businesses forward.

Those of you who uh watch Shark Tank, for example, Mr. Wonderful talks about buying companies be part of his wedding or birthday celebration portfolio so we can push things like uh daisy cakes etc to people who are having a wedding or a flower company or a pop-up card company etc. Uh that's kind of a platform strategy and that is within this third compartment. So to summarize here on this point number six diversified wealth management cash flowing real estate and then one or two niche business areas you're going to really dial into and have maximum control.

It's important to step back and realize in the first box typically unless you made your wealth in the stock market, it is minimum day-to-day control, minimum insight and management of it. And this box two, your trust in a third party, but you're picking things deal by deal. It's a moderate approach to control. And then the third area is maximum control, maximum transparency, maximum strategic value ad.

Uh on number seven, the number seven insight here is really showing a matrix table for those of you not watching. It simply has the name of the three compartments at the top. Diversified wealth management, cash flowing real estate, operating businesses. And then it has different areas that you can identify or you can have for control within each of those three areas.

So there's six layers of control within each of the three compartments. You can decide on strategy for each of these three compartments or outsource that. Have someone else decide on strategy after they get to know you very well. You can decide on how to source the deal and do the sourcing yourself or not. You can do the screening of the deals and figure out what the filters are going to be for what becomes into formal due diligence.

You can conduct the due diligence yourself. Most families don't enjoy that. They don't excel at that unless it's in the niche where they created their wealth in compartment number three. Uh or you could uh actually do the negotiation of the deal and the close the contract, negotiate the terms, the structure, the fee, and that's their really, as Dan Sullivan would say, unique ability.

And then the last part is the management of the deal and eventual exit of it and the day-to-day operational management of it. So, if you think about these six layers of control, you know, which one is right for you, which layers are right for you in these three compartments. So, you have 18 different decisions to make. Many entrepreneurs say, "Well, I want my own family office because I have to be in complete control, you know, and that makes pretty much no sense.

There's uh even if you're worth over a billion dollars or yesterday I was on the phone with an $800 million family that that called in say they were listening to our family office podcast. It still doesn't make sense to be in control of everything. You don't have those capabilities internally. You're not excellent in all these 18 areas.

The most I've ever seen is maybe 12 or 13 of the Excellent. Just so you know, you can get this trip millionaires.com. It's sent out with an I sent millillionaires.com. Go to insight at the top and you can get this book uh called sent to millionaire migraines and you can get this table within the book so you can follow along with this visually.

We also talk about the three compartments. It's a real short 1-hour read type book. Um you can print that out and read it if you'd like. All right, insight um number eight uh is related to uh those compartments. I just wanted to show a different uh version of it here uh from our website uh that's diagrammed uh for those following along visually.

Uh the next insight here is structuring of your investments. So many families miss this especially in the first year or two that they are really allocating directly to assets or investment in real estate or private equity uh companies etc. And it is pushing back in the right areas and structuring things so that everybody is aligned. I find that many families it's not about being cheap and paying no fees or paying very little fees.

It's really about whether someone is comfortable in the alignment. Is someone getting paid handsomely while the family could be losing money? Are they getting paid a moderate amount while the family hasn't gotten any return yet? Or is someone getting paid handsomely when the investment goes very very well? Almost everyone is open to that. So you need to make sure things are structured that way.

And if it's not, just push back. If you like everything but that or everything but that and one other thing, then I would just push back. Someone might come to you with a fund and you say, "No, we do direct investments. If you'll take our capital as an independent sponsor that's really performance-based, then we'll invest with you.

If not, it's not a fit. You might know that because of your family office dashboard, uh the strikes zone you've identified, etc. So, one trend I wanted to talk about that I mentioned while planning this webinar and maybe promoting it to you that it was going on is the co-GP structure. So, in independent sponsor investments, uh there's oftentimes a GP, the general partner who's running the deal.

Then there's LPS. There might be 40 LPS, 300 LPS or just one, but they are limited partners in that they're putting their capital into the deal, but they're not running it. Usually their losses are capped at what they invested as a li limited partner. And what happens is that many times these families, the LPs could add strategic value to the GP.

They could help raise the capital. Maybe they help source the deal. Maybe they could help identify the commercial real estate financing. Um they could maybe add some other strategic value like credibility, etc. And maybe it's such a big win for the company who's raising capital, the independent sponsor to get them in. They might offer or be open to a COGP structure, meaning that maybe you pay a more uh high quality waterfall.

Maybe you get paid or maybe you're paying a lower management fee or only a performance fee because you're co-gp. Maybe you pay no fees because you're adding credibility each of their deals that you like enough. Um, it also could be that you are earning money uh and you're a true equal cogp because you're adding so much strategic value. I think a lot of private investors underestimate the amount of leverage they have in the relationship to negotiate fees, negotiate structure, especially if you're a credible family office that over time can bring a lot of capital to a firm.

There's really a lot of opportunities to joint venture seed capital uh systematic kind of anchor capital. And I think that a lot of families are are missing that. And uh we just had our uh LinkedIn uh live feed go dark on us and I restart that while I'm speaking. So I apologize for that. Um and then I want to just move on to the next slide while I'm messing around with that to get it live.

So first of all on this slide uh insight number 10 is performance only fees. So, I mentioned this a couple minutes ago in talking about structures, but I think a lot of the industry is moving towards it. So, if somebody really believes in what they're offering, they really believe that the results are there and they're well established enough to not have to charge you an acquisition fee, a management fee, and a whole assortment of other fees, then it might make a lot of sense to structure things as a performance-son fee. By doing this, the manager is basically wearing on their sleeve and saying, "We believe in what we're offering.

Uh we believe it is superior. We believe it's excellent and we're confident it's going to get you returns. So, we're only going to charge you a fee when you get returns. We're not going to charge you a fee when we lose your money or we haven't made you money yet because we haven't added value yet. All we've done is tied up your money.

It's an opportunity cost and then we might even actually lose you money. So, what fee do we deserve for tying up your money for you? So, I think that is an important point and it's a trend that people want more performanceheavy, less management fee heavy. But I want to bring up the one thing that most people often say, which is, "Oh, well, doesn't that create a big conflict?"

Because now they could just goose up the risk, or now they could spike the returns one year, you lose money the next year. Uh, or now it's a a one-sided equation of them wanting to just maximize the profits on this one deal. And I think there's many ways to address that. I mean, one is making sure that you're working with a team that has a long track record, is credible, you did full due diligence on them.

So, you don't think that they would act in that way just as their nature and serving all their under LPs. Usually, you're not their only investor, for example. Uh, the second thing is that you could put it in a structure where the money is paid out, the performance fee over time and it's dripped out over 4, 8, 12 quarters and it's an escrow being dripped out in case there's any loss the next year or two years later. This could be done with a hedge fund, could be done with an independent sponsor where you have multiple deals.

Uh it could be done with distressed assets of different types you might be investing in. And the point here is that you can balance out that long-term approach by making it so the performance fee is paid out over time in escrow. So over eight quarters, every fee that's due on a quarterly or annual basis is being paid out over time. And that's a way to manage some of the risk at Centmillionaire Advisors LLC uh at centmillionaires.com.

That's how we approach things. We just do a performance fee only with probably 80 90% of our clients. So if someone needs a lot of heavy lifting, state planning oversight, trust planning oversight, etc. And full wealth management solutions, then we'll find an appropriate private bank, trust or multif family office and partner with them to provide the full solution.

So of course parts of that is not going to be performance only. But that's essentially uh our mindset in doing performance fees at Cent Millionaire Advisors. This next slide here is uh point number 11, insight number 11, and that is to double your quality deal flow. So, if you're not following along visually through the Zoom webinar software, there's just a sort of vin diagram that has many different circles that overlap in the middle, which is your strike zone.

And the point of showing that is that you really have to find a crossover of geography, industry, the size of the deal, the multiple you're willing to pay pay, the credibility of the deal, whether you need control or you're okay being a minority investor, quality and size of the team, etc. If you don't know that, you're completely lost in what you should invest in and you're going to waste a ton of time. You're going to waste your team's time. Doesn't make sense to hire anyone or spend money on going to get deal flow and doing due diligence on things till you know you're a strike zone.

And this is like somebody graduating from a university or their MBA and they say, "Well, I want, you know, any job in business or I'll take any job in marketing or any job in finance. You know, I don't care. I like them all. I'd like anything." Well, the truth is you you won't like anything. You just don't know what you want yet because you haven't either thought about it intentionally enough or you haven't uh been out and gotten the experience yet.

So a lot of private investors find over time, okay, it's not helpful to tell the world we'll invest in anything. We don't want mobile apps out of New Zealand. We don't want to invest in cannabis in Guam, etc. Uh which are extreme examples, but people say, "Oh, I'll invest in anything in real estate." Well, will you invest in London?

Oh, no. Well, not London. We don't like, you know, we don't understand Europe. We don't know what's happening with Brexit, etc. So, the more clear you are, the more your team will not waste your time. More you can say, "Nope, it doesn't fit our strike zone."

More you can spend time in places where you're going to get qualified deal flow and the more you can double if not 10 times your qualified deal flow which we'll get to how in a minute. Um if following along visually I have many other criteria in here you could consider while figuring out your strike zone and you can see that again in the free book at centmillionaires.com. And then also I just want to mention that families are looking for anomalies. You should be looking for an anomaly if you're a private investor.

If you're seeing 30 deals a year or only 30 deals even a quarter, you're not finding anomalies. You're finding random deals that are coming towards you, but you're not getting a stat statistically significant number enough to really identify what's two standard deviations away from an average firm who is way more credible, far more experienced, much more focused, and has a very unique strategy compared to the masses. Within our uh cending.com division, we've identified 486 multifamily independent sponsors in the United States. And I can tell you most of them sound the same.

Most of them charge the same fees, have a similar strategy, etc. So, when someone has a strength in an area uh that's unique from the hundreds that we've spoken to, uh then that really stands out to us because we're identifying an anomaly and that's what families want. But you want an anomaly that fits your little strike zone and that's how you double your quality deal flow. And a lot of investors don't do that.

Doesn't matter if they're worth 200 million or 400 million or much more or worth 10 million. Almost no one comes out of a liquidity event and within the first three months has a great strike zone identified and then not only is looking for things based on that but proactively seeks out those deals. It's a huge mistake and cost families millions of dollars, lots of wasted time. Uh it's just something to really meditate on and be intentional upfront and potentially get help with.

All right, so I think that this picture of Dan Kennedy uh if you can see it visually uh it shows a quote from him that says the most dangerous number is one. So, if you have one source of deal flow, if you have one strategy, if you have one person running your whole portfolio, uh, and they don't have capabilities on direct investments or they don't understand you very well, or they're old school and you tell them what you want and they say, "No, no, no, we do it this way. Trust us." But, you know, in your gut that's not how you operate, it's not how the world works and it's not what you want.

Uh, then you have to fix that and come up with a more complex strategy that's going to help you get more effective returns. So I believe in really having holistic quality deal origination and deal flow which means that you need to look at how to get involved in the right communities. You need to get involved with how to position your family office to get the right type of deal flow. You don't have to use your family's name that's actually a bad choice unless your family is very famous already and well known.

Uh you should use something functional that's going to attract companies or real estate opportunities that meet your strike zone. So you are getting qualified opportunities not just random people asking you for checks for random deals. So communities positioning uh proactively reaching out to companies uh and opportunities you want to be part of acquiring choke points in your industry and then operating within your space. Many families have found that it can be very smart to build a platform strategy within a specific industry to operate a business within that industry that will give them superior information, research, knowledge, deal flow, connections, talent to hire partners, co-investors, etc.

An example would be an oil and gas uh investment firm that also manages oil and gas pipelines and does the maintenance for them. Another example is a family that spoke at our New York event. They're billion dollar plus firm and they not only buy office parks in New York, they also help maintain them, clean them, broker them, etc. So that's an example of vertical integration and operating within the business.

Just like with our business, we have sent a millionaire advisors. We also run the family office club and have 6,500 people flowing through our 25 conferences per year. Uh so I'm really a believer in this and everything we're sharing on these slides is something I do personally. It's not just a random idea or this really smart guy said it.

These are things that after 12 years and having a thousand investors speak on stage at our 118 conferences to date, I know are true or I know are effective and could be valuable for some of you listening if it's appropriate for your unique situation. So, insight number 11, multi-pronged investment opportunity sourcing. So, it's not just trying to get deal flow within your strike zone, it's getting multiple strategies within deal origination specifically. So, make sure you're fishing in the right area.

Make sure you set up fishing nets to catch deals that are coming down the pike. That could be great for you. So, people are automatically helping you find those deals to hire fishermen that can go out find you deals. You pay them for finding you a deal. Figure out where there's barrels of fish. Where are prospects that you want to invest in?

It could be in stem cells, could be self storage, could be biotech or consumer products. Where are their barrels of fish congregating? And few other investors in the room. I can tell you if you go and speak there as an investor and you architect the brand of your single family office or as a private investor, speak at the right events, find where they're congregating and position yourself, it'll be like a grizzly bear in a waterfall and the deals will be jumping towards you that are highly qualified.

If you don't have a strike zone, you don't have a dashboard, you don't have family values, then you're lost in the wilderness like one client uh potential client I was just meeting with and he's been investing all over the place. He says it's like driving through fog and he can't find deals specific to where he created as well because he hasn't thought about or implemented any of these ideas. So, one of my favorite ideas on sourcing deal flow for private investors that we do often is figuring out their exact strike zone and why after we've gotten to know the family really well. Then we figure out, okay, well, what do those companies look like?

What industry are they in? Where do we find them? Where do we get a database list of them, etc. And we designed a process through which we'll start with in one case we did uh 375 companies emailed them got on the phone with 70 uh me personally after speaking with 70 identified eight that were investable uh we ended up getting two investments done uh one was from those eight one directly after because of the knowledge gained from talking to 300 plus uh consumer product companies and then now we're negotiating uh investment number three with a company that's on track to do about 15 million in revenue this year.

They did 10 million last year and we've sourced that through what we gained by going through this process. So the point is uh using all these things has so many benefits and saving you time, decreasing chaos, less stress, less cost, you know, and you're actually knowledgeable about what you're saying yes to and only managing the part that manages your unique capabilities uh or unique ability is really critical. And I think you see that common theme here through many of the slides. Insight number 12 is to use royalties and debt.

A lot of people approach private investing and they just invest as an LP and LP and LLP and that's 95% of their portfolio. Some get into hard money lending or lending to real estate uh you know fix and flip type groups uh or private businesses, but few do. Some that do love it so much that turns into 80% of their portfolio. But few do, I found.

And what almost no one does, I've brought this up at five of our conferences and I've met one family who's done this over five of our conferences and essentially it is structuring a gross revenue royalty when you invest in operating businesses. I really think this is going to be part of the future of the family office industry. There's no reason not to be doing this if you're investing in either venture angel or kind of family office very lower middle market type deals. Meaning companies that are doing positive revenue hopefully positive profits.

A lot of my clients look to buy companies that are doing you know the very low end 200,000 half a million a year in profits to one to three million uh or one to five million in profits per year. Another way to say it is companies doing at least a million a year in revenue. Oftentimes five 10 million a year in revenue or much more. So my largest clients, they start at five or 10 million in profits per year.

But the the masses of family offices out there and private investors are really going a bit lower than that hoping to sell to that next stage out the small private equity funds etc. And the point of bringing that up is that many of these companies do not have other options. No one's ever offered to invest in their company. No one's ever offered to buy their whole company.

And one risk is that a company's growing quickly, so they're going to reinvest the money that you would put into there. And you might not get dividend checks for three to five years. The dividend checks might be small. It might be unpredictable. You might not have control of the company. If you don't, you might not be able to fire the CEO.

You might not be able to change the cost. Might not be able to change the P&L. Or if it was your own company, you could say, "Okay, our goal is to get seven figures profits out of this holding because we started at 1.3 million profits. We at least need seven figures." Well, a CEO might have other goals.

He might want to go public and grow to 100 million a year in revenue. You might not be aligned. So, by having a gross revenue royalty, what you're doing is saying, "When I invest for a 5% equity stake in your operating business, and you have a 20% profit margin on average, okay, well then for my my 5% equity stake, uh let's say you're doing a hundred uh hundred million a year in revenue, just make the number easy, even though that's uh that's a bit too big. We'll use more realistic example.

Let's say you're doing five million in revenue, right? And you buy 5% of that company, many times you'll say, "Okay, we'll acquire that 5% and we're just going to assume a 20% profit margin." Uh so when you're going through the revenue numbers at 5 million and let's say five uh 20% profits, it should be a million a year in profits, right? Well, the million doesn't go all to you.

You only own five%. Uh so it shouldn't be a million. It'd be $50,000 in dividend checks that you would expect uh from that five million in revenue. So, what you then do is take that $50,000 amount of profit and you find that ratio with the amount of revenue versus the amount of profit that should be coming back into your pocket as a dividend.

And you either take that amount or a 20% less amount. There might be veritability and profitability and then it won't come off as too aggressive to the company owner perhaps. And you say, I want to get 1.5 times or 1.9 2.25 times my money back on my gross revenue royalty. Uh, and then my equity or equity warrants could go down from 5% to 4%.

So, I've got my money back off the table. Now I can go to another royalty investment two to four years later. I don't have to wait on dividends. I don't have to care if you get a Mercedes versus a Honda company car. I don't have to see if you're expensing your lunches through the business and choosing to go to the conference in the Caribbean because it's fun.

I don't have to be in your business on your on what your costs are. I can just stay at the high level with you and I know I should be getting this amount. If your profitability goes up or down, that's your responsibility. And I've done two deals like that. I'm negotiating my third now. And I think it's part of the future of the space.

The last thing I'd mention here is that having a equity warrant can be really helpful versus equity for multiple reasons. Equity warrant can keep you a little bit more at arms length. You're not tech technically an equity holder in case you're afraid of some type of liability. Uh also, and obviously you have to talk to an attorney about that because I I'm not one.

Uh, the other benefit that I've perceived though is that if you get a 5% equity warrant, depending on how that's written, that could be good at a 5% for whatever time period you set, it could be indefinite, could be for five years or seven years, but then when you activate that warrant, you're getting the 5% at that pre-calculated uh amount. And if you structure it as such where you can't get diluted, it doesn't matter if they go to the market potentially and raise capital a few more times. If you structured it right, you could still get the 5% for that price. Whereas if you had bought equity, you might have to invest two, three more times just to maintain your 5% equity stake because they're doing more rounds.

Now you're going to private equity or venture capital or big family office to raise more capital. So I think that's a pretty critical point too. Uh considering using equity warrants and use gross revenue royalties. Happy to talk to anyone about that. I see we have a few questions coming in by the way and I just have four more strategies to go through and I am going to try to answer just a couple questions before we end the webinar for today.

Uh number 13 here is going through our free quiz our free assessment. If you have a family office evolved or if you've started a family office you're going through that you want a quick five minute assessment on where you are and what you need to focus on next. You probably have some ideas just from this webinar, but you can go to singlefamilyoffices.comquiz. You can also get a link to this through centmillionaires.com under the insights tab if you fill out that form.

And the assessment will analyze uh eight different areas your family office and give you a score and tell you what you could focus on next to develop them further. All right. Uh strategy number 14 is to develop your operations and your systems. I can count on one hand how many family offices have their standard operating procedures, their checklist for their operations actually written down.

Usually it's only their due diligence process if anything is written down. But their onboarding of employees, how they manage uh the brand of their company, how they keep materials up to date, how they update their family office dashboard, how they hire, how they fire, uh how they give company reviews, how they follow up with investments have already made, what they require doing due diligence with great specificity. Uh all these things and many other things should be documented. You should have 20 to 30, if not more, standard operating procedures that are really well documented out and detailed.

Otherwise, all the knowledge is in your head or someone else's head. And that's not a good way to operate. Should you get sick, if god forbid, something happened to you or your CEO, it makes it so there's little uh, you know, control battles between people that say, they might not ever say it explicitly, but they might be like, well, I know how things work here, so if you're not going to give me that raise, you're not going to allow me to work from home one day a week, maybe I'll just leave. And it gives them some unbalanced power in your organization.

And if you're a CEO or entrepreneur, you know, you need to have these standard operating procedures. It's probably how you grew your company and created your wealth on some level. And whether or not this is a strength of strength of yours or not, you need to have it in place. There's no reason not to. So, we use a software program to do this, help document things.

We do it for the family office club and millionaire advisors. Uh, and we help with that with our our clients as well. Point number 15 is to focus your energy on choke points. So, if any of you have seen the movie 300 and there is a large army uh battling against just a small army of 300 and they have to go through this choke point of a canyon and only one or two bodies can fit through the canyon at a time.

The 300 people just focus on that choke point and if they control that they could hold the beach that they were defending. If you're following along visually, there's a geographical picture here of the Middle East that shows the Red Sea and then it shows uh point where unless he found inflation through owning for example pitchex.com we've done this uh on the family office side by having the number one most visited website the number one most downloaded podcast and you get more opportunities more connections more deal flow etc so you could own a choke point in a certain type of real estate deal flow you want you could have a strategic position or piece of intellectual property uh that would help you as a family office meet other families like you or get great deal flow. Uh we don't have time to go into this in great detail. I'm happy to explain if you want to follow up after thisar or put your question into the function focus is on the drink industry and you're able to put companies in your portfolio in the front row of that expo.

Uh maybe you're also able to look at all the exhibitors and request 10 of them to give you the contact details for 10 of them so you can meet with them before the expo even starts. Uh, and then when you invest in a drink company, you can say, "Hey, take our capital because we're going to get you distribution because you're going to be in the front row at the expo." And you're not paying 240,000 or 75,000 for that booth. Uh, you're paying nothing.

That's part of the benefit of working with someone who knows the drink industry and can get you distribution else. Those are the type of deals that uh Oprah has done, that Warren Buffett has done, that smart family offices do. It's not just having a TV personality or famous newspaper, radio channel, uh, level of being famous. It's about people knowing you within your space and having strategic choke point assets.

So, you get better deal flow and better results because you're buying at a lower valuation and you have a plan to spike up the revenue. So, you're winning on both sides versus just an investor investing all over the place and stuff they don't know without being strategic about it. All right, point number 16 here out of 17 is actually my favorite out of all of them because I just believe it is so true and is genuinely helpful to private investors listening here. And that is that you need to be playing a unique game.

If you're playing a game that a someone has advised you to play, you really have to think, well, is that the game that's most profitable for them for me to be playing? And it's a frustration for people to try to find someone who really knows a lot about life insurance. Usually in the next sentence after explaining that they're selling them a huge policy and their advice is buy this huge policy of life insurance. So that could be a real challenge.

You have to make sure you're playing your own unique game, but it's not in most people's best interest to tell you that. They want you to play their game and play things their way by their rules. And so when you look at how your wealth is created, what your strengths are, where you're passionate, where you want to go in the future, how involved you want to be, which of the 18 levels of control you want to employ, what are your family values, etc. You need to find a game that makes sense through all of those lenses and figure out, are you building a platform company?

Are you trying to just mostly sit back and enjoy life after building your company? Uh, or you want to be actively involved and you want to own this little space within the stem cell niche or within self- storage or within apartment buildings or a a private equity operating business area or a technology area where there's a lot of wealth being created. And then you define your own rules to that game. Who are the players in that game?

Who will I partner with? What are the rules? What is what is the timeline as a private investor or family office? You can be more agile than anyone else in the investment marketplace and then be more patient if you need to or want to with some assets or some opportunities. If you're playing a 20 year, 30-year game and you don't care if you get an ROI off one little part of what you're doing for 20, 30 years because it's a choke point and it makes you smarter, makes you be able to move faster, get better talent, deal flow, connections, etc., you can afford to pay for things others can't because you're taking a longer view and you have more time for it to pay off for you and your children to come.

And I think that can really give you a marked advantage. Others have to sell an asset after seven or 10 years. Others have to do what all their LPs are telling them to do. Others are just following their wealth advisor and saying, "Okay, okay, put me in that, put me in that." And randomly investing in things without having a ton of focus and really a very unique game they're playing.

And the more that you can develop a unique game with the success you already have, the more that you'll identify, I think that only one or two other people in your whole industry nationally or even globally are playing your unique game. I can tell you uh with pretty good confidence that I don't see anyone else in the marketplace who has a family office platform is serving ultra wealthy families and helping develop SFOs, single family offices, direct investment programs through a sentiment advisor component, but then also being helpful to the investor relations professional so we have more deal flow every year. The fact that we own capitalraising.com, pitchex.com, CRA lending.com, etc. That helps us get excellent deal flow which our private investors really like and appreciate and the conferences constantly refresh the best practices, structures and fees etc.

So I hope you can come and check some of those out but that's a unique game that we're playing based on my background and strengths and it's just really fun and enjoyable to help families figure this out because many of them have never thought about it that way and are not intentional enough with what they're spending time and money on every day. So the last insight here, so we don't have much time left, uh is number 17 and it is to make sure before you take advice from anyone, before you hire anyone, before you spend any money, um before you make allocations that you're asking yourself or someone's asking you the top 50 questions that you have to be asked really before taking actions. These are all things that if someone only asks you five or 10 questions or they try to sell you something before they know you at all, then they're selling something. And they're not prescribing anything.

You listen to doctors because they're listening to you, testing you, examining you, and then they prescribe some purple pill that you take without even looking up what the chemical is, you know, hoping it's not going to kill you and it's actually going to help you, right? Because it's a prescription. So, if someone's not prescribing something and they're just selling you something and pushing it, then it's probably not going to be good for you. The chances that it's excellent for you are pretty low.

So, asking yourself these 50 questions is critical. You can get this for free again at centmillionaires.com. And I would just recommend that you're the point of this insight is that you're very thorough on someone getting to know you and you get to know the other counterparties very well in terms of how custom and curated of an approach they can really create for you versus be showing to everyone else in the world. So, as I mentioned earlier, uh we've written a book on sent to millionaires uh given out the website uh several times and uh I want to just emphasize that our whole business model is to give away help uh and resources uh more so than we're taking or asking for anything.

You'll see that if you come to our live events. Hopefully, you've seen some of that on the uh webinar here today. And many of you might have read our book on how to start a family office or single family offices. You'll get all that by going to centmillionaires.com. And I want to uh end here just talking about family offices.com the events there as you come check one out and taking some questions from the audience now.

So let me uh go to the chat function here and we will see uh who is uh asking some questions. So will you have the presentation at the end of the webinar? Yes, I uh am recording this and what I'm going to do is send out a thank you email and a recording of it in case you only got to listen to part of it. Uh so you can follow along, share it with someone else on your family, refer back to a part.

I went very fast. Each of these 17 things we could talk about for an hour. Uh it might take hours of your time to think through it and digest it and we have to blow through them really quick because we don't have 17 hours to uh cover the content. No, nobody really has that time. Uh I got some other questions here related to impact investing in ESG.

Um I don't want to go into on this webinar uh anything related to how to approach families for this, how to raise capital for that. Uh the intent of this webinar is to add as much value as possible to private investors. I would like to end in saying though that if you have questions from this, if something made absolutely no sense with your experience and you want to figure out how to interpret it, if you uh missed part of it, uh please wait for the recording. But if you have questions or concerns or confused, uh please just reply uh to the email that you got inviting you to the webinar uh and you can send over your questions to us.

We'll get try to get back to you in just one or two business days. And then also um hopefully I'll be seeing you live and shaking your hand in person at an event here soon. So thanks for your attention. Thanks for watching live if you're with us here on LinkedIn or Facebook. And uh hopefully we'll have a chance to actually connect face to face uh instead of just digitally here.

Take care.