Seven Finance Terms You Need To Know To Get Rich

Join me as I reveal the seven essential finance terms you need to know to succeed in business. From "free cashflow" to "leveraged buyouts," I break down the most vital concepts that will level up your financial life. Plus, stick around for an inspiring story of how Cody (not this Codie, a different Cody) transformed from an employee to a business owner in just 90 days, leveraging the financial strategies I share. Reserve your spot and join the owner revolution → ⁠http://contrarianthinking.biz/3Hon5uW⁠ 00:00 Introduction 00:02 The Importance of Financial Literacy 00:28 Seven Key Acquisition Terms 00:36 Understanding Free Cash Flow (FCF) 01:29 Working Capital Explained 02:14 EBITDA and Business Valuation 03:19 Leveraged Buyouts (LBO) 03:43 Seller Financing 05:16 Cody's Success Story 08:41 Conclusion MORE FROM BIGDEAL: 🎥 ⁠Youtube⁠ 📸 ⁠Instagram⁠ 📽️ ⁠TikTok⁠ MORE FROM CODIE SANCHEZ: 🎥 ⁠Youtube⁠ 📸 ⁠Instagram⁠ 📽️ ⁠TikTok⁠ OTHER THINGS WE DO: 🌐 ⁠Our community⁠ 📰 ⁠Free newsletter⁠ 📚 ⁠Biz buying course⁠ 🏠 ⁠Resibrands⁠ 💰 ⁠CT Capital⁠ 🏦 ⁠Main St Hold Co Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Speaker 00

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• 0:30Codie Sanchez?

  You do not take enough risk for the amount of money you say you want. And small business acquisition is also the fastest, most overlooked way to build wealth in America. I want you to visualize yourself in this because this could be you. You could be Cody and not this Cody. He bought a business where he was with what he had, then he took it to grow it.

• 0:51Codie Sanchez?

  Hi, I'm Cody Sanchez and welcome to the Big Deal Podcast. You want to get rich? Build relationships with people in finance. They understand the game of money. I'll give you seven acquisition terms you should know to speak their language. But before we get into that, I want to share this quote with you. "Michael Jordan didn't wake up early because he loved mornings. He did it because mediocrity felt like a personal insult. He wasn't chasing balance, but meaning. Discipline is dragging your half-dead body to do what you hate. No one writes about the semi-committed." And with that, let's jump into these seven terms that will make you some money. And you got to stick with me, even if you hate the word finance. The first one, free cash flow, or FCF. If you're going to be obsessed with any number in your business, it should be this one.

• 1:33Codie Sanchez?

  It's the cash left over after you've paid all operating expenses and capital expenditures. Another way to say that is building improvements, vehicle purchases, anything you buy. So we're going to take your operating cash flow minus your capex. Net profit, AKA net income. It's the total earnings profit calculated after subtracting costs from revenue. Costs here equal costs of goods sold, so depreciation, interest, taxes, and all other expenses. This is the true profit, like this.

• 2:03Codie Sanchez?

  There are two types of businesses. A cash suck business and a cash flow business. Here's the difference between the two. Cash suck, you provide the service, then you get money. Cash flow, get the money, then you do the service. You only make money maybe one or two times a year. Cash flow business, lots of little checks continuously. Ideally subscriptions. So you have two big clients. If they leave, you're in trouble. Cash flow business, you have lots of clients, which diversifies your risk. You use RFPs and custom products so that every time you deliver a service, it looks different, a lot more work for you. Cash flow business, your service is productized, so you deliver the same thing again and again and again. This business that does $1 million in revenue and this business that does $1 million in revenue are not worth the same thing.

• 2:48Codie Sanchez?

  You want cash flow businesses, repeatable, predictable, de-risk businesses, not cash suck businesses. Working capital. See, this is the cash you use to fund daily operations. Current assets minus current liabilities. Current assets equal cash plus inventory plus money owed by customers. Current liabilities mean accounts payable plus wages payable plus money owed to suppliers. Accounts payable equal the things that you have to pay. Wages payable equal the money you have to pay your employees. And money owed to suppliers is for things you have outstanding, maybe like vendors. EBITDA, the gold standard for talking about true operating profit and deal making.

• 3:30Codie Sanchez?

  It stands for earnings before interest, taxes, depreciation, and amortization. It ignores non-cash expenses, financing, and tax deductions. It's used to calculate what a business is worth. Let's break it down like this. What are the three things you need in order to value a small business? First, profit and loss statement. How much money is coming in? How much money is going out? I care about net income. How much money you make that goes in your actual pocket? Two is tax returns. You want to match up What the owner says they make, AKA their P and L, with what they pay the taxman. Because guess what? They're probably not overpaying the IRS. So you know, at least that business makes what they said that they make. Third, understanding of the market. What do these things trade at?

• 4:13Codie Sanchez?

  Small businesses typically trade at anywhere from two to, let's say, 6X profits. So if your small business has 100K in profits, you should be buying it for 200 to 600K. With those three things, you're about 80% to where you need to be to know how to value broadly a small business. The devil in the detail is the 20%. Valuation. You'd use this to determine the sales price of a company. It's often calculated as a multiple from EBITDA or SDE, Seller Discretionary Earnings, or profit. Let's say the multiple for auto shops is three times EBITDA. The business has an EBITDA of $50,000. Then the valuation is 50,000 times three, that's the multiple, equals $150,000. Next is

• 4:57Speaker 02

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• 5:28Speaker 03

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• 5:53Codie Sanchez?

  LBO, AKA leveraged buyout. It means using money borrowed mostly from other people to buy a business or do a deal. Similar to how you pay 20% down and borrow 80% from the bank to buy a house. Private equity does this, but for businesses. Basically, same thing. The assets of the company are often used as collateral to secure the funds. Next, we got seller financing, where the seller accesses the bank in a deal. You pay them over time at a lower interest rate than a bank, using the profit from the business you buy from them. It's rare, but possible to get a business for $0 using this method. And small business acquisition is also the fastest, most overlooked way to build wealth in America, owning boring, profitable businesses that everyone else ignores. If you've followed me for a while, you know I give away about 90% of my playbook for

• 6:38Codie Sanchez?

  free 99. I make YouTube videos, I write books, I give talks around the country, I have a newsletter, I host this podcast, which you subscribe to, right? But there's a reason thousands of people in our community have gone from employee to owner. It's because they got access to the missing 10%. The step-by-step blueprint that uses all of these terms to actually get deals done. So for those of you interested in that last 10%, this September 19th through 21st, I'm hosting Main Street Millionaire Live. Three days, virtual, where my team and I are going to walk you through exactly how you find, buy, and scale the right business for you. We've put in over 10,000 hours testing this stuff. And after helping more than 9,000 people become owners, we're opening the vault. This is the closest thing you'll get to sitting next to me while we do deals together.

• 7:22Codie Sanchez?

  So as you listen to this episode, think about it as an appetizer. If you want the full meal, the actual blueprint to financial freedom through ownership, go to MSM.live, that's Main Street Millionaire.live, MSM Live, to reserve your spot today. If you click the link in the bio, you get 50 bucks off, that's 50% off the cost of coming to MSM Live. It's like less than a latte, which is ridiculous for you guys to learn how most people get rich in the world. Also, I want to end on this other thing. I just heard an acquisition story that basically made my heart melt. I want you to visualize yourself in this, because this could be you, you could be Cody. And not this Cody. This Cody was a six-year veteran, number two at a production company in California, runs the show While his boss lives in Utah.

• 8:03Codie Sanchez?

  Here's how he went from someone else's employee to becoming an owner of a business in 90 days. Cody landed on our content about ownership. He was 12 years building somebody else's empire. And he'd been leading operations at this production company. At the time Cody and his wife had been saving for a house. So it wasn't like they had tons of cash lying around. But after having a chat, they decided to use their house fund to buy a cash flowing business instead. Not an easy task, but this happened to be when I launched my three day business buying workshop last year. So he attended the whole event and he shared that those three days gave him the tools and the confidence he needed to get to work. And not my words, but his, that's how he bought the business. So as soon as the live event ended, Cody started hunting for deals.

• 8:45Codie Sanchez?

  He looked at laundromats, a couple of other business models, but none were prepared to offer seller financing what he needed. Props to him for not giving up and after tons of rejection and people telling him to pound sand. And it would be impossible to find this in Southern California. He eventually landed on pool roots. Now, pool roots isn't your typical business acquisition, but for contacts, you only purchase the client base, not the whole business, which is cool. So this caught his eye and he reached out to the owner. The listing description was like 40 pool root generating 70K annual seller asking 60K for it. 36K down, 24K seller financing, 0% interest. Guess what Cody's savings were? $36,000. So the seller was retiring and was looking for his next thing.

• 9:29Codie Sanchez?

  He wanted somebody who'd actually take care of the business, not just extract cash and run. Cody's military background plus genuine interest in learning the industry gave him this credibility. So in two weeks, the deal moved from handshake to close. Why so fast? Cody had a tiny window at his job where work was slow. So here's another smart move from Cody, not quitting his job. Don't go all in until your cash flow positive. So it took him. A few months to figure out how to start making money in the business and now he has a business that's profitable. Three months into the business, here's what he has accomplished. The root grew from 40 to almost 50 pools. Monthly revenue, 7K. Monthly payment, 2K.

• 10:10Codie Sanchez?

  Cody's take home, somewhere between 4 and 5K monthly profit while learning the business, which is really impressive. The best part is Cody's already thinking like an owner. Hired and training a pool tech, future operator, building systems so he can remove himself from operations. He wanted to hit 150K ARR by the end of the year. Not only that, he has plans to own the entire pool cleaning supply chain. So he's thinking, alright, I'm gonna buy some roots. Then I'm gonna buy pool supply stores. Then he's gonna add on new services like calcium removal or reverse osmosis machines. Those make a lot of extra income because they're bigger projects. Also makes his business more defensible. What I love about Cody's story is he had the guts to bet on himself and he didn't have to go huge and buy a giant business.

• 10:54Codie Sanchez?

  He bought a business where he was, with what he had, then he took it to grow it. I love this story because Cody did the thing that most of us just talk about. You wanna know a hard truth? You do not take enough risk for the amount of money you say you want. So, do the risky thing. And also, if you're not subscribed to this podcast, hit that fucking subscribe button.

• 11:15Speaker 02

  Progressive's Accident Response can contact emergency services if you're in a major accident. The only thing worse than someone you love being in an accident is not being able to help them. So Progressive is here to help when you can't. So get peace of mind knowing your loved ones are protected with Progressive's Accident Response. Learn more at progressive.com. Progressive Casualty Insurance Company and affiliates. Limited availability in California. Driver is responsible for emergency and towing charges not covered by the policy. Coverage subject to policy terms and conditions.