Whether or not you think of yourself as an investor, as the owner of a small plumbing company like you are, you're investing resources, you're investing attention and people. 

That's the reason that a lot of us got into owning a business in the first place. 

If you are bringing on an expense, what should the ROI be?

I have no idea. Well, I'm, I'm gonna give you a framework. I don't know if this is right or wrong. Is the expense you are going to bring in, will you get a three times return? 'cause if you don't, should 

you do it? You should be starting this on your. First dollar not on 

your millionth dollar. Right? Your company should always be in a somewhat saleable position.

It starts with the p and l.

Welcome back, welcome back to Own and Operated. Today we have operated. You are awesome host John Wilson. I feel like I haven't done one of those intros in a long time. Feels good? 

Yep. Welcome back. How's December? 

Dude, this year has been extremely good. We hit our best month ever. Yep. Followed by a decent month.

And now I think we're gonna break our best month ever with another best month ever. All within. Oh, nice. Three months. So 

our December, our December's good. November was really weak. Uh, we had, we've had like a week, I'm sure I've said this on here before, but we had a really weak. End of summer with HVAC. So September was week, October was amazing, November was week.

So yeah, the way we're thinking about it is, uh, like focusing on the, the tight, like tightening up process and then finding opportunity inside the departments that are growing. 'cause HVAC is not growing right now. Um, now we, we are sort of blessed, I guess, because HV C's like flat, but dude, there's companies around us.

It's kind of crazy. Um, I, I, I think I've said this on here, but like private equity went from being like the most expensive in market to like the cheapest Yep. In Cleveland anyways. And, uh, like there's a lot of companies that like fully laid off all salespeople. Um, I don't know. It feels like, it feels like just a lot of macro stuff hitting.

Mm-hmm. But it seems like you guys have been able to avoid it so far, so that's awesome. 

Yeah, we've been able to avoid a good portion of it, um, based on our size and just, it, it's a lot easier to grow when you're smaller, like the, the, you know, medium, medium changes make huge outcomes. 

And so Well, I'm seeing that a lot right now.

Yeah. Which is kind of funny. Like there's, you know, we're, we're in acquisition mode again and we're like, we're gonna close on one in a couple weeks, and then we have a few we're talking to, uh, like for Q1, basically, if the company's like under 10 million, they're growing. Yeah. And now granted, there's some, there's some big companies too that are growing.

And I'm not saying that they're not. Um, but like. I'm seeing companies in the one, two, $3 million range that are still like 50% year over year growth, which is freaking awesome. Yeah. And uh, whereas it just feels like a lot of the companies that are larger, like they've maximized those easy buttons and there's just less of them, there's less easy buttons to pull.

Mm-hmm. Um, and a like a bunch of these companies that are growing 50%, so when I'm asking them like, what are they doing to grow 50%, a lot of them, and this sort of drives me nuts, like in a good way. It's exciting. They're just like, yeah, we turned on LSAs. Like we found out LSAs existed and we just turned it on.

And I'm like, dude, that is amazing. To be able to have that easy of a lever to be able to pull where, like, I don't have those levers anymore. Um, a lot of our growth for next year is gonna be like maximizing current relationships, acquiring, uh, so like inorganic, um. And like that, that's where we see growth happening.

Yeah. Turning on LSA or turning on just any channel where they start to drive leads, they figured out this other channel can work and then they've started, you know, they hire one person and that can, that can change the entire makeup of a company or, or like 

literally pick up the phone. Uh, so I was talking to Juan the other day and he was like, yeah, so we actually just started picking up the phone on the weekends and we grew 30%.

And I'm like, yeah. Okay. 

Right. 

Yeah, it, it's, it's, yeah, it's kind of amazing. Yeah, it's kind of amazing. I mean, 

it makes sense 'cause like you, the bigger companies, they already run weekends. They already have all these easy buttons pressed, and so to actually grow that 20%. They have to really move the needle with some kind of big initiative or big cost savings or, you know, I mean, to me it's 

exciting.

It, it's exciting that, like as I think about multi-location or if I was, which will be multi-location in January, which is something we've been working towards for a while. Uh, but as I think about multi-location or if I was like an entrepreneur, like just starting off the fact that you can just like turn on.

One of the easiest lead sources to turn on. You just like literally hit a switch and it sends you leads and grow. 50% is kind of awesome. Like, it's like, okay. Uh, so like that's available or like you can find a, I don't know, AI call center to pick up phones on weekends or something, which is what this guy did.

Yeah. Um, and like, yeah, boom, 30% growth. Like that's insane. 

Yeah, I mean you add 52 weeks worth worth of two days and all you have to do is tell Yeah. One of your people to be on call and you actually have to run those and you sell one unit a weekend. Like yeah. It's not cra it's not rocket science, it's not crazy.

It's a few simple processes that are not a hundred percent dialed in and like that'll get you there. Um, yeah. And so we're still in that mode, which is, which is nice 'cause we can find things like that occasionally optimize. Um, yeah. Certain aspects of the business, optimize our marketing and get some pretty easy growth levers.

But where we've seen like the biggest change in the business on the whole is actually going into is, is is our plumbing side. So our plumbing side has seen, we've got a new leader in the plumbing team. Yep. And that change has grown the plumbing department over a hundred percent this year. Which is wild.

Yeah. Yeah. That is crazy. Plumbing's a machine when you do it. When you do it right, man. It's just crazy. 

Yeah, I'm sure like plumbing al, like there's all these auxiliary ones that, that are there that can really drive the business. Not to say that I think it's always a good idea 'cause it definitely is, uh mm-hmm.

Can be a distraction and it takes a long time to get it right. Um, I. But like, that's one of our biggest levers that, that this year has, uh, driven a ton of growth. It's no secret that my office here in Nashville is almost completely empty. So how do I support my team as well as have great growth metrics?

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Alright, today, uh, we're talking about investing what smart investing looks like as a home service entrepreneur.

So this one's kind of interesting. I feel like it's like open-ended. Mm-hmm. Uh, in that like, investing outside of the business, investing in the business. Um, I feel like we've got a lot of good stuff to cover here before we cover any of it. I have, I'm supposed to give the legal, this is not professional advice.

I'm not an investment advisor. This is strictly for entertainment purposes. 

Yes. I mean, you wanna start off with investing inside the business because I think that's where, I mean, my mind immediately goes a hundred 

percent. Well, I think like if, if investing, if investing. The goal behind investing is turning money into more money, right?

Mm-hmm. Like that's like, you know, it's as simple as that. And normally what most people have, like the fastest way to turn money into more money is just investing inside your own business. So like, obviously I think there's time and place to invest outside of it, which we'll talk about. But yeah, definitely starting off inside the business is like the easiest place to start.

Which is, is interesting because, I mean, that's the reason that a lot of us got into owning a business in the first place mm-hmm. Is that there's, you know, asymmetrical returns on investing in a business itself. Yeah. And then investing in your own business for growth purposes to generate ev uh, enterprise value is where and why a lot of us got into this in the first place.

Right. So, yeah. Um, I mean, it should make sense. 

I think so, uh, you know, this year we've been really focusing a lot more. Um, so we, you know, at the beginning of the year, our goal, I think I said it on here, but our goal was, uh, 5 million of EBITDA and a million distributed. Uh, we did not hit 5 million of ebitda, but we still four or ebitda, which is really, really cool.

Mm-hmm. Um, so we got, we got close, uh, we'll end up in the high threes and like for, you know. Uh, like in 2024 we did a million of ebitda. So like that's amazing. That was a huge improvement. And, um, as the years gone on, I've started to think way more about ROI, uh, like ROI for. Like the CapEx, like vans, if I'm gonna invest in a van, like, Hey, is this actually the right decision?

Like is this mm-hmm. Will this provide like greater revenue? Like I'm trying to be more thoughtful. 'cause I know in our heavy growth years we just weren't, like, we were not thoughtful in any way. And um, we were just sort of like pedal to the metal, like, whatever looks like it might grow us a little bit.

Like just do it. But what I've started to try to do is think about investing off our p and l in addition to our balance sheet. And that's like a new discipline I'm learning where, hey, like if you are bringing on an expense, what should the ROI be like, what do, what do you think it should be? From an 

expense standpoint?

Mm-hmm. 

We're, I have no idea. 

Well, I, I'm gonna give you a framework. I don't know if this is right or wrong, but it's how I'm thinking about 

it because I think that, like, this is, this is something that from an expense standpoint, we don't think about from a, obviously a marketing standpoint, something that we watch diligently.

Totally. Totally. And so it makes sense that you need to start looking at it. But we're also in that same pedal to the metal. 

Yeah. 

Uh, growth phase where we're like, Hey, if we need to grow yeah. 20% we're going to hire somebody and put a truck in place, like let's get it going. 

Mm-hmm. Yeah. And what we've been working on for really like 18 months is, uh, like I don't want a single unprofitable month.

Like we wanna be pro profitable no matter what. Mm-hmm. Um, so we've just really been continuing to push that. And I haven't had an unprofitable month in like almost two years now, and it's like really diving into that and. So what we've been doing is as we think about investments off of our p and l, uh, so p and l would be like people, uh, softwares marketing, like it's an expense in the business, versus the balance sheet is like tools, facilities.

Now facilities might also be like rent, so maybe that's on the p and l too. Uh, vans. Uh, but with p and l, what, what is kind of, uh, an interesting framework is. What, what is the multiple on your business? So, okay, if you're a business that would sell at a three times because of the size, so like mm-hmm. Maybe you're a, you know, two, 300,000, um, EBITDA business and like market is like three times ebitda, $900,000, right?

Is the expense you are going to bring in, will you get a three times return on that expense? Because if you don't. Should you do it? And, and that, that's like the framework that we've started to use where, hey, like this is, this expense is going to go onto my p and l, which is gonna reduce my ebitda. And how does that work into enterprise value?

So walk me through an example here. So if you were to undertake a new initiative to do packouts. Right. You guys do packouts. We've just started doing packouts. Mm-hmm. Um, walk me through then, from your framework, what that looks like. 

Well, that's mostly balance sheet. 

So you're gonna, you're gonna classify that as an, as an asset then, 

I mean, you're buying like furniture, which is the packout kits themselves, and then you're buying inventory.

So all of that's balance sheet, 

but it's under a thousand dollars for one packout. So you're going to put that on your balance sheet. Well, if you're 

bringing on like 20 Packouts. 

But for the, for, I, I'm trying to like, let's scale it down a little bit because that makes sense for you at your size, but for an operator who's at 5 million, who's going to start?

Well, how, how many packouts did you bring on? 

Two. Okay. We just ordered two more Packouts. 

Okay. You can make the rules whatever you want. The only thing you have to do is like, be consistent. 

Yeah. 

So if the rule is like at a thousand dollars, I capitalize a tool. Or a furniture, then you just have to be consistent with that.

Mm-hmm. 

Um, yeah, I mean, maybe twenties too, big number, number, maybe it's example five. You, I'm just trying to 

like drive a, a, uh, pertinent example of my life. Well, I 

think so software's a really easy one. Okay. Um, I honestly, something that's really easy is Price Book Pro. Like, I think that's a funny one because like, yeah, if you're signed up for it, it's like, okay, we're signed up for it.

So Pri Price book Pro. There's a company we're looking at and, and Pricebook Pro costs them $3,000 a month. $3,000 a month times 12 months is $36,000. Mm-hmm. Apply the multiple of whatever that size of a company is, three to 10 times. Is Pricebook Pro providing X amount of value? Is it providing if it's a three times.

Is it providing $90,000 of value? If it's a 10 times, is it providing $360,000 value? But like, is it providing that much value? Can you, if you went, if you got sick today with cancer and the business had to sell, would you be happy that you had Pricebook Pro, even though you had to take a, a dip on like value?

So that, that's, this is how I'm, that's a great example. I'm trying to think about it because I think like, we're not selling tomorrow, but eventually. You gotta do something or you just need to optimize the value of the business. Like the business is an asset. You have to figure out like what do you do with it eventually.

And responsible investing off the p and LI think is a really big part of that. 

Yeah. I mean, it's like what they say, you have to build the company like you are going to sell it, whether you are or you aren't. 

Yeah. To 

be fiscally responsible. So 

I remember when I was, when I bought the company, uh, I, my goal was at year five, I wanted to have the ability to sell it.

Mm. 

Now I'm going on year 10. So obviously we didn't, but I, I wanted to ha, I wanted to have actually built something of value. Mm-hmm. Because I see a lot of guys just get stuck where they don't actually build something of value and I just didn't want to be that guy. Uh, so I think this is a good example of like, your company should always be in a somewhat saleable position, and it starts, it's not just the vans and the balance sheet, but like, it starts with the p and l.

Like responsible investment off the p and l. 

Let's take a look at that. With that, that framework. How are you, how are you judging that? 'cause my mind goes to right investment in terms of sometimes in terms of ROI, but also sometimes in return of ROA, return on attention. So for example, a great, great example to me is hiring a A manager or a gm, right?

Yeah. Not great from a p and l perspective because it's going to hit below the line. It is. You know absolutely against your EBITDA numbers, but in a growth phase, right? You, you do need the help on the return of attention to be able to focus as the owner on other things. How do you view that, or do you view that exactly the same?

The same. I mean, it'd be if you hire a gm, like what should happen? So revenue should rise by x gross margin should rise by X because we're doing a better job. I think the math is complicated. Yeah. It's not as straightforward as like, oh, I bought this lead and I sold this dollar amount. Um, but I think that that's an investment and, and I think what I'm, what I'm not saying is don't ever do any expense.

Like obviously it takes investment to continue to grow. I think it's be thoughtful about the expense. So, hey, I'm gonna go bring on a gm. I hope this GM with his experience or her experience will add $3 million to our business and that $3 million is worth X. So I think be intentional. 'cause what I know that we weren't, so this isn't even me throwing rocks to anybody else but me.

I know that we weren't intentional. As we grew, we would just sort of like collect expenses and think we're doing this and think we're doing this and like a move fast break things, which like it totally makes sense until, hey, you're $30 million business and like you have to be profitable, which a lot of, I have a lot of friends and including myself, like we got up and do the twenties at break even.

Like just running, like break even companies, it's not hard to run, break even or loss and grow. It's much harder to run very profitable and grow. 

So where, where do you then it, it sounds like you're saying that you, you start this on your first dollar, not what, you should be starting this on your first dollar, not on your millionth dollar, right?

Like this is something that you can start really early on, focus on. I think people should be thoughtful 

about it. Yeah. And I think so, so this was a, I went to Pantheon this year. And I, I, I attended one singular session, so if anyone from Pantheons listening, it was too many pro products. I don't care. The, there was a couple value add sections.

This one was valuable. The rest of them, uh, were really awful. So the, I went to a CFO section, uh, or like talk, and it was the CFO's. I don't, I don't even remember which ones they were from, to be honest. But it was very helpful and they brought up this concept of investing off your p and l like OPEX investment and like they sort of spent a few minutes on that.

They didn't spend enough time. 'cause that was probably like the most valuable thing that I got, was I think all the time about. Investing into trucks, investing into tools, what that's gonna do for the business. Oh, let's go buy lining. Let's go buy X, and that's gonna turn into $2 million of revenue like that.

Math makes sense. I wasn't thinking hardly at all, except for marketing about ROI of our sg and a expenses like, alright, hey, does this software actually deliver what it's supposed to deliver? Whether it's cost savings. Or revenue, like is this an attributable cost to some gain? And if it's not, like what are we doing?

And I think that software, especially in 2025 with like a new AI product coming out every other second. Yeah. Like it's getting harder and harder to identify. What's actually a high ROI project versus a low RRI project. 

That's interesting. So how, how do you view that? Because I always try internally the, you know, as owners, you, you've said it the best, is like, I've thought about this problem for 10 years every single day.

And you know, I get stuck in those loops as well where you. You say something, I don't sleep for two days because I'm so busy thinking about it. And one of the big things when it comes to this specific topic is, and I think that your, your example right now touches perfectly on that is buying growth versus, versus buying throughput.

Right? It's like, okay, how do you, how do you spend that capital? And balance. 'cause there's a great bit of buying growth. Like you, you can buy the leads, you can hire the guy and just ram that growth through at yeah, very low. Um, at very low, uh, what am I looking Low? Low margin. Yeah. I mean, I know And low margin, most of my friends 

that are in the twenties or thirties, like they got there on like 40% gross profit, including us.

Uh, and then they're like, oh, we actually have to run a profitable business. You have to 

build the, the, the systems, the efficiency and the capacity on the backend. 

Yep. 

So, I mean, do you think that you would've still been where you are today though, if you focused on those things and not on slamming growth through?

I think, I think I would've been a little bit farther, uh, to be honest, because as I think about, um, as I think about some of the investments we've made over the years, like some of them just didn't work. And I bet if I would've, now this isn't, say don't experiment, like I'm all about experimenting, but I should have been faster to cut them when they didn't work.

Um, and I should have maybe even been more experimental. Or well, like what are my best alternatives? This is something that I'm trying to nail down too. Like, Hey, if I have to go do something, what's, what's the next best alternative? Yeah. And what's kind of funny is some of these like very expensive like solutions.

The next best alternative is just doing nothing at all. Like, 

yeah, but I was gonna ask that. So like, when you think about these things and, and trying and, and modifying stuff, like how do you view diversity of, of these, I mean, we're on talking about investing, right? Yeah. So how do you view on this diversity of ideas back to like the ROA is are when you're running these projects?

Do you, are you running like six of them? Three of them? Like how do you view the diversity aspect of mm-hmm. How many things I'm going to experiment on versus again, building throughput of like Yeah. Systems, processes and not worrying about like hypergrowth, 

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Yeah. 

Now I think there's like, you know, it probably depends on the bandwidth of your leadership team, but you know, we have seven people on our senior leadership team and.

Even it on one hand you could say like, oh, we could take seven high scope projects, but like, not really. Like really, it'd be much better if all seven of us focused on two 'cause we'd probably get it done versus like, we have gone fully separate directions and like, okay, you focus on this, I'm gonna focus on this.

And like someone's not getting something done and then all we did was tread water and probably have like a just burning cash. So that's why I think if I would've been more thoughtful about like the focus and like, Hey, this is a big project. The potential return for this project is $3 million of revenue.

Mm-hmm. Let's get this right and like, let's just Yeah. Fully focus and invest wisely. Like, I think we would've been farther off and we would've been more profitable on the way up. 

No, that, that's, that's super helpful because I mean, I, I try to view that from my lens of how many projects that we undertake with our extremely small leadership team, and it's, mm-hmm.

It's usually too many at once, and so like sitting down probably with the, the key players and going through and saying like, Hey. Let's pick two big initiatives this year that we really want to crush, and how are they gonna crush it? Yeah. Let's put a number to it and let's plan out these projects and how much the investment's gonna be, because this is 

something, it took us a long time to learn this.

Like I, I remember at 10 million, like two months in. 

If we need to cut it, we need to cut it. 

Yeah. Right. I mean, we, we used to focus like all over the place. You had these priorities and like, there's just so many conflicting things and like, if this helps anybody. We're going on 30 million and like we have three priorities next year, like three and like really two.

Uh, because the third priority is just like buy businesses. Uh, there you, which doesn't, which doesn't impact most of our operations. Uh, but like the two are like we. Like, uh, we just brought on the Home Depot retail relationship, which is gonna be pretty sweet. We're excited to like deliver there. And then the second is we're quadrupling down on our excavation.

And those are the literal two priorities like. For the business next year. Um, so all of our stuff is gonna steer towards that. But you know, as we've gotten bigger, we focused on less. 'cause I remember we used to, we used, you know, our rocks were like, it was hard to, there was so many different projects and things broken in our mind that we had to do all of it.

But then we would assign these rocks or we would've set these like goals and like, we didn't achieve. A bunch of them. I'm trying to, 

to balance in my mind mm-hmm. The idea of like, when you're smaller too. I, I don't think that what we're trying to say, and I, I could be wrong for putting words in your mouth, but I'm not saying like, don't go out there and like, fix things and build systems.

But I am saying that like there, in terms of the big projects and the big focus, like 

Yeah. 

That, that's where the, the scale needs to be. Reduce to be able to handle. Yeah. Like these big initiatives, like the real big ROI Movers of the Year, like you said, quadruple down on, on excavation. Yeah. And so I don't think that's a competing thought with like, oh, hey, I need to build out ServiceTitan.

Mm-hmm. Because like that really is, you know, ServiceTitan is a big rock, but it's not a Com competition in terms of bandwidth to quadruple down excavation. I think that's a overarching thing that everybody can help focus on. 

Yeah. Yeah. The a phrase that might help is, uh, put all of your eggs in one basket and watch that basket closely.

That makes sense. And 

so to change subjects a little bit here, not to, so that's investing inside your business. There's balance sheet. That's what I gonna, and balance sheet is 

like equipment. Mm-hmm. And like, it's very easy, like, Hey, I'm gonna go buy this septic truck and it'll add a million dollars of revenue, or I'm gonna go get this excavation equipment and it'll add a million dollars of revenue.

It's very easy. It's much more complicated to handle p and l like SG and a OPEX Investments, but that's actually the entire, like that's the much more important one because when you go to sell your business, they don't really give a shit like the value of your business. Actually even scrap the value. I'm right now like working through a conventional debt process and like, so we're gonna go refire SBA notes and we're gonna like go get an acquisition line of credit and.

Ebitda. Like literally all they gave a shit about is ebitda. They, they don't care how many vehicles I own. They don't care about freaking anything at all. The only thing that they wanna know is our ebitda. 

You mean that makes sense. You're an asset business though, like, or no asset business. Right? You have a bunch of depreciating assets in vehicles, so all they care about is your ability to generate, yeah, it's cash flow lending.

So 

like that the, so yeah, so I, I think whether the goal is sell or the goal is to grow, like regardless. You like this is investing off your p and l is probably the most important skill that you can have because either a buyer or a bank is gonna look at that and determine what the next step looks like.

So we're able to approach this conventional process like really strong. Like our EBITDA is like 14, 15% this year. And that's good. Like we're excited about that. And uh, so we get to present like a strong set of financials to go. They wanna give us like a $10 million acquisition line, which is a lot of money.

Like That's crazy. 

Yeah. It, you know, send, send them my way. I'll, I'll take a 10 million acquisition line. It does sound fun. Okay. But throughout this process, I think you're a great example of someone who, who to talk to about this. Just because we know each other, I know that you've also diversified some of the business capital into outside investments.

Yeah. Yeah, 

a hundred 

percent. 

So what I mean? Well, so yeah, what's your view on that? What does that look like for you? Or in, in your belief? Yeah, belief surrounding that we are not big enough to do so, but I mean, I've heard some crazy stuff out there about people diversifying into crypto and all this kinda wild stuff.

Yeah. 

Uh, what, what have you diversified into and, and what's your view on it? Yeah, 

so it's changed a lot over the years. Um, when I first started. Uh, I think I diversified too early, so the business was like a few million bucks and like I bought a bunch of real estate and, um, I had these like, I don't know, little.

Projects basically. Um, and then I sold almost the gurus on the internet say, yeah, they say You use, I think that was it. It was like, I need to have seven streams of whatever. Yeah. 

You buy, you buy real estate and then that's what you do with your, your extra capital. Yeah. From your business. That's what you're, and then you do cost segregation or something like that.

Yeah. Yeah. So what, what I, um, what I ended up backing into was I sold most of it off and like focused up because I, I like this idea and, and. I have since diversified, but I like this idea of focus, uh, because I think that like, focus gets you rich, diversified, diversification keeps you rich and mm-hmm. Um, so like our business is, you know, not 5 million of EBITDA yet, but like big.

So I'm, we're at the point where we're starting to think about diversification again, but from like literally 200,000 of earnings to like millions in ebitda, like single digit millions, but millions. I've really been like focused the way. So if, if that helps, I think like you can diversify too early and there it doesn't really do you much good.

I think it just adds like headache when you should be focusing. 

It also depends on your goal, right? If your goal is to grow a large business, then great. Yeah. Don't diversify. You wanna put that money back in. But if your goal's not to grow a business, I don't know if it's wrong, right? If you go buy the building, like we've talked about it before.

Yeah. We always say don't, don't. Generally, I'd rather use my cash flow to not buy the building that I'm in. I'll rent it at a cheaper cash flow rate. And then, yeah, but like, don't buy the business. Don't buy the building you're in because that money is better spent going back into the business for growth perspective.

Yeah. But if you're fine running a smaller business and don't want higher growth rates, like you could diversify early into real estate and not worry about growth, just worry about, again, safety. Like, Hey, I want to own. This building, I want to own a few houses. And then, 

I mean, to me that sounds like a bad capital allocation decision.

So I think that is the wrong answer actually. But I think that like, if that's your lifestyle, but like it, I think that that is wrong. Like I think that that's probably wrong. I think. I think 

if people out here, John, that they don't, not everyone has to want to grow a hundred million dollar business.

That's all I know. There's a lot of your friends listening and they'd be like. Jack's wrong on this one as they're all running their 30 and $40 million businesses. Um, well, it's just the 

highest and best use. It's because it is, I think like if you have a dollar, like where is the best use of that dollar?

Yeah. And um, so this is what ended up happening for me. So I, I, I bought the business and I immediately, I bought some real estate and so we sort of like branched out and did all this stuff and then I learned how multiples worked and it was oh. If I jump to this next threshold of business earnings inside Wilson, the business isn't worth three times it's worth four or five or six, or like 10 or 12 now.

Right? So I learned how that actually works and suddenly it became way easier because it was like any dollar that I spend outside of the core business for a while I was losing. I was, I was just choosing to lose money. I was like, Hey, instead of, yeah. Making the business more valuable by acquiring another business.

I'm gonna go buy a property and that a hundred thousand dollars that could have gone towards a down payment on a business that would've put us from a five times to a six or seven or whatever. I would rather own this warehouse that does nothing and doesn't increase my net worth and doesn't increase the multiple.

Mm-hmm. Uh, so like, I think from like purely enterprise value, I think there is a wrong decision. Now, whether or not that's your lifestyle. Uh, I guess pop off, but like, my preference is that that's what I'm getting at. Some people, their best invest is, your life should be determined. The best investment in a truck, 

uh, we've all seen it.

They, they'll never go past a million dollars, but they have, have a boat. In a truck. If you could sell me your 

business at the cheap multiple, because I'm choosing to invest wisely. 

I agree though. No, I, I mean, I'm playing devil's advocate here, but I definitely agree. Yeah, I mean, I, I, we've talked about, we've hit this subject really hard from like, even how you pay yourself on these ones.

It's like, Hey, I'm not going to take money outta the business because that money that it's better suited, I'll be paying myself. Yeah. That 10 KA year outta six x multiple is worth 60. Um, yeah. So, um, like focus on building the business, not diversifying into other regions. 

Yeah. What I've started to work on over the past year.

The podcast is a great example. Um, but what I've started to work on over the last year is separating into two buckets. Uh, this was in one of Warren Buffett's letters, like in the seventies, but he's got this a, a and B bucket model. So the a bucket is I'm going to wholly buy an enterprise and like. Uh, take cash flow and b, is enterprise value.

So, hi. His example is like, I'm gonna go buy Geico and I'm gonna use Geico's cash flow to buy Apple stock, right? Mm-hmm. So enterprise value from Apple stock, like, yes, you get some dividends, but like, you know, it's really like we're here to rise in value and Geico is just going to give us like free distributed cash to go reinvest.

Uh, so I've taken kind of the same model in my life over the last year because we're really emphasizing growth in the business. 'cause we're really emphasizing ev like we want to build a big business. So we're starting to like, okay, how do I find sources of cash flow by like investing into minority positions in companies that I can then put into the thing that I own that raises an EV and I don't need as much cash flow.

From, so I don't know if that helps anybody, but that's helped. Uh, I've explained that to a few people 'cause they're in like heavy acquisition mode or like, you know, big CapEx reinvestment. Like, I need to buy excavators or lining trailers or Yeah, whatever. And, uh, so this is how I think about it, is I don't really rely on like our core business at all for personal cash flow.

Uh, we like really hone in on enterprise value and some of the guys that are growing the fastest that I know. That's their story too. So like there's a couple companies in the 30, 40, $50 million range and like they have an external like source that is like paying for their life, their mortgage, their groceries, whatever.

I. And they're, they're just like reinvesting a hundred percent and that's how they're going from 30 to 40 million in, you know, very short amounts of time. Are you tired of paying money on leads that don't convert? With Paper call.io, you only pay for a lead when your phone rings. No junk leads, no bots and no guesswork.

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So what you're telling me is I should have, my wife should have kept working. Yeah. And she could be my external cash flow source. That's 

right. That's right. I mean, spouses income is fair game. I think a lot of people do that. I was listening to Acquiring Minds and uh, the host Will Smith, he's like, that's actually one of the most common.

Stories out there is that this spouse is like making a, a large income that supports that, uh, that entrepreneur to go start and like figure it out, which is kind of funny. 

No, I love that because I, I've seen that on Shark Tank too. It's like, Hey, how'd you guys start this? Well, my wife kept working and I'd.

When Chase this dream? Yeah, a hundred percent. I mean, it can be 

to, to anything. I mean, I know there's two people, um, that, that, uh, well, I gotta get 'em on the show here, but yeah, they, they're running like 40 to $50 million businesses and on the side they have other. Multimillion dollar businesses that they, that they're like a 10% owner of, or 20% owner of mm-hmm.

Or whatever. And uh, like one of 'em is a dog salon and one of 'em was like cell phone, like those, uh, T-Mobile cell phone store things. And like, they're, they're just producing cash. And like, you could call that a hack. You could call that a cheat, you can call that whatever. But like, it's allowing them to focus on the enterprise value play.

Yeah, 

that 

makes sense. So if you're thinking about reinvesting, I'd probably emphasize something in cashflow. Uh, whereas like real estate is probably not cashflow, real estate is also enterprise value. 

Mm-hmm. 

Uh, so I would just be cautious like where you put those dollars outside to make sure that it does give you cash so that you can continue building enterprise value.

That a bucket B bucket. 

Sweet. Um, any last thoughts? 

I think that, um, running a business. And like being the CEO of a business is the most, like, you're an investor, you're, you're a lot of things like you're. The driver of culture, you're probably a driver of sales. Like there's a lot going on inside that bucket.

But at the end of the day, you are an investor and you're investing your resources into people. You're investing your resources into the business, the balance sheet, the p and ls softwares, and if you don't like the idea of that, then you're probably in the wrong seat. Because like your entire job is resource allocation, whether it's people resource allocation or capital allocation or attention allocation.

Like that's the job. Uh, so whether or not you think of yourself as an investor, as the owner of a small plumbing company like you are, you're investing resources, you're investing attention and. So I think that's the final one, is like, this is relevant. 

Yeah, I think it's relevant at any size too, because all this, yeah, as much as you think that you're, even if it's still a job for you, this is still the path out of that job is making sure those investment choices are made correctly.

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