OWN YOUR FUTURE – LIVE 2020 took place live (from our homes) on July 9th 2020. The video included here was recorded at that event.
James Altucher has started & ran more than 20 companies & is currently an investor in & advisor to over 30, but at one point, James lost everything. In a matter of months, his account drained from $15 million to $143. Depressed & on the floor, James realized that today’s standard view of success comes with conditions & the only way to be truly successful and fulfilled is to “choose yourself.” Now, James Altucher is a bestselling author, successful entrepreneur, angel investor, chess master, and host of The James Altucher Show podcast.
James’ podcast has had over 40m downloads. He’s also the author of the best selling book “Choose Yourself”. And, get this, he’s started 20 companies – 17 of which have failed. James wants you to choose yourself and in this uplifting talk, he’ll help you to find your passion, your unfair advantage and make money.
And without further ado, introducing our first guest speaker for Own Your Future 2020. He is the author of 20 books, including the bestseller, “Choose Yourself!” He’s the editor at the Alpha Altucher Report, and hosted “The James Altucher Show” podcast that has over 40 million downloads. He started 20 companies, 17 of which have failed. He’s achieved the rank of chess master, and he’s a strong believer from what I understand in the power of a cup of coffee when it comes to getting things done. Let’s put our virtual hands together for a silent applause for our man James Altucher.
Hi there everybody, and thanks so much, Ben and Blake for, oh, gotta get a better microphone, hold on. Thanks, everybody for, thanks Ben and Blake for inviting me. I’m curious, actually, if you type into the Q&A where are people from, I’m just curious, how worldwide this is and you know, and you could start asking questions, I’ll start answering them at some point. But I wanted to, I wanted to comment on a few things, I got very excited about Flippa completely independent of knowing Ben and Blake.
I somehow stumbled on the site and it was like, it was like my dream come true. I always believe that it’s much more interesting to buy an existing business than to start a business.I always believe that it's much more interesting to buy an existing business than to start a business. – James Altucher Click To Tweet
So I think for VC funded businesses, they always quote, like, “Oh, there’s a 90% fail rate.” Maybe that’s true, maybe it’s not. But if you buy an existing profitable business, your fail rate goes down enormously, like if I buy a laundromat at a popular corner, my chances of failing or not being profitable is almost non existent unless people stopped doing laundry, which if most people were like me then I would be in trouble. I don’t like to do laundry that much. But again, buying an existing business is so much better in terms of having a successful business model.If you buy an existing, profitable business, your fail rate goes down enormously. – James Altucher Click To Tweet
Now Blake was talking earlier about you could, you know, buy some of these business is fairly cheap on Flippa. You can buy them as standalone businesses that you can, you know, have as a side hustle, so you have your full time gig. And then oh, with very, with only a few. I think the initial attraction of Flippa is that I could buy some e-commerce business that sells jewelry or whatever or some game, and I barely have to pay any attention to it, and I just make money while I sleep. I think that’s kind of one possible dream of Flippa, and by the way, I’m not affiliated at all with Flippa, but I am excited about other business models that make use of the Flippa model.
So let me just take a look at this Q&A, and see where people are from. New Jersey is where I’m from. New York, is where I’m from. Cleveland, Ohio, great, so all over the world. Good job you guys. So and that’s an interesting thing too. I think people have traditionally viewed the economy and entrepreneurship in a very one dimensional manner either it’s up or it’s down.
So either the economy is going up, and, “Hey, we should all start a business,” or it’s going down, and we should all hide under our covers until this period is over. And then there’s sort of this two dimensional way of looking at business which is that, you know, there’s this saying, “At any given moment some industry is in a bull market.” And so you don’t just look at one industry which might be up or down, you know, many industries. So you know, right now, obviously, we’re on Zoom, as opposed to having a real conference, not that this is not real but it’s a virtual way of meeting each other.
So Zoom and other video conferencing platforms have done enormously as an industry. In fact, I’ve seen at least two or three startups in the past two or three months that are building new video conferencing platforms, whether for events, or meetings, or learning, or telemedicine, or podcasting, this industry is in inning zero still, the video conferencing industry. And this is just one industry that’s in an inning zero which I’ll get to in a moment. But that’s the fact that there is a three dimensional way of looking at entrepreneurship which is that right now, yes, it feels the economy feels horrible.
It feels like everything is uncertain, and the economy is down. In the US there was initially 40 million layoffs, now, I don’t know what the number of unemployed is, but it’s still pretty horrible. There’s like an 11 or 12% unemployment rate. It just feels awful. But that’s again, that’s back to the one dimensional way of looking at things. Everyone on this conference is prepared to look at things in a three dimensional way. You’re looking, you’re here because you’re looking for opportunity, not because you’re trying to get back into the workforce, or get your old job back, or wait for the furlough to be over, or wait for the UBI. You’re looking for new opportunities. And I think that’s the three dimensional way is that trillions of dollars have been dropped onto this economy not only by the US, but by every major government.
There’s essentially those trillions of dollars, let’s say it’s like five to $10 trillion is right now sloshing around in the world economy, but has not yet found a home. It’s, we don’t know where it is, it hasn’t fully hit the markets. It hasn’t fully hit your pocketbook or wallet, but it’s here, that money has been basically air dropped onto the world, trillions of dollars. And so the key for all of us is to figure out where is that money going. Now, it might not be going into restaurants, or movie theaters or you know, cruise lines, the fact that they even considered bailing out cruise lines has to be the most ludicrous thing in the world. There are cruises still on the ocean which have not docked since early March which is insane. But America wanted to, I think they initially earmark something like $50 billion to bail out the cruise lines, which always tells me, America, no matter what you say about the US, the US is always number one at figuring out how to get people into a buffet line, and hence the interesting cruise lines. But that said, I do think what’s exciting to me is buying an existing business but not necessarily, I think it’s interesting to buy one business and have it as a side hustle and try to grow it.
Like let’s say, you buy an online, you know, jewelry business, or let’s say you’re looking at what’s trending on Kickstarter, and I think about a month or so ago, there was a bread machine product trending on Kickstarter. And that that’s interesting because during this period since the economic lockdowns worldwide, what are the main themes that we’re seeing? We’re seeing, obviously the theme of remote. We’re all from around the world and yet we’re sitting in our homes, so remote is key, and I spoke about that already. We’re also seeing safety is an important theme, so for instance, you know, the mask business, the disinfectant business, right now trending on Kickstarter to this moment is a product for hygienic doorknobs. So doorknobs made out of brass because brass is part tin part copper, and part copper, copper is an antiviral. So it’s always interesting to see what’s trending on Shopify, what’s trending on Kickstarter, what’s trending on Google Trends.
So bread machines were trending for a while, because bread is like this comfort food. We want safety, we want comfort, we wanna be happier. So during this lifetime people started cooking making their own bread. And so let’s say you were gonna buy, you know, let’s say, there’s some Flippa site out there that has makes bread machines, and for 20,000, it makes $20,000 profit a year, you buy it for 50,000, so two and a half times earnings, and that’s an interesting buy. So you’ll make an extra 20,000 on the side, you’ll be happy. And then maybe you have some ideas to improve it, so the 20,000 can go up to 25,000, like maybe you’ll do affiliate deals with other product companies. Maybe you’ll sell your e-mail list. Maybe you’ll sell other products, who knows, there’s various ways you can improve a standalone business and I think that’s fine.
But I think there are other business models that one should consider in this world. One is let’s go meta for a second on Flippa, so why can you buy a business that has $20,000 a year in profit for just $50,000, two and a half times earnings. This is if you’re buying something and you’re getting, it’s if you’re buying a bond, and you’re getting a 40% dividend which is enormous. That’s dirt cheap but you could buy businesses on Flippa. It’s because those businesses are small, so the smaller businesses it’s usually viewed as a little bit riskier, and you could usually buy it for a cheaper multiple of earnings. So one business model that one should think about is, and this is one that I’ve been thinking about, is don’t just buy one pre-existing business buy 100.One business model that one should think about is, and this is one that I've been thinking about, is don't just buy one pre-existing business… buy one hundred. – James Altucher Click To Tweet
So you buy 100 of these e-commerce sites, and let’s say they’re in all in the e-commerce area, so you can combine them and have some sort of back end synergies, like you could combine all the accounting, you could maybe combine what you’re paying for storage on AWS. You can maybe get a cheaper deal on drop shipping, and storage, and you know, physical storage of products. So there is if you buy 100 of these products, of these sites there’s ways to build a business just by combining back end synergies. But what ends up happening is, what ends up happening is when you buy 100 of these businesses the multiple that you can value the business at goes up. So instead of when eventually you’ll be able to sell the business not for two and a half times earnings, but for 20 times earnings. So that’s one business model which is buy 100 of these, improve the profits one by one, but also improve the valuation of the entire business. You buy all of the earnings for two and a half times earnings and you sell it all for 20 times earnings. So this is the way to start thinking, look for trending items, focus on, you know, safety, remote, all these other trending models in this environment, and then go meta, buy lots of these earnings flows and sell for greater multiple of earnings.
Similarly, you could be a lender to people who wanna buy on Flippa. And you know, if everybody’s making 40% on their earnings you could start lending people at 20% interest rates, and that’s a decent business, you could raise money for that, you could grow, it could be a multi. The last two business models I described; lending plus aggregating hundreds of these businesses, these could be 10, 20 $30 million businesses in the long run. And a great example from the OO’s was Demand Media, which bought and combined hundreds of small e-commerce businesses and was very successful doing that, and it ended up being a multi billion dollar company. So you know, and another thing to consider too is that, you know, you don’t have to put up all the money yourself, there’s various deals you could do with the sellers, you could raise money like a hedge fund, you could also create an information business about sites like Flippa.
So Flippa is my favorite site in this space, but there are other sites where you could buy and sell businesses or other streams of online income. So imagine you can create an online newsletter, charge $100 a month, and, you know, analyze different businesses you could buy across these platforms, and make suggestions about you know, show how you do due diligence on each one of these businesses. If you’re charging $100 a month and you get 100 people subscribing to your newsletter, that’s 10,000 a month. It could, the newsletter business about buying and selling these online e-commerce businesses that in itself could be another way of going meta to make an enormous amount of money. So I’m going to start answering some questions. Please feel free to ask someone. So someone–
Yeah, I’ll jump in here if you want, and we’ve been collecting some on the side for you to make a little easier ’cause I know a lot was coming in.
Okay, do you wanna, Ben do you wanna ask me the questions?
Yeah, I’ll jump right through them, and I really appreciate that you talked yourself, or all of us into essentially becoming our own bank, and bank rolling all of these investments that’s amazing.
And by the way, that diversifies the risk considerably, so you’re not just buying one business. And again, the way you’re managing risk is the more businesses you buy, the higher valuation you can charge when you combine them all, and the greater your profits can be by combining some of these back office needs that are replicated through each of the businesses. So this is a great way to go meta on Flippa by, or you could do the newsletter, newsletter, I just almost said newsletter, but you could do a newsletter about Flippa style sites, and how to buy and sell these businesses, and which businesses right now are attractive, and what’s trending and what’s not. And then you take almost zero risk, and that could turn into a huge business. So right now, thinking three dimensionally where how to get ahold of this extra $5 trillion that are being air dropped onto the world’s economy. This is the way to think of things. So anyway, go for it on asking me questions.
Yeah, it’s incredible. Yeah, we got a good one from Tammy. She says her biggest concern with buying a business is the ability to run it the way that the current owner has run it. I’m just wondering if you can speak to that.
Yeah, so that’s a great question, so let’s say you buy a business and the owner, the previous owner who sold you the business disappears, and then suddenly all of your customers and vendors disappear. The people selling your product and the people buying product they all disappear. That’s a catastrophe, right? So that’s what you’re referring to, that’s the main nervousness I would have in buying any of these businesses. But that’s why you do due diligence, so once there’s a deal that occurs, once you guys settle on a price, it’s, there’s always a quote in every deal term sheet. This is all done pending due diligence, so you call up the vendors who are selling you product, you analyze on a big spreadsheet who all the customers were, how did the customers arrive at this site? Were the customers arrived through Google search? Did the customers arrive because they were friends of the previous owner? So you need to do due diligence, and that’s critical, that but that’s a, the more due diligence you do that solves a problem. And there are many areas on the web where you could just search due diligence checklist, and you’ll see a pretty good checklist for how to do due diligence on businesses like these.
Good stuff, good stuff. We’ve got Max who’s curious. He says, given the current, excuse me, skew between potential buyers and sellers. If he’s got the numbers, right, is it time to sell or time to buy?
A great question. And of course, it depends on the industry, so let’s just say, let’s just not look at Flippa, let’s look at the world in general, it is the wrong time to buy a restaurant in New York City, so that’s like an extreme in one area. It’s probably the right time to buy a rising video game app, you know, mobile game app like, or you know, e-commerce. Again, you could look for, you could Google what products are trending on Shopify. So Shopify has over a million individual e-commerce stores, and if you see, “Oh, this is pretty consistent. “This product is trending on Shopify,” and then you could look on Flippa for of the sites that are selling products similar to those trending products. Those are probably good industries to go into, or at least it’s a clue.
By the way, validating a product is very important, so let’s say you wanna check the demand for you’re unsure, you’re thinking of buying some e-commerce site and you’re unsure about, if there’s demand or not going into the future, like maybe this was just this past year, past two years, maybe it’s not gonna be in demand going forward. Here’s an idea, take a picture of one of the products on the site that you’re thinking of buying, put up a bunch of Facebook ads, you know, you wanna experiment with different Facebook ads, and then see what the click through rate is on those ads. You just have to put $100 budget per ad, see what the click through rate is, you don’t have to link to anything, because Facebook will tell you what the click through rate is whether those ads are linking to anything or not. If you have a two or 3% click through rate then you just validated your product, that’s a decent product. And people like the picture, they like your ad, they like the headline. 3% is enormous and that means probably is good to go, then you could start bidding on the flipper site or whatever else. So I forgot the original question, but maybe I answered it.Here's an idea, take a picture of a product that you're thinking of buying, put up a bunch of Facebook ads, and see what the click through rate is on those ads. – James Altucher Click To Tweet
Should we be buying or selling?
Oh, oh, so if you validate the product you should be a buyer.
It makes sense, I love that, that Facebook trick is genius.
By the way, I use that Facebook trick for everything. If I’m thinking of a title for a book, I’ll put up four or five different titles, and I’ll just see, which on four or five different ads, and I’ll see which ad is clicked on the most, and that’s the title of my book.
Yeah, I love it that’s 100 bucks instead of thousands in product.
Alex from Germany, he is wondering what you think about leverage. He says, “Would you personally in debt yourself to start, “and if so, to what extent and any tricks “that might come to mind?”
Yeah, so the basic answer is, absolutely, I would go into debt, because let’s just look at the example that I gave before, you’re buying a company that has $20,000 in profit per year and you could buy it for $50,000, so I think the average multiple of earnings on Flippa, or other sites like this are about two and a half, between two and four, or two five times earnings. So let’s say you bought a $20,000 a year earnings site for $50,000 that means you’re getting 40%. You could borrow $50,000 with let’s say 10% interest, but you know that $50,000 is returning you 40% a year in earnings. So gradually, with no money down as they say, you could pay off the loan in just a few years out of your earnings.
So that’s the basic answer but there are some tricks, so the first trick is, can you borrow that money from the seller? So the seller is, most businesses 90% of businesses when they end, when the owner is tired of them, they simply shut down, they don’t sell at all, and so if you’re telling the seller, “Hey, I’m willing to pay the price you want. “I’ll even pay you a little bit more actually, “but let’s work out a deal “where I pay you a balloon payment, “maybe I’ll pay you $10,000 upfront for the $50,000. “And then I’ll pay you, you know, 8,000 a year “or 5,000 a year going forward, “and the collateral is the business.”
So you’re getting well that’s called seller financing, and many sellers will do it not all but many. And they might want a bigger, you know, all those things are negotiated, they might want a bigger balloon payment, they might want half down, they might be okay with zero down, they might want a quicker return. But seller financing is very common because it’s better than just simply shutting down the business and they have no work, and you kind of have no risk because if the business fails, because let’s say all the vendors or customers go away, the collateral is the business so the business just returns to the original owner, so that’s one way I would think about it’s seller financing.
If you’re using a bank to borrow the money, good luck that banks don’t lend money for this. But if you’re using like a hedge fund or some other fund to borrow the money, you know, just be careful about the collateral use though don’t, you know, the collateral should be the business, try to avoid a personal guarantee, try to avoid your house as collateral things like that. But there’s lots of ways to, I myself would always use that. Because then again, don’t forget the more businesses you buy, the higher the valuation goes up, so if I buy 20 businesses maybe now I could flip the whole thing for five times earnings, 10 times earnings. When I just spent two and a half times earnings for everything, so then I go through the math and it works out very nicely for you. If you’re selling the whole thing for 10 times earnings, you pay back the loan and you have a nice substantial profit when you put minimal to zero money down.
This is like the private equity market that existed for the past 40 years. This is how private equity works. It’s all leveraged buyouts. This is how that entire market works, but this is innings zero for e-commerce sites, whereas in the traditional private equity market it’s inning 12 where they’re in overtime already, and they’ve lost by the way. So it’s better to do that type of model here, and it’s a model that’s proven to work.
Exactly. I like this question ’cause I think we get a lot of people with similar thoughts myself included, Pawan, I probably mispronounce that name says, “What are the top skills that a newbie should have, “if they were getting into the online business space?”
It’s a great question, and I would always count myself as a newbie, because the industry constantly changes, right? So maybe 10 years ago your expertise in search engine optimization might have been an important skill. Now might be your expertise in you know, finding cheap opportunities for Facebook ads, or Instagram ads, or buying opportunities with TikTok influencers, or finding cheap ads on podcast, so marketing is one type of skill, but that’s a skill that constantly changes. So if you always have to be up with what’s the latest, what are the ad dollars that have the most impact? And I would have to constantly assess almost every month what’s working. So I guess the skill is learning about that, but Google.com is a useful little website for helping you figure that out, And there’s also online courses about this and so on.I would always count myself as a newbie, because the industry constantly changes. – James Altucher Click To Tweet
Another skill, of course, is due diligence, we spoke about that, you wanna make sure the business doesn’t fall apart. The second you buy it you wanna be able to analyze financials but you get an accountant to help you with that if you’re not skilled at that. That’s a commodity skill that you can easily pay $100 for someone to help you if you don’t have that skill yourself. Do you need skills in programming? No, again, that’s a commodity skill you can find on Fiverr or freelance, or in your neighborhood, whatever. And then, you know, then there’s some business skills, maybe you wanna be able to do affiliate deals, or you wanna come up with other business model, you’re selling bread machines, so you do deals with other people, with somebody’s selling a bread, a website selling bread cookbooks. And you do kind of a swap of ads, and you do affiliate deals with people. And an affiliate deal means if you send customers to them, you put an ad on your site, if you send customers to them, you split 50/50, whatever your customers buy on their site, and vice versa.
So it’s kind of nuanced business skills, but you don’t, the main skill, I would say, and this is a skill I learned, unfortunately, the hard way, understanding valuation. So understanding that first thing I talked about, how, why are some of these businesses only selling for two and a half times earnings, but with some, you know, business manipulation a little bit, manipulation is the wrong word, but over some business acumen you could change that two and a half times earnings to 10 times earnings, which means you don’t have to actually improve the business, you just have to improve the business model, and you make considerable money. So understanding the difference between a business model and a business is important.
It’s good stuff, and we only have about a few minutes left and I wanna give you a chance to for some self promotion, of course. And we did have a question here from Josh, could you just briefly summarize your book “Choose yourself!” What’s that all about?
Yeah, so a lot of times you wanna do something, and people tell you, you can’t do it. Like, let’s say, you know, right now, everybody calls this period in our lives the, you know, we’re going into a new normal. And for some reason, people think we’re going back to something that was like the old normal with just some tweaks to it. I don’t believe that at all, actually. We’re going right now through a great reset. And everything is going to change, everything in our lives are going to change. If you have kids you know what I mean, they didn’t go to school this past six months, they’re not gonna, they’re probably not gonna go to school next year.
Life is different. And the similar thing happened when with the rise of the internet, and throughout history similar things have happened. But let’s say I wanna write a book, and I used to be, I used to think, and I’m a writer, so I used to think, “Oh, no, I gotta get an agent, “and then the agent has to find an editor “that then publish rest to like it. “The marketing departments has to like it, “Barnes & Noble has to like it.” You have to jump through all these hoops, and you have to get everybody that like you in order to publish a book, in order to do your dream. Well, I didn’t want, what if I don’t? What if everybody says no to me? And what if I think they’re wrong? Well, I can choose me, I can just write my book, and now I can upload it to Amazon, and I could publish it. In fact, I’ve published, my first seven or eight books were with major publishers. And then I decided, you know what I’m sick of using regular publishers. It takes a year to get a book published, you don’t really make all that much money, ’cause they get the most of the money. So I wrote “Choose Yourself!” actually, and I self and I hired somebody to do the cover. I hired a marketer to help me with the marketing, and I uploaded it to Amazon as a Kindle, and as a paperback, and as an audiobook, I did my own audio book, and I’ve sold over a million copies, it’s my best selling book.
I’ve made more money from “Choose Yourself!” than any other book that I’ve done mainstream, or self-published, and I chose myself to write and publish a book. I’ll give you another example, somebody else came to me and wanted to do a docu-series, eight episodes about the book, “Choose Yourself!” and the lessons in it. So they shot a whole documentary and divided up into eight episodes. And then they were saying to me, “Well, do you have any ideas, “what should we do with this?” And I’m like, “Well, let’s self publish it. “Let’s release it as a series on Amazon, “and then it’ll look like any other “television series on Amazon.” But then I went one step further, let’s take the first two episodes, and let’s put it in movie theaters. So this weekend it’s going in movie theaters all across the southern US. And you know, and it’s fascinating because many movie theaters are not open, so to make the top 10 list of box office for a weekend, you only need to sell about $500 worth of tickets. Normally, you would need to sell $20 million. It will have to be an “Avengers” movie or a “Hunger Games” movie and sell $20 million worth of tickets to be in the top 10 in the box office.
Last weekend, you just needed to sell $279 worth of movie tickets. I always wanted to be a top 10 box office hit. I will definitely guarantee that my movie will be a top 10 hit next weekend, because I found one of the only movie theater chains that are open. And once you’re adopt and hit by the way you’re an Oscar contender. So there’s so many different ways if you think creatively, you could choose yourself, you could make your own fashion line, you don’t have to be Ralph Lauren, you could be, you can make your own fashion line order. I’m wearing pajamas right now, because I want to make an outerwear pajama line, so I can order pajamas on Alibaba from a factory. I can make them put my logo on it, and I can say we’re living in this new, this great reset, this new normal. I just wanna wear comfortable clothes, here’s outerwear that’s the same as pajamas. I could set up a store on Shopify, I could advertise it on Facebook, and boom, I just created my own fashion line. So you could choose yourself for almost any thing that you previously, I would have thought it was impossible to release a movie on 20 movie theaters across the country. I would have thought it was impossible to publish my own book. I would have thought it was impossible to set up my own fashion line, but all these things you can choose yourself to do.
Okay. I’ll give you a round of applause on that. “Choose yourself!” choose pajamas, do what you gotta do, I love it.
I’ll give one more example.
Okay, a quick one.
Six years ago, I started doing stand up comedy, and everybody told me, “James, James, you need to wait in line. “You can’t do this. “You need to be a comedian for 20 years “before anyone will let you on stage.” You know what? Last, in February, right before the lockdown. I toured all over the Netherlands, I’ve toured now all over the US. I chose myself I didn’t let, 100 people told me I couldn’t do this and I did it.
Okay, that’s what it takes, the more people say no, it’s when you say yes, I love it.
James, thank you so much. My God, next time we’re gonna need about four hours with you, ’cause we have a lot of questions. I know you are, you know, a busy guy, but maybe we’ll send some of these to you, and over the coming months if you can answer some for these people will be amazing.
Yeah, if you send me all these questions, I promise one way or the other I will answer them and send them back to you.
Fantastic, we’ll collect them and do that. So thank you so much for being here today for teaching us to choose ourselves. I appreciate it.
Okay, thank you guys. Thanks for inviting me, I really appreciate it. Thank you.