Rich Habits Podcast - 46: Our 3 Favorite Investment Categories for 2024

Episode Date: January 8, 2024

In this episode of the Rich Habits Podcast, Robert Croak and Austin Hankwitz share their three favorite investment categories for 2024. With that being said, this is not financial advice and we very much encourage people to do their own research. Remember, there's no such thing as timing the market. We'll be slowly dollar cost averaging into these categories all year long. ---Be sure to check out Public's new ⁠⁠High Yield Cash Account paying 5.1% APY.⁠⁠ This is higher than anything else on the market and is FDIC insured up to $5M. ---Earn 5.1% APY using a Public HYCA, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Opt-in and share your email, ⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠Learn more about our ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠4-module video course!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Download our FREE Budget Template, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠click here!⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Robert: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/RobertJCroak⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠To learn more about Austin: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://stan.store/austinhankwitz⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Contact: [e-mail] ---Hankwitz Group LLC has an existing business relationship with NEOS Investment Management LLC. The opinions expressed are those of the author, and the author owns several NEOS ETFs.

Hey everyone, and welcome back to another episode of the Rich Habits podcast, a top five business podcast on Spotify. My name is Austin Hankwitz, and I'm joined by my co-host, Robert Croke. Robert is a seasoned entrepreneur in his 50s with more than 200 million in company exits under his belt, and I'm an entrepreneur in my late 20s with a background in finance and economics. Since quitting my full-time job earned corporate finance a few years ago, I've built a seven-figure media business and actively advise some of the most well-known fintech companies around the world. As the show name might suggest, every episode, we talk about rich habits as they relate to business, finance, and mindset.

However, we try and bring you two unique perspectives, one from an industry veteran, which is Robert and the other myself, someone who's still in the process of building wealth and figuring it all out. Robert, what are we going to be talking about in today's episode? In this episode of the Rich Habits podcast, we're going to be sharing the three different industries we're most excited about investing in in 2024. You all know we're big believers in building your base before you begin diversify your investments. So don't forget to keep that in mind as you listen along on this episode of the podcast. With so many great things happening on the horizon as we enter 2024,

we think these three sectors will be a great place to dollar cost average into as you build diversity in your portfolios. Yeah, right? The mistake a lot of people make. And I see this all the time when they start investing into these secular growth trends that we're going to be talking about here in this episode, you know, it goes from 2023 to 2024. And they're like, wow, that was a great year. We invested. We made a much of money. Like, what's next? And I think as you will see here, as we talk about some of these ideas, you'll realize that some of the old ideas

still have legs. Right. I think we're like an inning one or two of the baseball game. We got a lot of innings left and a lot of home runs still to hit Robert. Yeah. So many people think that as the year starts over that we just get rid of all the old investments and there's a brand new list. And that's just not the case. So many of the callouts we had in 2023 that we've talked about through all of our educational programs, the podcast, our lives, our TikToks really do remain strong, strong picks for 2024. So let's get into it. Yeah, let's do it. Right. The trends we're going to be sharing with you all in this episode are decade-long secular growth trends that we believe still have awesome opportunities, starting with number one, cybersecurity. Now, this secular growth trend is obvious in

hindsight, but no one really knows how to place their bets in real time. It's a mistake I made, but now I've sort of come about that and figured it out. So let's talk about it. Now, for perspective, there was a survey conducted at the end of 2022. It was sort of a rough year in the markets, but it was conducted by Wall Street Journal and they asked 2,000 chief information technology officers about what they were projecting to spend in IT for 2023. 70% of these 2,000 chief information technology officers said that despite a lack in business momentum, right, the markets were sort of down in 2022. We had a lot of stuff to worry about in 23.

They were still going to invest heavily in cybersecurity infrastructure in 2023. And we saw that. Just look at companies like Palo Alto networks, Crowdstrike and Sentinel 1, just to name a few. I mean, they saw hundreds of millions of dollars of new money spent with them in 2023, just as they will in 2020. Now, Gartner just published a study a few months ago with 2024 projections, and they're expecting $215 billion to be spent on cybersecurity and risk management worldwide, which is a 14% increase over 2023.

That $215 billion, that 14% increase, screams growth in money for my portfolio. So for me, I'll be investing into the same names that led my portfolio's outperformance in 2023 in 2024. That includes Palo Alto Networks, CrowdStrike, CloudFlare, and Sentinel One. This is very much a buy and hold forever strategy because I believe that AI and cloud infrastructure will continue to expand. And as it expands, you of course need security to keep it secure. I love it. And these were some great callouts. And many of these callouts that were talking about in cybersecurity, we were discussing right when we first met last year in February. So we had a great year in this. category and rolling into 2024, I think it's going to continue to grow with more and more money

being flooded into this market. So let's jump into number two, one of our favorite categories, artificial intelligence. I think AI is going to continue its incredible growth in the coming years, and there are two ways to look at it from an investment perspective. The hardware, think chips, think data centers, the hard goods of the sector. And then the business efficiencies that AI creates, the players building new products in AI. So you got to really think about that side of it as well because there's a lot of opportunity there. So to break this down, let's start with the hardware.

We all know Nvidia saw 250% increase in stock in 2023. And that was largely due to the fact that they were the only company that could really manufacture the chips with such efficiency to build these large language models for chat GPT. And obviously, InVedia was one of my biggest callouts of the year. Thank you for all the haters early on that said I was crazy. You were wrong. Sorry about that. We all made a lot of money, which was just really, really incredible for everyone following along.

So there's more from where that came from as well. We really like Broadcom, AMD, Taiwan Semiconductors. So there's a lot of money to be made in this sector in 2024 and beyond. And these are just really the tip of the iceberg of what we think is going to be really, really big and a lot of gains coming up. Yeah. And Robert, it's really. Interesting, right? Because people, they think about the gold rush that happened to California in the 1800s, right? And the people that got rich in the gold rush were not the ones that were trying to find the gold.

They were the people selling the picks and the shovels. And that is what Nvidia, Broadcom, AMD, Taiwan semiconductors. And one more I just remember right now, Marvel Technologies is going to be in 2024, right? Marvel Technologies said that they're going to generate an additional $800 million. in revenue between now and 2025 from AI. Like, these are the people making the money, making out like bandits. Those are the people I want to have my money with. Right.

Yeah, I love that. And I forgot about that. When we talked about that a few months ago and we put it on our list, but I haven't bought any yet. So I'm going to definitely get in on that now. So let's talk about the companies actually building new products that leverage AI. In 2023, a big winner for me was Palantir. Many of you heard me talking about it for quite a long time.

and that's still a good one going into 2024. And I continue to believe they will differentiate themselves using AI in 2024. But there's also bigger names like Salesforce and Google. And both of these companies are expected to increase their operating cash flow by 35% between 2020 and 2025. So that's just incredible. And so many people when you think about this, they make the mistake thinking there's only upside in the little itty-bitty penny stocks and smaller companies. and newsflash, that's just not right. There's way more risk there. You don't know what the company's going to do. You don't know if they're properly funded. And there's a lot more risk and worries with those

smaller companies. But when you think about a company like Microsoft, the stock price went up 65% in 2023. And they're a multi-trillion dollar company. So don't sleep on companies like Google and Salesforce over the coming years when you're thinking about it from an AI perspective. I couldn't agree more. I think a lot of people make the mistake of saying, oh, wait, the stock price is only 72 cents. That means it could go to a hundred bucks one day and I could bejillion X my money. Well, I mean, maybe, right? Like, I guess Amazon did go from a dollar to like thousands of dollars, but Amazon is such an anomaly and it also took two decades for that to happen, right?

How about you look at the big players, the Microsofts, the Googles, the Salesforce, the apples, the Amazon's, right? The magnificent seven. And think about what are they doing, right? And maybe it's a good idea to kind of bet on the MVP's and the All-Stars, the All-Americans, versus trying to find, you know, the next Kobe Bryant or LeBron James on a JV team. Yeah, if you're going to gamble, take your significant other, get in the car, get in a plane, go to the casino, you know, play some craps, play some blackjack, whatever you want to do.

Baccarat is a great game if you want to gamble. Have some fun. But if you're looking to invest for the long term and build wealth and financial freedom, then don't do that and follow along with. what we talk about here, Rich Habits. And of course, just a quick reminder. Everyone, do your own research. We're just two guys on the internet sharing what we're doing with our money and what we are

excited about for 2024. If you agree, if you disagree, please let us know. Like, we are super open to other perspectives. So with that being said, our third pick here for 2024 and beyond that we're really excited about is cryptocurrency. And Robert, I'm not sure if you heard this, but Bitcoin is actually going to go to zero because Jim Kramer just went on CNBC last week telling me, people how much he likes it. We all know what happens when Jim Kramer says that he likes a stock or a

crypto, right? Oh my goodness. Yes, I saw that and I was like, oh my God, we're going to get a pullback in the market. Something crazy is going to happen. There's going to be a glitch in the matrix. And the joke here for all of you that aren't aware of it is there are many, many channels out there that bet exactly the opposite of what Jim Kramer says and usually it's right. So let's get into this a little bit. This is one of my favorite categories. You all have listened to me all year long in 2020. shouting from the mountaintops to dollar cost average into cryptocurrency. And I bet you're so happy now that you listened. So many people came from me early in 2023 saying crypto was dead.

And yet here we are. And I'm going to read off just a few quick facts for the people out there that say crypto's dead or that were crazy for talking about it and it's too risky. Let's do some numbers. Bitcoin is up 160% in 2023. Ethereum went up 82% in 2023. Austin's favorite chain link went up 150% in 2023. Now here's a couple crazy high flyers that have been on our watch list, on our buy list, and our callout list. So Lana went up 670% in 2023 and Fetch AI, which is still one of my favorites, went up 550% in 20203.

So as we roll into 2024, all of the above cryptos are still in our portfolios. And we think that folks should listen and definitely consider dollar cost averaging into these and many other cryptos with that 5 to 15% of your investable assets. So let's get into a few of my new favorites. So Austin's going to do a deep dive on these as well, but these are some of my callouts for 2024. One of them is near protocol. Number two is injective. Number three is arbitram. And number four is LCX.

Of course, these are just pie in the sky ideas. I love these projects. I like what they do. I like what they represent. I like the teams. But always remember to do your own research. Make sure you're following up and you know what you're investing in. This is so, so important because some of these projects may have huge upside potential.

But we just want to make sure you do your own research along the way. Yeah, I think it's really important because, you know, sometimes I see people comments. Even some guy, I remember commented on our podcast in the same. Spotify feedback part on the app. And he was like, hey, you guys need to stop talking about Bitcoin and comparing it to, you know, the S&P 500. It's like an asset class no one knows about. It shouldn't be an investable thing. People shouldn't own it. And I was like, okay, I understand Bitcoin is definitely not the S&P. We're not saying that. But we think it is irresponsible to not have 5%, 2%. Like, like, how risk averse are you, right? Are you that, you know, risk averse that you can't

take a 20, 30% swing to the downside or to the upside in a couple months. So $2,000 of your $100,000 portfolio, you don't want to risk $2,000 in that into Bitcoin. Like, why not, right? Like, 2, 5, 10%, like that is way we are. We think that there's so much risk in not owning it because of what the upside potential could be that even if you do experience a 50% loss on your 2% sliver of your portfolio, like boo-hoo, you lost $1,000. That's like saying if you had it all in the S&P and it went down by 1%, like what it did on Tuesday, the first year of the year, you would have lost the same amount of money, guys. So I just want to help people kind of make the mindset shift of like cryptocurrency,

specifically Bitcoin and Ethereum, these big blue chip kind of cryptos that have been around for a decade, should absolutely be considered in your diversified portfolio for retirement. And it's, you know, we're not telling you to sell your house and put it all on black and cross your fingers, right? That's not what we're saying. But what we are saying is that it's totally okay to put five to 15. percent of your total invested assets into this stuff with the hopes that, oh my gosh, my 5%, the $5,000 I put in, assuming you have 100K portfolio, it went up 160%. Wow, it's not worth, you know, $15,000.

That's incredible. Like, that's the kind of stuff we're talking about. And even if it goes down by 50 you lost two grand. I'm sorry, right? It's like it's ups and downs. I love the house reference. And I just had this conversation the other day with an investor friend. And it really comes down to the people through my career in my lifetime, and I've run across and done business with many, many, Uber wealthy people. And the people that are the most successful are generally the ones that take risk. If you're just playing it safe your whole life in your job, in your investing, you keep everything maybe in a high yield savings at best, you're just leaving so much money on the table. And I just think people play too safe throughout their lives, especially their younger financial years, I think

that's where you really should consider having a higher risk tolerance. If every time you invest, you wait till the market's almost to the top and you're getting that little sliver of upside before there's a correction, you're just never going to really, really get ahead. And I just want people to really understand it's okay to take risk and higher risk with a portion of your portfolios and your investable income. So to give you all the recap here, there are three categories we're very excited about in 2024. Number one, cybersecurity. We all know that cybersecurity is not going away, especially not for the next decade. So I'm really excited to be owning cybersecurity stocks that will continue to do well throughout 2024 and beyond. The second one is artificial intelligence.

2023 was the first inning of that, right? It's not even the first ending. Like we're still in the national anthem of artificial intelligence. So we're really excited to own both the hardware side and the business efficiency side. And thirdly, we are equally as excited about cryptocurrency as an asset class. Of course, there's a bunch of names out there and a bunch of crazy ideas, but Bitcoin and Ethereum aren't really going anywhere. And it's probably a good idea to consider learning more about them and adding to 5, 10% of your invested assets into this alternative asset.

Love it. This episode of the Rich Habits podcast is brought to you by Nios Investments. Nios currently offers three unique exchange traded funds, SPY, BN, D, I, and CSHI. All three aim to offer their investors monthly passive income with tax efficiency in mind. Their management team are pioneers in the options-based ETF space with decades of combined experience

creating and managing ETFs that pursue income as the outcome. And during uncertain economic times, Nios ETFs can also be thought of as a way to turn market volatility into opportunity. While giving you exposure to the S&P 500, the U.S. aggregate bond ETFs, or even T-bills, the NEOS team uses unique option strategies with a goal of increasing monthly income for their investors. So if you're looking to add tax-efficient, monthly passive income into your portfolio, you can learn more about Nios's ETFs by visiting Niosfunds.com. And as with all investments, investors should carefully consider their investment objectives,

risks, charges, and expenses of NEOS Exchange traded funds before investing. To obtain a prospectus or summary prospectus containing this and other information, please visit NEOSF funds.com. NEOS ETFs are distributed by Foreside Fund Services LLC, and investment in NEOS ETFs involves risk, including possible loss of principle. The equity securities purchased by the funds may involve large price swings and potential for loss. A fund's income may decline when yields fall. Fixed income securities will decline in value.

you because of an increase in interest rates. The funds may use derivative instruments to seek income, which involves risk in different form from or possibly greater than the risk associated with investing directly in securities and other traditional investments. As you all know, we are super grateful for NEO's funds for support in the podcast, and we cannot recommend their ETFs enough. It is my largest dividend paying ETF holding in my portfolio. I love the passive income I earn because I own this ETF. Robert has BNDDI, a really cool bond ETF in his portfolio. We talked to Troy about why that's a cool play for 2024. So go listen to that episode. But check out Nios's ETFs. I think you will be happily surprised. With that being said, let's now jump into our question and answer

segment with the first question coming from Kaysen. Kaysen says, hey guys, thanks for doing this podcast. It is super helpful to me. Question for you. I'm 21 years old. I'm a married student and my wife and I have more than we technically need for an emergency fund in our high yield savings because I need to pay for my master's program soon. I'm also thinking, though, about starting a small business and I'll need a little bit of liquid cash for that. We make contributions to my Roth IRA every month. Since I can withdraw money that I contribute to my Roth IRA without any taxes or penalties, would it be a bad idea to put any extra money in there instead of a high yield savings account? Obviously, there's more risk involved, so I'm wondering if the upside I'm missing out on right now

is worth it. Ooh, this is a really good question. Do you want to take a first step at this, Robert? You want me to? No, I'll take the first stab. This is a great question, Kaysen. And I'm always against putting money in and taking money out if you can prevent it, even in the Roth IRA. I'm glad you understand that you can take out your principle. But I just like looking at the Roth IRA as kind of like the golden nugget. It's the thing you build, the thing you just let go, and you don't worry about. So the way I would look at this is there are many other tools that are liquid and investment structures that you can use to be able to build on your nest egg while still making it liquid. You can look at the new public account that is similar to a high yield savings account.

It's earning 5.1% right now and it's fully liquid. You could look at T bills through public as well, but you could also just own funds in a traditional IRA or even just an investment brokerage account where you're buying ETFs and stocks individually and have those be liquid at any time you need. them because you have to remember almost all of these things we're discussing, you can get wired back to you in the course of 24 hours and no one really needs to be that liquid. So I wouldn't worry about it too much. So that would be my thing. I like when you look at the Roth, my Roth, I don't touch it no matter what. You look at that as the nest egg and the golden goose that's

going to take care of you in your later years. So that's how I would look at it and that's how I would approach it. I would entirely agree with that. I look at my Roth IRA as a I put money in and I will only take money out when I'm in retirement. It's not a savings account. I don't treat it like a savings account. I treat it as a retirement account, an individual retirement account, one might say. And by that, that means that all my liquid cash, I put in a high yield savings account. And I earn my interest that way.

Sure, I guess I could have it in the Roth IRA and invest it and maybe make a profit and take it out and blah blah blah blah blah blah blah. No way. I don't want to do any of that. It is way too hectic. I'm with Robert on this one. Put the money in, max it out. Forget about it.

Have the high-yield savings account that Public.com offers, which, by the way, you should totally transfer your funds, earn more yield because public is the highest right now in the industry at 5.1%. Earn more yield on public than you are somewhere else, and use that as your way to sort of have a little extra emergency fund. And good luck with the business. Let us know how it goes. Our next question comes from DJ.

DJ says, hey guys, I love the show, and I like listening on Spotify. Sometimes you all state, do your own research, read the prospectus. What are the key things to look for in reviewing a prospectus? That is such a good question because we say that in like every episode as a disclaimer. Okay. So what is a prospectus? Simply put, a prospectus is a report or an analysis or a piece of, you know, research paper that the person who is offering the ETF or investment puts together to make sure their

investors have full information, what the investment strategy is, the assets they hold, how they try and make money, like sort of everything coming together here and normally a 10 to 20 page document that breaks down everything you need to know as an investor. So when I'm reading a prospectus for a new ETF or anything that I'm trying to invest into, I'm looking for probably two or three key things. Number one, if it's an ETF, I need to know exactly what the strategy is. So, for example, with SPYI, they go into detail with two different things. The first thing they go in detail in is what they hold as the ETF, which is the S&P 500 index

fund. They just own the straight up ETF of like VOO, SPY, stuff like that. So that's the first thing that go into detail in. The second thing they go into detail in is their covered call option contract strategy, specifically how they plan to write the contracts, how often they plan to roll the contracts, all the fun stuff to do with that. And at the end of the day, those are really the only two things that they're doing or investing into to generate the yield for their investors.

Now, SPYI might be different than maybe a different ETF like SCHD that might talk about how they plan to invest into dividend paying stocks or maybe, you know, VGT by Vanguard, how they plan to invest into information technology stocks. Perspectuses are different for every ETF, and we definitely want to encourage everyone to go read the prospectus of any ETF before you invest into it. And it's really simple to find it. You just have to type in the ticker symbol of the ETF and then the word prospectus. It'll likely be a PDF.

You click the first link. You read it. And you're like, wait, now I understand this so much more than just like, you know, seeing a YouTube video about it, right? You want to be an educated investor with everything you do. And we really hope to not only, you know, encourage you guys to start investing, but also encourage you all to learn about the different intricacies of investing and the different ups and the downs and everything that could go good and also go bad with investing, right? Because we know

investing involves risk and we're not trying to shame away from that. But it's something empowering about understanding what you're investing into as well as where it could go as an investment. And that's what the prospectus helps everyday investors do. It's something else here now, something new. From exclusively on Paramount Plus, it's the series Stephen King calls Scarious Hell. Everything here. It's impossible, but it's also real. Sci-fi vision calls it the best show streaming right now.

We're running out of time and we still don't know the rules. Don't miss what the movie blog calls something you need to watch. Saving those children is how we all go home. From Binge All Episodes exclusively on Paramount Plus. Yeah, and one of the biggest strategies that you can implement into your career as an investor and entrepreneur or whatever is being able to enjoy and want to go down those rabbit holes of looking at all this information. Austin uses the term nerd out. And I love that term because it's so true.

We both spend hours and hours a week researching the various investments we're looking at, whether it be a startup or somebody reaches out to us with an idea or an investment into a business we're going to buy or a stock or an ETF. It's always about the research and understanding before you make that purchase and that investment, what you're investing into because too many. people see a hot tip from a Facebook group and they just buy it without doing their own research. And we strongly suggest against that. There's just too many shillers out there, too many scammers out there. And just really be careful and do your own research. Always, even if it comes out of our mouths, we want to make sure you understand everything you're looking at by doing

your own research. So important. So our final question comes from Devin. Devin says, what are some of your favorite ways to find cash flowing businesses? I'm a strong closer. So I'm confident I'm strike a deal, but how or where do I find the opportunities? Please share. So, Robert, you just bought a pizza shop in St. Petersburg, Florida. Can you walk people through how you found the deal, how you negotiated the deal, what the deal was? Like, walk us through all the details that you could share. Obviously, I'm sure you're under NDA for some stuff, but walk us through what you can share about that process and any maybe big takeaways that you've learned over the last several months. Yeah, Devin, this is a great question. And so many people ask this question. And it really is very

intricate. And so how I find deals are two really simple ways. Driving for dollars, the pizza store we just bought, we found on Biz Buy Sell. It's in fact not in St. Petersburg. It's in a very small town near St. Petersburg, a growing, growing market. So we are very excited about this acquisition. But I look at Biz Buy Sell. I look at LoopNet. I look at Facebook groups. And I love to drive for dollars. When I see an area that looks promising, there's a lot of cranes, there's a lot of construction, going on. I know that that area is poised for growth. So I'm always going to be looking at what car washes for sale. What restaurant is maybe doing okay but could do way better? What laundromat hasn't been remodeled in 25 years, but they're building thousands and thousands of new apartments nearby.

I'm always driving for dollars and researching on the biz by sell websites, the loop net websites, and sometimes the Facebook groups. That's how I find the deals. It works really, really, really well and it's really easy to do. You can literally go to LoopNet or Biz Buy Sell, type in the city or the zip code, you want to look in that area. And all the businesses will pop up that are for sale in that area. And then I just like to get the information. I'll print it out and I'll go drive around, look at the site, look at the area, see what the future growth is. If you're buying a business in one of those areas, it's maybe up and coming, go sit at a development meeting, maybe with city council or the village and see what else is going on. And that's really the best for. And that's really the best

way I can tell everyone listening to find a really great opportunity in a growing business. One of my favorite stories on this question is a gentleman that is now probably worth three or four hundred million dollars. All he did was watch in specified growing areas. He would watch the development news. And whenever a big development was announced for a new FedEx hub or an Amazon hub or anything massive that was going to create a lot of jobs in the area, he would state that as soon as the foundation was poured, he would start going in and buying up as many single family homes and multi-unit apartment complexes he could buy in a secular five-mile radius from that new foundation for that new hub because he wanted to be two years ahead of the growth

curve. So he would buy them all, start fixing them up, rent them. And then two years after that new Amazon hub would open, he would start selling them all off for huge, huge profits because the area would be growing so quickly. So there are a lot of ways to do that. That's a little more complex, but it's really all about using these websites, driving for dollars, and then going out there and knocking on doors. Robert, talk to me a little bit about the negotiation process of buying the business. How do you guys come up with a number? How do you guys negotiate? I mean, you're sitting in a conference room just talking like. What's the negotiation process like? Yeah, that's a great question and love to answer this. So for me, what I look for is when we first sign that NDA is I want to know

the real numbers. So I don't ever allow business owners or brokers to provide me third party numbers or P&Ls. I want it straight from the software, whether it's QuickBooks or out of the POS, so I know the real numbers. Then I want to get the expenses against the business so I can see what their actual profits are at the time. So that's very important for me. And then from there, I can extrapolate from those numbers what I think is a fair variable, a multiple of the profits, because that's one of the simplest ways on the fly to come up with the value of the business. So let's say the pizza store, for instance, I want to be able to buy that pizza store at a two to a two and a half multiple because a lot of times when you sell a pizza store, you're going to get a three, four, or five multiples.

So I want to make sure I'm getting a really good deal. And in this instance, we were able to really negotiate a strong deal for a strong deal for. myself and the investors because of the fact that the owners had to sell, close, and be out of the country in like a three-week period. So it gave me all of the leverage in the negotiation. So I'm going to start at the top when negotiating what the price is. And then from there, I'm going to negotiate my best possible terms. Is the lease transferable at the same amount? Because what we don't want to do is terminate that lease. And then the owner's like, ooh, we have a new owner. And they jack up the price. So we want to negotiate the

that the lease is transferable with the same terms, especially if that lease has three, four, five years left on it because then that way they're not going to be able to put in an arbitrary raise in the lease amount upon transfer the business. So that's a key one. We're also going to want to look at what is the status of all the licenses. Are they current? Are there any debts owed? Are there any back taxes owed? All of these things come into play to make sure you're getting the right price and you know what you're buying. And then after that, I am always going to try, not always, but in most instances, to get owner financing so I can really, really get great terms. So in this instance, with the pizza store, we were able to get partial

owner financing with a 6% interest rate, which was very fair for both parties. And it just makes everything go quicker so we can close quicker and take over that operation. So that's how I do it. It gets more complicated as the businesses get bigger and more complicated. But in a general sense, when buying a small business, let's say you're paying $500,000 or less for a small business, that those are the best strategies and how I would do it. I love it. I think we should have a whole episode dedicated to walking through how you bought your business, how you found it, how you're thinking about employees and scaling and efficiency,

stuff like that. So, you know, stay tuned for that here in 2024 with the Rich Habits podcast. But everyone, thank you all so very much for listening to this episode of the Rich Habits podcast. If you haven't already shared your email address with us, there's a little Google form linked below that's going to give you the opportunity to do that. Remember, we have a January email challenge about tracking your investments, velocity with money, diversification, all that fun stuff. So share your email, be a part of that. You're going to love it. We're going to do this every month. So February,

there's going to be a similar theme and so on and so forth. Also, if you've not yet checked out public.com's high yield cash account, I'm talking to you, Kaysen, check it out. Go drop your savings in there. 5.1 percent. It's higher than Robin Hood. It's higher than M1 finance. It's higher than Ally Financial. There is no subscription required. Five million FDIC insured. Go check that out. Use the link in the description below or go to public.com forward slash rich habits. Again, that's public.com forward slash rich habits. We are so excited for 24. We have a lot of new tricks up our sleeve and just so many amazing things and we couldn't do it without all of you. So thank you again for following along on this journey. If you love the rich Habits podcast, please share it with a friend. Let them know about it. Give it a five-star review.

And we hope to continue providing you the best value on the internet and the best education through the Rich Habits brand. Thanks, everyone. And have a great start to your week.