equity vs cash flow businesses 🤖

It wasn’t until pretty recently where I realized that starting a business wasn’t only to make cash flow. As a primarily YouTube-focused media company with high margins, I had grown accustomed to building businesses to generate cash.

Each month, hundreds of thousands of dollars would come in - and a big portion of it would be profit.

This was great for my lifestyle and investing - I was able to get a nicer apartment, cooler cars, and invest a lot more money.

However, there was a big catch - while I was generating cash flow, I wasn’t generating any equity.

And in addition to that, I was paying a f*ck ton in taxes. Like, 7 figures a year.

Let’s talk first about the lack of equity - because it’s actually a pretty big issue for lots of newer entrepreneurs.

When you think about a business, you think about the profit it brings in, as well as the ability to sell it. If you can’t sell it, you really don’t have “real” business. And what I realized was that my main YouTube channel (Charlie Chang) was entirely based on my own personal brand.

This means that it’s impossible to sell unless I stay on as the main contributor. And knowing me, there’s zero shot I would work for someone else and be okay with it.

So in building up this portion of my media business, I was wasting a lot of time. You see, most business owners who strike it BIG do so by selling their company. And well, that wouldn’t be me if I kept at what I was already doing.

So that’s where I pivoted - I started creating new channels that were not based on my own personal brand - channels that could eventually be sold in the future. I’m not planning on selling them as there is still so much work to do (getting them monetized properly) but it definitely is an option in the future.

Now that we have a large catalog of channels, I could package them up in the future and sell it to a new operator. Woohoo!

To diversify even more, I knew I had to get out of YouTube only. You never know when you’re reliant on a platform - something could happen and my income could basically drop to zero.

So in 2023, my business partner and I started Paired, an overseas recruiting agency. With this business, I actually make no money. We haven’t paid ourselves a single cent in over 2 years!

However, we’re becoming profitable and therefore I have high hopes that this business can be sold within 4-7 years timeframe. Our best month so far was about 45k in profit, although this past month has seen a pretty big dip. Agencies aren’t the best type of business to sell as you can’t get a high multiple on sale - compared to a tech business for example.

Here’s a little “mindset” shift that definitely influenced me: Building and selling businesses allows you to leverage “multiples” to your advantage. If you can spin up a company that generates $1M in net cashflow, you can sell it for let’s say 3-8x. This means you’re fast forwarding 3-8 years of cashflow and getting it all at once. If you’re good at this, you can repeat this in a new business, sell after a few years, and keep this cycle going.

Of course it’s easier said than done, but with this type of build and sell mentality, you should be able to increase your assets at a much faster pace than if you were to just continue running the business and never starting another. This isn’t taking into account if your cashflow were to increase year over year, which is definitely possible. As well as if you pour resources into a new business that doesn’t end up working out.

I’ve been trying to keep this in mind with new projects that I start - making them not tied directly to me and really just trying to operate as a real business owner rather than an “influencer”. 

Best formula in my opinion for influencers? Get an audience, and then build an equity-focused business using your audience as free marketing.

That way you can have the best of both worlds - a solid cash flow business (your “influencing”) paired with equity in a real business.

I Worked Out Like David Goggins for 100 Days

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