Why Simplicity Beats Scale in Building a Profitable Business

Five years in 2016, me and my partner had 500K in the bank from running our study startup. And that's when we put it almost, we put every bit of it into that first self-storage development. So then we were broke again, totally broke. I had no money. Still living extremely frugally. I got married for 25K. You know, like that was kind of how I started my relationship with my wife renting a shitty one-bedroom apartment in Medford, Massachusetts. And then five years later, 2020, I would say I was making 30 grand a month or so. 30 grand a month. As in like in your bank, your personal bank. Yeah, that's coming to me from my real estate that I own and some affiliate stuff I was working on, selling some courses online. Yeah, but somewhere.com didn't exist yet. Both storage had six properties instead of 65 that they have now. RE Cost SIG, which is another monster company that I own is not in even an existence I was found in 2022. So yeah, exactly. So this is before you, this is before you'll kind of like Twitter flaming kind of explosive shit and then suddenly things start taking off. So it's just wild to see that it's kind of, it's been that that's how long it's taken. And now you told, you told Jackie that you considered giving up two times. Can you tell me, can you tell me about those two? Okay, one of them was 2014 or 15 on the streets of Boston and that's what he started up in that company storage squad. And what we did was pick up and delivery storage for students. So when the students went home, we picked up their stuff. We were driving box trucks around. We rented a warehouse. We were, it was a logistical nightmare business. We did 7,000 students at our peak in 12 states at 25 major colleges. So we had 200 plus parts of employees driving trucks around these major cities. Is that all happening in one week as well, by the way? So yeah, it's the fan in Ithaca and you're in Texas, whatever, like you're screwed, right? Okay, exactly right. So it was a total nightmare of a business and we went into a super, a super growth season in Boston. I mean, I painted the town with sidewalk chalk and we got 3,000 customers in Boston. I had a little like 7,000 square foot warehouse. I had to rent 20,000 extra feet to put them in. I had to hire a bunch of extra employees and I worked myself to the bone basically. And during deliveries, it was a total nightmare on September 4th in Boston and yeah, man, like one of my employees put gasoline and a diesel engine, total one of my trucks. One of my employees ripped the top off of a truck on Sturro Drive in Boston and one of my employees side swiped to BMW and that all happened in a matter of three days and two of them happened within two hours and I had a mental breakdown on the side of the road in Boston because I thought my business was going to be, was going to be done, maybe it was going to be gone. - Yeah. - Literally the phone ringing nonstop 'cause I'm the one answering customer service calls. I didn't know how to delegate. I didn't know how to run a company. And yeah, I curled up a little more. - And how levered were you in that? Like, if that had gone down, like how screwed would you have been do you think? - Oh, I was spending money like crazy. I mean, each of those accidents cost me five grand out of pocket. We had a ton of customers that were getting upset asking for refunds. We had, I wouldn't say we had leverage, but our entire, you know, our business reputation was on the line for sure. And we were getting bad reviews, like added to Google daily. So it was a very scary moment where I thought I was going to having wasted the last four years of building this business to watch it all crumble. - Yeah, right. So that was the first one. And I'm guessing spoiler you didn't quit 'cause here we are. But what was the second? - Yeah, the second one was when we were doing our development and if it can New York, our first self storage facility from the ground up and we raised a bunch of money on a $1.7 million budget to build a building. And by the time we were done, we spent like $2.45 million. So I had to go back to my investors and ask for 20% more money. I had to go back to the bank and ask for 20% more money. We were seven months over schedule. It was very, very stressful and there was big money on the line 'cause I had borrowed over a million bucks from a bank. I had raised a bunch of money from investors. So yeah, I think people talk about online, on social media and in these books and on podcasts, people talk about all the good stuff that they've done. But I have been humbled by entrepreneurship. I have been in a ball on the sidewalk in Boston. I have been like dreading, trembling before getting on a Zoom call with seven investors who have their livelihood with me on a deal. So people forget that part of this whole game. - What was the toll of that stuff, do you think? Like did it have a physical toll? Did it was just like a mental emotional one? Like what was the kind of impact of these stuff? - I think it's, look, it's very, I have a good life, right? I'm not gonna cry about where I ended up, but there's definitely some trauma to these situations. And you build your muscle of dealing with stress because as an entrepreneur, the amount of money that you make is directly correlated to the amount of stress that you can endure. I had to get on a, right before we spoke at 9.30 this morning, I had to get on a Zoom call and let somebody go who's been working with me for four years. We cried on the call, like me and my manager, it's a very, very difficult thing. But as an entrepreneur and as a business owner, these happen a lot, like it's your job. This is why they pay the big bucks to handle the big problems. So this is why entrepreneurship's not for everybody. I mean, people listen to this podcast and think, oh my gosh, I wanna be this person. I wanna be that person, look at the money they're making. I pretty firmly believe that entrepreneurship is not the right path for 95% of people. - Early 2019, we refinanced that building that we bought and built and I got it seven figures wired to my checking account tax-free because it was alone. That was life. That was set us on a totally new trajectory early 2019. I invested almost all of, I didn't buy a bigger house, I didn't buy a new truck, I didn't buy anything personally. I put all that money into buying four more storage facilities between me and my partner that we own wholly without investors. Those deals have been phenomenal for my net worth. I've turned that million dollars into six or seven. - So before we get into like, 'cause again, I wanna chart the trajectory 'cause I think it's really fascinating. But do you not have your mom in your mom, sorry, in your ear? Like Nick, what the fuck are you doing? Like put this money in a, you know, whatever. Like the market's anything, just like somewhere secure, lock it in, you know, what gave you the sort of gumption to go, now I'm rolling this all over. - We were finding really good deals and I had, I was compelled as an investor as an entrepreneur to seize the opportunity. So I, my mom had never heard of that much money getting wired into an account. I didn't even really tell her that it happened. I told my dad and he said, holy cow, is this possible? Like what are you really doing, Nick? There was a little bit of that, but mostly it was, okay, hey, we got this cash. We're still making a little bit of money from our storage business. Let's go buy some buildings now because we know what we can do with this money if we continue to operate these buildings well and do this. So it's a charted 2011, broke college student, but I had, you know, always 10 or 20 grand in my checking account because I was an entrepreneur, I was a hustler. - Yeah. - Three years into business, 2015, I was making a hundred grand a year maybe. The next two years were really good. 14, 15 were good years. Me and my partner after tax had about a half million bucks that set aside, so 250K each that we had saved up. We put it all on red and built a self storage facility with some outside investors, two years after that. And our business was staying around the same size making 200 grand a year, 250 grand a year of profit, two million of revenue, by the way. So our storage squad was operating at 10 or 15% margins, is all like that risk in that headache and that physical toll that it was taking on us. Two years later, 2019, we opened the building in 2017. By 2019, it was rocking and rolling and producing a lot of net operating income. That's when we did the refinance and I made a million dollars on my checking account in 2019. - Yeah, well. - So to my partner together. And then we went and bought six more deals. Still our monthly income is still only 110 grand a month or 15 grand a month or something like that. We're making enough to pay the bills. I had my first two children at this time. And then, yeah, 2020, I started doing some work online. 2021, I was doing some affiliate revenue with somewhat with shepherd, but still not making any more than let's say 20 grand a month. 2022 started making real money as an affiliate for shepherd for somewhere.com. - And how big was your Twitter following and podcast following and newsletter at this point? - It was about 100,000 followers, but it was way more engagement than today and I could sell way better today. It was better, it was better then. So then 2022, we found Ari Costseg and I buy into somewhere.com. I buy equity and 2022, then my income started becoming, let's say 80 grand a month, 70 grand a month. 2023 is when these businesses really exploded. And I started making 150, 200 grand a month. And it's been lumpy ever since around average, maybe 300 grand a month average since then. - Wow, that's insane. - And so, yeah, I think you've walked me through that you've kind of figured out might, have there been any exits along the way then? - No, so I guess the other side of this is talk about equity and what it's worth and kind of how I'm building because I've never sold anything. Never sold a business and I've never sold a piece of real estate. So we've gotten some cash out refinances and a little bit of liquidity from those, but I still have the majority of my net worth. If we say my net worth is somewhere between 25 and 50 million, it's always moving, right? Over half that is equity in the three companies. Bolt storage, all the real estate, RECOSSEG, ION45% of, and then somewhere.com, ION12.75% of, and I bought a big additional chunk that gives me a little bit more upside if the company starts to grow. But yeah, the equity in those businesses is kind of where the majority of my net worth is. And then I keep a couple million or so of liquidity fast, accessible cash if I need it to make payroll or make an investment. What's that threshold you think where you can just like, relax a bit and go, all right, fuck it, I am buying the next car in the big house and all that shit. A million a month of revenue or profit, personally. That's my next checkpoint. Okay, yeah. Oh, that's it. Yeah, I made a 900K quarterly tax payment two weeks ago. Oh, yeah, no. So the money comes, the money comes, but the money goes. Yeah, I'm not into that. I'm not into that. It's so weird, isn't it? You see the top line growing, growing, growing. And then your tax man says, oh, yeah, but you've got to pay tax on it. And suddenly, it feels like just the world's caving in. That's definitely an impact of it being an entrepreneur is it's the highs and lows from a financial standpoint. People talk about the highs and lows of business. One day, your team's fired up. You do a ton of revenue. You make a big sale. Things are clicking. It's working. As an entrepreneur, that's what makes you feel alive. As other days, you're not making very many sales. Somebody quits big problems happen. Your team messes something up. There's highs and lows of an entrepreneur from an operational standpoint. And a guy like me who has a lot tied up in his careers and his businesses, that will send you on a roller coaster as a man and how you feel about yourself and how you walk home in the face you put on in front of your family, which gets difficult. But then there's the financial side of it, too, where one month, you make a short load of money and you're like, oh my God, I'm rocking, man. I can do whatever I want to do. And the next month, you make an investment in one of your businesses. You don't do a distribution. And then you pay a 900K tax bill and you're like, I am broke. This is what happens. With me and my wife, I'm literally on a Monday. I'll be like, we are rocking. This is awesome. Yes, we should build that deck outside. Yes, we should get carpets fit. That's the carpets is the talk of the day in our house. And then the end of the week comes and I see paychecks go out and I'm like, do you know what, actually, I don't feel so hot. This is why I think your podcast and your message is so important because nobody talks about these things. As an entrepreneur, it's taboo to have a group chat with your buddies and send them a text, be like, we are fricking rocking. Here's how much money I made. These are some of the things I want to do with it. This is how I'm thinking about it. And then the next week say, oh my God, I'm broke. I just paid almost seven figures of taxes that this is crazy. Do you have those people in your life that you can text that too? Yeah, I do. I do. Are these like Twitter buddies that have turned into real life buddies or are these like people in it in Georgia? Yeah, Dan Hagberg, my business partner, he knows every single thing about my life. He knows me better than my wife does. He's been around longer than my wife has. My wife is right or die with me and she stands up for me in the highs and she's with me in the lows. My accountant is a great friend of mine, Mitchell Baldrige. My personal attorney is an amazing guy. He's the executor who would help me sort shit out if I passed away so that everything keeps going. So yeah, there's, and I have even guys like Sam and some other close friends of mine that we talk about this stuff and Hampton has been amazing. The private community has been a group of guys that talk about this stuff that nobody else talks about, which is really important. So you don't have to be curled up on a sidewalk in Boston. You can give someone a cool sense. Or at least if you're curled up, you kind of have somebody you can reach out to. So what's your monthly burn as a family? Yeah, I wrote it down here. I spent 2300 a month on my house. I spent another two grand a month on daycare sports, camps for my kids. I spend my nanny makes 57K a year. So that's almost five grand a month. Health insurance I don't use is three grand a month. Private health care I spend at least two grand a month. More like four probably. My jet overhead that I'm committed to every single month is only about three grand. Because I paid cash for it. It's a portion of it and I share expenses with three other partners. And then there's some variable food miscellaneous that is about five grand a month to live on. So I'm all in about 22 to 22 to 25 K a month of spend. Yeah, wow. That seems remarkably low for a man that owns a jet. So that last year, if you would add 12 grand a month for the times I used the jet. You would add four grand a month, evened out over the year for my trip to Colorado in the summer where I spent a lot of money to live in Crestabute for a month. I have other variable things that pop up. Like I'll buy a new vehicle. I'll buy this or that. But those are expenses that I can control. The 25 K a month is what I'm on the hook for moving forward. Yeah. And do you feel like you're short of anything? Do you feel like you're holding back on anything? I feel like it sounds like you're making conscious decisions not to spend more money. Oh, yeah, definitely holding back. It'd be nice to go buy a $5 million house with a outbuilding to play basketball in the Georgia summers. But like I said, I've only been making money for a little bit of time. And I think the most irresponsible thing I could do is put what I've built at risk. Yeah. Yeah. So yeah, why are you afraid of lifestyle creep? I wouldn't say I'm afraid of it. I'm just conscious of it. Because I see people with-- and I've listened to folks on your show that have massive monthly overhead nuts. Yeah. And that would get stressful if you run a business that you could make $250K one month, which is, by the way, it's only $125K after taxes. That you're going to make $125K. And you're going to spend $80 or $100 to live. What if you have a couple-- if you have a couple of goose eggs or you need to make a big investment? Things are not-- things are-- it's not good. It's not good at all when you've got big bills. Yeah. So you have a-- so what the big fear I have is like, so like one month, like, my wife gets a personal trainer. I'm like, oh, fuck, I want a personal trainer. I'm going to get one, too. So I get a personal trainer. And now we're both on the hook for personal trainers every week, which is amazing. Yeah, that's what I have that in my private health care budget of 2 to 3 year in a month. So we have that. I really don't want to scale back from that, because this is a good thing. But every time I make a purchase decision or an increase in lifestyle, I get this pang of, like, firstly, guilt. And then second, of just slight mild panic, because I'm like, is this the decision that's going to be the one that fucks me? And a year or two's time when we have a few bad months. And like, should I just be holding on to this extra couple quit over here that's the, you know, absolutely. I feel very lonely. Yeah. I think when that goes away is when you're when things start to get a little dangerous. Right. OK, so and then and then to just and to put a cherry on it, I get it, but just put a cherry on it for me. How do you justify owning a jet as a man that says he doesn't allow a lifestyle creep into his into his? Yeah, I'm an hour. I'm an hour and 45 minutes in traffic from the Atlanta airport. And then it's an hour to get through security and get to my gate in the largest airport in the world. And I have business in rural towns all over America with my storage facility. My family's in a rural town in southern Indiana. My wife, family's in a rural town in upstate New York. Traveling, especially with kids from where I live in Athens is very difficult. And I travel a lot to speak to do business. So I did the math of, hey, I can I can buy one fourth share of a jet that can fly my family around for in look. This is, I say jet. It's a vision jet. It's smaller than a turp most turbo props. It's more it's more affordable than most turbo props. It barely holds my family as my kids grow up will not fit them. It's it's a small airplane, right? This is not a private jet that you imagine Taylor Swift or Kim Kardashian coming around. I bought a one fourth share of this airplane for $900,000.