Mar 31, 2020
BRT Sampler - Best Of Early 2020
- BRT S01 EP8 3-29-20
Things We Learned This Week
What Business Are You In? - McDonalds is a Real Estate Company
Replay Clip from 2/9/20, where Matt talks about the biggest franchise of all, and what their real business model is. McDonalds has built an business empire thru Real Estate, not burgers.
The Dollar Menu is designed to get customers in the door. McDonalds loses $ when people purchase from the dollar menu, it is a Customer Acquisition Cost (CAC). This is also called a ‘Loss Leader’, selling a product at a low cost to get customers. McDonalds then makes money when people buy more, and off return business.
McDonalds is one of the biggest Real Estate companies in the world. The stock is valued on the $37 Billion in Real Estate they own. They make money as a landlord, because the franchisee is their tenant.
The Founder – business movie biography of Ray Kroc. Kroc started as a milk shake salesmen to the McDonalds brothers in California, then went on to create the franchise system we know today. The first President of McDonalds Franchise (Harry Sonneborn) helped Kroc create the real estate model that the franchise was base on, and used to scale to a billion $ company. Internally McDonalds used the Brother’s Speedee Service System created pre-Kroc.
The Question ‘What Business Are You In?’ comes from business consultant Peter Drucker. Business owners need to understand what problem or service they really offer their customers.
Ie – Starbucks is in the Customer Experience business, not coffee, but the atmosphere of drinking the coffee
Full Show: HERE
Nowicz, President - Wealth For
Denver is an advisor with nearly 20 years experience working with clients in investments and insurance, designing retirement plans with a combo of both. He takes us through different strategies for clients to get the best allocations for their money over the long term. It is the Combo Strategy of both Offense and Defense, the synergy of the mix, not ‘All or Nothing’.
Why You Should Own Assets
In The Founder movie when Ray Kroc was having trouble getting a loan, he was telling the bank about current sales, and future sales. The bank kept asking him what Assets he has.
Banks like to own Assets, Tier 1 Capital like cash, real estate, life insurance.
People (customers) put money in the bank, and get an interest rate of half percent % (.005), and bank turns around and loans out money at 3 – 5%. Because of Fractional Reserve Banking, only need to keep 10% in reserves and can loan out the other 90% to make that loan spread of 2/12 to 4% + on the customer’s deposits.
Business Owners put all of their money $ in the business (all eggs in one basket), but do not acquire Assets (Real Estate, Gold, Stock, etc) outside of the business. Wealth looks ok on paper when looking at the business valuation, but in reality a business owner’s net worth may be less than thought.
If the business is not worth what is on the balance sheet, big problem. If the business is not worth what is on the balance sheet, big problem.
Business Owners struggle to leverage their cash flow to grow wealth. Market and Business Cycles can hurt business owners and cash flow.
Wealth Creation is in the Assets, as the Assets appreciate more than cash and inflation.
Debt can be used to acquire Assets (Leverage) in the right way to build long term wealth. Can also get write offs with debt and interest. If you buy Real estate, more write offs which lessons taxes.
Full Show: HERE
Seg. 1 of 2/16/20 show – MB on Disruption in the Business World – The Innovator’s Dilemma
MB on Disruption in Business & The Innovator's Dilemma book by Clayton Christensen
Clayton Christensen’s book, “The Innovator’s Dilemma”
Tech Disruption – technology changes and a small company startup can up-end big tech companies. Hence, disruption - the power of disruption, why market leaders are often set up to fail as technologies and industries change and what incumbents can do to secure their market leadership for a long time.
Innovator’s Dilemma – how can big companies stay up with tech changes and pivot without hurting core business? All businesses (including tech companies) have trouble with disruption.
Example: Blockbuster – rented movies, DVDs, lost market share to Red Box (vending movie rental), then both disrupted by streaming movies.
Music industry went from records to cassettes to CDs to streaming (Napster).
MySpace taken out by Facebook in social networks.
Yahoo search taken out by Google (controls 75% of the search market)
Kodak afraid to get out of film business and passed on digital film, lost market share.
To solve the Innovator’s Dilemma, big companies acquire smaller tech companies; have in house R&D to be ready for next tech wave.
Steve Jobs of Apple was very influenced by Innovator’s Dilemma and took this idea seriously.
If you do not try to put your company out of business (w/ disruption / new tech), someone else will.
Jobs was not afraid to innovate, and cannibalize his own company and products to stay relevant.
Apple created iPhone, and now computer is in your pocket
Peter Thiel – “Zero to One” book - Great innovation is not A to B to C, it is vertical, jumps curves.
Current smart phones have more computing power than a computer 20 years ago.
Guy Kawasaaki (former Apple) Talk - “12 Lessons From Steve Jobs”
Full Show: HERE
Seg. 1 of 3/22/20 show – Interview w Denver N / Wealth for Life of https://wealthforlife.net/ – How to Navigate the Market with Real Diversification (in the Pandemic Crash)
Markets are inefficient, and often irrational. Humans are emotional and tend to panic when they see scary headline on CNBC. People sell on fear of a recession, disregarding the fact that many of these big companies will not go out of business.
Trading in the Markets have changed with all the super computers and algorithms involved in daily stock trading. Computers can create huge sell offs in the market, because of the programs and indicators they operate off of - artificial intelligence.
Financial Advice should be more holistic. Too much advice is based on buying stocks, vs growing your overall net worth. To grow wealth, one must have cash flowing assets. You want to put yourself in a solid financial position owning different assets (like real estate, stocks, etc.) so you can handle economic downturns.
The stock market value is all on paper until you sell, so it is inefficient on capturing gains. The wealthy may only have 20 - 30% of their money in the stocks. It is hard to be consistent and disciplined in your investing. You need ways to generate cash, and lock in gains.
It is important to understand Market Cycles, and how they work, plus how long they will last. Howard Marks writes often on this topic, in his memos or the book he wrote on the topic (here is a summary). If you can recognize these cycles, it helps in investment planning.
Tiger 21 Club - Follow this super investor group for ideas, and how they diversify their investments. Allocation usually has 25% in real estate, 25% in stocks, 25% in private equity, 10% in cash, and the rest is Bonds or other investments.
Full Show: HERE
Link to Taxes Show on 10/31/2021 w/ Denver: Here
Link to Offense / Defense Show on 6/6/2021 w/ Denver: Here
Link to Shows, Denver was a Guest: Here
Investing Topic: https://brt-show.libsyn.com/category/investing
More - BRT Best of: https://brt-show.libsyn.com/category/Best+Of
Real Estate Topic: https://brt-show.libsyn.com/category/Real+Estate
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Business Roundtable with Matt Battaglia
The show where Entrepreneurs, High Level Executives, Business Owners, and Investors come to share insight and ideas about the future of business. BRT 2.0 looks at the new trends in business, and how classic industries are evolving.
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