The following is a transcript of Episode 13 of Return on Podcast, the show where we help e-commerce sellers improve their ROI in business and in life. For more episodes, subscribe to our YouTube channel or listen on Podbean, Apple Podcasts, and Spotify.
All right. Welcome to Return on Podcast, where we talk about the experiences, the obsessions, and the habits of the most successful e-commerce entrepreneurs. I’m your host, Tyler Jefcoat. And I wanna welcome you to this episode of ROP. You’ve heard of return on investment. Well, this is gonna be Return on Podcast today. Guys, I wanna talk about how to use an Amazon cash flowing business to build a short-term rental real estate empire. I wanna talk about how to view the investment in your Amazon business. Given the current ecosystem, the bearish market we’re in the middle of, and the other point I wanna make here is that some Amazon sellers can develop this private label brand to exit with ease. And if that’s your strategy, you should run that strategy as hard as you possibly can, but there are other ways to make money on Amazon. And I don’t want us to forget about where Amazon started along with how to actually view your life holistically as a business owner. So to do that, I wanna bring my guest into the stream here, Caleb Roth. Hey buddy, glad to have you with us today, man.
Caleb Roth (01:10):
Excited to be here.
TJ (01:12):
So Caleb, you own several things. You’re a fellow serial entrepreneur. By the way, for those of you guys who are, listened to our podcast here, and you, maybe you don’t always make it to the end, quick sketch. We’re gonna talk about Caleb’s journey. We’re gonna talk about some things that have made Caleb really successful. We’re gonna talk about a geek out and then we’re gonna end with Caleb giving us a habit, hack, nugget. I may have one, too, about what’s made him so successful in his life. So, but to start on the hero journey part of it, Caleb, you, 2015 was a big year for you, right? I mean, the first chunk of your career was I think in the medical device industry and something was happening that created the pivot into owning your own business. Give us a glimpse into what was happening in your life in 2015, where you made that pivot.
CR (01:53):
Yeah, pivot’s the lovely word that we all like to use and we don’t know what’s going on and we just make a transition. But I graduated college in 2010 and studied business. I was always an entrepreneur. I always had the lemonade stand and the car wash and I’d kind of actually flip books a little bit, which kind of leads into my story in high school. And really the story started in high school. I worked my very first job. You turn 16, that’s when you can go get a job. And minimum wage back then was cheaper than gas is today. Minimum wage was $5.15 an hour. And so I would work 20 hours a week and make maybe a hundred dollars a week, which was good money back then. Gas was a dollar a gallon, and that allowed me to have some spending cash.
CR (02:34):
So the next summer I just said, you know, what, if I can make that a hundred bucks a week on my own time, I don’t care if I worked more, I was, you know, missing out, going to the beach and hanging out with my buddies. I grew up in Michigan. And so I just quit my job. I worked at a golf course when I was 16, worked all summer. It was great. I got free golf but didn’t make a lot of money and just said, hey, I’d rather have freedom. And so that’s what I did when I graduated college. The I went to a small school in Winona Lake, Indiana, that’s home of the medical device industry. And so DePuy, which is Johnson and Johnson, Zimmer, and BioMed are three of the largest five companies in the world in terms of orthopedics.
CR (03:10):
So artificial hips, artificial knees, spine, et cetera. And so if you study business or if you, I mean, really most people in town end up working for those firms. And so I figured, hey, I’ll go try it. One of my professors got me an in, got me an internship. And I said, hey, I’ll just, I’ll just do this. And one year as a test turned into, you know, five and a half working for corporate, which nothing wrong with that. I actually stockpiled some cash. I lived below my means, which we’ll get to a little bit later as well. And in 2015, I said, you know what? I actually, 14, I said, I’m really an entrepreneur. I want the freedom. I don’t want to go ask a grown man, i.e. my boss, for time off or to show up late on a Friday, ’cause I have to run by the bank.
CR (03:49):
And I said, I need to go back to my roots and really who I am. And that’s an entrepreneur and said, what do I know? And for me, that was books. And so I decided to you know, to start something on the side. I was a bit of a chicken and in 2015, I finally made the decision to step away, move to Denver, quit my job, actually got a part-time sales gig for one of the few offices out in Denver, just as a way to transition, see above note that I’m a chicken, and kind of transitioned my way out. And by the end of the year, I actually stepped away in November, had a call with my boss, said, hey, I’m really ready to jump in full time. I was starting to develop software.
CR (04:26):
And I said, you were great. You brought me out here. I will give you, you know, six months, if you need it, I’ll help train the next guy. I don’t wanna leave you high and dry. And he said, hey, the guy that you replaced wasn’t cutting it as a manager, and we were gonna put him back in your spot, dot, dot, dot… Basically they were probably gonna let me go or shuffle me around. So I, with one phone call, I think it was actually August of ’15, I went from, I’m probably gonna be self-employed in six months to, hang up the phone, and I guess we’re doing this.
TJ (04:54):
Man. So what’s interesting about that, Caleb is I think we have this picture of entrepreneurship where we believe that the hero story should be, I have this moment of courage and I tell my job, I tell my boss to go to hell and I quit. And I just do my thing. And it’s scary because I eat ramen for a year and then I magically make it. But I, actually my experience, in the experience of most of the really successful guys that are in my network, you’re one of ’em, is that a gradual process is more often the case where the ability to be prudent, to leverage your existing skill and then go part-time and then, okay, this business gets traction. And then in some ways it almost is the, it’s the right way to do it because you – I was actually even listening to a podcast last week on venture capital, on the venture capital scene right now.
TJ (05:44):
And these big deal venture capital investors are actually more impressed with founders who are hustling at another job instead of just begging them for money to meet their like salary needs, if that makes any sense. And so, you know, there’s probably more wisdom in there than you’re – you’re giving yourself a hard time, but there shouldn’t be. So, okay. So book flipping, and this is a really interesting thing. So 2015, for those of you guys who haven’t been in the Amazon world forever, Amazon originally sold books, right? That’s a thing. And then the book flipping was kind of Amazon version, seller version 1.0, if you will. But 2015 was almost late to the party. And this is the, my point asking this question, Caleb, is that obviously done correctly, there’s a way to make a living selling books even today, much less maybe when people would say you’re late to the party. What does it look like to build a business in a market that says you might be a little bit late, but you can still be successful? Like, what did, was there anything in your story that you’re like, man, that really, I’m glad I did this way because it still worked?
CR (06:42):
You know, it’s funny you say that. In retrospect, sure. I think books are late to the party. That’s probably the best way to put it, but in general, there’s, you know, there’s always a market for something. And one of my business partners, Matthew and I, we joke that you can make money doing anything. And I really believe that books are still probably the easiest way to get started on Amazon. They tend to be an open category. You don’t need special approvals, or you don’t need to be ungated. So most people can start. And they’re also, they’re easy. Every book’s got a barcode on the back, so it’s really easy to research them. They’re light. Well, they’re heavy and aggregate, but they’re durable. It’s easy to find. They’re pretty cheap at thrift stores. So it’s kind of just an easy way to kick the tires and make mistakes.
CR (07:24):
I’m a big believer, I think there’s a pendulum in business and just in life between trying to be overly planning and trying to set your course and make sure you have all your ducks in a row before you start. And then the other school of thought is to just take action. And I think a lot of people assume that entrepreneurs are just action takers, and we tend to be, but you have to find that balance. And I think with books, your downside is pretty limited. You’re not gonna get into too much trouble. You’re not gonna spend too much money, doesn’t require a huge investment. So if you just want to kick the Amazon tires and learn how to flip things, I think books are a phenomenal way to start.
CR (07:59):
And then what happens is – and that’s all I knew. I, when I got into books, I didn’t realize that there was private label. That was probably the early stages of private label. You could do wholesale, you could do retail arbitrage, online arbitrage. A lot of those were kind of in their early stages. And I just gravitated to books ’cause I knew it worked from high school, and that would’ve been like 2008. So I was, you know, six, seven years later at that point. I knew it worked. And I just said, hey, I’m a numbers guy. I literally pulled up a spreadsheet and said, if I find a hundred good ones a week, how many will I sell? I had no idea. I didn’t know that what turn rates would be. I figured it’d be, you know, 2% a week. So I said, week one, I’ll sell two books. Well, if I, you know, sell them for $20 and net, maybe $10 after fees and my buy cost, that’s $20 a profit week one.
CR (08:44):
That’s not real glamorous. Week two, now I’ve got 98 books that didn’t sell and I add a hundred to it. Now I sell 2% and you know, that’s four, that’s still not glamorous, but you start compounding upon that and you start looking out six months, nine months, 12 months in advance and go, man, if this actually works, if I can consistently find this inventory, it starts to turn into a decent number. And one of the things that makes it easier, it is awesome to have those stories where someone calls their boss and says, screw you, I’m outta here. But in reality you can kind of build that ability to be able to do that by living below your means. And that’s a really big thing for me. And I know we’ll get to that a little bit later in the show.
TJ (09:24):
No that’s – and you, we will get to that, but there’s a little bit of a – gosh, what I love about what you said about the business model itself is that I think brand owners in the Amazon space can forget how to be traders first. So what I mean here is you mentioned a bunch of the available business models out there. You could be a retail arbitrage, wholesale arbitrage, white label, private label, you know brand registered private label. And then you could actually be a direct to consumer. Then on the extreme, you might be what we call IP-related consumer, which what that means is you actually have a patent that’s protecting your product. And my point is that yes, it can be better to continue moving up that value chain where you own your brand and you’ve developed the products. But if you lose sight of what Caleb just said, this very simple mathematic model of saying at the end of the day, I’m delivering some amount of value to my customer. And I only capture margin in that transaction if I buy the product correctly. Talk to us a little bit about how important it’s to know your numbers, Caleb, and how that should permeate any business model.
CR (10:33):
I think numbers are a huge thing. I’ve got a, I actually sell a tracking spreadsheet, which is basically an accounting tool for Amazon sellers, primarily book sellers. But the idea is understanding the business. And I tell people all the time and I preach it to myself. It’s not what you make. It’s what you keep. We see all these sellers bragging, you know, hey, I’m a seven-figure seller, eight-figure seller, 10-figure seller, six-figure seller, whatever that magic number is for you. That’s all great. If you wanna make a hundred grand, if you want to take home six figures, you definitely have to earn, you have to sell at least six figures, right? There’s no way to bring home six figures unless you sell six and probably multiple sixes and maybe even seven. So sales are really important. It’s a great like scoreboard, but sometimes it’s the wrong scoreboard.
CR (11:15):
You have to know what you’re keeping. And so understanding like at a fundamental idea, we’ll talk about this book later, but the idea that you could buy this book for $2 at a thrift store and sell it for $16 and after fees, you’ll net six. You can’t lose sight of that. So many people joke like, oh yeah, I’m losing money here, but I’ll make it up in volume. And one of the big things in tech is you see these companies that aren’t profitable, and you and I talked about it during the intro call. It’s something like 70% of companies that have their IPO now are still not profitable. And that’s okay. We’ve tried to – and Amazon’s kind of responsible. Bezos kept losing money over and over and over again and kept telling the shareholders, we’re in this for the long term.
CR (11:54):
Because at that point, back in the late nineties, early 2000s, everything was being graded and valued based on the actual cash flow. And what had actually made in terms of profit. Amazon had a longer range idea of what that meant, and they were kind of building something and obviously it’s been successful, but Bezos convinced shareholders to say, hey, we’re going to have quarters and years without profit. And that’s okay, we’re gonna focus on the growth. And so he changed that number and you’re seeing valuations up until really the bear market set in this year, you were seeing valuations just based on gross sales and they kind of ignored profit. And I think we’re gonna come back to a little bit more fundamental understanding of profit ’cause that’s what matters.
TJ (12:37):
It is really important. And it’s – you held up a book. So for those of you guys listening, I think it’s I Will Teach You to Be Rich. Is that the book you’re holding there?
CR (12:44):
Yeah. Ramit Sethi.
TJ (12:45):
So why don’t we just go ahead, I wanna go there for a second. So if you were to maybe, either the 22nd synapsis of that book or how you would recommend the average Amazon seller apply that, the mantra of that book to their business, what would that look like in your mind?
CR (13:02):
Ramit looks at things a little bit differently. So most people are gonna focus, and this kind of goes a little bit counterintuitive to what we just said, but in general, most people look at budgets as uh-oh, I’ve gotta cut costs. And really Ramit looks at both sides of the equation and says, you can either bring home more money by making more money and keeping the same percentage, right? So as your growth grows, goes bigger, you’re gonna keep more of it or you can cut costs. And I think most people, when they think budget, they just think trimming costs. And how can I avoid spending, I don’t need to spend on a $5 latte every morning. And Ramit just turns that around and says, look, if you get joy out of that $4, $5 latte every morning, then buy the damn latte. Like it’s okay, buy it.
CR (13:49):
But so what his basic idea is, understand what’s important to you. He calls them levers. So it might be convenience. It might be fun. It might be food. It might be music. For me, it’s golf. So figure out what levers bring you the most joy, satisfaction, and spend extravagantly, like actually ramp those up because – or dials, I guess he calls ’em. So dial those up. Be willing to spend extravagantly. For him it’s convenience. He’ll fly first class nearly all the time. But if you’re gonna dial up certain areas of your life, you can’t do that everywhere unless you are, you know, you won the lottery or you’re a trust fund kid, then you gotta dial things back. So when you see somebody spending, instead of going, oh man, they’re spending so much money on lattes – and he’ll joke all the time.
CR (14:30):
You know, when Elon is like, hey, Elon is now worth, you know, X billion dollars and they’ll go, yeah, it’s really easy to get there. All he did was he didn’t buy 48 billion lattes. Like, so his main point is figure out what’s important to you. Don’t be afraid to spend lavishly on those categories, but then if something’s not important, if you’re not a car guy, don’t buy a big car to impress other people. Do things for you. And that that’s really the main point of the book. And then he talks about other things like how, you know, how you can cut costs, but you can only cut so much. And he really tries to help you understand how to grow the revenue side of things through side hustles, through software, through recurring business models, et cetera.
TJ (15:10):
By the way, while you’re talking there, Jeff, a listener here did post a great comment. He said, “all the people who invested in the non-profitable IPOs are certainly paying for it now.” And I agree with that. I think there’s gonna be a little bit of a tech, there already is a tech backlash right now with prioritizing – I mean, the reason Amazon was able to command the kind of multiple that they commanded was that they were substantially disruptive. They really changed the ecosystem. But I mean to Jeff’s point there, I think companies are going to have to make money and they’re gonna have to prioritize capturing and keeping that value. Caleb, just, I wanted to grab the comment while Jeff had it up there, but like there’s just to take this a step further, find things that are meaningful, invest extravagantly in the things that are most important. And then kind of merge that back with your comment earlier about living within your means. Like how have you viewed living within your means that’s allowed you to be so seamless as you’ve transitioned from business to business?
CR (16:02):
Well, I wish I could say I was just born with it, and I don’t have the book in front of me, but one of my college professors, he’s an accountant and I love the guy so much. His name’s Roger Stichter. And he wrote a book. He had like a speech he gave in college called like The Principle of Maximums. And so it’s the idea of establishing – and he challenged us in college, which was weird. We had no idea, like he’s like, think about the ideal house you wanna live in someday and what car you want to drive and like where you live and all these things. And I’m like, I have no idea. I’m a, you know, I’m 20 year old college kid in small town Indiana. I grew up in Michigan. My parents were, we were middle class. We weren’t poor. We weren’t rich. I had no idea like what, what my potential would be. And he’s like, well, think about what your maximums are.
CR (16:44):
And his main thing that really stuck with me is most people make this much money, whatever that is, 50 grand, a hundred grand, 200 grand, a million, they make this much money, and they spend this much. And in reality, they spend a little bit more than that because they, you know, credit cards and everything else. So we like to live in debt. That keeps corporations happy, that keeps us working. We can’t take any risks because we have no margin. So most people make this much money and spend, if you can’t see, ’cause you’re listening to the podcast, it’s literally, you make 50 grand and you spend $49,999. You have literally no margin, no savings, no anything else.
CR (17:19):
And so he challenged us. He said, look, understand what that idea, that maximum lifestyle you want. So if you’re making 50 grand now, but you can live the life you’ve always imagined at 75, then as you get a standard of living increase or as you get a salary increase, go ahead and raise your standard of living and just keep approaching that. But once your income exceeds whatever that maximum idea you had, which is hard to picture when you’re in college, then at that point stop. So most people get a raise, raise their standard of living, get a raise, raise standard of living. What that means is there’s literally no margin. No margin means you can’t take risk because you live paycheck to paycheck. And the vast majority probably of the world, but especially Americans, live paycheck to paycheck. Doesn’t matter if you make 30 grand a year or 300 grand a year. There’s literally no slop, no room for you know, saying, hey, I’ve gotta go take a month off to take care of my parents. I’ve gotta take time to deal with an emergency. You don’t have that luxury because you’re spending everything you’re making and you can’t step away.
CR (18:18):
So Roger’s kind of challenge to us, and he actually wrote a book on, it’s called Principle of Maximums. Probably doesn’t have a great Amazon sales rank, but you guys can all go buy it and make him feel good. He’s an accountant so it’s a really dry book. So I do apologize in advance, but the principles are phenomenal. He says, once you’ve kind of reached that maximum that you wanna live at. Then once you get that raise, don’t raise your standard of living anymore. Leave it, that creates margin. Now you can increase your standard of giving is what he called it. But the idea of having margin – so I worked for Johnson and Johnson. I didn’t expect to do that right outta college.
CR (18:51):
It paid very well. You know, it was paying about twice what I would’ve got at nearly any other job in town. And I kind of realized early on, I don’t want to be in this rat race and not be able to escape later. And so even when I was starting the book business, at the time I was making just over a hundred grand. So I remember I was like, yes, I finally got six figures. I’m crushing it. I was 27. That was a lot of money back then, not with inflation anymore, but I was making a hundred grand, and I was probably living on about 60, you know, 50 to 60 and living very comfortably. And some things I did, the first house I bought was a duplex. So I lived in half, and the other side basically paid the mortgage, which was phenomenal.
CR (19:30):
So I, you know, I kind of house hacked before that was popular. And I just did things to try and keep my standard of living low. And so I was able to generate a lot of margin. that capital I could then use and say, hey, I could quit my job today. If I had to, if I really get fed up, I could walk in, flip the bird to my boss and say, I’m outta here and have a little bit, you know, couple months of expenses in the bank, so to speak. But it also made the target easier when I was ramping my book business. I wasn’t trying to get to six figures. I wasn’t trying, and that was a nice goal, but I didn’t need to do that to step away. All I had to do was get to the, you know, the $60,000 number. And so that was a much more attainable goal when I was trying to say, hey, and planning my spreadsheet, can I actually escape the nine to five? And if I had to get to a hundred grand of, you know, net income after everything, that would’ve been a much harder task than trying to get to that $50 or $60,000 value.
TJ (20:23):
Well it’s interesting, like the psychological approach to building wealth. I think sometimes we can view it as a dichotomy. We either have to wait until we’re 80 and it’s like, we make a hundred bucks a year and this is really a slog, or I’m gonna reach for the stars and hit a grand slam. I’m gonna have a $10 million exit of my business and then I’m gonna be set. And what happens before that is, is irrelevant. And I think the path that you just described to us there, Caleb, where the more reasoned approach is to meet your needs, invest in base hits, invest in base hits, build margin, build investable assets, invest in more base hits. Oh, wow, I hit a double. Oh wow, there’s a recession around the corner. But I have some margin in my cashflow where I’m not gonna be waylaid.
TJ (21:13):
I can’t tell you how many investor friends of mine would’ve crushed it if they hadn’t gone bankrupt during a recession. Right? It’s, in other words, being solvent when things get a little bit sticky is crucial. And so that mantra of, hey, what about a more reasoned, steady, disciplined approach that’s ready to take advantage of the opportunity when it’s there, because guess what guys? The guy that sells the $10 million business is more likely the one that got there slowly, right? It’s almost like it’s an overnight success that took 10 years to happen. And man, that’s such a great, that’s such a great piece of – it’s funny, we’re talking about budgets. I wanna ask you a question about something you told me the other day about this idea of a minimum budget. Let’s pivot there a little bit here. Caleb, what in the world is a minimum budget, and why do I care?
CR (22:01):
A minimum budget, I will actually take credit for this. I’m sure I stole it from somebody, but I don’t think Ramit talks about it in I Will Teach You to Be Rich. It’s the idea – actually, I’m sure I stole it. Pretty much nobody has any new ideas, so. I don’t know who to attribute it to, but if you guys know, you can comment below or something. The idea is most budgets are restrictive. And so when we talk about budgeting, we kind of go, oh, I don’t wanna do it because I’ve gotta trim the fat. I can’t get my latte. I’ve gotta, you know, cut some subscriptions or whatever. So this idea of budgeting becomes kind of a, ugh, I don’t want to do it. You dread, it’s like going to the dentist. We talked about that, too. You don’t want to do it.
CR (22:37):
And so the idea is to turn that around on its head, and I’m a big believer in automating. Ally bank allows you to do it. A couple banks now are starting to let you do this, where you put money in, and if it detects money coming in from like paycheck or payroll or anything, you can actually chop it up into percentages. So I might set 25% aside for taxes and 10% for charity and 30% for living or whatever. You can kind of set those custom rules, custom buckets. What that does is make it simpler. So instead of a maximum budget, most budgets say you have $600 this month to spend on groceries. So that is your maximum budget. You can’t go over it.
CR (23:14):
The idea is all right, let’s apply the concept of dials from I Will Teach You to Be Rich. What things are important to me? And the way you spend money, if you go back, I use Mint, you can use whatever budgeting tool you want, but I go back at the end of a month or the end of a year, and you can easily see your priorities because you can see where did I spend money? So, you know, food was important. Friends, travel, whatever that might be for you. And so the idea of a minimum budget is instead of, I can only spend $600 on groceries, it’s saying, hey, what’s important to you? Well eating out with my friends and being able to pick up the tab. Cool. Well, I’m gonna set a minimum budget of $500 a month or a thousand dollars a month. And I have to spend that money. What that does now is instead of going, oh, I can only spend this much, it changes your mentality or mindset to say, I’m going to spend this much for me.
CR (24:00):
I’ve done it in health. So I take 2%, which doesn’t sound like a big number, but it adds up over time. 2% of my income, gross income before taxes goes into a bucket in Ally called “Health.” And I can use that for anything. So I’ve been, I’ve experimented. I’ve got a blood sugar monitor that I wore for like six weeks to understand how my body metabolizes sugar. I’m not diabetic, I just wanted to learn. I used that to go to the chiropractor. I used that to buy a rowing machine, sports equipment. I don’t get to use it for golf because that will get spent very quickly. I love golf. But the idea is instead of going at the end of a year and looking back at your budget and saying what was important, it’s kind of setting that vision up front and saying, what’s important to me?
CR (24:39):
Okay, well, health. Like I wanna stay healthy and active and so I know that I can be more productive. Well, great. Instead of waiting till the end of the year to see, did I spend money on health, I’m gonna force myself to do it. So that idea is a minimum budget. What I do is at the end of each quarter, ’cause it’s hard to do it each month. I have to have spent through that. So 2% of all my income from Ally, every time I pay myself, goes into that bucket. And by the end of each quarter, I’ve gotta, you know, basically spend that down as low as possible. And so that’s, that’s been a fun challenge and now the budget component is fun. Instead of looking at my account and going, ooh, I only have this much left to spend, it’s ooh, I have money in here. I gotta spend it. Let’s go.
TJ (25:20):
It’s such an interesting mantra. It almost takes the like Michalowicz’s Profit First mentality and like force you to put dollars in priority areas. Like most of us are probably not gonna have to have a minimum budget for lattes, right? Like that’s one that, that we’re gonna have to say no to, unless that’s a priority. But I think when it comes to something, you know, for instance at Seller Accountant, we try to do this, we don’t always enforce it. But like the idea of like, not only do you have paid time off, but we’re gonna force you to take like this much of it each year. Because if not people feel guilty and they don’t, and Caleb, almost wish that you and I could replay the first conversation we had a month or two ago where, you know, Caleb and I are 10 minutes into this conversation, and he’s like, hey, what are your goals? My word for the year is health.
TJ (25:59):
We start talking about health, and I don’t know how it came up that I hadn’t been in the dentist since the pandemic started. I don’t feel great about it. But Caleb immediately, being the kinda guy he is, is like, hey, let me talk to you about minimum budgets and why you need to make sure you’re investing in this key part of your life. So I can report, I went to the dentist, I think last week, week before that. I was able to get that appointment. Things are good, but you know what, in terms of making those forced investments in what’s really important. And I think all of us should have a minimum budget for something, whether it’s taking our spouse on a date night or whether it’s health, is a no brainer. Like what if you bought a massage, or what if you had somebody, hired a health coach? Like how much – it’s just it’s opened my mind so much. Anything else about minimum budgets that you feel like have been like transformational for you or for the people that you have been around?
CR (26:50):
I think it’s just forcing yourself to tell yourself what you’re gonna do. A good speech is tell people what you’re gonna say, say it, and then tell ’em what you said. And I think with budgeting, most of the time we just get to the end of the year and we look back and then we feel shame or like, oh, I shouldn’t have spent money on that. And then it’s like, I’ll do better, but we don’t really set like actual vision and set the plan out in advance. So it’s really just like someone that’s good with managing their time. That’s not necessarily me all the time, but they’ll typically the night before or first thing in the morning, they’ll kind of plan out, “here’s the one or two or three things I’m going to do today,” and they write those out and they actually go do it.
CR (27:25):
And that’s the same thing with the budget idea. So now it’s actually fun to open the bank account instead of going well, I’m gonna feel shame. And here’s the things I shouldn’t have spent on. It kind of changes that to where you’re excited. You get a little bit of a dopamine hit to say, hey, I get to go be creative. And like with the health, I’ve gotten massages, I went and I’ve kind of gotten into a little bit of alternative health. Haven’t really done the essential oils yet. Maybe that’s next. But I went and saw a chiropractor. I got like a cranio – something, they stuff, a balloon up your sinus and like they adjust your cranium, I guess, for lack of a better word. So there’s just a whole bunch of things that I never thought I’d get into. And it’s, there’s definitely a payoff. I feel a lot better.
TJ (28:07):
I love it. I mean, we spend so much money on other things. Why aren’t we doing it there? It’s really, really, really interesting. Well, Caleb, so I guess I wanna talk about, so the arc of your investment life here that you continue pivoting in. One more comment I wanna make, I was leading my mastermind this morning for seven- and eight-figure CEOs. And to kind of buffer on the question you just mentioned a second ago, Caleb, if I can ask myself right now, we’re in June as we’re recording this, hey, at the end of December of 2022, what am I gonna wish? What is Tyler Jefcoat, on 12/31/22, like the end of this year, what is Tyler Jefcoat gonna wish that Tyler had done more of in Q3 and Q4? And then what Caleb just says, take it a step further to say, okay, what is my plan?
TJ (28:49):
Because I know I wanna invest my health. How can I put a mechanism in place to make it less likely that I will forget? One mechanism for doing that is what Caleb just described, which is just to use, I think almost all the major banks will let you auto-move a certain amount of your money over. And if you set something tiny, literally if you made it a one or 2% budget and said, I’m gonna force myself to spend this on making myself healthier, on delegating tasks, whatever it is that’s got you stuck in your life and your business. Take a second to imagine, what am I gonna be pumped that Tyler did in July, August, September, October, November? What am I gonna be pissed off if Tyler doesn’t get this done? And then take the step of making that into a goal that you’re gonna accomplish. Find people that will hold you accountable and just get it done. I wanna talk about real estate for a second.
CR (29:33):
I’d love the 1% before we move on to real estate and whatnot. I love the just get started. And that’s a big thing in my space. Again, you asked that question, well, why don’t you do, you know, private label or wholesale or something a little more glamorous or sexy? Well, books worked, and rather than overcomplicate it and kind of have paralysis by analysis, and maybe I was just shortsighted, I don’t know, but I just jumped in and said, hey, I can find a hundred books a week. I know I can make some money doing it. And you know, the turn rate we thought would be two, it’s closer to, you know, five to 7% a week. So we underestimated. But I just got started. And then once you’re doing it, once you’re kind of paddling the boat, so to speak, it’s easier to pivot and change the direction than it is to try and change the direction if you’re sitting still.
CR (30:14):
So if you’re, if you hear this idea and you’re like, man, I should try a minimum budget or I should pick up any kind of new habit, don’t overly complicate it, just jump in. And if you’re like, well, I’d love to spend 5%, but I don’t know how I could do that. Just start with one. Start with half percent, just do something easy. I guarantee you won’t notice a 1% drop in your income. Especially if you get to spend it on something that improves your life. So just do 1%. Once you get in that habit, you’ll start looking forward to it. And then you’ll go, man, I’d love to bump that up to, you know, 3, 4, 5, and you’ll figure out a way to do it. Just like the Profit First mentality.
TJ (30:47):
Yeah. It’s absolutely true. And you and I were talking before we recorded about my interview with Trent a few weeks ago. And that was his same advice is don’t get trapped analyzing something to death. Get started. Put that process on paper, the shitty one, the current one, the one you’re doing now that isn’t very good. Do something consistently and then iterate on it rather than sit there. And this is probably most Americans, honestly, is I don’t wanna get it wrong. I’m so used to school. Like school, I got a grade and if I didn’t get a good grade, mom was mad at me and then I didn’t get ice cream and it really sucked, right? Like it’s not like that in real life. In real life, we wanna get, to steal from James Clear, Atomic Habits, and we wanna get 1% better, 1% better, 1% better, 1% better. And if we can do that consistently again, we’re gonna be in a position to hit that home run when it comes in front of us. And we’re gonna be in the position to weather that storm when it comes up too.
CR (31:36):
Right. And it’s simply taking responsibility. I kind of happened yesterday. I flew back from Richmond and I had to go back through Atlanta. So pretty close to you, I think, but had a connecting flight through Atlanta. My flight outta Richmond was delayed. So I go to check in, I had my golf clubs with me, so I go to check those. They wouldn’t print the ticket for me. And I had to go up to the counter and they said, hey, you’re not gonna make your connection. We’ll pay you $200 bucks. You can, you know, spend the night in Richmond tonight. We’ll get you out first thing in the morning. I’m like, well, I don’t really wanna spend another night. I wanna be back home, sleeping my own bed. And you know, most people would just say, well, you know, someone in charge is telling me, well, you can’t, you know, we can’t get you.
CR (32:11):
You’re not gonna make your connection. I’ve flown a bunch. I kind of know that stuff is wiggleable. And we might get in early and the next flight might be delayed. And I said, well, let’s just try it. And they said, okay, kind of rolled their eyes. And I got on the plane. Our flight got in a little quicker than expected, even though it was delayed, the next flight was delayed 10 minutes. And I just barely hopped on the next flight, and my golf clubs made it. So it’s that idea of, it’s really easy to push off decisions. And we do this all the time. We say, I’ll start my diet tomorrow. I’ll start at this minimum budget tomorrow, or I’ll start at Monday or the first of the month. We love to do that because now we get to take that decision away from us today. Just take action. So again, I could have let that ticket agent, and she knows what she’s doing, nothing against her, but she’s just saying, hey, our system says you’re not gonna make it. And so a lot of times we’re like, okay, well, the system told me not to, so I’m not gonna try. Just get started. That’s really what I try and preach over and over to myself and to others is just take that first step and then you’ll see where it takes you.
TJ (33:10):
Love it. Love it. So I do wanna talk about real estate. So one of the things that is I really loved about your story. Caleb is you, you pivoted from the Johnson and Johnson world, you build your book business. You’ve pivoted a couple times since then, but one of the things that you’ve done that I admire, and I think this is something we should take away is kind of the Kiyosaki mantra of can I find ways to use business to generate cash flow that could then be applied to what he calls income generating assets. And of course, real estate is an income generating asset if you do it correctly. Talk to us about your real estate journey and why you kind of landed on the short term kind of Airbnb kind of model.
CR (33:48):
Yeah. So the first house I bought was a duplex. Like we talked about, Indiana’s cheaper. I mean, it’s gone up substantially just like the rest of the country. But I bought my first house in 2000, either ’11 or ’12, it was $110,000. It was a duplex side by side, two bedrooms on a side, you know, garage in the middle. It was awesome. And so that cost me like $673 a month for the mortgage. And the guy next door paid $600 bucks. So it cost me $73 plus utility. So that was awesome. I think that’s a phenomenal way to get started if you don’t mind having a neighbor, and I’m not handy. I can’t hardly fix anything, but I can hire people to do it, or, you know, people that you can barter with. I built a small – I was like, that was great.
CR (34:30):
I bought two more duplexes, bought one with my brother, you know, used my cash flow from Johnson and Johnson to get the mortgage and then bought a single family home as well. So I had seven doors in Indiana. And then I had to evict somebody. This is kind of a traditional story with everybody, and I started not liking people anymore and said, well, that’s not good. And yes, I could tighten my systems and do this, but I was also getting ready to move out to Colorado and jump out on my own. And housing was way more expensive in Colorado. So I ended up selling off the portfolio. These were all long term rentals at the time. And then used all that to essentially put into one house in Colorado, ’cause that’s how much it costs out there.
CR (35:09):
Kind of dabbled back into it. I bought a condo in Indiana and put that on Airbnb, and that, all of a sudden the economics of it, I could use it myself when I was back in town. So I still had friends in my college town back where I used to work at DePuy. I could come back and use it, but I could also leave the money there in usually an appreciating asset, and people are renting it short term and all you have to do is find a good cleaner and a handyman repair guy, so to speak, and off you go. So I kind of dabbled in it that way. I’ve done it with my own house in Colorado. I’d just list it. And, you know, five night minimum, kind of threw an expensive price on it. And we were able to rent it out more often than we, you know, than we thought, and that paid the mortgage on the house we lived in, ’cause I love to travel.
CR (35:50):
So anytime someone would come in and rent it for five days, we would just say, hey, we just got $2,000. Where are we going this week? You know, and go fly somewhere and just have some adventures. So that that was really enjoyable. And then just kind of built on that and talked to people in the real estate market. And I’ve got a couple business partners and we’ve taken cash from books, actually built kind of a software brand with ScoutIQ, EFlip, and a couple other small brands. And we’ve taken the cash from the software and the book business now and put that back into short term rentals. So we have, with some investors, we have four in Arizona, I’ve got one in Indiana here, and on paper, they’re all looking pretty good. And with the way appreciation’s going, you know, they’re looking really good as long as real estate continues.
TJ (36:35):
Well, and this is like in an inflationary market, having money in income generating properties, and in assets that are largely appreciating is a really good thing. And I just, I wanted to, I wanted to make sure, Caleb, that you told that story because I think again, this kind of false narrative can be believed in the Amazon world that, okay, there’s only one way to be successful. Now this is the new age, Caleb, get with the program. The only way to be successful is to build the right brand, squeeze out a little bit of margin, keep borrowing money to buy those POs from China. And then eventually one of the aggregators will come buy me for a large multiple that my family gives me a high five and thanks me for the headache. But I just wanna, I want people to remember that having a cash flowing business and even prioritizing profit over size and then using that cash flow that can be gleaned from the business to invest in other interests.
TJ (37:28):
I mean, real estate’s good because it has, seems to be so durable in our market here in America, but I just want, I wanted you guys to see that’s, it actually works. Like Caleb has a number of doors with a number of investors and from what I’m hearing, Caleb, the returns on capital and returns on investment are really high right now for short term rentals. And so maybe that would be the final question I would ask you is other than the fact that you hate evicting people and you don’t wanna have a dim view of humanity, right? Like what was the economic argument for going short term versus long term for you and your investors?
CR (38:01):
Oh, when you start looking at it, it’s pretty straightforward. So just one of the houses, I’ve got two in Tucson. So one of them in Tucson costs about $400 grand at the time. If you wanted to rent that out long term, you’re probably looking at $2,000 to $2,500 a month tops. You know, it’s got a pool, hot tub, it’s got some nice amenities. It’s got mountain views, all that, it’s a great home. But so to rent it out long term is roughly $2,000 a month. Now there’s less maintenance, typically less wear and tear on the house. But for short term rentals, you know, we’re getting closer to like $350 bucks a night. And so if you only rent that thing out, you know, 15 nights a month, which is, you know, 50% occupancy is not that high, even in the summer in Arizona, your economics start to look, you know, two to three to four X what you would be looking at. And yes, there’s more moving pieces. You have to manage cleaners, you have to set up systems. So your interview, you did with, you know, Trent Dyrsmid, and talking about getting the systems. You had a SDA, I forget, systems, I forget what the acronym was. I’ll have to go back and watch it.
TJ (39:02):
The delegation, automation maybe? Or something?
CR (39:05):
Yeah. So I love automation. I’m a big software junkie. I love, you know, we talked about Krisp and some other software and, you know, I love to just dabble with that. I love automation. I’m not as good delegating. I think most entrepreneurs struggle there, and the systems I’m learning, I’m a work in progress. So the economics just make way more sense from a short term rental. Plus you’re, you’re allowed to use it, as far as the IRS is concerned, don’t quote me on it, but 10% of the rented nights. So if we rent it 250 nights a year, we can have 25 nights of owner use, which means we can let friends use it. We can go down for golf trips. So there’s a lot of personal benefit to buying real estate where you would like to visit. So for all those reasons, it just makes sense.
CR (39:46):
Now, just like people talk about Amazon, it’s their sandbox. They can change the game at any time, they can raise the fees. They can, you know, cancel our seller accounts. We kind of sort of live in fear and trepidation around what Amazon could do to us. Same thing with real estate. A neighborhood could change the rules. A state could change the rules. You know, Denver’s kind of cracked down on Airbnbs. Arizona seems really favorable, and it looks like they’re getting even more favorable toward Airbnbs. But that’s always a risk. The state could vote something, you know, next year. And all of a sudden we can’t do short term rentals, but we still have four single family homes that we could either then sell. We could convert to long term rentals. You know, it’s still an asset versus if Amazon kills your brand, you really have nothing left to show for it.
TJ (40:29):
That is important, like to keep – ’cause I think Atlanta had some momentum in this direction also here recently. I’m not sure what happened, but just be aware of the local market when you make these investments. And again, the point, I think what I want you guys to – there are lots of resources out there to learn how to do this. I’m sure there’s podcasts that are really completely focused on this. Find those. My point is hit base hits, be disciplined, live within your means. Build cash flow using job, part-time job, Amazon business, lawn mowing, whatever it is, and then find ways to do the two things that I feel like Caleb is advising here. One, set minimum budget targets for things that you tend to underinvest in but know you need to invest more in, your health, whatever it is. And then also take that excess cash flow and find some kind of an income generating asset that you can purchase. Real estate’s obviously one of the favorites out there. Tell us just a little bit, I wanna talk about some fun stuff for a second before we close the show, but tell us a little bit about ScoutIQ.co.
CR (41:31):
Yeah. Well somebody owns .com. So we’re still trying to wrestle that one away at some point. But ScoutIQ is our software. So when you go to research books, again, nearly every book has a barcode. It’s fairly easy to research, but every book has sort of its own stock market if you think of it as a stock on the greater index. And it’s got a history and how often it’s sold and for what price. And so we took a lot of that data – my brother works for Google. He is very, very intelligent, and so he kind of helped build our database. And we said, if we had a database of every book in it, we could actually build an app that has that has some really solid data. We invented a data point. It’s called eScore.
CR (42:09):
It’s essentially the number of days in the last six months where a book has sold at least a copy. The reason we did it is most of, like you’re familiar with sales rank on Amazon. You know, one is the best. In books, a million sounds high, but it’s not that bad. A million ranked book means it sold four or five days ago. That’s it. And so rank is just a measure of how long ago a book last sold. So it sells a copy, typically drops to about a hundred thousand and then it just goes up. So 3, 4, 5, 8 million is certainly really long tail. It doesn’t sell very often, but a rank of a million. You don’t know if it just sold the one copy it’s gonna sell that year, and then it’s, you know, it happened to be five days later, or if it’s selling every, you know, once a week.
CR (42:47):
So we kind of invented x-ray vision, which we called eScore and said, hey, this book has a rank of a million, but it’s selling every week. This other book, option B, has a rank of a million, but it’s selling once every six months. And so helping our users make better decisions. And you know, I love the data. I love to get into the weeds, but what most of our customers love is that the app turns green and says accept based on the algorithm that we built. They can customize it. We’ve got a lot of advanced users as well, but in general, we wanted to make it very, very simple and, and have a better chance of being right. And so our app, literally sign up. It’s a monthly fee, and you scan books with a barcode scanner, with your phone camera, you can type ’em in, and it literally just tells you, should you buy the book or not?
CR (43:30):
And we help people build book businesses. And a lot of our customers, we, again, we joke it’s the gateway drug. It’s a great place to get started. We’ve seen a lot of our customers graduate. Some of them keep books in the portfolio, some of them move on to retail, arbitrage and private label and wholesale and all the other sexy, glamorous things. For me, I’ve had a lot of people ask like, hey, why don’t you do private label? You’ve got a good marketing mind. You’ve got a good marketing experience. That probably seems right up your alley. And you know, every year that we want to, we’re able to still keep growing the book business, and the longer I’m in it, the more connections pop up, the more deals tend to come my way, and I’m still having fun. So books is kind of where I park myself.
CR (44:09):
I’ve got the software with a number of business partners called ScoutIQ. We help other book sellers kind of run a more intelligent book business. That’s why we called it IQ. And then we’re kind of taking some of those profits and throwing it into real estate. And I don’t know what next will be. I love asking you the questions about like, what’s your, what’s your bigger aims and what drives you, and all those things, ’cause frankly, I’m still trying to figure that out for myself. So I like to ask other entrepreneurs and then kind of, you know, borrow their best ideas and apply them to my own life.
TJ (44:39):
Yeah. Well said. Well, so again, I just wanna encourage you guys. There’s a path to profit there. I think that’s really – so ScoutIQ.co, .co. Okay, quick lightning around here. So you’re a golfer. You love golf. You’re obviously going through airports with golf clubs. If you could wave a magic wand and improve your, any part of your golf game, what is it that you would love to see improve?
CR (45:02):
I’d love to see my perspective improve. I get to go play really cool courses, meet some really fun people. And I am so darn competitive. I’ve really come a long way, but I still have more to go where if I’m hitting bad shots, which happens in golf, you tend to get frustrated, not enjoy the round, not interact with the people that you’re out there. So I think just honestly, less technical, but understanding a better perspective and just enjoying being out there. It’s pretty cool. I’m healthy enough to be out there and play. I’ve got time, I’ve got some cash to be able to play and it’s pretty cool. That might not always be the case. Technically speaking, I’d love to, you know, improve my putting. That’s where the next best part of my game’s gonna improve.
TJ (45:43):
And then no, I totally get that. I love that idea of like, okay golf is either work or it’s like green therapy. Can I try to find ways to embrace it as a gift and enjoy the people, and I’m with you on that. I love it. Okay. So we also talked a bit about bourbon collecting. Give us your nuggets for the guy who’s only had like Jack Daniels. What do we need to know if we’re trying to get into the bourbon world, and what did it look like for you to start collecting bourbon?
CR (46:09):
Well, there’s two schools of thought. One is, do you enjoy drinking it? And if so, then go find someone that is a collector and that loves finding them and probably has the bottles. Every investment class went crazy during the pandemic. You can’t find a Rolex anymore. You can’t, you know, get collectible cars. You know, everything just got snatched up, ’cause there’s so much cash and everything was appreciating. So it was kind of this game. So I’ve got a couple closets, more than I care to admit, full of bourbon right now. And I definitely enjoy drinking it. I’ve met some amazing people through the process. I do plan to sit on some of the bottles for a long time. So if the market does drop a bit, which I think it will, that’s okay. I’m kind of in it for the long haul.
CR (46:49):
But go and just experiment, go find someone that loves it, that’s enthusiastic, and just say, hey, I wanna learn more. Can you show me, you know, all ends of the spectrum, from ryes and you know, high proof to, you know, smooth and just, just sample it, learn the stories, and just see if you like it. But I’ve met some amazing people through collecting bourbon, and it’s kind of the fun part of walking into a library and not knowing what you’re gonna find and be able to resell. That’s the thrill of the hunt. That’s the adventure, same thing. When you walk into a liquor store and it’s always this game, the person behind the counter, they usually have a really nice bottle hiding somewhere that they’re waiting for a good customer or a good story. And so it’s kind of the game of, you know, build your rapport, be friendly. Don’t just ask if they have Blanton’s ’cause everybody’s doing that, and see if you can kind of unlock what they have hiding underneath the counter. And if you can, great.
TJ (47:38):
By the way, I don’t wanna like over apply this to Amazon businesses, but that same mantra, we should be applying that to our supply chain relationships in general. Like I think I was talking to some CEOs this morning, again on my mastermind about this. How crucial is it to invest 30 minutes per week? Like reaching out to our suppliers and not just asking for stuff but like actually developing those relationships. Caleb said build rapport, and then if the market gets weird saying, hey, I need an extra 30 days to pay you, or hey, is there a more creative way we can structure this? I just wanna say this. Like data, being a trader nerd, but also being a relationship builder, like that part of the skillset actually matters, and so, you know, wanna throw that shot in there real quick. Hey, last part of the show here. And then I wanna wrap up. We have this thing called the Return on Podcast, Caleb, where just looking for any additional hacks, habits, tricks, tips that you’ve been applying that you feel like are giving you just unreal return on investment in your life. What would those be for you if you had a couple that come to mind?
CR (48:38):
Yeah, a couple. Definitely track things that are important. So if you like, we always say you can’t measure what you, or you can’t manage what you don’t measure. So set up ways to track. And I know that becomes painful. It’s like pulling teeth. We don’t like to do budgets. We don’t like to do things, but there’s so many good software now that just, they’ll pull your budget for you. They’ll pull expenses, they’ll do all that. So find ways to automate and get some sort of a scoreboard. And then I wear Whoop, it’s a, you know, it’s built for the golf community, but it’s for all, you know, athletes or, you know, just people that want to know their numbers. And so this measures how much strain I’m putting on my body. Am I sleeping enough? What are the impacts of alcohol? Spoiler alert: they’re not great. So finding some ways to measure things that are important to you. Again, health is important. So I’m, you know, making an active role to measure that. That’s been really big. I mean we could talk about software pieces all the time, but I would say probably the best thing you can do if you haven’t read it yet is to go read the book The One Thing. I give that recommendation out a ton. Have you read it, Tyler?
TJ (49:39):
That is one that I have skimmed but I have not actually read it. So that’s one that’s going on my list right now.
CR (49:44):
And if you’re not a book guy, and one of the things Ramit talks about is if anytime someone mentions a book, he just goes and buys it right then. So he doesn’t even put on a to-do list. He just pulls up Amazon and goes, hang on a second, just buys the book. ‘Cause it’s gonna be $12 to $15 bucks. Yes. I’m a book seller. That’s not really just you know, benefiting me. But those things like we always have, someone’s like, hey, you should read this or watch this. Just do it, buy it, let it show up. And then check it out. If you’re not a book guy, I think Tim Ferris interviewed him. It’s Gary Keller, and he kind of does explain it actually a little bit better than he did in the book. So if you were a podcast guy, check that one out, Tim Ferris and Gary Keller.
CR (50:20):
But his main concept is he goes, find the most leveraged thing in your life. So if you wanna talk about return, this is a great way to get it. What’s the most leveraged thing you can do so that if you did it, everything else in your life becomes easier or perhaps even not even necessary. And so that’s the concept and that applies everywhere. He talks about when he comes home from work, what’s the one thing he can do. He asks himself that question, when I come home from work to make sure that this evening with my family is the best? And for him, that is to go find his wife and kiss her. So how can you, you know, what’s one little thing you can do. Another way to say it is going upstream. What’s something that can impact everything else you’re doing. So read that book. It talks about time management, but that question is incredibly powerful, not just in business, but in life as well.
TJ (51:05):
Love it. So by the way, I did just, it’s amazing. I had some Audible credits, and I’m about to be traveling. So I Will Teach You to Be Rich by Ramit. And then The One Thing by Gary Keller. I think I just bought both of ’em. So it’s easy to do. I’ll be on a plane. Get to listen to those. So Caleb, this has been awesome, buddy. For those of you guys who are still with us, thank you for hanging through the end of the podcast. ScoutIQ.co is Caleb’s tool if you’re looking to find ways to make cash selling books. Man, I’m grateful for you, dude. Love to have guys like you in my life that make me better. And for those of you guys who have stuck with us through the podcast, I just wanna say, thanks. This is, it’s not trite. It’s meaningful to me that you guys would listen to this. Hope you did get some value, some return on the investment here of your time. Again, I’m Tyler Jefcoat, and if this content serves you, it would really serve me if you’d share it. If you’d like it, if you invite your friends to consume it. And with that, I wanna close today’s episode. Thank you, Caleb. You guys have a great week. Let’s go kill it. Thanks.