How I Bought an $8M/Year Company With Only $5,000

Sean Weisbrot: Gary Shelton is the coaching king, and he has purchased, grown and sold 12 businesses in the last 50 years, all for a massive profit. And in this conversation we talked about one of the main reasons why people never get to a million dollars a year in revenue. And with his model, you are able to acquire businesses that are already running so that you can focus on growing them. And it was a very interesting conversation with him. So if you wanna know more about mindset and the founder's journey and his experience of growth over time and some of his personal history, then you're gonna love this episode. Let's get to it. You told me that the vast majority of businesses will never hit a million dollars a year in revenue, and yet you've been able to do it 12 times. What is it do you think that separates you from other people? It's something that I believe people can learn, but, but what is it do you think that prevents people from getting there to begin with?

Gary: Mindset. I think the most important asset that you can have in any endeavor, whatever it's, is how you're thinking. First of all, have you made a decision to do something and do you believe you will do it? Have you blocked out any doubts, any second thoughts have, have you reduced it to I am doing this one decision, one thought, I'm doing this and I'm stepping forward to accomplish it, and I'm going to just simply make any adjustment that I need to make until I get to where I want to get to, and I'm never going to quit till I get there. That kind of mindset is required. In business.

Sean Weisbrot: There's two interesting things that I have noticed. One is a lot of the people I meet who create businesses that go on to do over a million dollars a year in revenue. Come from poor families, not rich families, because, and, and, and so the, the interesting points here is that I believe one of the reasons why they get there, despite the fact that they didn't grow up around money, is that they feel the need to help their family. And so that propels them to do whatever it takes to make the adjustments they need to make those changes. But at the same time, they also are starting from a place of. Maybe lacking of self-confidence or self-worth because they didn't know how to get there. They didn't have this mindset around money and how to attract it and what to do with it when you get there. So what was that experience for you? I mean, I, I'm, I'm not sure, I imagine you probably grew up in deport Detroit. Not with a lot of money.

Gary: I had that experience and when I was younger I complained about being, growing up poor. But as an adult I came to understand that, you know what? It actually was a blessing to have those kinds of challenges that I had where I had to live in public housing in Detroit and in Chicago, where my parents divorced when I was only one years old, where I, I didn't go to the same school from one year to the next until I got to middle school. These, these challenges forced me to innovate, forced me to challenge myself since I didn't like it. I didn't like that experience. I wanted, I became a person that had a burning desire to not repeat it. You know, I raised two daughters as a single parent myself. I made sure they didn't have to experience what I experienced

Sean Weisbrot: making it so that they didn't have to struggle like you did as a kid. Does that help them or did that hold them back in any way as adults?

Gary: Well, I, I believe that because I gave them balance, I did not spoil. Any daughter of mine, I had my grandfather, my mother's father, when I was four years old, I asked him for a dollar. Now, I had been told that he was a very successful man in the South, which he was. He, he built a funeral home, a grocery store, a motel, and he operated them as businesses. He built homes. He was successful. He asked me how could I earn a dollar? I said, Papa. I'm just asking for a dollar and you're rich. He said, Hey, look, if I'm rich, I didn't get rich giving away dollars. How can you earn it? He did not give me the dollar. He made me earn it, and then I said, and I, so I did earn it, and I come back to him proud. He's a living legend in my family. Papa. I have the dollar. Great. What do you want it for? Only buy Ruth some Easter candy. That's the little girl lived on the corner. He said, well, how much did candy cost? I didn't know this was a trick question. He said, I he, he said, how much does the candy cost? I said, A dollar. He said, well, you have to get some more money. Well, why do I need to get some more money? I'm not gonna let you spend all your money on that girl. He taught me how to save money right then and there. He cut up an apple and half cut that, cut that. You could decide what portion, but you save a portion of every dollar. And I did. And I graduated from Southwestern High School in 1969 with 25,000. That challenge he gave me, gave me balance, and that's what I gave my daughter balance. Didn't spoil 'em, made sure that I was committed to their success in life, but I made sure they had a taste of reality.

Sean Weisbrot: So let's go back to the first business you had. You told me that you started and three years later sold it for one and a half million dollars in, I believe, the 1970s. I

Gary: actually acquired it when I was a senior in college. Remember, I had a few dollars. I had saved money. I and, and plus I had started investing in stocks when I was in the seventh grade as a result of reading the Wall Street Journal. At first I was playing like I was buying stock, and I just go, gee whiz, I would've made some money. And so I had my grandmother to take me, who raised me, by the way, take me and open an account at Merrill Lynch. And, and I started investing in the stock market. That's how I really got to that combination of saving and doing that got me to the 25,000. So I bought this business before health food was really a craze. I, I, I was ahead of the curve, uh, born in Tucson, Arizona. I'm from Detroit. Um, people moving there for, for wealth. Um, for health reasons. Uh, that's how I got my first million when I sold it.

Sean Weisbrot: So you had some money saved, you acquired this business, but what did you have to do to enable yourself to make that business worth what you sold it for?

Gary: The difference between a successful business and a mind power, not so successful business, it's systems. How do you, how do you build this business in a way? That it can succeed without you. You don't have to be there. Most mindpower businesses that aren't successful, that don't get beyond 1 million, much coveted, 1 million revenue mark, they're, they're not operating with systems. They're not operating in a way that, Hey, if I'm not here, I'm the founder. This is my great idea, but if I'm not here, this thing doesn't work. That is not creating a business that has value. When I, when you create a business that can operate without you, it now has value to someone else. If, if I can come to acquire your business that you are operating systematically, that means all I need then is to acquire that system. When I acquire that business and I don't have to know anything about that business and I could be successful, but if it's a mind power business operating without systems, that gets a little tricky.

Sean Weisbrot: I know you've been doing this for decades now, so obviously there's a lot that you've learned and hopefully we can cover that in a little bit. But I'm curious to know how you got the idea to acquire someone else's business. To then grow it, especially when, I imagine it wasn't easy to go between states at that time. It's obviously a lot easier now, but you know, I, I know that you didn't, uh, like did you move to Tucson to run this business, or did you stay in Detroit and talk to them by phone? Like how did you manage that?

Gary: My first trip west, I went to a health food convention in Las Vegas. That's, that got me interested in eating healthy, that sort of thing. I met some people there and that's how I discovered there was an opportunity to acquire a health food store and restaurant in Tucson, Arizona. Well, fortunately for me, I played high high school basketball and our. Rival's. Coach became the first black coach at the University of Arizona, which was in Tucson. And so he recruited kids that I knew, and one kid in particular, Tommy Williams, who was a point guard like me, and he was my size. I knew Tommy. I went there to visit and to see this op, this business opportunity, and I met with Coach Fred Snowden. To let 'em know that I was there. And, uh, so one thing kind of led

Sean Weisbrot: to another. So did you end up working with these two men or one of these men in this business? What, what happened with that?

Gary: The business was white owned and so I had the founder to agree to stay for a transition period. I said, look, I, I need you to stay so that your, your employees don't get all shook up. That you're selling, I need you to stay at least one year. And that gave me a smooth landing kind of a situation. Um, and so when I succeeded with that, um, I learned about Reginald Lewis. Reginald Lewis. Well, I should say, after I learned about Reginald Lewis, he bought Beecher's Foods. He was the first black man to own a billion dollar business. Um, I was introduced to him. He mentored me and so my next deal I bought was a much more sophisticated deal. It was an electrical engineering firm doing 8 million a year in con electrical engineering contracts with General Motors, Ford, and Chrysler, and I bought it with only 5,000 on my own money and took it to 20 million in one year. Now I'm bit by the bug, for real. I'm like, I, I'm singing the, the value of acquiring. Starting when you go to the bank to try to get money to start, that's a challenge whether you have a business plan with projections when you go to the bank with tax returns from the pre the business you're trying to buy, let's what? If you go to the same bank they bank at,

Sean Weisbrot: they give you all of the money to buy the business and you put 5,000 in.

Gary: I bought a business that was doing 8 million a year. With 5,000

Sean Weisbrot: of my own. So how did you get all of the financing? What did you pay for that business?

Gary: I leveraged the assets of the business. The business had accounts receivables. The business owned the building. The business had equipment. I leveraged those assets to get the money I needed to buy the business. The 5,000 was pretty much for lawyers. I do this to this day. I'm, I'm doing a deal right now, uh, a Manu a, um, manufacturing business in Florida. And by the way, these, these industries that I've been involved in, I knew nothing about 'em before I got involved. Nothing. I, I was not experienced at it at all. I later went into the telecommunications business. We provided telephone service to the Department of Defense, the White House and Cap. David started that deal with no money on my own. I'm really getting more sophisticated at it at this point. And, and we did 70 million a year. But here's the thing, I knew nothing about the telephone business, absolutely nothing. I knew nothing about electrical engineering. I knew nothing about a restaurant, a store. I knew nothing about any of that. But what I did know something about was the common denominator, and what is that? Humans. Humans are the customers. Humans, that's the owner. Humans work there. That's the common denominator. And what's common about humans? What's in it For me? That's what everyone's thinking. What's in it for me? And so if you approach things, realizing that, and you are not thinking about yourself. You are thinking about the humans you are dealing with on whatever level. If it's the owner, if it's the customer, if it's the guy that sweep the floor, these are all humans and they all have that thing in common. What's in this for me, not you? Me. Did you ever have anything that went wrong? Always things went wrong. Every day? Every, every day.

Sean Weisbrot: Like did you buy a business that

Gary: fell apart? Fortunately, I was always able to make the adjustments that I needed to make and I, I learned playing baseball as a kid. If you swing for the fences, if you're trying to get a home run, you're gonna have more strikeouts. In business. I use that to understand, you know what, I'm not betting the farm unless the crops are on fire. I am not stepping out too far that I can't step back. And that saved me in many instances. I just, I wasn't, I wasn't trying to get a home run in every move I made. I was just trying to get on base. Now can make the adjust, you know. Everyone should plan. You should have a goal and you should plan. But you should also realize absolutely no one succeeds according to plan. No one ever. It's the adjustment that you make. Don't make the same mistake twice. Make your adjustment, Usman, don't stop. Only death can stop you. Now if you, if you're using that approach. Time is always on your side. There's more time. I learned that playing basketball started in high school for my high school team. Hey, if there's time left on the clock, the game's not over no matter how far we are down. There's time on the clock. Game's not over. We're playing to win.

Sean Weisbrot: Hey, just gimme 10 seconds of your time. I really appreciate you listening to the episode so far, and I hope you're loving it. And if you are, I would love to ask you to subscribe to the channel because what we do is a lot of work. And every week we bring you a new guest and a new story. And what we do requires so much love. So that we can bring you something amazing and every week we're trying really hard to get better guests that have better stories and improve our ability to tell their stories. So your subscription lets the algorithm know that what we're doing is fantastic and no commitment. It's free to do. And if you don't like what we're doing later on, you can always unsubscribe. And either way, we would love a, like if you don't feel like subscribing at this time. If someone likes the idea of acquiring a business they know nothing about, even though that sounds scary as hell to probably everybody, what is the thing that they need to tell themselves to help them get through that fear so that they're more likely to take the next step to actually do it?

Gary: Anything you're trying to do that you haven't done before is going to appear to be very difficult to you at first. But if you think about learning how to ride a bike, you'll realize that. Once you started, you've discovered it wasn't as hard as you thought it was going to be. After a couple of falls, you figure out how not to have those falls. So everything you can learn how to do it, everything, but you can't from the sidelines. You have to actually get on the bike to learn how to ride a bike. You have to get started. And so that's what I've always realized that, no, I don't know anything about this, but I will learn what I need to learn if, and especially if I don't try to go for the home run,

Sean Weisbrot: I just want to get on base. So what model do you use to look for these kinds of opportunities? I know you've already mentioned that the business has assets that you can use to to get a loan.

Gary: Well, yeah, that's. Come on. Let's face it, I'm a, I'm a black man, and it has tended to be a little more difficult for me to borrow from the bank. For example, I'm looking for an asset heavy business, a business that has assets that gives me something to leverage as opposed to, for example, a software business that doesn't have. Where I'm gonna be selling software as a service, I'm looking for a asset heavy business. Like say it's a trucking company, they got, they have trucks. So now I have something I can leverage. So that's the first thing I'm looking for an owner that will give me that transition period that, that I can say, Hey look, I need you to stay in. Matter of fact, I want you to stay in. Used, I'll buy 80% of the business, not 100 used to keep 20. And so for during this transition period, they're really involved in helping me grow this business. That takes a lot of the risk out for me, and it, and it reduces my learning curve because I'm right there growing it with the founder, with the CEO. It's excellent. I'm, I'm on the job training from the best. The person that birthed this baby and grew it and they're in it and they're enjoying being in it with new blood because you see, they started it. They were fired up. When they started it. They were, they were aggressive, but lately they haven't been there. I tend to buy from baby boomer age men or women. They're older. They're looking to retire. They haven't been very aggressive with their business lately. Plus we have new technology now like never before. So you certainly can make a business more efficient today when you come in to own it. Absolutely, you can.

Sean Weisbrot: So the other thing that scares me about acquiring someone's business. Is what if things go sideways and now I have to put my own money in to keep it alive?

Gary: Well, if things go sideways, if, and you have to put your own money in, well that's what you would have to do. So what that says is, number one, everyone would be that wants to do something entrepreneurial would benefit from learning how to live within their means. Accumulate some. I mean, I have a bias. I started saving when I was four years old. It benefited me to do that. It would benefit everyone to, to practice living within their means so that they can accumulate some assets, accumulate some liquidity, and be in a position to put out the fire that's going to, that's inevitably going to happen no matter what. I know many successful people, but I don't know anyone. That succeeded without perseverance. They succeeded because they persevered. They just didn't stop.

Sean Weisbrot: If I acquire a business that's doing a million dollars a year in revenue and it gets in the hole for a hundred thousand, somehow I just have to suck it up and put the a hundred K in and and fix it.

Gary: You gotta, you gotta do what you gotta do, man. You can't quit. You have to, you, you, you have to practice making. Those adjustments along the way that you need to make, and you have to be honest with yourself. You have to be authentic. You need to authentically acknowledge where you are. You can't know how to get someplace you want to get to without knowing where you are. So you, you must look at your books every week. You must look at, you know, when you go to see a doctor, and I, I just came from one i I go every six months and they draw blood and all of that. But what do they do? They check your vital signs well, well, a business has vital signs too. You need to be checking your business's vital signs, and you need to be checking your business's blood on a regular basis so that you can see how are you trending. Are you getting sick or are you getting healthy? You, you need to do that. And too often, especially my and pop businesses, they're not doing that. They're running blind. You need to look at what's happening with your profit margins. You need to look at the signals that your business will tell you. The, the numbers will tell you what's happening if you were looking but. Too often we're in a mind and pop business, especially, we're so busy working in the business and we don't have time to work on it. I, I don't, I wanna work on a business

Sean Weisbrot: not in it. What's the biggest hole you've had to cover financially with one of these businesses? If, if ever.

Gary: I've been under, I've been under, I I, I invested in real estate quite heavily and so I, I, I got hurt with the, the great recession hurt me badly. You

Sean Weisbrot: lost

Gary: properties?

Sean Weisbrot: Oh, a big time. How did you respond to that? Did you, did you recover and, and after that reinvest, or did you stay out? Did you kind of like, feel hurt and, and say, I'm gonna avoid this?

Gary: When I acquired either engineering and I'm doing business with General Motors, Ford, and Chrysler, it was when Toyota finally surpassed the big three to become number one. And so the big three wanted to know, well, how did they do it? And it turned out that it was the Toyota production system. And one of the pillars of the Toyota production system was that they practice. A continuous improvement process, which means psychologically they didn't push back against change. They purposefully, continuously improved. I began to practice that myself, a continuous improvement process. No matter how well I'm doing, no matter how poorly, I'm constantly, continuously looking for where can I improve, you know, small improvements. I. And let's say 12 different areas of your business that that changes night to day as opposed to trying to change one thing big time. So again, it's about mindset. It's about how are you thinking, how are you setting things up? That makes the difference.

Sean Weisbrot: So with that in mind, if someone is coming from a place of, maybe they have a job now, but they're curious about being an entrepreneur, they don't have an idea for their own business. Maybe they're interested in acquiring a business, they're inspired by this interview. They don't really have many, much money saved, if anything. 'cause I think that's very common in America. What size of a business would you encourage them to look at acquiring so that they don't get absolutely destroyed? If there is a bad. Result that they have to cover.

Gary: It sure helps to be mentored. I first was mentored playing little league baseball, then high school basketball. I had coaches. It helps, and then I was mentored by Reginald Lewis. It's awesome to have a mentor, someone that has already done what you want to do, find that mentor so that you. Won't have to have all the same mistakes they had.

Sean Weisbrot: So find a mentor before you try to buy something. That's what worked for me. It happened for me as well, and it, it changed my life very quickly because I was able to apply what I learned

Gary: at my dinner table. There was no talk about owning a business. There was talk about going to school and getting a good job, and so I had to go find someone not at my dinner table. Go, go, go find someone that was, that had a different experience where I grew up, the men worked in factories. They had a pretty good life working in these factories. But you know, when I was in college during the summer, I worked at Chrysler. No, I don't think I wanna work in a factory. That's too, that's too

Sean Weisbrot: dirty and it's too hard. I learned something similar. Because when I was in high school, I was very fortunate. My brother was well connected with the teacher in in charge of the network of our computers. We had 1400 computers in our school of 6,000 students, and my brother was able to get me into this private, I. Class with the teacher. There's only 11 kids in the school into, in this group. And our responsibility was for the first two hours of the day to make sure that any computer that's broken, any requests from the teachers were handled. And it was our job to do that. It was, we had to make sure that the hardware and the software and the internet didn't have any problems. Nothing went down. It had to be live at all times. And what I learned from those two years. Was that I never wanted a career doing that, but I loved the experience of doing it.

Gary: That's great to know what you don't want. Often when I'm interviewing people, I ask, I ask, what do you want to achieve? Someone's saying, I wanna start a business. What do you wanna achieve? Well, people think about that a little. They think about the money part, but I've, I've peeled onion on them because it's never all, it's never just about making money. What someone wants to achieve, but I'm gonna tell you what they don't think enough about. The next question I ask is, what do you want to avoid? Now they have to think, they haven't thought about that, and that's very important. What do you want to avoid? And that's what you learned with that experience, something you wanted to avoid, you knew you didn't want to do that?

Sean Weisbrot: When I was in college, I, my degree was in psychology and in the last two semesters I had to take one class and make it what I wanted it to be. I. So one of them, they weren't formal classes. I had to tell the school, I'm gonna do this thing that's my semester for this class. So in one of the semesters I worked alongside a graduate student who was running an experiment, and my job was to help them facilitate the experiment. And in, in her specific case, this graduate student was testing. We put senior citizens in front of a PlayStation two, and we let them shoot at Nazis. Does it make their hand-eye coordination get better? And does it make them happier as individuals? And while I love the experience, I realized that I didn't like the idea of being a researcher. I. And the other semester I went to a, an elementary school several days a week, and I worked alongside the speech pathologist and the behavioral therapist, and my job was to shadow them, see what they're doing, help them if they need, I. So in one case, you know, the kids were, uh, they'd have issues with speech, so we'd have to help them with their, you know, pronunciation, things like that to help them to develop better strategies to cope with that and improve their speech. And the other one, the kids were from homes where they had problems and so they were having behavioral issues in school. And so my job was to talk with them and. See if I could get them to communicate a little bit about what's going on at home to help them feel like it's okay, it's safe at school. They can, you know, still learn and, and not have to act out. Unfortunately, a lot of them did. And while I loved the opportunity to work with these people and these children, I also realized I didn't wanna do those jobs because it was very emotionally draining to do that.

Gary: I'm 74 now. I don't know how fast I, I got here so quick. Life is quick, man. It's short. I don't want to live my life like I'm running on a treadmill, never getting anywhere. Like I'm, when do I get to be me? When do I get to do what I would do if I wasn't on that treadmill? Because I have to pay bills. Most of us, that's how we live. We work a job we don't really like, but we have to pay bills, so we're, we're willing to do it. We're on this treadmill. We're running, but we're not getting anywhere. We're just paying bills and then we get old and then we die. No, thank you. I, I think everyone is so unique and so special that they need to express themselves. They need to be themselves. They need to do what they like doing. Most of us don't do that. We never do it. What a waste. Do what you like doing. Find a way to do that. And I think, again, I'm biased. Ent. For me, entrepreneurship has been it. I have a friend I grew up with, he said, man, what are you gonna retire now? He was working at Home Depot with the same age. I said, retire. I've never thought of it. It's never crossed my mind. I don't work. I. I do what I love doing. You're like asking me when am I going to stop doing what I love doing? Never. Why would I stop doing what I love doing? I understand you were at Home Depot. You couldn't wait to get out of there. I can't wait to wake up in the morning because I'm always working on the next deal. I'm always working on the next experience. That makes me a better human being. I can't wait. I start every day. My first meeting is at 6:00 AM It's not work. I can't wait for that meeting. I want to get going, man. I love living life because I'm doing what I love doing. We should live like that. We should do, we should do that. And if we start off not making any money or much money, we'll figure it out. It'll come. Hey, I didn't, my first job, I was bus busting tables. I didn't make much money busting tables, but I figured it out. That's what we should do. And corporations are no longer loyal to employees, only shareholders and customers. Donald Trump is firing people with hours and notice. Could you imagine that you got kids in college a a mortgage to pay and you show up to work and you discover you. Everybody's living paycheck to paycheck. I don't care how much they make, they make more money. They buy more house. So gee whiz is a job security. No, not to me. I don't think so. I think owning the job is security.