Welcome to the Bigger Pockets Money Podcast where we interview Cody Sanchez and talk about the asset class of boring businesses.

Hello, hello, hello. My name is Mindy Jensen and with me as always is my future boring business buying cohosts. Scott Trench.

Thanks Mindy. I'm going to try to do that while being the world's greatest EBITDA.

You're going to have to clarify what EBITDA is. I still don't know when I hear you say that all the time.

Scott and I are here to make financial independence less scary even though he uses weird words like EBITDA.

We're here to make financial independence less just for somebody else to introduce you to every money story because we truly believe financial freedom is attainable for everyone no matter where or when you're starting.

That's right. Whether you want to retire early and travel the world go on to make big time investments and assets like real estate, start your own business or simply improve your EBITDA will help you reach your financial goals and get money out of the way so you can launch yourself towards those dreams.

Okay, Scott. First of all, spell out EBITDA and then tell us what this is because I don't know what this is even though I hear you say it every single month.

Yeah, EBITDA or EBITDA pronounce both ways I heard is earnings before interest taxes depreciation and amortization. It's a way of factoring out all the noise and a business's profit and loss statement to get at an approximation of cash flow and it's useful most the time in valuing businesses.

It's imperfect like any approximation of profitability is imperfect, but it's how many businesses are valued is based on a multiple of EBITDA.

It's consistent with how we value a commercial property. We'd say we take the net operating income and a Y and apply a cap rate to it or multiple to it and you do the same thing in businesses to value them.

Another common term that you'll hear to describe this when you're looking at businesses is SDE which stands for sellers discretionary earnings and it's another way of describing the profitability of a business.

So the business brings in $600,000 in profit the owner pays themselves a salary of $200,000 and there's $400,000 in EBITDA. We would call that business as having an SDE of $600,000 again a simplistic example.

But businesses are the businesses we're going to talk to Cody Sanchez today who is one of my favorite influencers investors on the internet.

I love everything she puts out and thinks she has a fantastic thesis. She will buy businesses that are valued on a multiples of either EBITDA or SDE.

Scott, I learned so much talking with I can't even say talking with listening to Cody give a really great overview of how she values businesses, how she looks for businesses, how she finds businesses and how she buys these businesses, how she funds them.

This is just a super awesome episode if you listened to episode 325 with Tim Delaney where he bought a liquor store and you're like, oh, that sounds interesting.

This one is going to make you want to start looking for businesses.

Absolutely. I she's so inspiring what a treat to listen to her today.

She's fantastic. We have a new segment on the show called money moments where we share a money hack tip or trick to help you on your financial journey.

Today's money moment is if you want to spend less money at the grocery store, use self checkout studies have shown that shoppers who use self checkout save more money because they are more conscious of what they are scanning and spending.

So one of the reasons why I'm so excited to talk to Cody is because of the thesis in the asset class of small businesses right is 2023 where do you put your money do you put it in real estate, do you put it in stocks, do you put it in bonds, do you put it in cash, do you put it in private businesses, what what what are we looking at here.

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