What up, Dealpreneurs!

We all know the pain of losing hard-earned money due to ill-advised investments. Whether you're a seasoned investor or just starting out, it's crucial to recognize the common mistakes and pitfalls that can hinder your financial growth.

That's why, in this week’s edition, I will walk you through my 10 Commandments of Investing that have served as my guiding light throughout my investment journey.

These commandments are not mere suggestions; they are battle-tested rules that I have developed over years of experience and countless ups and downs in the market.

Each time I have deviated from these principles, I have inevitably suffered financial setbacks.

Keep reading for essential knowledge and strategies to navigate the complexities of the market, mitigate risks, & seize lucrative opportunities! Don’t have time & would rather listen? Check out the vid here!

Best,

Back when I was in the legal field, I had the chance to work with a billionaire client who shared a valuable lesson with me.

I asked him how he managed to do more deals than others with bigger pockets, and he dropped this golden nugget: never go all the way down to zero.

As long as you avoid those risky deals that could wipe you out completely, you can keep playing the game and level up your skills. It's all about staying in the game, avoiding total losses, and getting better at what you do.

We play for profits, not for pitch decks.

Once you step into the realm of dealpreneurship, brace yourself for a flood of individuals vying for your investment in their ideas, especially once they discover you may have money to spare.

From my own experience in countless venture deals, I've come to realize that if given the chance, I would take it all back and reclaim every penny I invested.

The reason is simple – most of these ventures fail to generate profits, and their time horizon is just too long for my liking.

Unless I can see clear signs of an already profitable and revenue-generating venture, it simply doesn't pique my interest.

If your capital is your only contribution, stay on the sidelines.

I once did a deal in oil & gas and I really liked the guys running the deal. They were the general partners, the ones in charge of the operations. I, on the other hand, was considering joining as a limited partner (LP).

To gain some insights, I reached out to a friend of mine who had prior experience investing in oil and gas. I explained the deal and mentioned that I was planning to invest $100k, but I wanted to understand the learning curve of the industry.

He gave me a valuable piece of advice: treat your investment as tuition for oil and gas, but don't stay as an LP longer than necessary.

LPs are often considered the "dumb money" in deals. Focus on finding deals where you can contribute with a unique perspective, rather than simply writing a check.

This has helped me avoid passive partnerships, where I have no control over the long-term outcome of the investment, resulting in better deals with higher returns.

Diversification is for dummies!

When you enter the investing world, you'll hear a lot about diversification - they'll tell you to put 1% here, 1% there, and make all these small bets.

If you're cool with just being a passive investor, that might work for you. But here's the thing: the size of your wins is tied to how big of a gamble you're willing to take, so you should only go all-in on things where you believe you can actually make a difference.

Forget about diversification and start getting picky about what you want to bet on. It helps you make smarter choices, take fewer risks, and go for the opportunities where you have a real shot at influencing the outcome.

Everyone pays to play & your sweat doesn’t buy my jet.

There’s all these consultants out there that want equity in the thing that you’re trying to build. They want to basically get a free ride on the hard part that you’ve put in into doing your business or investing in the deal.

My personal rule: no skin in the game, no deal.

In my experience, when everyone involved has something at stake, it aligns everyone's interests towards a common outcome. That's when the best decisions are made.

I don't let anyone in on just sweat equity or consulting. I make sure everyone has skin in the game, fully committed and aligned on the desired outcome.

No more situations where it's heads I win, tails you lose. I avoid all that nonsense and ensure that everyone pays their dues to play. That way, we're all on the same page and invested in the success of the venture.

There’s more fish in the sea than you know what to do with.

In investing, you can find yourself in situations where you feel pressured to make a decision. You feel like you’re getting sped up or you don’t want to miss out on this next great opportunity.

Don't let FOMO (fear of missing out) or the influence of others running the deal drive your decision-making. Take the time to find that perfect opportunity that truly excites you.

I've made that mistake before.

One of my first deals was a restaurant investment. I didn't particularly like the restaurant concept, but I didn't want to be left behind while all my friends were jumping in.

So, I put in $20k.

The deal started off fine, but then the Department of Transportation changed the roads leading to the restaurant in Utah. For the next six months, the restaurant couldn't attract customers, and everyone lost their investment.

It felt worse than other deals where I lost money because I was solely focused on not missing out. I didn't bet on an idea I was genuinely excited about; I just didn't want to be left behind.

In the end, we all ended up losing. Learn from my experience and ensure that you invest in ideas you're truly passionate about, rather than succumbing to pressure or FOMO.

Always cut square corners, no shortcuts. Stellar businesses can’t overcome bad partners.

There may be instances where you come across tempting opportunities but hesitate because the person running it raises doubts in your mind.

For example, I once invested in a drink company. My partner in the deal was someone I didn't know well, and he displayed some signs of dishonesty. However, I genuinely believed that the business itself had great potential, despite my reservations about the partner's integrity.

What I learned from that experience is that a shady partner will always be detrimental to the business. No matter how promising the business economics may appear, over time, a shady partner will find a way to ruin it if given enough time.

It's a lesson I won't forget.

If you don't have complete confidence in the person running a venture, pass and move on, even if the opportunity seems enticing. If someone has a track record of problems or fails to deliver on their promises during the due diligence process, walk away and live to fight another day.

If you can’t articulate the downside, then you don’t understand the deal.

In a deal, if everyone's painting a rosy picture about the outcomes and nobody can even explain how things could go wrong or the chances of that happening, it's a red flag. You're likely surrounded by overly optimistic individuals.

Now, don't get me wrong, optimism is great, but when life throws unexpected curveballs like a pandemic or events beyond anyone's control, you need people who have actually thought about the worst-case scenarios.

Understanding how a deal can lose money is crucial to avoid falling into that trap. So, always make sure you have a team that has considered the downside risks and be prepared for the unexpected.

Balancing optimism with a realistic assessment of potential risks is key in any deal.

“All I want to know is where I'm going to die, so I'll never go there.” - Charles Munger

Know how you get your money back & double the time horizon expectation. Leverage weakens every deal.

You know what the best dealpreneurs care about most? Keeping their money safe. They're not easily swayed by promises of a crazy 30-40% return.

Here's the thing: when someone dangles a massive return in front of you, it's important to realize that it also comes with a big fat warning sign that says, "Hey, you could lose everything!"

When I come across a deal promising a 50% return in the first year, my immediate question is, "What are the chances of losing it all?" If they assure me it's completely safe and backed by this and that, I remind myself that the return is directly proportional to the risk involved.

If nobody can explain how I can score a fat return without risking it all, then something's fishy. It's way better to never lose money in the first place than to chase some lofty return that might never happen.

Always optimize for getting your money back as opposed to maximizing the best return that you could potentially get.

Deploy your capital wisely, specifically focusing on staying within your circle of competence - the things you truly understand.

Here's what the best investors in the world emphasize: how ever big your circle of competence is isn’t nearly as important as the fact that you should stay within it.

If you fully comprehend a deal, understand its ins and outs, and are aware of the potential risks, then it's worth pursuing and going all-in.

However, if it falls outside of your area of expertise, don't fall for the trap of thinking it's a once-in-a-lifetime opportunity or succumbing to FOMO. That's how scams happen, and you end up losing your hard-earned money.

The goal is to optimize your investments, making great deals so it keeps you in the game and always moving forward.

I’m looking for my 4th deal in 2023.

My most recent deal has doubled the Trailing 12 Profit in the 4 months since we’ve owned it and the owner works half as much as she used to, while focusing on the part of the business she loves.

Here’s what I buy:

• Owner led looking for a big exit in 3-5 yrs (we buy in and help)

• Digital Businesses (courses, newsletter personal brands, certifications)

• Min 500k trailing 12 profit

• Product must be awesome

• Less than 15% of sales spent on advertising

I rarely buy the entire business, I don’t want in if you want out, but I want to hop in the boat with you, relieve the operational burdens and quadruple the exit multiple with you.

Send me your info at dealmaven.io!

I respond to all inquiries within 24 hours.

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