JF1078: Focusing on Not Losing Money with Business Consultant D. Anthony Miles
Sometimes it’s best to have someone in your corner advising you on investing decisions. A consultant like D. Anthony Miles is here for exactly that reason. As he says, the most important thing is not losing money vs. how much you make on one deal. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Anthony Miles Background:
-CEO and Founder at Miles Development Industries Corporation©, a consulting practice and venture capital acquisition firm
-Host and executive producer of Game On Business Talk® Radio Show
-He has over 20 years in the retail industry, banking and financial services industry
-Award-winning researcher, professor, statistician, legal expert witness, and best-selling author
-Featured on nationally syndicated media such as: Forbes, NBC News, Fox News, CBS News and others.
-Based in San Antonio, Texas
-Say hi to him at http://mdicorpventures.com/
-Best Ever Book:The Cashflow Quadrant
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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Dr. D. Anthony Miles. How are you doing, D.?
Dr. D. Anthony Miles: How are you doing today?
Joe Fairless: I’m doing well, nice to have you on the show. A little bit more about D. – he is the CEO and founder at Miles Development Industries Corporation, which is a consulting practice and venture capital acquisition firm. He is the host and executive producer of Game On Business Talk Radio Show. He has a book called Risk Factors and Business Models, and he has over 20 years in the retail industry banking and financial services. Based in San Antonio, Texas… With that being said, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
Dr. D. Anthony Miles: Sure. I’m an entrepreneur, award-winning professor, award-winning researcher, a statistician, legal expert witness, best-selling author, I’m a nationally-known expert in my field of entrepreneurship and marketing, I have appeared in the national media, I have been interviewed in Forbes, I’ve been on CBS News, I’ve been on Fox News, I’ve been on the other major news networks, and what I do is I share my experience with startups in marketing. That’s my story, and I’m sticking to it. [laughter]
Joe Fairless: Specifically, how do you make the most amount of your money?
Dr. D. Anthony Miles: Most of my money comes from my consulting work, and I have a really interesting business – I deal with professional athletes and high net worth individuals or lottery winners. Those are the bulk of my clients.
Joe Fairless: Okay. And what value do you provide to them?
Dr. D. Anthony Miles: I work in a capacity with my clients — I’m a business advisor. I have a unique practice – I prevent my clients from investing in business scams, or businesses that I would not recommend they invest in, because you have the horror stories in the media about a guy investing in a business, and he did not know that they were losing money and they were taking his money, and his return on investment [unintelligible [00:04:26].21] A lot of these stories are making it to the media, and I try to be a voice of reason, I try to protect my clients. That’s what I do.
Joe Fairless: I know you have experience in the real estate field, because in another life you used to be a loan officer and you used to do foreclosures… So knowing that your primary source of income is the consulting work and dealing with professional athletes and lottery winners on preventing them from losing money on bad investments, what are some investments that you personally have made or are currently making that are good?
Dr. D. Anthony Miles: Oh, goodness… That are good? [laughs] With my venture capital side of my business I try to look for businesses that are underworked, meaning they have potential to get more business outside of where they are, and a lot of times when I look at a business, I look and see if I can take them global, I look and see if I can exploit another market segment that they had not been exploiting, and I also try to stay away from businesses that are in a declining industry. Some of the successes that I’ve had have been small businesses that I try to take global, particularly some of the services industries.
Sometimes I actually partner with other businesses, and if I have a partner and we take on a business, I may come in as the marketing expert, my partner may come in as an accounting or finance expert, and then we try to close all the gaps that would make the business unsuccessful, we look at certain things…
So a lot of businesses that I deal with, I find them that they’re underperforming, and find out what’s wrong and how to [unintelligible [00:05:58].08] I try to get the businesses under what the guy selling the business (the seller) is trying to ask for. That’s primarily what I do.
I’ve had some hits and misses. One of the mistakes — it’s probably more interesting to tell you some of the mistakes that I made, as opposed to successes… [laughter] One of the mistakes that I made – this will probably be interesting to your listeners – is look at the facts and don’t try to go on passion when you’re looking at something to invest in. Because you may like something, and it may not represent the facts when you read the financials or whatever, and it may not be a good picture; some people see what they wanna see.
I could tell you seven ways till Sunday why you shouldn’t buy this business, and the guy is gonna sit there and go “Well, I still wanna get it.” Then he finds out he got a duck, or a lemon. That usually happens, and I’ve made that mistake.
Sometimes you’ve gotta look at the facts, you’ve gotta be Joe Friday. If they’re not making money and they are in a declining market or the market shifted on them, why do you think you’re gonna try to make something out of nothing? That’s the mistake that I’ve made in certain ventures, and I’ve lost money… And I think I’ve lost money on some of the ones that I’ve made mistakes at because I was passionate and I didn’t read the fine facts and I didn’t do my due diligence. That’s what I would say – you’ve gotta do your due diligence. If it doesn’t reflect in the numbers, the profitability that you’re looking for, you may not wanna pursue this.
I go by the mantra what Warren Buffet says. Rule number one – don’t lose money. Rule number two – don’t forget rule number one.
Joe Fairless: Yeah, I love his two rules as well. I love focusing on that. You’ve mentioned some of your good investments… Basically, you need either to turn them around or to maximize the potential because they have some upside opportunity, which is the same exact thing that we do as real estate investors. Can you give us a specific example of a good investment where you did this, just to add some color to the framework?
Dr. D. Anthony Miles: This is probably endemic of all the good investments that I’ve made and it’s probably a good example… This really wasn’t a company; I looked at some stock, and I tried to buy stock in a company, because I’m actually gonna be the investor and I actually partnered with another investor, and the success that I had with this was I had a team of people behind me: I had a CPA, and I had an attorney check things out, because obviously I’m not a CPA… And why this was successful was because they did the groundwork and they did their due diligence, and that prevented me from making a bad business move.
Sometimes in business you’re gonna see some things that are apparent to you, and sometimes you’re gonna see things that are not apparent to you. Case in point – another successful business we partnered on acquisition was the owner was getting ready to get out of the business; he was on the point of franchising the business and he didn’t know where he was gonna go with it. The guy just wanted to get out of the game, so we said, “Okay, how we can make this successful for both parties is why don’t you tell us about your market, tell us about where you’re going with the business, tell us about who’s on your board of directors and those types of things?” We found out he was a solid company, he had made profit several years; he had one down year over a ten-year period. When we got into the business, we found out that his market segment was declining. Sometimes when you have a guy working at a business, Joe, he doesn’t look at all sides of the business; he’s just worried about what’s going on in the business, he doesn’t look at the potential.
So we brought a fresh pair of eyes and we said, “Okay, we see an opportunity to pursue this for a foreign country that’s next to Texas; you had never considered exploiting the Mexico market? You have a product that they need over there, and you have probably one or two competitors, so you would be one of the three main competitors in that market.”
What we did was we acquired the business, we bought them out, and we went over there and not only did we penetrate the Mexico market, we almost dominated it within the first four years. What’s the moral to that story? Sometimes when opportunity speaks to you, you have to take advantage of it. We were just lucky to come in at a time when a guy wanted to get out of the business, and we totally reinvented the business and reinvigorated it, and we got into a new market and we almost doubled and quadrupled our profit margins.
Joe Fairless: What was the business?
Dr. D. Anthony Miles: It was a manufacturing supply company that manufactures goods for vegetables, and a sort of items to their product line. It was like a food company, like manufactured goods and those types of things.
Joe Fairless: Okay, and how did he get in touch with you or you get in touch with him originally?
Dr. D. Anthony Miles: When we got in touch with him it was kind of like — I work with a broker that finds business that are up. My broker contacted me, and he also contacted a couple other partners, and asked us to take a look at it. I believe the guy just wanted to get his money and get out of the game, and that’s how we found out about the business.
Joe Fairless: Your previous experience as a loan officer and doing foreclosures – what did you learn from that experience that you’re applying now in your business as a venture capitalist, buying businesses and then repositioning them and making money?
Dr. D. Anthony Miles: I had trained in real estate in Baltimore, Maryland when I was with a company right out of college, and I spent about 2-3 years studying real estate, and some of the things that I learned that I wasn’t aware of is how grueling the foreclosure process is, when you’re trying to get out of a bad deal because there’s a lot of federal and state regulations that you have to deal with.
What I learned was reading credit reports when you get a person, when you do a loan application for a mortgage or whatever, and people can lose their job, and that just really makes everything bad, and you never saw that coming. Case in point – the state that I’m in, Texas, we have a lot of military bases here in San Antonio, and one of the military bases got [unintelligible [00:12:05].10] So all of the loans that we had, that we made – I was part officer on them and on some of them I wasn’t – and a lot of the loans that were made to people, they lived in this particular area, and when they shut down the military base, a lot of those people lost their jobs… And they had pretty good, high salaries – we’re talking 70k, 80k/year – and some of them refused to move because they transferred their jobs I think to Georgia.
So what we had to do – the lessons that I learned from that is sometimes you have to work with people where they are, sometimes you’re just gonna have to eat a loss. A guy that was making 80k a year, and he loses his job and he has to go get unemployment, and that’s only temporary, and then when you do get another job, they don’t wanna pay you what you were making, so your debt ratio is not in alignment to what you were making before, and we had to eat a lot of foreclosures. What I learned from that is you have to really work with people, then you also have to look at the bottom line. If you can’t keep a guy in the house that you no longer can afford, you’re just kind of delaying the pain, or the inevitable. So you wanna try to be a human person, you don’t wanna try to just go “Well, you can’t make the payment, we’re gonna shut it down.” There’s alternative things they could do, and a lot of the guys that were working at this particular installation were the only persons working, their wives weren’t working. So when they lost that income, they didn’t have a two-income home, it was a one-income home, and how do you negotiate that with a guy who just lost his job and he can’t make any money, he’s not even close to that, unless he relocates.
We used to always have a saying with this, and what I learned from a guy that trained me in real estate and also lending – he said if a guy doesn’t pay for his house, he doesn’t care about anything. If he lets his house go into foreclosure, he’s not gonna pay his credit cards, he’s not gonna pay his car payment”, because you know, real estate is the most secure type of collateral in lending, and if a man doesn’t care about his house, he doesn’t care about anything, and we ran into people like that when I was trying in the business… And you just try to make it as less painful as possible for you, and also the other party.
So what I learned from that is try to negotiate, try to find the optimal solution before it gets to the foreclosure, because there are alternative things that people can do. It’s just a matter of “What’s the optimal situation for that particular person in that particular situation?” One thing that works for one person doesn’t work for another person.
That’s what I learned from that, and I’ve seen people get their stuff put out when it was raining and cold, and their kids — it’s really depressing when you actually do foreclosures. There’s a human element that you have to deal with, because it’s not about numbers and quads, it’s also about these people are losing their homes and you have to have some type of empathy about it. You just can’t be a guy going in there saying, “Well, we’re gonna take your property. We’ll send a sheriff over there to serve an eviction notice or a [unintelligible [00:15:14].28]” You have to be a human being when you deal with a situation like that.
That shaped how I do business in my business. I always try to bring it back to “Let’s be human about it, let’s negotiate, let’s try to prevent this before it gets to that point.” Because you have to understand, when a guy is losing his house and you have a foreclosure, he’s not in his rational mind. The other part of it too is he doesn’t feel like a man, and you don’t make it any better by making him feel like he has no alternative and he has no options. There’s always options when you do this, Joe, like in real estate… There’s always options, and you’ve gotta work with people.
Sometimes it’s not about what’s on the paper, it’s about the person you see before you. How can you help this person? That’s a critical component of how I get clients – I try to protect my clients and I always take that approach – how can I optimize the best possible situation for this person?
Joe Fairless: Yeah, one of my deep-seated beliefs is that there’s a solution to any problem. It might not be the solution that everyone wants; everyone might want that 25% of the actual solution, so no one’s really happy with the solution, but I believe there’s a solution to anything, and I love how you’re focusing on the human element.
Based on your experience as a businessperson and previous real estate professional, what is your best advice ever for real estate investors?
Dr. D. Anthony Miles: Well, that’s a good one. My best advice is when you look at a property – and I see a lot of similarities between venture capital where you buy a business and then when you buy a property… You always wanna look at “Okay, if I buy this property, what plan do I have for it? Can I make more money, can I open up a new market?” Case in point, you buy a property that’s near a university, and you can say “Okay, these kids need a place to stay during a semester. What if you cut the rent $100 cheaper than the competitors in that area, just to get a man there?” Obviously, you wanna make your money back, because remember, when you look at opportunities, especially in real estate, it’s very similar to when you’re looking at a business – you always have to look at “If I buy this property, what plan do I have for it? Am I gonna make money, or am I just switching hands? Is there a market that I’m not considering when I’m buying a property? Can I get people in here that had no idea that the property was [unintelligible [00:17:41].27]?” That would be my advice. What plan do you have for the property?
Joe Fairless: Yes, I love that. I can tell you that that is a question that I didn’t ask myself after I bought my single-family homes, transitioning into multifamily, because I just figured I would do the same thing with single-families as I did multifamily, and that is I buy it and I forget about it, and I don’t really have a business plan. But you can’t do that with multifamily. Or if you have a fixer upper, you certainly can’t do that. If you have a turnkey property that you’re buying and you’re making a couple hundred bucks and you just hold on to it forever, then that’s the plan; as you said, you just switch hands. But if you wanna make some real money and you’re trying to turn it, then you need to have a business plan.
Are you ready for the Best Ever Lightning Round?
Dr. D. Anthony Miles: Yes, I’m ready.
Joe Fairless: Let’s do it! First, though, a quick word from our Best Ever partners.
Joe Fairless: Alright, D., what’s the best ever book you’ve read?
Dr. D. Anthony Miles: The best book I read – and your audience is gonna really love this… This is a book called The Cashflow Quadrant by Robert Kiyosaki, the author of Rich Dad, Poor Dad. That book changed my life.
Joe Fairless: Yeah, love it. Get out of the employee quadrant and get into the business owner quadrant?
Dr. D. Anthony Miles: Everybody should have that book that goes to business school. I used to teach that in my entrepreneurship MBA classes. I actually made my students buy that book. Excellent book.
Joe Fairless: Best ever deal you’ve done?
Dr. D. Anthony Miles: The best deal that I’ve done – I saw a little business; the guy was trying to give me a price that I didn’t like, and I actually got it for half the price that he was asking for from a competitor. I closed on the business and I didn’t look back.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Dr. D. Anthony Miles: A mistake that I made on a transaction was I didn’t pay attention to the previous five years, why the company was in the dumper, and I got greedy, like everybody else does. I saw potential, I got greedy, and I didn’t look at why the sales were in the dumper the past five years. And there was a reason the sales were in the dumper the past five years – because they had a product that was no longer needed in the marketplace. They had to do a shift in technology, and the product was obsolete.
Joe Fairless: That would be a problem. [laughs]
Dr. D. Anthony Miles: Oh, I think so. That’s an A-track situation. [laughter]
Joe Fairless: Yeah, exactly. What’s the best ever way you like to give back?
Dr. D. Anthony Miles: I like to go to schools and I like to do workshops on basic business things. I work with some schools, universities and some high schools, and I have a workshop called Business Sense. We wanna instill financial business principles with these kids coming out of school. It’s not sexy anymore to have a $130,000 student loan, it’s sexy to be able to pay off your bills and have a little business on the side and try to niche what you learned in school. You have to look at school as an apprenticeship.
We wanna create entrepreneurs, we wanna create millionaires, we don’t wanna create more employees. That’s not the business.
Joe Fairless: And how can the Best Ever listeners get in touch with you?
Dr. D. Anthony Miles: Oh, easy. I’m on LinkedIn, and my company’s website – mdicorpventures.com. My e-mail and my business cell is on there. I’m also with my books on Amazon.com, and I’m also on ResearchGate – I have some free materials and some workshops that I’ve done around the country, so if they wanna download a copy, they’re welcome to do that. That’s pretty much it.
Joe Fairless: I love how you’ve gone from previously working in real estate and then applying those lessons learned to what you’re doing now, because it absolutely is an apples to apples comparison for what real estate investors do, as we buy properties or really businesses, if you think about it that way – a single-family house is a business… As you buy a business, you make sure that you have a business plan, and that you’re dealing with humans, and just use a common sense approach along the way. And comparing that to what you’re doing, which is you’re buying companies and you’re looking at what the upside potential is, and determining how can you optimize it, whether it is taking something global, doing a new market segment, having different partners in the business, staying away from declining or obsolete industries or products…
So thanks for making that parallel or the connection on those different industries and the lessons that you’ve learned, because for any Best Ever listeners who have been in real estate, it’s just not scratching their itch like they thought it would, then perhaps you do something similar to what D. is doing, and you start looking at maybe businesses versus properties that you buy. And I know I said just a second ago that properties are basically businesses, but for this context, businesses versus properties – maybe you do something like The Profit on CNBC (Marcus Lemonis) does.
D., thank you for being on the show. I hope you have a best ever day, my friend, and we’ll talk to you soon.
Dr. D. Anthony Miles: Thank you so much for having me, Joe. I really appreciate it. Thank you so much, I really enjoyed. [unintelligible [00:23:46].18] Take care, have a good one!
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