Investors nowadays have trouble finding where to put their money into investment. Do you put it to stocks or direct company investments? In this episode, host, Anthony Frischknecht, shares his insights on how you can identify where to invest and how to keep an eye out for the risks involved. While at it, he explains the importance of doing background checks on the people you invest your time and money to. Don’t miss out on this great episode where Anthony gives you advice with an entrepreneurial mindset.
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Where Best To Put Your Money To Invest
I wanted to talk to you about what kind of investment is best for you? Stocks versus direct company investment. Things have been pretty wild over the years especially with Canada getting in the race on who is going to be first to legalize nationally on a large level and they ended up having achieved that. I’m not sure how successful they are but this has also caused a lot of confusion for the investor because there are not too many stocks to invest in New York Stock Exchange but there’s Canada. If you aren’t familiar, a lot of the groups out of the US went up there and what they call a reverse merger and opened up on the stock exchange up there. That allowed them to get access to capital and come back down to the US and invest that money in the cannabis economy down here. It’s a work around. It’s an entrepreneurial mindset. Let’s see how we can get around the sticky part and get some financing. I have done multiple deals in investing in companies and I’ve also done stock deals too. There are a few things that I look for and they’re not fast. I want you to be aware of it. My type of investing is more of a long-term. I know there’s a lot of you out there that did trade and there’s a lot of opportunity in that.
Who Are You Investing From?
I don’t personally look for the quick book. For those out there that are just starting in this world, whatever you see on the media and whatever transactions are happening, this is not a get rich quick game. This is a long-term play if you want to make some money. There are guys out there as in anywhere where they made $100,000 off of this deal. They made $500,000 off of this deal. It’s becoming rarer because there are more people getting involved in the industry. These deals of quick money are few and far between. When you do start investing or looking into investing, think about what kind of investor are you. Do you want to turn a quick dollar? Which is fine, there’s nothing wrong with that. Everybody has their reasons why they prefer to go either long-term or short-term. I’ll share with you a few things to think about as you’re looking into investing. You’re dealing with these types of high-risk investments because they are. I would urge you to start slow and you’re going to have to learn as you go. I’ve come into this industry from the black market. There are a lot of very sketchy people out there, so you got to keep your eye. They’re smart too. It’s not like they’re idiots but they will test you on some of the stuff they do. Some may fudge numbers, some may tell you one thing and you see another. These are all red flags as an investor that you have to understand.When you are looking to start investing, think about what kind of investor you are. Click To Tweet
I like to get my hands dirty no matter what you’re digging into. You either know these companies personally or you spent some time and put in the legwork to understand these companies. If your full-time job is as an investor, which is awesome, there are very few people that I know that can do it full-time, but there are a few of them. These guys have either their people on the ground or they’re in it and they’re digging. For example, with companies, if you’re going to invest in an extraction company, a grow facility, these are all exciting things. The news shows it’s exciting. These are cash-intensive operations and a lot of the times they’re not showing any profit for several years. You’ve got to be willing to hold out for those. You’re not going to get dividends most of the time on any of these deals.
If there are companies that you talk to that you’re interested in investing $20,000, $100,000, $250,000, what’s that money worth to you? Because $10,000 to me could be the whole world to somebody else or vice versa. You need to understand that this is simple investing. There’s nothing unique to the cannabis industry. What’s that value of money worth to you? I suggest depending on how much you’re going to invest, that’s about how much time you need to invest. If you value your time and you have $100,000 investment, then you need to invest $100,000 worth of your time into figuring out if that’s the right deal for you or not. It’s the only way that you can equate it to make sense. What’s that $100,000 worth to you?
If you’ve got a big deal and you’ve got a month to figure out whether you’re investing, you better kick some butt and get in there and start doing your due diligence. I’m still on companies. I don’t want to shoot too far off in the stocks. Companies, I like to see them firsthand and meeting with the executive group, the entire group, whether it’s two guys or ten guys. You need to understand the dynamics between all those guys because more than likely there are some things that you’ll uncover between relationships. Usually, you can find out things about money and who’s controlling the money. These are all big things especially if you’re going to be dumping a bunch of money into it. You need to understand who you’re dealing with. I’ve gone out for dinner and drinks with people and spent several hours meeting with them and at the end of the day, they’re running the company.
You’ve got to know these guys and what their passions are and how they believe in it. You also got to know, are they quality people that are working in the industry or are these guys shysters? Are they trying to take advantage of people or fleece the investors of their investment? I know a handful of guys that were living way outside their means for several years because the cash was coming in and now it was coming in so fast. They may not have seen the profit in there but it was coming in so fast. It’s hard to tell until that slows down, you can see that. You see those issues happen or it’s like, “Why are we 10,000 below? Two months in a row, sales have been down.” That stuff catches up quickly. Most of these guys don’t have any extra income sitting behind in case they had a couple of bad months. Those couple of bad months can kill the business.Projections are great but performance is where results comes out. Click To Tweet
Another thing really simple to do is check their licensing and verify it. Make sure it’s not only that they have it but that it’s not expired and they’re not owing any in taxes. There’s a lot of stuff that can be hidden there where they may owe some city or state taxes that are unknown. Those can cause issue when you go to renew your license. They tap right into that. I’m sure this is common in other industries, but this one even more so. It’s like, “We don’t even care if your license is $50,000. You owe us another $100,000 in taxes. Sorry, you’re going to have to come up with $150,000 this month in order to get your license.” That license is no good because they can’t renew it. There’s a major issue with your investment.
Another one is when you’re looking at taxes and tax payments, look to see if that matches up with the amount of revenue that they’re talking about. That’s a clear sign. They say they’re making $10 million but they’re only paying taxes for $2 million in revenue. Something’s not right here. The other thing too is salaries. A lot of the industry has come up from nothing. When you come up from nothing, you spend money fast a lot of the times because nobody ever taught you.
You’ve got to reinvest in your money or you’re putting this aside, these guys have all been sole proprietor. LLC is for many of their professions prior. They’ve created bad habits of using company money as personal money and vice versa and a lot of comingling. That one happens a lot in every business. I’ve seen it firsthand in this one following up that why are they doing this? Why are they treating the company like a piggy bank? That’s a little bit tougher to dig out. If you’re doing a large investment especially if there have been a couple of raises already and you’re a B or C. You should find out if you’ve got a forensic accountant on hand. Those are key components.
Getting A Board Seat
I’m good with numbers but these guys can dig out because they look for fraudulent activities. They might be $400 an hour. If you’re investing $100,000 or if it’s $10,000 to you, what’s a couple thousand bucks to make sure your investment is safe? It goes into your business expenses and stuff like that. You’re investing in your business to become a better investor. I would say if you’re also putting a significant amount of money, you should get a board seat. At the end of the day, you want to be in these meetings when they sit down. You want to have some control there. I know a lot of investors agree with me on this but to share with you new ones out there, it’s a big part of it. I know guys that they won’t invest at all unless they have a board seat. They’re like, “I’m going to invest 20%. For 20% stake in the company, I want a board seat.” There’s a lot that can happen that you can’t control unless you’re a part of them.Don't chase other people's dreams. Figure your dream out for yourself. You'll be much happier. Click To Tweet
Those are my top five, six things that I would look for. Of course, you’ll find red flags and that will open up a bunch of other things for you to check out. If they’re newly starting, you are going to have to go off of what the owner is like. A lot of these are going to be personal loans are going to be coming to them. You need to do your background check on these guys. Make sure that they don’t have massive debt that they’re sitting on or lawsuits that are happening. See if you can find some referrals or get around them in some of their friends and understand where they’re coming from. That’s the very first investors. The ones that are just starting, those are challenging because that’s a lot of feel and see and touch. You don’t have a whole lot of numbers. They’re going to give you projections. Projections are great but performance is where it comes out. You need to look at these performance paper like what’s the worst possible thing that can happen in this scenario so you don’t lose money? As an investor, everybody hates to lose money but it happens. You can’t call it every time.
Let’s talk some stocks. Stocks are tricky too. It’s been an interesting couple of months. The last few months, stocks have dropped 30% and 40% across the board. You can either look at this as a curse or an opportunity. It opens up opportunity in a lot of areas. This is going to come down to, are you short-term or long-term? Step back a couple of minutes. I wanted to add something to the companies. If you’re looking at a company that potentially can go IPO, then that’s your short-term. Still, you can do pretty well on that. You want to keep that in mind too. Jumping back to stocks, limited information. A lot of these have not had any real statistics out there. Arm yourself with some good statistics to read and there’s some stuff starting to happening on the stock exchange now and there’s information. There are a lot of companies that are doing analytics now, so you can start digging some of that stuff up.
I still recommend if you are going to invest in these companies, you need to dig in and look and see when they’re going to be profitable because a lot of this is going to be a guessing game, “I think they’re good.” You want to know their future. You want to know where they’re going to go or where they’re headed. Being profitable could be two or three years down the road. It could be five years down the road. There are some big plays out there. There are a lot of companies that are splitting up. They’re diversifying into medical stuff, not only recreational but their company has a lead in R&D in researching the medical benefits.
The medical benefits, we haven’t even scratched the surface. If you can find somebody, a company that is digging in and is heavily investing in the medical side of the plant, that’s more of a long-term play. I would search out those types of companies because those are going to be the big hitters as we go down the road. The research is just starting. I’m not sure if anybody has been following. I’ve done a couple of videos on my Facebook Live, but the DEA have to fit their hand forced to allow multiple schools now with the ability to grow and research this plant. There was a lawsuit done. It forced them to process applications for several schools. Arizona has a couple, I believe California, there are several others. There were eight or nine that were sent through.
This is good but this is what’s going to propel some of these other companies and they’re going to work back and forth. You find companies that are working with universities and stuff. That would be maybe new to the biotech world but it’s new to what we’re trying to do on the cannabis industry. Tie in and look for stuff like that. Look for where all the operations are located. Are they in one area? Are they spread out all throughout the US? Do they have a dispensary or grow over here? When you spread them like that, unless you have a big plan in place and you’re going down the right direction, it’s not very easy to make money when you’re separated. I’m sure people will argue with me on that and it depends on the situation.
Invest In What You Know
Something that I learned a long time ago, invest in what you know. There are real estate investment companies out there. There are equipment companies. There are several other industries that have their toe in cannabis that you can invest in and your risk is not nearly as high as if you went for a massive greenhouse grow company. Look for those pieces of the puzzle that those companies that piece this together, that have a strong balance. They know that they can put some of their information into it and help grow the industry in maturity, because the maturity side is where we’re going to see some big dollars. We’re not even anywhere close to that. We’ve got another four or five years to when we see the maturity happen. If you’re looking at either, they’re both very promising. You’ve got to do your homework. That’s what it comes down to. Do your homework and invest in what you know and take some of that information and use it to your advantage. There are not a lot of guys out there that are investing in stocks. They don’t know anything about stocks. They’re the hot new thing. You don’t want to do that. Don’t chase other people’s dreams. Figure it out for yourself. You’ll be much happier. You’ll also be more aware of what your investments are doing.
Once you have those investments, especially stocks, make sure you keep up to date with everything that’s happening in the news on them. I hope that helps you out a little bit. I wanted to give you some to start with. I’m going to be having guests on here. I’ve got some guys out of Canada I’ve been talking to that I’m going to bring on the show. I want to give some deeper insight on specific stocks and information. I’m also going to get some bigger companies on here too. I know the gentleman and the founding owner of Medicine Man Technologies, which he’s had at Denver, Colorado. He’s been involved in the industry since 2009. They’ve got some huge stuff happening right now. I look forward to bringing him to you. If you’re interested and you want to follow me a little bit more, please head over to BlackMarketBook.com. I’m going to have other information there. You can also purchase my book there if you want to check that out. You can reach me at all my social media sites as well. Thanks a lot. I hope you have a great day. I will talk to you soon. Bye for now.