Earning Freedom with Michael Santos

Although our growing portfolio of rental properties had become an integral part of our wealth-accumulation strategy, I remained determined to build a digital-products business. With hopes of finding more institutional buyers for the program, I accepted 12 speaking assignments in the fall of 2015, keeping me in different airports every week. I traveled to various cities between Tacoma and Washington DC, striving to create market awareness for Earning Freedom products.

Some of those speaking events provided memorable experiences, and opportunities that I hope to leverage in months to come. Earlier I mentioned that the Washington State Department of Corrections was a client of the Straight-A Guide product that I created. When I made my initial sales call in Washington State, I had an opportunity to build a friendship with Michael Colwell, assistant director of Correctional Industries. He introduced me to his colleagues, including Bernie Warner, Dan Pacholke, and Scott Frakes. At the time, Bernie served as Secretary of the state’s prison system. Since then, he retired and went on to lead a private prison system. Dan took over as Secretary in Washington’s prison system, and Scott Frakes advanced to become Secretary of Nebraska’s prison system.

Those were powerful allies for me, and I hoped to persuade them to use the Earning Freedom programs in their prisons. Through those relationships I’d built in Washington State, I received an invitation to give a keynote presentation at a regional training conference in Spokane. Representatives from correctional industries in 11 Western states would be in attendance. Business entities that served the corrections industry sponsored the event with vendor booths.

Keefe Group and Union Supply were two of the vendors in attendance. I approached the sales representatives and introduced myself. They didn’t know that I’d been incarcerated previously, so I played a hoax.

“I was a loyal customer of yours for more than 25 years,” I said. When the sales representatives smiled, I told them that I’d never buy another one of their products again.

Keefe Group and Union Supply were two of the most influential vendors to prison industries. They not only supplied commissaries and food services, they also were creating devices to deliver digital content. The devices were designed in such a way that they would not compromise security, and inmates could use them to download music or entertainment. After getting to know representatives from Keefe Group and Union Supply, I suggested that they connect me with decision makers. I wanted to make a case that those companies should make Earning Freedom products available to people in prison.

As a consequence of those meetings, I received invitations to visit leaders of Keefe Group at the corporation’s headquarters in St. Louis, and I visited with leaders of Union Supply in Los Angeles. I also received an invitation to visit with leaders from New Mexico Department of Corrections, including Secretary Gregg Mercantel. Through these relationships that I’m developing, I anticipate that I’ll succeed in building interest for digital products I’m creating with Earning Freedom.

The more I worked to generate purchase orders from giant corporations or government agencies, the more I realized the time commitment necessary. Complaining about the challenges of selling into this market wouldn’t advance my cause. The market existed, but as Andi advised, I would need to invest significant amounts of time to build the business model. By continuing to create content, make sales calls, and bring awareness to the value of Earning Freedom products, I’d sow seeds that would lead to the multi-million dollar business we aspired to create.

Meanwhile, by learning more about the digital marketplace, I learned techniques that would allow me to offer products and services directly to consumers. Again, masterminds taught that we could create value when we trained ourselves to think about issues that were beyond our personal experiences. Every individual in society faced challenges. Those people could overcome challenges if they learned strategies that masterminds taught. In an effort to bring products and services to their attention, I invited Tulio to work with me.

Earlier I wrote about Tulio Cardozo, one of the first graduates of Chris Redlitz’s The Last Mile program. I admire formerly incarcerated individuals who successfully transitioned into society. Tulio was especially impressive because he trained himself how to code computers and use technology while he was locked inside of solitary cells. Using the same strategies that empowered me through my journey, Tulio wrote letters to people and requested books. Since he had an interest in computers, he asked for books that would teach him how to code. When he concluded his prison term, he interned with technolog...

The wisdom of Socrates has lived for longer than 2,000 years. His teachings influenced my thinking and approach to problems. To figure out next steps in the development of my career, I turned to his question-based approach to learning. The more questions I asked, the more truth I found in his saying, “The one thing I know is that I know nothing.”

By the spring of 2014, I’d been free from the Bureau of Prisons for eight months. The experience of creating the Straight-A Guide and striving to bring the product to market taught many lessons. More than anything, I learned that I needed help. In order to build a truly sustainable business, I’d need to inspire a team of qualified professionals who could accelerate sustainable growth.

I did some simple back-of-the-envelope math. Attracting candidates who could execute a plan would require sufficient capital. To start, the organization I envisioned would have to pay livable wages. We’d need at least $300,000 per year to build a team of five people with appropriate skills. In addition to those resources, we’d need resources to pay for office space and equipment, travel, marketing, advertising, and web development. Then, we’d need resources to fund an independent research project to evaluate the effectiveness of the Straight-A Guide. All in, I anticipated that we would need between $600,000 and $1 million per year to fund a sustainable operation. Further, we likely would need three years worth of funding before we would become a fully validated, evidenced-based program. Simply put, to bring this dream to life, I anticipated that we would need between $2.5 and $3 million of venture funding.

As a convicted felon who had only recently been released from 26 years in prison, I anticipated significant challenges in raising $3 million. Yet raising funding of some sort would be necessary if I were going to succeed in building a business. I couldn’t work for free and I couldn’t expect anyone to join the team I envisioned if I couldn’t offer livable wages. Working to change the world would be great, but people needed to eat, too.

Before picking up the phone and trying to raise money, I used the same strategy that I taught through the Straight-A Guide. That strategy of identifying values, setting goals, and articulating a message helped me conquer 26 years in prison and I was convinced it would help me chart the next course of my journey in society.

To start, I thought of my avatars—the prospective investors. What questions would they want me to answer? If I could understand their motivations for investing, I would advance my prospects for success.(Discuss crabs in bucket, importance of building credit...)

Carole and I met with a mortgage banker and provided all of the documentation requested. We took the next step of ordering an appraisal of the property. By considering comparable prices in the neighborhood, the appraiser provided documentation valuing our property at $454,000.

To avoid additional charges for mortgage insurance, we agreed to accept a mortgage of 80% of our home’s appraised value, or roughly $363,000. We wrote a check for $17,000 to cover the remaining amount we would owe to pay off the note to ABS Development. With the $12,000 we had put as a down payment when we initially signed the purchase agreement, and the $17,000 in additional funding we had to pay at the time of the close, our total out-of-pocket investment in the property was $29,000. But in less than 18 months of ownership, our total equity in the property surpassed $90,000—or more than three times what we put into the property.

In applying for the mortgage, Carole and I considered the term of the loan. Traditionally, most people finance their properties over a 30-year term. The longer amortization brings the advantage of lower monthly payments. With the longer term, however, payments during the first half of the loan went primarily to satisfy interest. Since we wanted to build equity in the property at an accelerated rate, we chose to finance our property over a 15-year term. The monthly payments on such a loan would be around $2,500, but each payment would reduce our principle balance by more than $1,500.

The advantage of owning real estate that we financed over a 15-year term became readily apparent to us. As long as the housing market continued to heat up, our property’s higher valuation would increase our equity. If we looked at a five-year plan, and property values increased by 20% over that term, our $454,000 property would be worth $544,000. In addition, by making our mortgage payments on time over a five-year term, we would reduce the amount of mortgage debt we owed on the property by at least $100,000. If those plans worked out, we could project an equity in the property of more than $280,000 after five years—a 10x return on the money we invested to purchase the property.

As I made these projections, it became clear that real estate ownership could and should play a significant role in my plan to build credibility. If I could replicate the strategy a few more times, it would seem that I could reach the goal I had set of building a $1,000,000 net worth by August of 2018, five years after I concluded my obligation to the Bureau of Prisons. I would only need to make my mortgage payments on time, and build my career.

To build my career, however, I would still need to persuade more institutions to purchase The Straight-A Guide. Without independent research to validate the program as being evidence-based, however, I would continue to meet resistance in the marketplace. Administrators would object, saying that although I used the course to become successful, there was no guarantee that others could do the same.

To overcome administrative objections that I anticipated, I would need to build more credibility. One strategy to build that credibility would be to write more, to speak more, and to create opportunities that would put me in front of more prospective buyers. Each one of those strategies required financial resources. Accordingly, I needed to figure out ways to obtain more working capital that would allow me to reach a broader market. As the old saying goes, it takes money to make money.