Business Buying Banter - NO BS Kick Off Episode!

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welcome to headbands and handkerchiefs where business buying banter meets no BS

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reality get ready to dive into the world of buying and selling businesses without the fluff and fancy jargon we cut

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through the BS to bring you raw unfiltered insights from industry experts seasoned entrepreneurs and no

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hold bar discussions they get straight to the point whether you're a seasoned

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business buying Pro or a curious aspiring entrepreneur this is where the

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real talk happens buckle up for headbands and handkerchiefs because in

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business there's no room for sugar cooing let's get down to the Brass

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tags hey hey hey what's going on today how you doing Deb did you like

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that opening Richard that's like frightening that's like real legit looks great sounds great looks great I almost

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look good you look terrific as always but yes terrific yeah I love the opening

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um I actually picked the the the song out um little rock and blues because

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that's my kind of music I love like AOS Smith Chris Stapleton any kind of music with Blues so um what about you what

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kind of music do you you you went to the um you went to the eagle was it the Eagles concert you tell I did how was

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that Minneapolis saw the Eagles um fantastic uh Glenn Fry he's what

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76 and he doesn't look old at all he looks great Joe Walsh he's 75 he looks

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old but he's still he still can yeah oh look it we got some people

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coming in welcome hey Kelly good to see you um hey Mike Mike from the hounds

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business Community thank you so much for coming here um check out that chat cat is filling up Richard beautiful we're

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glad to have everybody yeah so this is our first show Richard headbands and

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handkerchiefs and um backstage before Showtime we were just talking about how

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we came up with with the um the name obviously everybody knows me because I

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love to wear the headbands and I got to know Richard on LinkedIn of all places

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and we decided that we walked on Common Ground we love to support people that

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want to buy businesses and all of a sudden I noticed show them what's in your little coat pocket there Jack that

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was this and then you go check it out and my the picture that you saw the original picture on LinkedIn or the one

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that's on one of my uh websites has a pocket square handkerchief I don't want to confuse the two because I don't want

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to start blowing my nose into my pocket square but it had the exact same pocket square as you have in your headband

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wearing my famous Pink Suit which always solicits or elicits a few comments

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that's right so it was a divine intervention Richard amen we could not figure out what to call this show and um

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my uh good friend from the hounds of business Community CIA from brilliant

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beam media ladies and gentlemen she is our behindth scenes producer and she

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even has a secret mic can you say hi to everybody CA hello hello

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hello oh wait wait wait actually it would be more like

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this hello hello hello that's better that's much better yeah there we go so

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ladies and gentlemen if you are watching this live take it from me and take it

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from Richard you have to hire help production help for behind the

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scenes I try to do lives on my own failed miserably brilliant beam media

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why don't you put up that little QR code if you would seea uh this is who I

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engaged Richard and I for our show and behind the scenes we would not be able to do what we are doing today without CA

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and her team from brilliant beam media so if you are watching the show right

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now and you don't want Gremlins stealing your show trying to put on a live by

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yourself take a picture of that code on your phone and connect with brilliant beam media trust me I feel much better

4:38

don't you Richard knowing that CA is behind the scenes can we give her a hand I'm like you know you know like I'm so

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neurotic right and preparing for this I'm thinking like we got to do four hours of rehearsals right just to make

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sure all the technolog is working and you're a master at this and then you introduce me to see and she said guys I

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got you just we'll we'll log on half an hour or so before and we'll just do a run through and I'm thinking to myself like a half an hour before how is this

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even possible right it could it could take me a half hour just to log on but boom boom boom boom boom she's got this

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and and you're right she says don't worry I got you and believe me she's got us she was unbel she's unbelievable I

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love it I got a little thing up at the top there you see that someone scan the QR code I wouldn't know what the heck or

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how to do any of this CIA thank you can you give yourself a round Applause I know you got one in there

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[Applause] somewhere woohoo

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I love it okay okay so everybody came here because they want to learn how to

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buy a business and here's the good news Richard we're not just gonna be here today we're gonna be here what every

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week on Thursdays every week on Thursdays yep every week we got a lot to cover oh my gosh and and we have a lot

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to cover because it's always changing right right yeah it's and the landscape you know some of what we see today was

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almost predictable a year ago you know talking about interest rates and other things but you know I'm doing this for

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God in February it's going to be 34 years that I'm doing this which is hard to believe considering like I think that

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I turned 18 about an hour and a half ago and and like I think about and and yet and done and seen and involved and

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looked at and and represented in both sides of the equation hundreds and hundreds and hundreds of transactions

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and it's and it's unbelievable like I know for me anyways I still learned something new in every transaction action so it's it you know this the

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world is fascinating but there's never there's never going to be a a shortage of of subject material that's right yeah

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I'm with you on it and and uh 30 years is is how long I was in Corporate America um and 20 of it was in Small

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Business lending in some capacity and um oh God like you said every

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transaction brought some kind of a hairball curve ball you name it yeah or

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both yeah or both but then there were some easy ones that would come in too um so headbands and handkerchiefs business

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buying banter we're going to be here every Thursday 2 pm Eastern um so please

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mark your calendars and come back this is just our kickoff episode um and I do

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want to thank uh one of our sponsors for the show Richard um that would be

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Walking Tall movement and and um the two gentlemen that are um working on this

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project big hearts they both are survivors of mass massive shootings the

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one in Las Vegas a couple of years ago with the big concert and then the Fourth

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of July shooting in Highland Park um if everyone on the on the live today could

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scan the QR code that is put up on the live here and follow Walking Tall um

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they they are a small movement today but I they have big hearts and if if

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everybody recalls yesterday in the news there were two different mass shootings one in Vegas one in Texas so Walking

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Tall movement their mission is to reach out to the people as fast as they can

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that are dealing with these kind of unannounced things that happen in our

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world today so um I would like to just say all of our prayers and thoughts are

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with all of the victims and the survivors and these two gentlemen with Walking Tall they are the best um and

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I'm proud to say that they are sponsoring the show and um we We rise

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together right Richard We rise together absolutely I mean it's just it's ridiculous that an organization like

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that even has to exist right I was born in Canada and there's you have far less of it although there's been a couple of

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uh really horrific mass shootings over the years not not Rel you know not commensurate let's say with with the US

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rd: 2007

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which was one of the best days of my life but it's still astonishing to me that you know that it happens and

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yesterday we say it like we had two of them yesterday which like just say it matter of factly it's just they're doing

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God's work and and and um you know any support that we could provide to them or and people could provide would be

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wonderful absolutely and um I was talking to Chris one of the partners of

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the Walking Tall movement the other day uh and similar you know to to any industry the qualified are truly the

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ones that have walked through the fire they are the qualified to help pull others through uh in good times and in

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bad so thank you Walking Tall for uh being a sponsor of today's show and uh

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we appreciate all that you're doing absolutely and I do want Deb I'm going to give a shout out to someone who's

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who's uh G to be uh participating today for about half an hour he's not a sponsor I I am probably more of his

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sponsor than he is of a sponsor but this is my my son Jake's one of his closest buddies his name is Miles Woodbury 21 I

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think Miles and um he started in the he's he's mine and my wife's we call him our adopted son but he started in the uh

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real estate business residential real estate last February and he's very entrepreneurial he got all excited when

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he got invited to today's episode I'm sure he'll be in his own business soon enough he actually has closed a couple

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of transactions within his first year and got his first listing actually last week which is a massive Milestone right

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when you're selling real estate and so that's very exciting and I know he wants to eventually get into the world of Entrepreneurship so miles if you're

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listening I know you said you could only join for about 30 minutes but I'm thrilled to have you I'll call him my son because he is my adopted son and he

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always shows up at [Applause] our I love it well we were just busting

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his chops this week that he always shows up at our house at you know when Sarah's about 3 minutes away from taking dinner

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off the stove top he's got great timing great does he do the dishes when

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when dinner's done then yeah oh yeah yeah yeah yeah he's pretty good he's pretty for him that's good okay well

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listen uh we're gonna start the program here and just kind of Dive Right In um

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you know with our goal here is to educate all the business buyers and and um I'll kick off with um what is the

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market like today right now when it comes to business buying and the interest rates and how do you navigate

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and um that that's the question Richard how do you navigate you you just can't

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navigate as a business buyer the Waters of finding the best

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bank loan project for these transactions when you buy a business and a big

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confusion Richard and maybe you can um tell me what your thoughts are people

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think that the SBA is what gives the money the SBA which stands for small

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business administration they are an entity of our US government and they provide to all

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the bank lenders up to a 75% guarantee of the

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business acquisition loan so the government doesn't give the money everybody complains quote unquote about

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the SBA well they're not the ones giving the money Richard they're guaranteeing the banks that give the money right

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right so there's and and you know there's there's a lot of misconceptions in the whole process of buying

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businesses one of things certainly as it relates to lenders understanding that they're going to deal with a bank and

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that the SBA is in theory they're guaranteeing it to and to an extent underwriting it but what's critically

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important and how you and I originally met was how does someone facilitate that or

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make that process simpler more stream lined because I think the first knee-jerk reaction of an individual

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looking to acquire a business is the government is not going to give me any money that's the first thing and if they

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happen to get past that it's like well it's it's probably impossible right or

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close to Impossible and so there's such a lack of understanding yeah it's a complicated process and it takes time

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and there's underwriting just like there is if you're going to get a loan for a home I mean it's no different but

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understanding that the process is very doable and the terms especially with the new criteria that's in place it's

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unbelievable I mean the the leverage that someone can achieve to get into the world of Entrepreneurship through an SBA

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loan today versus you know some of the criteria of years past is incredibly favorable it is it is and we are a lucky

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country to have the SBA the um the the government guarantee I have been on um a

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couple of podcasts in other countries and the only reason why they want me to talk about the SBA is because

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they want their government or their leaders in their countries to hear what

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our government is allowing for people to buy these businesses because it's all

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intangible assets when you buy a business right Richard well for the most part I mean it's almost especially when

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you get into the smaller businesses some of them have absolutely no hard assets and so you know usually the biggest

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asset is between the ears of the owner and at Le every day at 5:00 and so understanding you

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know individuals who are looking to acquire businesses oftentimes they

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believe that Banks actually lend money to buy businesses and they don't they the SBA program does but you can't walk

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into your bank down the street as a commercial lend as a commercial lender and think with no experience no track

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record and you think you're going to leverage a loan to acquire a business without the involvement of the SBA sure

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I mean if you want to put up 100% collateral you can get a non SVA Lo but who the hell needs that so but there's

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no there's a real misunderstanding when it comes to small business Acquisitions and if you want to go through the you

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know down the path of a third-party lender versus you know Aller and part of a seller balance a sale this is your

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only choice in America it is your only choice no track record I mean no one's lending you money

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right on right on I'm so glad you said that and and

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there's a lot of talk out there about um 100% seller

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notes which can be done but it scares the beesus out of me because the due

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diligence in my opinion might not might lack when it comes to 100% seller notes

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just because a bank your bank partner they're going to dig deep and do a lot of searches and and support the buyer

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because they want to protect their portfolio to make sure what loan they're putting on the books is not going to

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have hair growing going on it within the first six months right well you you have a you know one of the things that's

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become a a just a a horrible problem in in our world of small business uh buying

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and selling is this concept because you see a proliferation of these alleged gurus right who are selling these

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teaching people how to buy businesses with no money no money down it's pretty interesting because when anybody tells me that they're a guru I've learned you

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know over the years that if you're a guru you don't have to tell anybody right the world knows that but you know

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these you're very you're very nice the way you position it these this concept of um buying a business for no money

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down lends itself to the title of this show which is it's complete I mean you can buy a garbage business all

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day long for no money down you can possibly buy a highly distressed business that and that has the word

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stress in it for a reason and if you have no experience as an entrepreneur the last thing you want to do is buy a

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distress business because you're going to have enough of a challenge learning how to be an entrepreneur and a business owner of a good business and so this

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concept of buying businesses for no money down it's it's just not a reality I mean it it's and he's certainly not

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going to get a good business um one of the things by the way that someone was asking um whether or not foreign

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Nationals can qualify for SBA Loans and so we should touch on that in a second

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but to to wrap up the point related to you know 100% seller financing I'm a big proponent of seller financing as part or

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all a component of the transaction there's no doubt that puts skin in the game it really validates everything that

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they've represented it represents and should be part of potentially the financing but anybody who's looking for

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you know businesses no money down I wish I could help them I wish that was true but it's it's complete BS I mean it just

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doesn't happen so people should save themselves a whole lot of time effort money and heartburn because that's not

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the way you're going to get into a business any good business and you want a good business oh yeah preach it now

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Richard come on well the one thing I've always liked with the SBA even when criter IIA was

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was so rigid that the percentage of SBA back small business Acquisitions was small is there's probably no better

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resource for a buyer to do their due diligence right if it passes the SBA

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muster and their underwriting I mean that goes a hell of a long way in validating the the core fundamentals of

18:20

the business I mean buyers can take tremendous consolation in that I mean it's it really increases your comfort

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level versus you know an accountant or others that may be involved into due diligence sure they're very capable but

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the underwriting is Hefty right and and so if it passes that that's a hell of a good vote that's

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right I just want to get an Applause for that that's right that's right that's right um yeah thank you and

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and I see there are like you said the gurus or the influencers out there on

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social media that are pushing 100% um seller note uh by these

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businesses and some of the younger Generations they have savings they have

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they have 401ks and they're cashing it all in to pay as much to the seller and

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then put the rest on a seller note and discount going to the bank for any money please don't do that please don't

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do that um it's just absolutely yeah it makes no sense I mean there's a couple

19:24

things that you shouldn't do right you shouldn't pay all cash for a business even if you it unless you get a massive

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discount and you shouldn't discount leverage because that's going to allow you more money to Market and grow the

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business so just do this in a good prudent way and there are facilities and resources that allow you to do that

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that's right yeah for some reason my screen is frozen and you look terrific

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but you because you froze straight on got the headband got the headband here the laugh yeah you're Frozen for a

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second but oh it's coming back there we go yes it must be a gremlin in my um

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uh but usually when my screen freezes it's like a you got a at least my voice is still here I

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should have a an AI Avatar of me in this black window wouldn't that be cool yeah

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absolutely I'm afraid what an AI Avatar of me would look like oh what the heck my you know I'm going

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to maybe uh well I'll keep talking okay yeah absolutely yeah so I Know You Can't

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See Me Maybe CA can send me a chat here to tell me what it is that I need to do and exactly again why ladies and

20:29

gentlemen you need brilliant beam media to be help you out to help you out

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because I wouldn't know what to do I'm willing to bet this is not on beam media I'm willing to bet this is something on

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your side 100% I think so I think so what do you Deb tell us about this um

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inquiry someone had related to four Nationals and the SBA because I have no insight into that um I'm going to switch

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my camera real quick here I think that's what I can do let me try this

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if this works there we go there we go there we go looking good oh no I'm gonna there you gone

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gone I'm just gonna go with this there we go looks terrific okay so um foreign

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Nationals um as long as you have a green card and it's all verified in the

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systems um the you know the um government systems there is a form that

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your SBA lender has that's an SBA form that needs to be uh complet deleted

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signed notorized um yes uh as long as you have a green card you can apply for

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SBA not a not so a green card not a um not a a resident alien it's an actual

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green card yes okay correct all right okay got it okay terrific yeah um we got another

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question here did you say seea I'm just looking at the chat here oh yeah who was it that was James Patrick thank you Mr

21:56

James Patrick I believe soaring profits is in the house would that be correct oh

22:03

and I like the way he spells it soaring profits p r o p h ETS yeah nice that's

22:08

another great um uh live stream podcast show and I am will be a guest on that

22:15

show coming up I think in a couple of weeks so um anyone want to marry a

22:22

Canadian IO that's where Richard's from hey come Onre all and I've got to say

22:27

thank you to I see it on the right hand side you know um a lot of familiar names

22:32

of uh people that have over the years purchased our course on buying businesses and saying hi and some of

22:38

these names are being triggered from from recent and and past years so hello everybody and and it's uh wonderful to

22:45

have you I appreciate the uh the kind comments and the regards it's great I agree um Rael is here thank you for your

22:53

sweet comments and supporting us I see that as well Mike asherbranner from

22:58

the hounds business Community Richard you need to consider joining that Community um I'd say the hounds business

23:06

Community HS a business Community they're all taking notes taking I'm taking I'm gonna send you a link you

23:12

will love it it's a great group we work together and we support each other um

23:17

there he is perfect got it that's the leader the founder of the hounds Mike uh

23:23

he teaches kiding Garden skills of how to network oh perfect okay yeah I'm not

23:29

very good at networking so no that that that'll be that'll be helpful that'll be perfect thank you what are you seeing by

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the way I wanted to ask you when you're you know I hear mixed stories related to SBA activity up and down and based on

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interest rates because I I see it through a very um different lens maybe um as opposed to not you but as opposed

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to you know pure lenders because of the interest rates and the impact that they have tell me what you're seeing as far

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as number of applications or what you if you have any insight to what maybe the overall SBA is or SBA lenders are seeing

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a number of applications are there people you know um prepping themselves at the idea of of you know we interest

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because I guess it's now Wall Street prime plus so it gets to gets to 11 plus percent it

24:14

does so let's go back to: 2020

24:20

Prime Richard zero I think at one point for a while there yeah um so the s

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ba uh loans that are financed by Banks doing business acquisition

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financing um generally will be on a variable interest rate when you buy a

24:42

business okay so variable we all heard about variable home equity loans back in

24:47

2008 the market crashed and then everybody's rates went up and forclosures were

24:53

t if you bought a business in: 2020

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probably was it was it's generally prime plus a spread of 2.75% that the banks will will charge so

25:06

you probably bought a business at two two and three qus percent uh maybe 4

25:11

perc if the rate C came up a little bit the prime rate well today prime rate is

25:17

eight and a half percent I believe Wall Street Journal prime rate is eight and a half yeah eight and a half yes correct

25:22

at 2.75 you're buying a business 11 and a half percent or so somewhere

25:29

where everyone that is listening needs to understand it's the business

25:36

Cashflow reported to the IRS that's the key reported to the IRS right that

25:42

supports your SBA loan project payment if you take over ownership and the

25:50

business continues to operate as is and produce those same profits as it has historically so don't let the interest

25:58

rate scare you as a business buyer because it is well it is high I'd be

26:04

scared too but if the business can afford it and it's the it's a variable interest rate if and when rates come

26:12

down now your rate on your loan is going to come down and your your principal and

26:18

interest payment is going to be less so you're going to have more profits going to the business onto the balance sheet

26:24

building value okay so um it is slower today Richard as far as

26:32

activity not So Much by business buyers but by business

26:39

sellers why they the sellers will not recognize the fact that the cost of

26:45

money for buyers is higher today and if the cost of money is higher they got to

26:52

come down in their price to meet the cost of funds today and um we're a year

26:57

into this High interest rate environment so my hope is and I'm starting to see

27:03

some sellers are like is this rate ever gonna come down I don't know right we

27:09

got an El election year next year I don't think anything's going to change for a good year and if it does I don't

27:15

think it's gonna be drastic I Wrong well you know we don't we don't you have more

27:20

insight certainly than I do we don't don't predict but you know interest rates in mortgages I mean for many years were this was you know five six seven

27:27

eight % was was pretty normal I mean I did a back of the napkin um calculation

27:33

you know and typically at 11 at 11 plus percent you have about $160,000 a year

27:38

um of you know principal and interest over the course of the loan well at 6% you had 135 so the difference right

27:45

you're talking about about let's let's talk about about $30,000 of difference between a 6% SBA loan and and a an 11

27:53

and a half% SBA loan and and I just went through this uh recently with a buyer

27:58

and walk them through the comparison say you know that's what you're talking about on a million dollars right you're

28:04

talking about 30 to $40,000 per year Debt Service and there's so many ways to

28:09

get around this number one mentally I mean if you're going to get into business there's always an element of risk you have to understand sometimes

28:15

you might just need to take a step back with what the income that's being thrown off um and what you're going to be able to put into your pocket after Debt

28:22

Service and if if that becomes too slim the other way is you use alternate methods to help bridge the gap with for

28:28

example you know I did the the math where I took a million dollar loan and 700,000 was an SBA and the seller note

28:36

was um if you if the seller note goes to $300,000 and you could negotiate where

28:42

you just pay interest only on the seller note for the first year or two until there's an adjustment downwards in in

28:49

you know the variable rate comes down in interest rates well if you take the seller note on 300,000 and you pay them

28:54

like I think it's about 6% and you pay pay the higher uh rate on the SBA loan

29:00

you you you you come back to the total amount that you would have normally paid anyways except you're you're only paying

29:06

interest and so you're not your your debt service is not costing you any more money than it would have before right

29:14

you could also get a holiday where you don't pay the note for a year so you can't let interest rates get in your way

29:20

unless they're 20% I get it but the seller has to contribute they lower the price they could provide a note there

29:26

could be Hol a holiday from from the note Etc that should not prevent people from moving the deal forward you just

29:33

have to get participation from from other you know typically from the seller

29:38

right and that could be and now someone uh by the way asked what the approval rate is on SBA Loans and I'm not sure if

29:45

they meant approval rate related to the buyers or the sellers but um maybe you could um lean into that a little bit

29:53

yeah thanks Graham Stephen nice to see you here um Graham does business

29:58

valuations uh he's got a um he's an artist so he's an artist he might be a good guest for us one day in the future

30:05

here and get him on the show perfect to talk about business valuations but um so

30:10

this this question could be answered to two ways um typical approval rates for

30:16

SBA loan applications I'm going to spin that first with this answer that all depends

30:23

upon who are you talking to to get the SBA loan and for

30:28

example um I just delivered a commitment letter last week for a fella that's

30:34

buying a business down in Florida for 1.5 million it's um an electrical

30:40

lighting company they they put lights in all the pools in Florida in your neck of the woods Richard maybe beautiful maybe

30:47

you got some lights in your pool I have a light in my pool actually my light in my the actual mainl in my pool went off

30:53

in uh stopped working in September of 200 and five I just haven't gotten

30:58

around to fixing it I might have a referral for you I got a referral only about 18 years we got lots of lights in

31:03

the back right but the actual light in the pool is about eight it's been off for about 18 years well his business is

31:09

he will transfer in to this business it's been around for 15 years and it's been profitable we're funding on

31:16

December 15th knock on wood so exciting wow yeah so to answer Graham's question

31:21

you know the approval rates really depends upon who are you working with as far as

31:28

credibility reputation experience the qualified like we were talking about

31:33

earlier how many times has somebody walked through the fire with SBA funding

31:38

on business Acquisitions let me tell you I've been doing this for 20 years I've

31:43

made a lot of mistakes and I've learned from them I take ownership when I make mistakes but that's what makes me grow

31:49

Richard and um if you're working with somebody that's been through the fire they are the ones that are qualified to

31:55

take you to the finish line this fella called three different banks on his own

32:02

to get feedback if he was qualified for the SBA on this particular business

32:07

listing he was told no three times came to me I took it to two of my SBA lenders

32:15

and here's where the magic lies um my SBA Partners who I work with they know

32:21

that I've got knowledge I'm not trying to be boastful it's just called she's walked through the fire you can V

32:27

because you're really good at what you do so if you don't boast I'll boast for you oh thank you but when when you've

32:32

been when you've walked through the fire and you've been burned and you learned you just get better and better as time

32:38

goes by so he contacted me and I reached out to two Banks one was a non-bank

32:43

lender they said no real good lender they say yes to some deals that other Banks say no reached out to another bank

32:50

they said yes and I even told the front-end lender can you take it to your chief of credit just to confirm that yes

32:59

a little bit more for me because there were just too many NOS right commitment commitment letter delivered and we

33:05

funding on on the 15th so Graham I hope that answers your questions regarding

33:11

approval rates there really is no Rhyme or Reason Richard do you know how many

33:16

people probably leaned on their business broker that's selling the business one

33:22

second when you said there's no Rhyme or Reason for so you saying there's no Rhyme or Reason for like the rates who

33:28

gets well there is Rhyme or Reason but I guess it's lender specific right lender specific yeah and what about someone

33:33

asking you know there they were asking about um are there sector specific areas because I know in my experience and and

33:40

having done a number of transactions with SBA Loans were involved we started seeing a lot more where there's certain

33:46

sectors for example you know restaurants where they wanted to know you had restaurant specific experience um or

33:52

there's sectors where there's licensing and I know they've there's some criteria now that allow the the seller the license to the seller the current owner

33:59

of the business to qualify the business for the next owner related to licensing but by and large there's no outside of

34:06

probably like you know the drug industry and porn I'm sure there's you know there's really no

34:12

restrictions they they look at whatever right I mean there's there's there's no industries that they've ruled off the

34:17

table completely so what I want everyone to take away from all of your statements

34:23

there and question every Bank has their own in-house credit policies every bank

34:31

that lends on these deals has their own industry appetites every Bank out there

34:38

has a SBA loan portfolio that's on the books and either performing or

34:45

struggling and there are a lot of struggles happening right now in today's market especially with the increased

34:50

interest rates that is changing on The Daily you could call a bank today

34:57

and be told no regarding a specific industry and then possibly four months

35:02

from now maybe that industry is performing better in their portfolio and now the decision makers are saying well

35:09

we'll open up the gates a bit on this industry think I I think back to my time working at the various Banks Wells Fargo

35:15

for interest for for instance they would Finance restaurants but they wanted you

35:21

to have 50 as in 5 Z 50% down as the business buyer if you wanted to purchase

35:27

finance and establish business I can call some of my other bank partners and 10% down is typically um the minimum

35:35

required down payment and that's sbop qualified on a restaurant and I have

35:41

some lenders that will do that we could even go 5 perc down if the seller is willing to carry back 5% of that 10% uh

35:49

down payment so no Rhyme or Reason hence why buyers really need to pull in a

35:59

partner that has access to the different SBA lenders where number one they're

36:06

going to pick up the phone when they know Deb Curtis is calling because she's got a package of a buyer that's

36:13

qualified and she knows that this business the buyer wants to purchase is Cash flowing because she demanded to see

36:20

the tax returns I get people picking up the phone if you're Richard Parker and you're buying a business and you're just

36:26

calling A lender at random depending upon if they're transactional lazy tired

36:33

lack of experience you don't know what you're gonna get Richard yeah they're not picking up the phone and one of the things you know I'm going to give a a

36:40

Shameless plug for you because you know i' I've dealt with tons of SBA lenders

36:45

business brokers and I do some U lower Market uh m&a work myself you know and

36:52

and and part of the problem in this whole industry was not all but a disproportionate percentage you know of

36:59

of of of Brokers may be pushing a buyer towards a certain lender where there may be some compensation and that's their

37:04

business but everybody has their expertise there's lots of stakeholders in the business buying process and everybody has their expertise and one of

37:11

the things you know that I I absolutely adore about you is that your heart's in the right place and hopefully I'll make

37:18

you blush a little bit your heart your heart's in the right place and there there's a massive Advantage for an

37:23

individual to be able to come to someone like yourself and be able and you'll be able to look and say you you know which

37:29

lenders are uh potential candidates for this particular business this particular individual because you see the you know

37:36

the the pluses and minuses with with both entities the individual and the business because it becomes very

37:41

frustrating you know one thing that I've always encouraged people to do in our course when they you know when they look for for financing is first of all do it

37:48

early right don't don't wait till the last minute to you have a a deal in place you want to start reaching out um

37:54

as early as possible to understand what's involved but if you start going bank to bank it

37:59

become very frustrating because the reality is and I've seen it happen where you could speak to you get two different

38:04

answers from two different people at the same bank and so you know and and and

38:09

unfortunately that situation exists so being able to funnel something you know all of that to an individual like

38:16

yourself who above everything else is going to do right by people and you know so encourage people you really if you're

38:22

going to go down the road it's well worth it to you know to join hands with some like Deb because she'll she'll make

38:27

your life a hell of a lot easier you'll have a good laugh along the way and she knows her stuff I mean so and that's really important because if not it's you

38:34

know buying a business isn't difficult it's just complicated and this is like another piece that becomes very very

38:39

complicated so thank you for that you're you're course kind gentleman um and I'd

38:45

like to toss it right back to you to maybe share with our listeners about your courses and and what what it is

38:51

that you offer um and then maybe we can talk about um the the top things sellers

38:57

don't tell you and see you can pop that up for us if anybody's interested why don't you give us a little feedback on

39:02

that Richard sure and and one thing I want to tell everybody we um Deb and I put together a report on 10 things

39:08

sellers won't tell you and um there's a QR code and we'll put in the link as well but you can get that reported down

39:15

get it in an email with a download link it's 10 uh 10 critical elements I think it's about 40 pages it's if I do say so

39:22

myself it's really well written and very helpful and um covers a lot of things you're just not going to hear directly

39:28

from the seller or they're going to tell you something and um it's not it's going to be something else for example you

39:33

know um growth opportunities key employees that will stay if they have issues related to customer concentration

39:39

which is a massive problem in a substantial amount of small businesses

39:45

outside of retail and by that customer concentration we mean when a disproportionate number amount of the

39:50

business comes from a very few number of customers and that's very common in

39:57

small businesses and they you know sellers will typically tell you that oh you have nothing to worry about so and

40:03

so will keep buying from you and so well you need to you need to examine that because if that doesn't prove to be true

40:10

the entire business can change and I know we had the individual who does the business valuation Graham I think you

40:16

gram and you know he would certainly understand this if you have a business that's throw that's doing $5 million a

40:23

year and making a million dollars a year and you have a a a a very uh uh high percentage of customer concentration and

40:30

if that customer disappears that business can now be doing you know making $400,000 a year and those are two

40:36

completely separate valuations and very often the seller will tell you yeah you have nothing to worry about well you need to investigate that and you need to

40:42

get confirmation and you may not be able to get confirmation from the client because the seller does not want you to

40:48

speak to that client because they're worried if the clients find out that they're selling the business then

40:53

they'll go somewhere else and so you have to develop a a um a deal that

40:59

carves out that client and puts them into a bucket of an earnout in other words the business does makes a million

41:05

dollars of profit I'm going to give you some rough numbers so Graham don't don't jump up and down because I'm just going to do this for math business makes a

41:11

million dollars year and you determine it's worth $5 million so it's a five times multiple well without that customer right that business makes

41:18

400,000 so that becomes a two a $2 million business at a five times multiple that difference between those

41:24

two that's the earnout so if that customer continues to buy after a year

41:30

or two that you run the business the seller earns the rest of the purchase price they're pretty dramatic numbers

41:36

it's usually not that large but it gives will give people some a sense for some context of the impact of customer

41:42

concentration there's the other parts of it of you know key employees whether or not they're going to stay or not stay

41:49

and so you know when you go through this it's it's it's well worth the read um it it it'll be very very insightful and we

41:55

you know I run into to these things all the time with Buyers where you know most businesses when you're buying an existing business they're going to have

42:01

warts they're going to have blemishes they're going to have problems there's nothing perfect so you want to mitigate what's really problematic you don't want

42:07

to turn incidents into catastrophes because the beauty of buying a good existing business is you get the keys on

42:13

Monday and you could take a paycheck on Friday right versus a startup which is a beautiful thing right but there's going

42:20

to be some problems so you have to you have to solve for those and you have to go through this methodically because

42:25

it's not it's not unless it's material the seller and the

42:30

representatives either legally or just by Nature I'm not going to tell you they may they may they may but there

42:38

there's no guarantee and there's no requirement in most cases unless it's material and so the buyer has to do

42:44

their due diligence in a good good way that's right I I like to add to that a

42:49

true story this happened a couple years ago I had a young man um purchase

42:54

finance a commercial C cleaning company very profitable just doing well longtime

43:01

company and the seller the owner was a a woman a female okay we did all of our

43:08

due diligence checked you know the receivables and all that I have a feeling I know what's coming here okay go ahead oh my

43:14

goodness nowhere along the line and um and this is one of the this is an area

43:20

why experience you you want to engage somebody that's been through the fire they're the ones that are qualified

43:26

because I learned a lesson really hard on this one the attorney didn't even catch it business buyers engage

43:32

attorneys to help with due diligence sometimes they engage good ones yes so

43:37

my my buyer was a male and the seller was a woman beautiful commercial

43:43

cleaning company he was so excited it was approved getting ready to close and we did close and fund but nowhere along

43:51

the line did she disclose she was a woman certified business and

43:56

her customers only wanted to work with minority owned businesses knew that was

44:02

100% see it frequently oh man so it was a bit of a a back and forth workaround

44:09

with and the business broker didn't even disclose it okay do you think the

44:14

business broker should look for that Richard do I mean now I know to look for it if it's a woman that's selling or a

44:21

veteran what what are the who are the what question so I would answer to you

44:28

this way I would say that anybody who's been in the world of business brokerage for any amount of time would most would

44:34

know to ask that question can I guarantee that they all would no but they would know to ask that question

44:40

because it does surface and as you were talking about I was noding my head and I hate to you know be the Assumption guy

44:46

but I knew exactly what was coming because I've seen it before yeah okay and so because then sometimes they get

44:51

favorable terms or they have to re there's certain County or or um governmental agencies that are you know

44:59

they give favorable treatment to minority and women-owned businesses and so if they're some of these related to contracts they would get favorable

45:05

treatment in the bidding process so I knew exactly what was coming so in your question should they should they have disclosed it if the broker knew it knew

45:13

this then I I would like to say with confidence that yes they will disclose it because the reality is you know very

45:20

very rarely do surprises not surface so any decent broker would absolutely let

45:26

it be known because if not they're all liable especially if they knew about it right yeah the problem is if you're

45:31

dealing with an you can't fault a seller they just knew this is the way they do business so they didn't even probably

45:36

think about this right they didn't even know that it was advantageous or maybe they they you know they they didn't hide

45:41

anything but they didn't put forth the information because they probably didn't know um that it was that um uh

45:47

influential on the purchase price or or or on the actual fundamentals of the business a business broker hopefully

45:53

would disclose it and if any broker has been in this this business long enough and I'm when I say long enough a few

45:59

years you would know that type of stuff comes up and you have to know to to ask for those things but it's incumbent upon

46:06

the buyer to uncover them that's that's where this becomes really almost unfortunate right because no track

46:14

record if you don't have the resources behind you and the information behind you and I appreciate you mentioned earlier about our course which sold over

46:20

100,000 copies of these takes people through the whole process and so those you know those are the type of things that you want to that we point out that

46:27

you want to look for in due diligence and Graham by the way um just to revert for a second put up a note related to

46:33

valuation which thank you Graham talking about a pragmatic view related to earn outs and customer concentration one of

46:39

the things he said was um you know you take you know a question to ask the seller what percentage of Revenue do

46:45

your top three clients represent I usually ask three to five or in a very open-ended question to say give me a

46:51

breakdown of your top 10 clients I don't need to know their names client number one client number two client number three through to 10 and what percentage

46:57

of the business have they represented over the course of the last three years and if they've changed um so that's a a

47:03

very good way to pose that question and um extract that information so these are all things that you know the and you

47:10

know what de the example that you gave about the woman-owned business or the minority owned business we're talking about concentration the nice thing about

47:16

doing this every week is there's like about and I'm not trying to exaggerate there's about a billion more examples of

47:21

these things right you know which is which makes our industry fun can I tell you another story about this same buyer

47:28

of course he this this was business number two commercial cleaning company

47:34

the first one that we had approved for him it was a male commercial a male

47:39

owner selling his commercial cleaning business this is rare that this ever happens Richard but it did this time the

47:47

seller got cold feet and 10 days before closing changed his mind and didn't want

47:54

to sell the business sellers remorse happens almost as frequently as buyer remorse so think about it my client we

48:01

were shocked we we the broker was shocked the first round we the first business he put in all this money into

48:08

buying the business the valuation the time the due diligence the

48:13

seller got cold feet and just wouldn't return anybody's calls or show up at closing so then we quickly moved to the

48:19

second business that was women-owned and then after it was funded found out clients were walking away but it all

48:26

came together so it all worked out and the nice thing is when you know sometimes when there's a lost deal for a buyer or especially for a buyer if

48:33

they've gone down the road with a ve with a specific type of business if they're able to get into you know find

48:38

another one in that sector that's um you know that they they can potentially acquire a lot of the initial research is

48:45

already done for them right they did it on the last business but sellers remorse is very common maybe in our next show we can touch upon that um a little bit

48:52

related to the seller side of things because we certainly you know how you know buyer's best way you know to

48:58

interact with with the seller because that that piece is so important and and very often most you know most small-time

49:04

buyers or first-time buyers most of them are get panic stricken at the thought of having a a meeting with a seller and not

49:10

you know no don't know exactly what questions to ask or what to look for so probably be you know maybe we can pick out a few of those and and why they

49:16

should be asking those and and preparation for the seller meeting that's right and by no shape or form am

49:22

I trying to to scare anybody that wants to buy a business because a lot of what

49:27

we talk about isn't the norm but it it's good to know to help you with your due

49:32

diligence when you're getting ready to buy a business um I want just shout out

49:37

to Graham he's heading heading heading off here soon he's on the over the pond

49:42

on on this other side of the world but does a great job with business valuation so Graham have a good night have a good

49:49

night um now we're we're down to 10 minutes here of the show um I'm what

49:56

should we we we we want to keep talking business buying banter every every

50:01

Thursday you're going to find us here live we Richard and I both agreed if you're interested in being a guest and

50:08

you want to talk about some of um what you may add as value to our listeners

50:16

simply DM um Richard or myself or reach out to us and uh we would love to

50:21

entertain adding some guests to our roster right Richard oh absolutely and certainly if there's any U you know

50:28

buyers who have gone through this process would be wonderful to hear your stories some of the challenges that

50:33

you've um you know that you've uh encountered along the way so industry experts whether it be someone like

50:38

Graham with uh you know um you know valuations or anyone's any accountants doing forensic accounting or uh

50:45

attorneys doing transactional work at this at this level we' you know we'd love to have you participate but certainly related to the buyers um that

50:52

would be great um you know and and and I think Deb your earlier point that you made just before you're talking about

50:57

potential guests when you're talking about you know not to scare anyone it buying a business I mentioned

51:04

earlier it's a difficult process but it's it's not difficult it's complicated and so when I mean complicated there's a

51:09

lot of various steps but they're all doable I mean I'm the poster boy I've bought 13 businesses and have a

51:15

co-investment in in a 14th and businesses ranging in value from $50,000 to $200 million I don't have a fancy

51:22

education I'm not sitting here to try blow blow smoke up my rear end with with accomplishments but I'm you know I'm I'm

51:27

the poster boy for it and I made a ton of mistakes you know at the beginning you and you can there's enough

51:33

information that you can avoid doing that but it's doable anybody can do this not everybody will but anybody can do

51:38

this it's not Beyond anybody's scope you just have to do it in a methodical way reducing all the steps like into into

51:45

into bite-sized pieces and you know I I tell buyers that the the two greatest

51:51

emotions that you have you should be excited and you should be scared excited excite excitement keeps you

51:58

going scared will force you to be diligent and so there are Peaks and valleys and I'm sure you've seen it

52:04

people you know they it's frustrating that the individual who lost the the commercial cleaning business the seller

52:10

backed out and then a then then it's a woman you know women's own business that had favorable treatment so that's enough

52:16

to knock you on your ass a little bit but if you a true entrepreneur those are like just bugs on the windshield of life

52:22

right you just dust yourself off because that's the world of entrepreneur and if you you have to get used to that sort of

52:29

those challenges and failures because there's very few entrepreneurs that have

52:34

that started out and their first Venture was Uber successful most of them failed a bunch of times so you just don't want

52:41

to make you're going to make mistakes you just don't want to make big ones and you do your best to mitigate the big ones but that's the world of

52:47

Entrepreneurship the flip side of it is it's unbelievable how exciting it is and fascinating and it comes with ongoing

52:54

heartburn I think you would and I a while ago were talking said you know I can't even remember how many times like I went to bed on a Monday night and you

52:59

know how the hell am I going to make payroll on Friday in one of my businesses and that's just like it's just part of it right you get used to it

53:06

and and you and you become stronger and and better for it oh man I love everything that you just said there in

53:12

these closing comments Richard that just resonated with me deeply and and if you

53:18

are a buyer you want to do it with Partners Like Richard or myself that are the qualified that have walked through

53:24

the fire time and time again 30 years each of us what we got 60 years together

53:30

of we're old right I tell people we're old I tell people I'm not that smart I'm just

53:36

old it's just the aggregation of information along the way I I've learned

53:41

um representing buyers sourcing SBA Loans um a good chief of credit of mine

53:48

from from a bank of past time I nicknamed him and I as the curveball

53:55

catchers because every deal brings curveballs and iare my buyers from the

54:02

Geto you know just just be ready this is like you said this is entrepreneurship

54:07

life curveballs happen but we catch them and we find a solution that's that's

54:13

what it's all about that's what we do we we pivot we adapt um that that's exactly

54:19

what we do that's what we do um so next week we we will have another

54:25

episode um I I would like to maybe give a special thanks again to our sponsors

54:30

and and have put them up on on the board again um brilliant beam media CA is the

54:37

one behind the scenes here thank CIA how about a drum roll or something yeah give

54:42

us some give us some music CA what do you got for us there we

54:49

go had a little different than mine but that worked oh okay F fine fine I always

54:56

think about the Family Guy episode when I hear that about Peter Griffin talking about walking behind the fat person with

55:01

a tuba I know that's not politically correct but he had that whole episode when he's walking so he said that that's what he wanted as his job to walk

55:09

behind sorry like that's just well well only because you guys are

55:15

a dream to work with here's my my mine for you okay oh that's like fairy dust I like that

55:23

that's what we're going to do we're going to sprinkle fairy dust people and get them to the Finish Line yeah oh I have to say hi I see Terry Smith is in

55:29

the chat is that the Terry Smith I play hockey with no I don't know but he he's

55:35

awesome he's on LinkedIn everybody should connect with him um uh Terry

55:40

Smith it is a business advisor he helps people with business financials growing

55:47

in my opinion anybody that's a business advisor a business coach of some sort

55:53

when I see their business business financials the tax returns as a seller that the the the business that engaged

56:00

the business adviser like Terry Smith nine times out of 10 that business is going to sell and be approved for

56:06

financing because the owner saw value in engaging in the right coaches and

56:13

mentors to support them all the time it's the owners that want to do it all on their own that fail and expense their

56:21

Tesla that's sitting in their parking lot by the front door of their business well we can go we actually do a whole

56:27

thing related to unreported income because that's a perfect topic and I like uh I think Terry posted something

56:32

by the way no risk uh no you know no risk no reward but I think the you know one of the subject matters that we'll

56:37

cover is related to unreported income or you know the this the laundry LIF list of ads adbs and um you know yeah it's

56:45

dangerous U you I saw Anthony um Wilson posted a thank you and and welcome that if you don't know Anthony he was one of

56:52

uh one of my first clients his his dad was one of my my first clients he actually um started off made an

56:58

investment $30,000 into a candy store in in Oklahoma and built a multi-million

57:03

dollar Empire his him and Anthony I I I interviewed them if you will via Zoom um

57:09

for our for one of our websites they're gonna their whole uh the whole interview is going to get posted shortly but they

57:14

actually used our course and and and the and Anthony I mean he's an his dad's

57:20

really impressive Anthony is unbelievable I mean he's really taken the torch and he's he's a brilliant guy

57:25

and I I believe he told me that he he won the um you know top 40 under 40 in

57:31

in in western Florida like in the Tampa area um so thank you Anthony for joining us and uh those are those are great

57:38

stories maybe one day we'll have those guys on because it's a your tag team father and son and their stories are

57:43

just just fantastic there's there's money and sugar there's money and sugar and even if there's not money there's

57:49

sugar and sugar you know it I got a shout out I see Crystal Lloyd is here

57:54

she's an SBA lender uh with veritex Bank in the big state of Texas see you that's

58:01

your neighborhood Crystal Lloyd and um one of her leaders at the bank is an old

58:07

chief of credit of mine his name is Kirk B he's one of the best SBA chief of

58:14

credits leaders in the country by far um so uh thank you for showing up Crystal

58:21

tell tell Kirk I said hi um so many s in the chat here yeah Dr Dr trong thank you

58:28

so much hun for being here Terry Smith Graham so Donson by the way there's

58:35

that's Anthony's dad yeah I love it yeah and Anthony said he's actually under contract now for a business is going

58:41

through SBA so they're uh um you know we we got a terrific selection of

58:46

individuals thank you everybody who joined today and and certainly any feedback we're new at this we're very

58:52

excited about the subject matter um and and I'm thrilled to share it in any way we can but if there you have any

58:58

feedback what we could be doing better or subjects you want to um cover but certainly anything that you uh believe

59:04

from format or otherwise that we could uh improve upon please your uh your criticism is welcome Deb has got skin as

59:11

thick as a Buick and if you want to know why just go read her background and her upbringing and her story which I

59:16

encourage everybody to read with her and her Poppy and her dad the story will bring will'll bring uh bring a tears to

59:22

your eyes but you'll understand she's got grip so um any criticism is is going to be taken very well and I'm uh doesn't

59:29

phase me at all so we look forward to that Deb you're did best I appreciate you you getting this organized and and

59:36

love doing this with you well Richard thank you I it was a divine intervention

59:41

headbands and handkerchiefs baby show me what you got here's what I got here's what I got and I'm not waving the

59:47

flag until next time ladies and gentlemen make sure you mark your calendars next week Thursday 2 p.m. Sun

59:54

centr and please if you no 2 pm Eastern Eastern thank you 2 p.m Eastern please

59:59

spread the word to your friends as well because um we're all in this together and and we should always be learning to

:: 00:06

be earning Amen to that see you later see you

:: 00:14

[Music]

:: 00:23

later