The Right Business for You – The Most Important Decision You Will Make

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[Music] wel to headbands and handkerchiefs business buying banter me no BS reality

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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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Holds Barred discussions they get straight to the point whether you're a seasoned business buying Pro or a

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curious aspiring Entre this is where the real talk happens

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buckle up for headbands and handkerchiefs because in business there's no room for sugar cing let's get

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down to the Brass

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TXS happy day happy happy happy days are here again remember

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that sing are here again the skies are something I don't know do you help me

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out with the lyrics on that one no I could just hum along it's good to see you Richard

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making me smile always always a pleasure how you doing on a Thursday I'm doing

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good I'm doing good excited for today's um topic um which is the right business

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for you yes I I've uh I can't wait for this

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this is this is uh this is it this is everything this is um you know this is sort of what I've been teaching and

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preaching for uh for decades and and um it's just so important so I'm looking to

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diving right in yeah I thought we would kick it off because I was thinking how should we kick it off I always think of

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business buyers when they call a lender or call a broker or call you or I they

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tell us the business how they how they look at what they perceive as the right

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business for them so what are some some good ones that that you heard along the

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years well I got lots of them so well you know I just want to take a step back

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for a second to the point that you're saying because one of the the biggest problems is um prospective business

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buyers have this horrific misconception of what constitutes the

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right business and where they missed the mark repeatedly is the right business is

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a business that's right for them because if a if you have a good

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business and it's run by the wrong person it's going to go south quickly

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similarly there's lots of businesses out there that are just not run by good owners and you know we outline 23 steps

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in the business buying process which there are from from what to consider right through to closing the deal and

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then post-p purchase priorities and of those steps if you were to do a marginal

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job on all of them including the valuation negotiation due diligence

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investigating the competition the ETC and what the industry looks like if you were to do an okay job on all of them

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but you do a terrific job on identifying what type of business is right for you

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and match it perfectly to the to the appropriate business you are going to be fine but if you do it the other way

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around if you do a Flawless job of everything in the process but you don't

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get the business that's right for you MH it's probably going to go out of

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business pretty quickly and so the the making sure that you acquire a business

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that's specifically Geared for your best skill set is critical is absolutely

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critical it's everything yes thank you one of the most common phrases I hear

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from many business buyers out there is they're looking for a business that has

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this much iida yep and where do we go wrong there Richard I mean uh where do buyers go

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wrong there this much iida well well the the obvious thing is you know the money

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is important the profits important the cash flow is important all of that is important but again if that if the

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business has this much iida or I'm looking for business with this much ibida well if you're the wrong person to

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run it guess what if we have this conversation in six months from now it's going to be this much iida less a whole

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lot of iida there you go right right and then also I I know that like on the lender side like having relevant

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industry experience is obviously really important yeah can you explain which I

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could as well but iida what it stands for for our listeners so that's a common

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acronym that we hear but not everybody lives in our world our world of acronyms

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so give it to us Richard E it up okay so I know CA has a a comment there but it's

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EA ebitda which is earn the textbook term the definition is earnings before interest taxes depreciation and

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amortization and in the real world of layman's terms it's as follows it's a debt-free managed business here we go

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that's what it is that's ebit IA ebit is an is a business including the um the uh

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interest in depreciation or depreciation amortization cost and that's really what

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operating income looks like but to keep it in real simple F terms is it's a managed debt-free business also what you

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have is you have this um wealth of terms in the business for sale world that are

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allegedly supposed supposed to mean the same thing owners benefit adjusted earnings adjusted eida sellers

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discretionary earnings Etc they're supposed to what they're all supposed to mean is the following because they're

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different than iida is the net income of the business on the tax return plus

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adding back owner salary plus perks any onetime expenses interest and

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depreciation and then offsetting it which most Brokers forget to no I don't know if they forget but leave it leave

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it alone not to do it but you have to if there's a depreciation addback you have to offset that with a capital allowance

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a capital expenditure allowance to to accommodate future asset purchases if

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you will so getting back to ibida simple terms debt-free managed business and would it

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be correct to say iida on different Industries is a

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different definition nope the definition is the same because it's a formula the

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the the the um percentages may change according to Industry so for example one type of Industry May across the board

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typically have a 10% eida while another one might have 20 or two but the

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definition of iida is a textbook accounting term there's no wavering on

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that it's where buyers of these smaller businesses run into trouble is when

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there's representation by a seller or an intermediary of here's what the owner's

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benefit or seller's discretionary earnings or adjusted eida because sometimes they take the eida number and

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make the adjustments to it to try to equal owner's benefit or what have you and so um the most important thing that

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a buyer needs to do is you can get all wrapped up in all of these terms but what a buyer needs to do is the foll hey

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Mr or Mrs seller or broker break down for me exactly what's in that number

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that's right that's right and these buyers that are you know coming to A

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lender come coming to me for financing saying I only want businesses that have this much

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eida well that's not necessarily the answer that means means that that is the business fit for you it can have all the

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eida in the world but it may not be the right business fit for you exactly exact

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your your spot is exactly what was mentioning earlier and that's critically important and another area where you

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know along the subject lines of um what is the right business for you and so there's a couple things the the Mantra

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that I've been teaching and preaching for deage is the following whatever it is that you do best must be the single

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most important DW driving factor of the revenue and profits of any business you consider purchasing that's it that's a

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nutshell that get get that right in your halfway home another area where I see buyers sort of uh go off the reservation

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is confusing experience with expertise in other words just because

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you've worked in a certain industry well that gives you experience in an industry

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but it doesn't make you an expert at a specific skill what you want to drill down to is what is it that I did or do

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in any jobs that um are my single greatest

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skill set because everybody has a shining star everybody has one thing that they're absolutely terrific at you

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know and so that is what you need to drill down to and sometimes you need to speak to colleagues or co-workers or

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former bosses and get get their input because not people often often what they

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think they're good at is not necessarily what they're really good at and has a tendency to be more what they enjoy or

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what they think they're going to enjoy and you can't conf those are all confusing things you've got to drill

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down to your skill set your single biggest shining star skill that's what you have to identify and marry it to a

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business that needs that to to to grow and generate Revenue I love that and I'm gonna follow up your Sage statements

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there with an example for our listeners right um auto repair

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industry sometimes buyers will come to the table and they have the experience

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under the hood repairing the car taking care of the repairs that are needed they

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have the experience they're the technician and they want to buy the business but they don't have any experience in sales in marketing in

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customer service people skills right you don't have a lot of people skills when your head is under the hood so I'd like

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to share with our listeners that there is confusion out in the marketplace that

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if if you want to buy an established proven profitable auto repair shop that

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you have to be a licensed mechanic that is not true I have financed buyers that

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were the general manager of an auto repair shop and she did the inventory

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she handled the customer service she hired the technicians she kept everybody happy if she left the building the

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mechanics would would not know how to run that business so think who would be

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the better fit for that business now we got to be careful because some states require an owner to have a license to be

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an auto repair technician you know a state-by-state specific but let's think

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back to what Richard said your expertise and yeah maybe some

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shops deals may need a licensed mechanic to be owner if it states specific but

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there are many deals where someone that has people skills because if you don't

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have people skills you're not going to be successful because people bring profit and I just wanted to add that

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Richard no and it's so important because it's a perfect example in that particular case someone from looking

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from the outside would say Hey you know and if if I want to identify the driver of this business and when I say driver

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it's what drives the revenue and profits of the business would be very easy for for them to look at it and say it's the

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caliber of work that gets done under the hood well the reality is you can always

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hire good auto technicians they may be hard to come across but they are

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available and certainly if you've you've got them you you want to take care of them in that particular business what

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was what drives the business is the customer interface managing the

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inventory making sure the parts are ordered to complete the job so you get paid and so the operation person whether

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it be you know an an extension that sales marketing customer service but operationally that's the individual

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that's needed to drive the revenue and profits in that particular business so it's to the point we talked about

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earlier this is so important I mean I can't even emphasize it enough how critical this is to the process you've

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got to get this part right and why business um buyers end up not closing

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transaction in the numbers that they they fail because we've talked about that before how Pro how pathetic the

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numbers are is they jump into this process they start racing around the internet looking at businesses for sale

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clicking all over the place sometimes sending inquiry looking at one business after another trying to figure out which

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if any is right for them and that's ass backwards you've got to do this in way

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you first have to figure out what type of business is right for you and you can do that with a little bit of research online um or or and sitting with certain

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sellers so that enters part of equation but the the the theme here is you have to first figure out what type of

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business is right for you then I promise you it's easy to find and buy it but if you go it the other way you you just

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it's it's it's a never-ending Maze of businesses listed for sale and you can't figure any of them out and and buyers

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don't sit in Cross sellers or go to enough meetings or make in enough an off enough offers so they never get out of

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their own way and that's why the failure rate is so high that's right and my message would be so stop coming to

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your lenders saying I'm I'm looking at a business with this much iida listen we

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there's a lot more to the story if it's a fit and uh you could go in with all that eida which is historical eida we're

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not even talking about what's gonna happen in the future um boy oh boy that

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eida could disappear real quick with the wrong owner transitioning in and we have

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seen that happen right oh absolutely I I'd say you know because if if a

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business has historical iida and the wrong person buys it it's then going to

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become hysterical iida it's just yes I love it's just gonna disappear

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pardon my French oh my gosh that was perfect goodbye it's over there's

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there's historical iida and then there's hysterical hysterical iida and you will become hysterical when the iida goes

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away that I promise you oh I you know if Underwriters are listening to this call that they're they're agreeing with you

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on that one Richard yeah may not publicly but they'll

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agree all right well what else can we add to this uh what are some other um

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good examples that we can share with our listeners um I think of some of your deals that you've done in the past where

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maybe it was the wrong business fit for the right for a buyer who's qualified

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but the wrong business fit um well seen it you know heard of it mostly in in

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broker days where you know from from colleagues the business is being sold and going seeing them back on the Deal

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Board three to six months or 12 months later and you know I was the wrong fit they were the wrong person it almost

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always comes back to that barring some catastrophic events um and I've seen similarly how the right person can

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absolutely um explode a business I was in um Mexico you know a couple weeks ago

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and and doing this uh uh brought into do an educational portion for some uh um

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business buyers that are being underwritten and there was a perfect example that the people um behind all of this one of them is Iggy domagalski and

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and his partner Mike Miller they started buying smaller businesses um and Iggy

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and Mike terrific operators good marketing people and and really good people they understand people they

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understand the importance of people and they looked at one of these businesses that had really good margins but there was a couple of certain fix fits and

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fixes to the manufacturing process that were so obvious to um Iggy in this case

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but even the owners didn't recognize that they were just almost too close to it or what have you and they took that

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business and you know I think from they bought it was doing about $600,000 and it did multi multi multi-million dollars

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afterwards they bought a number of them like this and aggregate them and built them up to over $200 million in Revenue

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because they were the right people they found these smaller companies family run typically the owner operator was someone

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who may have been a technician a mechanic or what have you developed this product um but they were stuck in the

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manufacturing process they weren't you know and they were very good at it but they weren't marketers and so they had a

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defined product a good product there was demand in place for the product a big Market which they have an they said oh

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well you know in one case they were talking about well you know we have the whole area of one province in in Canada

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covered we covered that very well there's nine other provinces and two territories and they sort of expanded the business Dr ically and um built it

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up like just explosive growth so there's a perfect example that that business had been surviving based on you know

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manufacturing and operations but what it need was sales and marketing you have it the other way as well so I mean that

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that was a brilliant example they ended up exiting and selling out for over a hundred million dollars how's that for a nice story that's a story all right a

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that great yeah that's great that's a story uh I think of one um I know you don't like restaurants but some

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restaurants I do I eat in them all the time that's true but some restaurants do well and are cash flowing and and they

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are successful speaking of right fit for a restaurant obviously you need someone

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with restaurant experience every Bank wants that when they come in to buy an established restaurant that's profitable

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I have seen um sellers who were the chef

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um full-time and the owner and anybody out there that's ever

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thinking of buying a restaurant if they sell the recipes which they do

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when they when they exit they'll leave the recipes behind that's part of the intangible assets but Underwriters are

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skeptical because I could have a recipe for my chocolate chip cookies and then give you

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the recipe to make the same ones Richard and they might not they may not taste the same and I have seen I it's a little

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bit of this and a little bit of that maybe a little extra something something in my chocolate chip cookies

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but no wonder why you're so happy all the time smart very smart just a little

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green in my cookies well all right we'll move on but anyways it's staying healthy

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there you go we had restant and everything that's right we had a restaurant in town and they made a h

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chicken salad uh that I loved it it was their famous chicken salad and then the

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original owner who was the chef fulltime sold and the recipes went with the new

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owner but the chicken salad was never freaking the same and I tried it three times and I gave up I'm like I it's just

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it's not even close and that restaurant closed within a year no surprise happens

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all the time yeah Underwriters look at that kind of stuff um there's you know even though you think it is the right

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business fit and you may have the industry experience to buy that restaurant there's what should have

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happened was that chef the the original founder should have trained other chefs you know for a good amount of time to

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make sure that they're cooking it the right way and I've seen deals get done where where the underwriters will

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approve it but then they want that Chef to be a key employee and they may even offer a a structure where you got to

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make them 2% owners so that Chef doesn't go away because whether the original founder or the trained up Chef is gone

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that that business is going down so that's it's going down and you know what what happens I've seen it happen

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countless time in the restaurant business by the way I like I like the restaurant business enough that my late partner and I we had a co-investment in

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118 Taco Bells and Applebee so I'd like them as a business as a business model certainly and um so where this goes arai

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in the restaurant business the new owner thought to the

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best of his or her ability that they were following the recipe that's what they thought but they said you know what

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I don't know why we're buying all this mayonnaise from Cheney Brothers or the other ones I can get this I can get 42

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gallons where you know at Costco and and then find out that you know that's different or the type of chicken they're

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looking to save a little bit we have it that exact SC scenario going on on around the corner for my house here with

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an Italian restaurant that was just sold and um I been ordering pizza there for years once a week chicken and calam

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olives and all of a sudden comes in and I tell my son Jake who brought him I said something's wrong with this pizza whatever I said there's nowhere near

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same amount of chicken there's like four olives on the on the thing where it used to be like 30 oh yeah it got you know it

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got sold because he used to deliver for them it got sold they said how long ago he said A week I said yeah they'll be out of they'll be out of business in

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three months and so this is very important which brings along the point of what when you buy a business and we

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we could probably have a whole show on this at the beginning unless you're an expert in the industry that still even

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and even if you are an expert in indry you don't know that particular business most buyers buy a business in something

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an area of they're not familiar so the first thing you have to do when you take over is nothing you have to learn the

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business I mean you come in the first day you don't even know how to turn off the alarm and so at the beginning you sit on your hands you Pummel the owner

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with questions and ask you know get feedback from from from employees But You observe you take it all in you ask

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questions you don't make changes if you're buying a successful business whatever level that success is there's a

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reason for that so at the beginning you don't know enough to change anything so shut up sit down on your hands zip your

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mouth and observe and then when you finally get the guts of the business in your belly then you could start making

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these changes but at the beginning you you you're not capable you don't have the you don't have the know how to make

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these changes so just chill out and for anybody listening to the show if you are

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an aspiring buyer you can negotiate the seller staying on for a certain amount

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of time to show show you the ropes train you up uh I just want buyers to you know

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recognize a lot of what we're sharing is is red flags but but we will help you Richard and I will help you understand

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that you can negotiate the seller to stay on to show you the ropes and how are things done and if they're selling a

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business and they want to get the hell out of there in in two weeks I don't know if I like that no I agree with you

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that transitional period is critically important the way you want to have the longest period possible that makes sense

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and it should be free training as long as it's not abusive they're not staying on board for a year for free but certainly a month or two and if you feel

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that at at you know whenever you feel at the certain point if it happens during that agreed upon transition period that

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you're good and you don't need them then throw them out that's great sometimes they're more of a pain in the ass than anything else but but at the beginning I

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mean you need them for the transition and just to you know to help you navigate your way initially and

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sometimes it it it's also required to provide a level of comfort to the employees or the suppliers or the customers so you do that in a good

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meaningful way um but you you must have them on board initially just even if

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you're bouncing stuff of them and and if they're getting in the way you could always tell them listen don't come in I'll call you if I have any questions

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that type of thing but understand that the that it's this hump of transition that's really important you don't know

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it all and so don't think that you do you're not going to make your mark on the business until you know the business

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and have the you know have the guts of the business in your belly so back to if the business is the right fit for you

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and and we were talking about restaurants just a bit ago I got another one it was an Italian restaurant and the

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owner was semi absentee meaning you know one foot out the door the the team of

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people are running the restaurant successfully Richard and uh I learned a

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lesson from an underwriter because she came back to me explaining that what are we going to

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do with the new owner can the new owner sing I'm like can the

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new they could have hired you okay yeah and I'm like okay I like where this is going go ahead she studied reviews on

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the business which I learned this years ago and she taught me this and it was an eyeopener and for any business buyers

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doing their due diligence we should do a show on Google reviews of businesses the

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Google reviews and other platform reviews of the restaurant talked about the original founder who is now selling

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always singing in the restaurant to the patrons table to table an Italian

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restaurant and singing you know old kuner songs she's like who's going to replace him

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you right no how you know how Wild is that that what I find Spectacular in all

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of this is that the underwriter not the buyer uncovered this there you go I mean

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that's just crappy due diligence on the part of the buyer because all they had

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it shows you that the buyer did not go for dinner at the restaurant focusing on

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iida probably yeah hysterical iida yeah

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F imagine imagine doing your due diligence on a restaurant and not going there to

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eat when I when I used to be in the uh in The lower-end Brokerage business I

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never took an engagement when I first met the seller I always wanted to learn more about the business about them that I like them I trust them I'm I'm very

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diligent about taking on because I don't I don't want never want to represent a business that I'm not comfortable in selling of course but I I always did two

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things if you know we had a meeting but before I even had the meeting I went to the restaurant I went to the bathroom

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there you go if the bathroom was dirty I never I canceled my appointment I never met them I like that idea and the other

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thing that I did is after I met them then I went and had dinner there and sometimes I did it before but always after um and just to measure the the

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caliber the food and and what have you the service see if there's any uh pain points but it shows you this buyer how

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ridiculous it is that this buyer was moving forward on a transaction and obviously never even ate at the

27:08

restaurant yeah it's like well we made this great dog food but the dogs won't eat it the well guess what the bank

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declined the deal they they weren't comfortable enough and the buyer still wanted to move forward and and the

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reviews were all we love this owner we love this restaurant I mean I'd love it too if I had you know an old pruner

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singing me a song over my lasagna yeah well they the food might not have been that great but it was the experience

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yeah he was the he was the intangible asset that was no longer going to be

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there intangible and immeasurable absolutely it a great example yeah but let's do that I I see CIA put a note up

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let's do a an episode on Google reviews because that's another take for business

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bues you can see a business is getting ready for sale when all of a sudden there's a ton of Google reviews and all

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five star in the last six months yes yes yes you you have that and it's that and

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that's the key thing to look at we could have another show on that is the timing of these when did they happen recently the other thing to look for in the

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Google reviews and we're off subject a little bit is the um uh the it intermittent period between reviews

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because you can go back for a certain period in time not just to look to see what's recent but going back further and

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see you know how frequently people are writing reviews Al together which could tell you a lot about whether or not

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these are realistic or not realistic and what type of Engagement does the business have with a negative review

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like who cares about the positive ones it's you want to see how they handled it the negative ones because sometimes you see very combative staff and ownership

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which is ridiculous I um recently put up a post um last week suggesting to everyone to

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do a do a review of your competitor if you're a small business owner look at

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your competitor reviews so I did one a a review of my competitor in my space and

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it was clear Richard that he was paying to get five star reviews in a similar

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position doing SBA brokering of loans and every three hours every day for

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three months straight it was like a 90day period constant five-star reviews

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with great job great owner got to do business with him and then after the 90 days crickets yep and and I I dug a

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little bit deeper and yes there are firms out there and I they're probably overseas or what have you but you can

29:36

pay as a small business owner to have your business lifted up with all those

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reviews y it made me sick because there is no way that this one little oneman

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broker with maybe some assist you know people assisting him could have closed that many loans every three hours for 90

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days straight yeah really it's it's it's it's nonsense and you and you you catch but and I I don't think people are

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really that dumb you know they they catch on to it as well there was a stat there's a a software that's being

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developed right now that's going to be able to um fil the goal of it is to

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filter through all of the false reviews whether it be on Amazon Google reviews Etc because a study was done I read this

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not long ago and they said 87% of the refie reviews that are online are BS 87%

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and I would believe it yeah and and would believe it and what's going to happen because of that is people are

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going to start paying far less attention to reviews as they started years ago to start paying attention to some

30:36

testimonials where they Mark Bob J Witchita Kansas well who is this make him real right show a picture of him

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show a picture of his business make make Bob legit and so you know the uh

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understanding reviews and looking for the um inconsistencies in reviews is equally important as the task of looking

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at reviews themselves that's right I have some questions by the way oh yeah

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oh yeah I think it's time to to take them in we're at the half hour mark so let's put up a question or two see you

31:05

in the background here what you got for us here we

31:12

go what key factors or criteria should individuals consider when determining

31:17

the right type of business for them you uh want to take a stab at it

31:23

yeah um well I always want I always request to see the most recent professional

31:30

resume but I also like to ask questions as well of

31:37

aspiring small business buyers Hobbies interests let's let's be real some of us

31:45

are in our later years and a lot of us are buying these businesses because they're absentee owned a job that I had

31:53

in the early 90s that experience may qualify ify me for a business I want to buy today so my

32:01

resume may be recent because if I if I go back 30

32:07

years Richard with my resume it's going to be a few pages long right so so I like to as you were saying Richard you

32:15

know what is your interest you know what are you good at you were saying that earlier in the show so I'll let you I

32:21

I'll yield the mic and you add to that well I think you know I and I go a step further saying what are you great at

32:27

yeah because interest U and we can talk separately related to Turning Hobbies into a business which is generally a

32:33

terrible idea but the it's really what you're great at so to me when you look at the factors you have the the

32:40

financial factors of how much you're prepared to invest what you need back from the business what the business does

32:46

every day certain considerations for example if you're someone who has a young family you don't want to be working on a business that you know has

32:52

that you have to work every weekend or evenings or if there's travel involved so you have these these type of considerations other considerations

32:59

related to your family members because even though you may be buying the business they're in this process too and you have to make sure that they're on

33:05

board so that that's important criteria but at the top of the list is getting back to what we talked about right at

33:10

the beginning of the show is the number one important factor is making sure is identifying your number one skill set

33:18

and can't you said this in almost the same words can't emphasize that enough that's the the most important factor

33:24

what is your number one skill set marry that to the right business and then you have the uh additional criteria of ones

33:30

just talked about family um what other considerations what growth growth potential um that you want from the

33:37

business or you want a business with recurring Revenue if you want a business that has a unique product or sells to a

33:43

particular industry those are all important criteria but your criteria should be a few bullet points you know I have five golden rules that I look for

33:49

in a business um which should be no more than that which is sales and marketing driven demand in place High margins

33:55

exclusively territory and does compete on price so you you want to keep those really tight but there's one that's got

34:01

to be at the top of the list which is skills and and that's why I believe seasoned corporate employees generally

34:08

have a lot of those skill sets right yes yeah I I agree I agree next question

34:14

here we go how can they assess whether a particular business aligns with their

34:20

skills interest and long-term goals you know the resume for one is and

34:27

and and as a business acquisition Loan Consultant I have sent buyers back to

34:33

the resumé table to tweak things because in conversation I know that they have

34:40

skills to align with the business but it's not necessarily written in the resume as it

34:47

should be um so yes number one that resume and a lot of conversation with

34:53

the buyer for me to understand their character and their skills um the underwriter as

35:01

well Richard will interview the buyer before final credit decision and a lot

35:06

can be determined if that resume is fluff because let's there's a lot of

35:12

those oh yeah people have you know I I had friends back in the day that would

35:18

put fluff on their resume and get hired and big paying jobs and they didn't know

35:23

what the hell they were doing and didn't last long and you know what that's it's I don't can't say it that I agree with

35:29

it but that's okay if you're going to work for someone you certainly don't want to do that when it's on your nickel and you're the business you know when

35:35

jod asked this question so he talk about business aligns with their skills interests and long-term goals the first thing jod wanted is you know get a very

35:42

good understanding what the owner does every day and you want to make sure because if if you're going to replac be

35:48

replacing that skill set most importantly if their particular skill set is what drives the revenue and

35:54

profits of the business you have to understand what they do every day and make sure number one that aligns with

35:59

you number two in if it's a a a common type business for example you know land

36:06

Commercial Landscaping or Distribution Company or durable medical equipment

36:11

company when I say you know Common more generic that these type of businesses

36:17

exist and from one business to the other a lot of it is the same you should speak to owners in the same type of business

36:23

now if you speak to owners in the same type of business don't speak to competitors go outside the territory and

36:29

never disclose the type of business that you're looking at but you want to speak to owners of like businesses and

36:35

understand what do they do every day because the seller of the business may be not telling you the exact truth of what they do every day because remember

36:41

they want to sell you the business so by getting perspective from others in the industry of what drives their particular

36:48

business will give you some um some terrific insight as far as your interests are concerned in long-term

36:53

goals I'm going to talk about the long-term goals first whether you have to Define what those are I mean I can't

36:59

Deb can't what your long-term goal whether it's growth or stability I personally believe in the acquisition of a business that growth is sexy but

37:06

stability is is value is valuable and so you want something that's stable but if you want something that has long-term

37:12

growth goals of long-term growth for example you want to make sure that the industry the business is poised to do

37:18

that with you at the helm yeah as far as the interests are concerned I think that comes into play related to people's

37:24

passions and whatever and I think going to have to expand on this but I think passions are overrated as it comes to

37:30

businesses because you typically if you focus on oh I got to buy business that I'm passionate about well you know what

37:36

if it's a business you're GNA lose your passion pretty quickly so your your passion really comes in time meaning you

37:44

buy a business you're operating it well you don't have to work for someone else or listen to some boss's nonsense you're

37:51

you're helping you know you're empowering employees you're seeing some growth opportunities you're excited

37:56

about getting up every day there's an economic benefit and your passion happens by default and so I think the

38:03

the the the hierarchy of your question is you know making sure it aligns with your skills and your long-term goals

38:09

number two and the interests I think are further behind as long as you you define certain things that you won't do like

38:15

you won't be in certain industries or you want to be in something related to children or health care I get that but

38:21

but making sure you you Whittle that down so it becomes very granular to your to your skill set and those a few ways

38:27

you can go about doing it so what are your thoughts because this is a common question that I receive from um buyers

38:33

Searchers out there just like SBA qualified is pasted on every listing out

38:39

there and we know it's true and accurate another marketed terminology is absentee

38:44

owned quote unquote on every business listing so buyers will ask me how do I

38:50

know it's absentee owned how do you verify that in your due diligence well

38:55

the first thing is when absentee your own businesses usually equal absentee profits and even if you're buying an

39:03

absentee business if you are the new owner you have to learn that business right because if you have a manager

39:09

let's say Deb you own a business you own a Distribution Company you're working four hours a week or or 22 anything that

39:15

could be considered absentee you have a terrific manager in place and it's humming along great for you but at the

39:21

beginning you ran that business and then you ultimately decided to extract yourself a little bit and put in manager

39:27

now if that manager quits gets hit by a pepsicola truck or anything happens the next day you go back in you work 40

39:33

hours a week and you find a replacement manager that's the scenario right yeah yeah however now you take that same

39:38

situation where there's a man in place and Deb is selling her distribution business and I want to go buy that business and we agree in absentee and

39:45

the manager um is jod and she's doing a great job and I buy the business okay and Jody's running it for three months

39:51

and I'm just collecting some paychecks and checking in with her periodically and then God forbid something happens to

39:56

jod or she quits or she goes to a competitor or she gets hit by the same Pepsi truck as Deb's manager got hit by

40:03

well now what do I do I don't even know how to hell to run the business I don't even know how it operates what type of

40:08

manager to hire I don't even know where to start and so if absentee op uh run

40:14

businesses sound wonderful yes you can figure out if it's true or not by by some real good questions however you

40:21

have to understand if you're G to buy an absentee run business the first thing you got to do is learn the business thank you

40:27

and if you're doing Bank financing back by the SBA there is two words that mean

40:33

everything to the transaction what owner operator gu yeah okay yeah that's right

40:40

and there's a lot of influence out there online by some folks that are in this

40:45

space talking about buying boring businesses because they're absentee owned or

40:52

they're just old it's nonsense I mean yes yes it's it's attractive I like Bland boring

40:58

unsexy businesses I yes but this concept of buying a boring business and I know

41:03

who you're talking about specifically with this idea that anybody can run an a

41:08

boring business it's not true it's not true my grandson Grayson who's six

41:14

months old can't run the business there on I'll line up 10,000 people that have

41:19

good jobs that can't run the business and so if you have no operational skills

41:24

the idea of of buying a business then you're not going to get involved with doing you know what might as well light

41:30

your money on fire it's not going to work until you learn the business then

41:36

yes you can you can move towards getting a manager in place and that's ultimate because then it becomes more sellable

41:42

but the new owner coming in has to have operational experience if not they're

41:47

putting themselves in a horribly horribly vulnerable position if anything changes in the business imagine you have

41:53

a full-time job and you have three laundromats or whatever some of those examples that that I know that one

41:59

individual you're talking about you have three laats and they're run by a manager and they quit what are you gonna stop

42:05

working no you're gonna if you do that you'll lose your job and the business and sadly what I'm seeing is that same

42:14

person that talks about buying boring businesses is telling you to do it without SBA financing and try to cash in

42:21

whatever cash you have and just buy it all or do 100% financing with the seller

42:27

you're putting yourself in a terrible terrible position terrible position

42:33

there's no due diligence by a bank on those three laundr mans that said you

42:38

know boring absentee own manager quits you're working full-time thinking you

42:45

got an absentee business and I'm gonna make all this money and have diversify my income it's going to be a show

42:51

when that manager leaves oh absolutely and very often it's a show while they're there taking the money I mean I

42:57

I've doing this for over three decades and and we said from the onset absentee operated buying an absentee operated

43:04

business it typically means absentee profits it just does not materialize like you had hoped or what was

43:10

represented unless you understand the business so and some of these uh information sources is you know they're

43:17

just taking um advantage of very vulnerable people who have hopes and dreams and aspirations would love to get into a side hustle or additional income

43:25

um you know to generate some additional income but you know what here's what it it comes down to use your common sense

43:30

even though we know that Common Sense isn't very common use some goddamn common sense and think about it because

43:35

if that business is absentee run and it's so terrific and the owner spends no time doing it unless they're unless

43:42

they're dying why are they selling it why the hell are they selling it then thank you because if I had a bunch of

43:48

those I wouldn't be selling them right thank you that's a great way to end the show damn

43:54

it okay Deb since you your sign is down I will tell you go with God have

43:59

yourself a have yourself a terrific week as always it's wonderful wonderful to spend time with you this was great I you

44:07

know I love talking with you I learned so much from you and I I I know our listeners do as well and thank you

44:13

everyone who who stopped by today we're g to do this again next week and if anyone out there has ideas for episode

44:20

topics feel free reach out to Richard or myself our information is there up on

44:25

the screen we'd love to hear what topics you'd like us to talk about but uh I think we need to do a Google review

44:32

episode that would beely you know we should probably do a little bit of research and bring some up um you know

44:39

live on screen or some screenshots to show ones that we know for sure are full of and you know and yet they come

44:47

across so terrific you know what it's like the you know what reminds me of the the the business for sale ads right and

44:52

I've told people this for years you go online to one of the business for sale websites you oh it sounds so terrific

44:57

including or not including what you mentioned about absentee owner business but there's a great write up it sounds terrific and then you find out it's like

45:04

a pile of garbage and I like to tell people said you know if I went on to

45:09

personal ad app the apps or websites I said I could make myself sound like Tom

45:17

Cruz I know you know instead you get a short balding guy sitting in South

45:23

Florida and and you're expecting Tom Cruz used to walk through the door sorry not happening yeah the uh the competitor

45:30

that we talked about earlier that I did a review on I'm in Wisconsin okay and so is the competitor and there's a radio uh

45:38

station that's real popular in the Milwaukee market and they do a weekly segment we're in Wisconsin and it's

45:44

called Dairyland dumb asses so I call a Dairyland dumbass because there's

45:51

no way in hell you can have that many five star reviews um yeah anyways so

45:57

well you can have that many five star reviews it is possible in a on a limited basis right and and and timing that

46:04

makes sense if he had those from 12 people over the course of the last year it's a lot more believable than every 90

46:11

minutes exactly was wow crazy crazy we'll end the show on that note ladies

46:17

and gentlemen and this is uh Richard Parker and Deb Curtis your co-hosts we

46:22

love talking business buying banter the no yes kind um so next week Thursday

46:28

we're back at it 2 pm Eastern thank you for stopping by and we'll see you next

46:34

time bye Richard bye Deb see you soon all

46:40

[Music]

46:51

right