Thinking Like an Acquirer with Cameron Bishop

Welcome to another episode of the Above the Business Podcast. My name is Bradley Hamner, your host. On today's episode, we have Cameron Bishop with RainCatcher. Have you ever wondered what it looks like in the mind or the eye of an acquirer? What about somebody that has done well over 100 acquisitions or sales during their time? In this episode, we talked to somebody that has done just that. And, you know, it's one thing you, for those of you who are able to sell your business, you really get to sell your business one time. But when you have somebody that's done well over 100 acquisitions or sales during their career, they are a wealth of knowledge. Look, there's a lot of different terminologies and acronyms and things like that that may kind of go over your head in this episode. Hang in there. I too. Had to learn all of these things along the way. So whether it's around GAAP or accrual-based accounting, or we talk about private equity, we talk about the different financial buyers. More importantly, we talk about how to consider what are the green flags and red flags that an investor, an acquirer, would look for in your business. How are the things you can begin to do? Because the things that make a business attractive to an acquirer also make that a great business to own and to run. Without further ado, here's my conversation with Cameron Bishop. Our team, thank y'all so much. See you. Cameron, welcome to the Above the Business podcast.

Bradley, thanks for having me. I'm glad to be here.

Excited to have you. We fundamentally believe that every small business owner should operate off of some level of a business blueprint. You, in looking at your bio, have had tremendous amount of success in business. And I do believe that success leaves clues, and there are things that you can kind of learn from other people, things to avoid, the pitfalls that maybe you've already experienced in scaling companies to some pretty substantial levels. Before we get into some of those elements, take us back, give us— catch our listeners up if if they're not familiar with your, your work and your background of, you know, your origin story, your journey, and how you got to where you are today.

Sure. I'd be happy to do so. So I am a registered investment banker today, but my career path to investment banking is probably arguably not like any other investment banker. So I started my career, I went to the University of Missouri Journalism School. Graduated with a J-school degree, started my career in a small technical magazine publishing company as an advertising copywriter. I was a pretty good writer, won some awards, and I figured that's what I'd probably just always do. Our company, which was based here in Kansas City at the time I joined, was doing about $7 million in revenue, had been in business almost 100 years. And we had something like 90 employees, and we were owned by a massive conglomerate called AT&T, New York Stock Exchange number one largest company, I think, at that time. And about 6 or 7 years after I joined the company and I had been promoted a couple of times, I became a division publisher in a technical magazine business. The big conglomerate started to divest non-strategic assets, and we were one of those. And they sold us to the Macmillan book publishing company, which was a Fortune 100. And those guys said, hey, we kind of like this business. We don't have anything like it. We want you to grow. We've got money. Go start buying other companies. Didn't tell us how to do it. Just told us to do it. It's like taking the proverbial 6-month-old baby dropping a hammer in the pool and saying, swim. And, you know, they just float right to the surface.

Well, I'm curious. I don't want to interrupt because it's fascinating to me. Did they give you effectively a pool of money that you— hey, this is the equity fund that you have to be able to go in and deploy that capital?

There was never anything that specific. They were always cash strong on their balance sheet. So they were just going to fund these deals out of their existing cash on hand.

Wow.

Certainly they reviewed every deal and signed off on it. So we weren't just going, you know, gangbusters all completely on our own. And they provided the legal backup to do all that. But we weren't financing deals with outside bank debt or anything because nothing we were doing was that material to the size of a multibillion-dollar company. Which they were. So for better or worse, the first acquisition was one that came to me because it was a— I was running the technology division of Titles and this was a technology title and we did all the typical things, checked all the boxes around, you know, accounting, audits, personnel files, all the typical due diligence things that are factual. But nobody talked to us about assessing the people side of the business. And we, you know, I've always believed that my best learning opportunities were the ones where I've ultimately failed or made huge mistakes. So I basically got an MBA in acquisitions in that deal because I did not properly understand the importance of knowing the people, reading the people, and adapting some elements of their corporate culture. And within a year, 3 key employees left, and that little product came crashing down. Thank heavens it was probably the smallest deal we ever did. You know, everything's relative, but if you're multi-billion, spending $1 million for a product isn't a real big deal. That's a rounding error for them at most. So yeah, we learned a lot. We ultimately really refined our processes, handled it in a collaborative nature where we had each specialized division of the company, that being, you know, VP of HR, Chief Technology Officer, CFO, Head of Marketing, all had their responsibilities in the due diligence process on these deals. And by being collaborative, we would all get together in a room. Everybody would report on their areas of expertise. And that was so valuable because so many times, like our head of production, he says, we're going to have to make these changes. The head of HR has to say, well, wait a minute, you know, we got some people we can move over there to save money, or we're going to have to eliminate duplicated positions or whatever it might be. But if we weren't all talking together, those things wouldn't have happened. So we became a well-oiled machine. We were doing 3 to 5 deals on the buy side at a time. We would carve out non-strategic assets, repackage those, and we were selling those off. So we learned both sides of that equation. Long story short, I spent 23 years there, my career. I ended the last 2.5, almost 3 years as the CEO, and by that time we were a $400 million business throwing off $100 million in EBITDA. Wow. I liked that leveraged roll-up model, so I left. I wrote a business— I took 6 months off, wrote a business plan, and spent a year literally flying coast to coast around the country shopping my plan to private equity firms. To find a new financial backer. Had 2 or 3 deals die for various reasons in the process. Ultimately landed an engagement with JPMorgan Chase Bank's private equity division. Over the next 3 or 4 years, we built literally from $0 at my kitchen table to about $120 million with 500 employees in 7 different cities around the country. Following that, I consulted for Hallmark Cards. To do a very difficult turnaround for them in New York. So I lived in New York for a year, came back, spent 5 years as a partner in a boutique consulting firm doing exit and transition planning. Then lastly, I was recruited to do a very, very complicated turnaround on a $60 million 501(c)(3) business that had— was in a glide path of decline. That engagement was a contract ended during COVID I get bored real easy. I said, what do I like to do? I like buying and selling companies. So I did a lot of research and found the company I'm currently with called Raincatcher. They're based in Denver. As I mentioned, I'm based in Kansas City and I am one of 5 partners and a managing director in that firm. And we focus on representing business owners, small privately owned and family owned companies when they decide it's time to sell.

Hmm. I don't think we're going to be able to do this interview in 25 minutes. I have so many things, so many questions I have to, I have to talk to you about. So I have a company right now that we may use it as a proxy for a discussion, but there's a company that I have that is quite literally built to sell. I mean, there are some numbers that we have. Going into its fourth year of business. And so we have some ideas of having an exit at some point, or maybe even a couple exits. And so we may end up kind of feathering that in either way. That's not why I have you on the podcast. All right. So 20, roughly 23 years. How many acquisitions do you feel like you've done?

Actually, over the course of my career, I've done approximately 50 acquisitions on the buy side, spent a little over $500 million of private equity firm money, and probably done 30 to 40 sell-side transactions covering carve-outs that we would do coupled with my work selling companies here for Raincatcher.

Okay. So with that, I mean, that is a tremendous portfolio. What was the average on the buy side? What give— Give me an idea, and I recognize that there was probably a range, but what were the average revenue and EBITDA numbers that of the majority of the acquisitions that you did on the buy side specifically? Because I'm going to end up turning this around and making this beneficial for business owners that maybe are not currently looking to sell, but how they can view their business through the eyes of an investor, somebody like yourself, because I think it helps them to create better businesses. Okay. And so if they view their business that way, but roughly give an idea of the average revenue and EBITDA numbers that you were seeing.

Yeah, sure. So some of our deals, so there are different kinds of businesses to acquire and this is how family offices and private equity firms look at it. There are companies which are big enough to be what they refer to as a platform. So, and that's what I did. I would acquire a big company to be the platform, had the back office infrastructure, accounting, HR, technology, etc. And then you do what are called tuck-ins or bolt-ons. And those are small, generally smaller, strategically targeted deals that are going to build up the portfolio of the platform either even further. So there's opportunities for both. And I talk with 5 to 10 family office managers or private equity firms every single week, and they are all generally looking for both. So it creates hope and opportunity for any of these buyers, of course, depending on what market sectors they're in. But so To answer the question broadly, some of our deals were $50 million plus in acquisition cost, and some of them were— could be $500,000 to $2 million, depending on the strategic benefit that they could bring to our portfolio.

Yes. And obviously, from my own research, the platform companies, if you are the platform acquisition, typically those are going to gonna garner a much higher multiple on EBITDA than a bolt-on or an add-on company that's gonna be a part of that overall roll-up. If you had to give, and we'll split it, if you had to give some sort of an average multiple that maybe some of those platform companies, and I recognize based on sector, so if it was a software company, those are gonna garner a much higher multiple than, you know, say a local services business. But generally speaking, what were the platform multiples on average? And then what were maybe some of the add-ons that you typically see from a multiple perspective?

Sure. Well, those change quite radically given the market environment. So the market environment is very much cyclical, particularly on a macro level. So as we all know, we've been in a real high interest rate period, right? When interest rates are higher, Multiples go down because buyers, they don't pay with all their own cash. They go out and they borrow money from banks, whether it's a public bank or a private lending source. They're paying high interest rates, so they can't afford to pay as much for the company. In addition, the banks go through these regulatory cycles where the term is they are no covenants or covenant light versus when they're under pressure from regulators, they are heavy on the covenants and they are far more risk averse. So it makes it tougher to get debt leverage on these deals. And again, that means that the buyer is going to pay less because they're only going to put in a certain percentage of their equity. Yep. So as an example, the $400 million company, the first deal I did, I mentioned, was a million-dollar deal. But we did some $25, $35, $40 million deals. But the key was when our— the group that acquired us, they paid— we were in a very covenant-light period when they acquired us. So they paid 15 times multiple of EBITDA for for that business, which was off the top of the charts.

Wow, that is a lot.

That is a lot. But the model is, as you go in and buy these small tuck-ins, uh, strategic acquisitions, you're not going to pay as much. The rule of thumb is small businesses get a small multiple of EBITDA, which is how they're all valued. Yeah, big companies get a big multiple. So the play is— it's a mathematical play for these investments. So they paid 15 times, which was a little over $100 million when they bought our platform. We were about a $90 million business when they bought us. But over time, we did so many small acquisitions, the overall multiple of the total investment had averaged down to about 6 times.

Okay. Yeah. Yeah.

So that's, that's the play. And then when they exit, they get what's called an arbitrage on the exit multiple. They're averaged in at 6 times, but they're going to sell at 10 times, and their IRR is exponential when that happens.

Now, when you were on the buy side, I— so one of my mentors years ago had shared with me about MOIC. So multiple on invested capital and using the 3x that private equity will usually look at it, that they're, they're trying for at least a 3x MOIC. Did that hold true for you? Did you guys discuss that or was that for the, for the funds itself? Or is that, does, is that also cyclical with, with the environment, the rates, uh, interest rate changes, et cetera?

Yeah, so another term they use is their internal rate of return. Mm-hmm. And in the '90s and early 2000s, which was a different time, it's pre the bank and market crash in the 2007-2009 period, typically they liked to target for most of their investments a 30% return on their equity capital invested. Yeah, a lot of them post the downturn sort of had to ratchet that down to around 20%. A lot of factors around that macro and micro. But yeah, so that's where they like to be. There are cases easily where they get 100% return on their capital, but that's what— to get those returns, that's why they borrow money, they take on debt. And they make sure the company has the cash flow to service that debt until they exit. The usual term used is OPM. They like using other people's money.

Other people's money.

And the more of other people's money they can use, the higher their return on their capital is going to be. It's all math.

Hmm. Okay. Now let's turn over to the business owner side for just a little bit. And we'll— I'll probably have a number of questions that'll pull back on the other side. What are the— some of the things that you have seen whenever someone approaches you today and they want to, you know, consider selling their business in the next 1 to 3 years? What are the elements that are in place of the businesses that you feel, wow, they really have their stuff together. And what are those things? And then on the other side of that, maybe the inverse, what are some of the typical things that, you know, maybe it's a, maybe there's a business underneath this that could be good. But when you look at the people, the accounting, et cetera, is just kind of a mess. And maybe you turn people away and say, hey, look, you've got to go do all this work. And then come back to me at some point. I think understanding kind of both sides of that, hey, these are the businesses that really have been prepared for this type, for an exit, and they will be valuable into the eyes of an acquirer. And then here's the ones that absolutely are not even close to that. What do you say? What are the typical things?

Yeah, first I'll say you said two things at the beginning of our podcast here that were absolute music to my ears. First, I taught a course for a number of semesters at a local college for— on behalf of the Small Business Administration. And in one of the first classes, I mentioned— because these were all younger companies, smaller companies, early stage— I mentioned that you create a company with the exit in mind. And that was mind-boggling for every single person in that room. And I would explain to them, "Hey, you're going to leave your company someday and you have a choice. You can either leave it standing up of your own volition or you're going to leave it in a box. But you're going to leave your company at some point. What do you want to happen with it when you exit?" That leads to the second point that you mentioned, which— I speak on many podcasts because this is a passion topic for me because I've seen so many business owners make so many mistakes when I was trying to buy them, but they had no idea how much money they were leaving on the table that I would have been willing to pay if they were properly positioned and structured for a true maximum valuation exit. But I was the buyer. I'm not going to voluntarily tell them what they need to do for me to pay more. That was on them. I still found it kind of painful. So the key there is, and I see this all the time, Bradley, business owners who are primarily S corps or LLCs, so they're what's called a pass-through entity, those owners are focused on revenue, tax avoidance, and how much of a distribution they can take at the end of the year. Yeah, they are not focused on growing their business for valuation. So they spend 95% of their time working in their business and at best 5% of their time working on their business, and most don't even know what that means and what the differences are. So that's a lot about what I talk about to try to help educate these buyers so that they are in a position to be sellable when they do decide to sell.

Indeed. You know, um, I mean, those are the same, same thing it was for myself as well. You know, when you start out, those kind of things were not bestowed upon me of like, this is actually how you need to begin to approach it. When, when you have met— somebody picks up the phone, reaches out to you, comes to you all and says, hey, I'm ready to sell. What are some of the things that you go through knowing as the investment banker, you know what the other side is going to be asking? Okay, you have given your experience. I mean, you know already what they're going to be asking. So what are some of the things that you'll go through, not in a due diligence perspective, but I mean, in some way of analysis both the business itself and then the other key part, the business owner. Okay. Because I'm going to ask in a second around earnouts and, you know, if they roll equity into the next other entity, how much you see that, what works, what doesn't work. But before we get into those elements, what are some of the things that you see that the businesses that are well structured, the business itself, but then also the business owner, him or her, are prepared to actually go through this process?

Sure. Well, we're very particular about the clients that we choose to engage with because, uh, believe it or not, depending on the size of the deal, there will be one other team member from our firm, sometimes two, that work on a deal. And Owners have no idea how complex and time-consuming the process is to sell a company. First of all, it takes 9 to 10 months. If you told me, Bradley, hey, I want you to sell my company today, and we sign an engagement, it will be 9 to 10 months before we close that deal and a wire transfer hits your account. Doesn't matter what size the business, doesn't matter what industry It's a national documented average. It's not an overnight process. So we don't want to engage with a client that we suddenly find out is going to be unsellable. Uh, and we also don't want to throw some highball valuation number out at them to get them to sign with us, because if that number is unrealistic and we get to the end of that process and they're not seeing offers remotely close to that, they're very often going to say, "Hey, screw this. I'm not going to do this." We both lose if that happens because we've invested 9 or 10 months and hundreds of hours of our time. Sure. So we begin the process. If you called me today and said— which we get a lot of inbound calls of people who find us through our website or Google search. These days, a lot from ChatGPT. And our first question is always the most important question, and that is, why are you calling me? Why are you thinking about selling? Because some aren't fully committed to it, and we know that they're going to go through an extremely difficult, time-consuming process. And if they're not fully committed, it's just too easy to, you know, pull the plug on the process. We want to know what their personal goals are, how long they want to continue to work, what's important to them, what their corporate culture is like. Then we get into the more detailed stuff. This is all on just an inner— an initial introductory call. We want to know what, in general, what their top-line revenues are. Are they growing, declining, stagnant? We want to know at at least what their net income is. And I say that because the vast majority of people we talk to have no idea what EBITDA is.

Yeah, it just—

so yeah, so we want to know some factors around that. Then we go into some more detailed questions. The first key question is, how long does the owner want to stay on after they sell the company?

Okay.

Number Number 2, what is their role and responsibility? Are they the private— that we're measuring what is called owner dependency. Yeah. And it's a key red flag for buyers. If the owner wants to sell and leave the day after, our buyer pool is going to be extremely limited because buyers who buy businesses are open to taking on the risk of an acquisition. At the same time, they are extremely risk-averse, and they see the owner as integral to the deal, at least to a certain extent. So sometimes that means that owner's going to stay on for a minimum of a year in a consulting capacity, or depending on circumstances and the amount of reliance the company has on that owner, could be a 2-year or 3-year management contract. They could ask them to roll over part of the purchase price as equity in the new legal entity the buyer is going to create. Then they want to know, does that owner have a succession plan? Do they have a number 2 individual who can be ready to step into their job? Because of the proverbial, what if that owner gets— what if I spend millions of dollars to buy this company and the day after the owner gets hit by the bus? They want to know what the backup plan is. The problem with most business owners, because A, they don't understand the importance of that, and B, they are a pass-through entity, and if they invest in a successor, which is usually going to be kind of expensive to get the right kind of talent, that's that much less money they're going to take home at the end of the year in the form of a distribution. And so they don't understand the return on that investment in value creation when they go to sell or whether or not their company's even going to be sellable at all. Pepperdine University's research says that 80% of business owners who try to sell their company never are able to sell it. They're just not sellable. They're also going to ask how much dependency the business has on the owner as it relates to sales generation, business development, and customer relationships.

So the other side of that is if there are, and I'm sure you maybe have had a couple deals where this has come true. I recognize that what I'm about to lay out is likely the, not the norm, but there probably have been some scenarios where the owner, and maybe owners, have been effectively removed from the business. There is an operating CEO in the business, and that business, even doing due diligence for that 9 to 10 months, has continued to grow without their complete involvement. And so when they do want all cash up front, well, the buyer can say, well, yeah, I mean, they have been completely removed. And so that lowers their risk, therefore obviously more open to that. I recognize that that's not the likely scenario, and that's not the norm, but I'm assuming that there's been maybe occasions of that.

Yeah, absolutely. There are. And one of the questions we ask the owners in our initial kind of get to know them is, do you take vacation? And you'd be amazed, Bradley, at how many owners say, oh no, I haven't taken a vacation in 2 or 3 years. That's a red flag.

Red flag. Yes.

If a business owner isn't confident enough in his business and his staff to take a vacation, then that's extreme owner dependency. The owner who tells me, well, I live in Florida 6 months of the year and my company's in Kansas City, we like that. If he's got a strong manager in place then buyers are going to want to meet that manager. And it's good for that manager because if it's a financial buyer, private equity buyer, it's going to be really good for that operating manager because they're going to want to retain him and they're going to give him some kind of a piece of the pie or some kind of equity stake in the company as an incentive on the upside for him to continue to run and build the business.

So you mentioned obviously owner dependency, and we gave the example of just asking explicitly the question, you know, when's the last time, or how many vacations do you take? Let me go the other side. What are some of the other green flags that you hear? Not just the inverse of the red flags, but what are the other green flags that you hear? I pick up the phone and call you today, and we're having an initial conversation, and then you hear— you ask me some questions and it's ding, ding, ding. Okay, like, hey, I'm actually— now I, I was bored, now I'm not bored. Okay, now I'm actually locked into this question. What are, what are some of the things that you hear that are green flags?

The things that are music to my ears when a buyer, an owner calls and says, hey, I'm thinking about selling, uh, because these things, uh, knock down roadblocks that I'm going to face trying to find buyers who are willing to overlook downfalls. So number, number one thing, first and foremost, and the biggest problem we see is horrible or incomplete or inaccurate accounting. So if a business owner tells me that they are doing their accounting on a GAAP accrual-based method, that's a beautiful thing.

Yeah.

The alternative is to do cash accounting. The problem is that buyers, especially sophisticated buyers, they'll look at the cash accounting, but it doesn't tell the story the way they need to see it told.

Yeah.

So the owners are going to have to spend the money to go to an outside accounting firm a CFO, fractional CFO or something, and convert their accounting to at least accrual-based and ideally GAAP-compliant accrual-based. And if they've got an opinion of audit or a formal audit, that's an even sweeter deal for me. The real reason they want to see accrual-based accounting is that every industry has a sort of normalized average gross profit margin. So that's their cost of goods, their revenue minus their cost of goods. And buyers or sellers need to understand that and pay attention to it because buyers know what the average— if they're looking to buy a company in any industry, they're pretty well educated on what the normal financial performance criteria are. So let's just say hypothetically, in a given industry, the gross profit margin is 30%. If you're running a company that's at 20%, you're probably not going to sell, or you're going to sell at a steep discount, or you're going to get a very unattractive deal structure or some combination of that. If you're above the industry average, good on you. It may help get you a premium. If you're at the norm, then it's a non-factor. But the accrual, because the buyers want to see what the true cost is to deliver that revenue at the cost of goods level.

That's— yeah, I actually was listening to a podcast myself on someone who was the exact situation. He was basically running his books on cash-based accounting and it was almost like his personal piggy bank. The business had scaled to, I think, around $30 million in top-line revenue. And when he went to sell, he had to spend $180,000 to move it to GAAP accrual-based accounting. Now, ended up paying off for him. He had a nice exit. But I mean, he says, wow, I mean, that was money I really wish I had not had to have spent if I would have just been doing it right from the get-go. Okay, question: what are some of the metrics from the deal flow that you see? In other words, uh, we'll take inbound— I'm kind of getting an idea of the ratios of your funnel effectively. You know, we'll take an inbound of, you know, 1,000 inbound inquiries. You know, we'll end up signing deals with that, uh, X percentage of those in a given year. We'll get LOIs on 10% of them and then 5% of the top line end up closing me. What are some of the general held rules that you guys see?

Yeah, well, our firm's been around for 11 years and we are right now, I can confidently say, on all-time record pace in terms of signing engagements with clients who want to sell and have met the primary qualifications in terms of metrics and characteristics. You know, obviously, I think people would assume this kind of a business is much higher volume than it is. But we'll do 45 or 50 transactions in calendar year 2026. But you have to keep in mind, again, you know, we're a 9 to 10 month sale cycle from engagement to a wire transfer hitting the bank account.

Yeah.

And on any deal, we're going to invest 200 to 300 man-hours of our time for each member of our team that's on the deal. So we don't like to get too saturated. So at any given point in time, I'm working generally on 3 deals and pretty much top in as many as 5. Because there's only so many hours in a day. And a lot of what we do is very time sensitive. So you have to be able to be responsive. That's one of the reasons why we staff each of our deals with more than one individual. One person could do it, but we can't really service the client and be responsive. And time is important. There's an old expression in this business that Time kills all deals, so you don't want things to languish. But finding our clients is like a needle in a haystack. You have to find a business owner who has a company that's sellable and who is ready to sell at that time. And that's, you know, it's not like selling a business owner light bulbs. They're always going to need light bulbs. They're going to go through selling their business as a one-time thing.

Yeah.

And yeah, I mean, client acquisition is a hard part. Thankfully, most of our clients come through referrals from previous happy clients. That's the best kind of new client.

Yeah, no question about it. Of the 45 to 50 deals, what percentage of those will sell to private equity versus, say, a strategic?

The majority— I'll broaden it a little bit— the majority of the deals we do sell to a financial buyer. So let's define financial buyer. There's 4 kinds of pure financial buyers, and then there's a hybrid on the definition of strategic. So the finance— pure financial buyers are private equity firms. Those are businesses that get contributions or investment money from high net worth individuals, unions, insurance companies, etc. And then they're in charge of going out and investing that money in the acquisition of companies. So that's a private equity firm. They generally buy and build and hold a platform for usually around 5 years. Some get an opportunity to sell faster, some may they run it out to 7. So that's one type. Then there are family offices. Those are people who are ultra-high net worth individuals or families, and they're diversifying their investment portfolio by acquiring smaller companies. And some of them are so active in that process, they stand up their own essentially private equity firm on the front end of their family office, but all the money the PE firm is going to spend is the high net worth family's money. The third type of financial buyer is what is referred to as an independent sponsor. So an independent sponsor is someone who has the skill set and experience to run a company, but they don't have the net worth or financial balance sheet to do that on their own. So they go out and they pitch usually high net worth family offices. Sometimes it's a consortium, could be 2, 3, 4, 5 who back them to buy the business. So that group invests the equity money. And then because of their capital strength and reputations, the independent sponsor is able to go out and shop banks for the debt portion of that capital structure. And then he or she goes in and runs that company, and they get a small percentage of equity in this business that they went out and found and helped to get the deal closed. LASTER for smaller deals, and those are are referred to as search fund buyers. So they're individuals on the lower end of the deal spectrum. Often they are reliant on SBA Series 7 loans and they go out and they look for companies. There are investment groups that will put $100,000 or $200,000 or $300,000 into their deal and they may need to go get 4 or 5 of those to get a deal done. They almost always can't afford to pay as aggressively because, again, almost none of them have any capital that they're putting in themselves, and these groups that fund them are only going to risk so much, and then they're dependent on a 7(a) loan, and the owner of the business is almost always asked to carry back what's referred referred to as a seller note for at least 10% or maybe more of the purchase price.

Yeah, that makes sense. That's really good. That was helpful to kind of break down on the financials. And then you mentioned on the strategic side, there's a hybrid.

Yeah, the strategic side. So those are private equity firms, which are rolling up a platform. So let's take an example. Hottest industry in the entire world right now, at least in the US, are HVAC companies. Yeah, uh, they're ripe for consolidation because most of them are smaller companies. They have a good local market brand, and the owners are aging out. And in this day and age, I don't care what the industry is, almost no one has— business owner has children that want to come in and take over the business. So these owners are left with just one option, and that's to sell the company because it's their primary source of wealth and certainly generational wealth. So there are approximately— the last number I saw was 40 platform plays. So that's 40 different private equity firms or family offices that are buying up as many of these HVAC companies as they possibly can. So right now I'm about 2 weeks away from closing a deal in Southern California for a road resurfacing company. And there are about 10 financial buyers, PE, family office, who are doing roll-ups in the sector of repairing, maintenance and repair and resurfacing of roads because it's a business that will never go away. There will always be wear and tear. So yeah, we're selling to a strategic that is rolling up a number of these companies, and my client's business will be tucked into the platform road resurfacing business that they already own. And that is also, by coincidence, a PE firm that was stood up on the front end of a high net worth family.

Wow. Yeah, I've actually seen and read a lot about HVAC companies. And because they have so much, you know, there's the recurring revenue nature of those businesses too, that's very attractive to a buyer because of the, you know, maintenance contracts that they have on, you know, however many houses that there is. That's, I think that's fascinating to get an idea. So the majority of your transactions in a year are going to a financial buyer of some sort.

Yeah, that's correct.

Yeah, that makes sense.

Okay.

Last question, but I'm curious, for someone listening to this, that, you know, some of this may be going over their head in terms of this is all new language and that sort of thing that they've not been exposed to, but they're running a business right now. I think I mentioned at the beginning that there's a, an idea, like a lens that you could kind of put yourself, almost like you're putting on glasses to try to think and look at your business through Cameron, like your eyes as an investment banker, but even as somebody who is a potential buyer. And for somebody listening to this, you know, You may say, well, I have no intent of selling this business. I don't want to sell this business right now. I'm 30 years away from selling the business. What do you think the benefit though of doing some strategic thinking time about looking at their business through the lens of an investor would be, one? And part two of that question is, how would they actually go about that? What are some of the things that they could— objectively try to look at from their, from your perspective or an investor perspective that could help them to think about it from that lens and also make improvements? Because a business that's attractive to a Cameron or an investor is also a really great business to own and run.

Yes, it is very true. Yeah. So, you know, as I said early on, they're going to leave the company someday. And we have a lot of cases where an owner calls us and we said, why are you calling us? And they're sick and tired of it. One of the— in the recent years, there have been several frustrations. So right now, a lot of them are very frustrated and tired of dealing with all these questions around tariffs and how they're going to impact their business. You know, during COVID they were wrestling with, do I make my employees mask or not mask? Do I make them get COVID shots or not get COVID shots? And it's a no-win deal. They're going to— half their employees are going to be unhappy one way or the other. The supply chain issues that everybody went through and the rapid run-up in cost for raw materials or their inability to maintain their inventory levels. But probably the biggest motivator we see right now in owners finally deciding if they're going to sell is that they are being honest about this, what they tell me. And it doesn't matter what industry. I've heard it for every industry. They're sick and tired of dealing with people. They will say, I can't find people to hire. I can't grow my business, which I could do if I could find the people. I hire people and they don't show up for work. I hire them and they show up for a week and they ghost me and they never even give me any notice. So there are real frustrations across industries around employees. And, you know, owners went through COVID, they went through the steep, steep economic downturn in the early 2000s. A lot of them are just tired because they can't turn it over to their kids. They finally say, you know what, I I think I'm done. I'm going to sell. So you don't always know when that time is going to come. And to properly prepare and groom the company for an effective sale so that it'll either sell it all or at the best possible value, they've really got to begin that anywhere from, in a worst-case scenario, a year in advance. And ideally, it's 3 3 to 5 year window that they should be targeting and then knowing when they finally decide to sell, it's not going to happen the next day. It's going to take them 9 to 10 months from that time period.

Wow, that's great. Cameron, I'd sit on here with you for about 3 hours and just pull out all of the nuggets from your experience. You just can't microwave that meaning. Years of experience that you've had. Hey, people want to connect with you personally and also learn about your, your company RainCatcher and what you guys do. Where would you point them to?

Yeah, absolutely. So they can reach me at cameron.bishop@raincatcher.com. Our corporate website URL is raincatcher.com, or I am also easily found on LinkedIn And if you have any listeners that, you know, just want to have a call and ask some questions, we are a no-cost, no-obligation, no-sales pitch. We feel like it would be unethical to try to convince an owner to sell his or her business. That's too big of a decision and too personal. But I will say I have talked many owners out of selling for a variety of reasons. Reasons we thought were not going to be in their best interest if they went forward with the process.

That's great. I think that, that, that level of honesty, integrity, and transparency, you know, obviously ends up playing its way out. That probably comes back around to you at some down the road, uh, whether it's with them coming back or, you know, referring, uh, them referring some of their friends and family, which obviously I know is a big part of where you guys have gotten so many of your, your business before. You know, Cameron, I picked up a tremendous amount from this. I think that whether you're looking to, you know, have an exit in the next handful of years or sometime down the road, you know, approaching it from that perspective of being built to sell, I think can be very valuable for small business owners. And look, at the end of the day, that process, you know, can be very foreign unless you've gone through it. I mean, you've done so many, you know, at this point, nobody's gonna— a first-time business owner that's going through that process for the first time is not gonna have the level of experience that you do. That's why they come to you, is to— that's right. Is to—

that's right.

For you guys to be able to walk, walk through that. Uh, Cameron, real— I learned a lot on this podcast. Thanks very much for coming on.

Hey, you bet. I appreciate you having me.

Wow. Was that beneficial or what? Look, I know many of you listening to this may not be aware or able to necessarily sell your business, or certainly not something that's, you know, top of mind right now. But hopefully this idea, number one, to think about the business being built to sell, number one. Number two is seeing the business through the eye or the mind of the acquirer and what are the things that they would begin to look at. Now, for some of you, we got into accrual accounting. If you're an insurance agency owner right now, you don't necessarily, you don't have to be that. You can be obviously cash-based is totally fine. But hopefully some of those things begin to kind of get you to think not just about your business as being maybe, you know, like your business bank account being a, you know, personal piggy bank for you to be able to operate off of, but really and truly looking at it like a real business. I think it has helped me so much. We ended up spending, by the time we finished that, we spent another 30 to 45 minutes or so talking and strategizing. He actually shared with me some things that would be helpful for one of my companies as we move forward. Some ideas that, you know what, I hadn't even considered some of that, that I'm really excited to go back to my, to my business partner and discuss. Like, hey, these are some ideas that that I have that can help us in our customer acquisition cost. And so just being around other people and kind of leaning in to the knowledge that you can pick up from other people absolutely is so incredibly valuable in approaching, thinking about it from, you know, the mind or the eye of an acquirer or from the mind of an investor. So go to raincatcher.com, raincatcher.com. .com. You can also connect with Cameron Bishop on LinkedIn as well. I want to give a big shout out to our podcast brand sponsors, Coach P Consulting, Autopilot Recruiting, and DirectClicks. Go to directclicksinc.com, directclicksinc.com/above-the-business. DirectClicks had a phenomenal year in 2025, and not because of just their marketing. They had a phenomenal year because of the results that they are able to provide for small business owners in their marketing efforts. Go to directclicksinc.com/above-the-business and allow them to be able to help your marketing to really take off, help you to be able to hit the growth targets that you have for 2026. Any growth or scaling initiatives that you may have is going to take marketing investment, and it's going to take people. The more that you want to grow, the more that you have to make the right investments in marketing and in people always. And finding great people, as Cameron just said on the podcast, is really difficult. But if you work with Autopilot Recruiting, they can help you to have a pipeline of candidates that can really help you to be able to grow your small business. Autopilotrecruiting.com. Autopilotrecruiting.com. Look, you know the importance of having great people on your team, but you also have to develop them. You have to create a team development system, something that reliably takes and gets people up to speed in that initial 90 days of onboarding, and then continues to develop them on an ongoing basis. Well, one element of that is also helping put your team members around other peers that are trying to do the same thing. You get that with Coach P Consulting. Go to coachpconsulting.com. Coachpconsulting.com and let them know that you heard about them on the Above the Business podcast. All right, everyone, hope that episode served you well and gave you kind of like this idea, like in the eye of an acquirer and how it can help you to grow your small business. Till next time, lead well and go be great.