Changing Your Future With Acquisitional Wealth: Josh Tolley

Foreign.

Oh, it's hard work building your company, building it from scratch, that's hard work. We've talked about this before. We've talked about buy, then build. This is just buy it and turn it, run it, flip it, like whatever, but buy your way into some business. Whether you already own a business or you're thinking about it, or you just exited one, you're thinking about another. Our guest today is talking all about the easier way to buy things and lead that to securing your financial future. Everybody, my name is Bill Gallagher, scaling coach and host of this super fine business podcast show, Scaling Up Business Podcast Show. Our show comes to you every week, over 500 episodes and more now@scalingcoach.com Scaling Coach.com also has our free course on the four stages and secrets of the big scale ups that we've noticed over the many years of coaching thousands of companies. Now, what are the secrets and what stages do they go through? How do you move from one stage to the other? That is all in this free course. There's videos, there's workbooks, there's worksheets and examples, all that kind of thing to help you start to work through the things required of each stage. Of course, you have to focus mostly on the stage that you're in right now, but it's good to think about where you're at, where, what comes next, what did you skip over? Anything, the one before that, all that more simple free course there. And it doesn't take long. It's get some video segments, some stuff there. Go get it now. Just give us your email, we'll set you up. Don't worry about ongoing marketing. You can just unsubscribe. You don't have to get all that stuff if you don't want it. Or you could get it forever if you think our stuff is groovy. So skincoach.com, free course. All right, I'm joined now by Josh Tolley. So Josh has a business program brokerage company and he owns dozens of companies which, like that is terrifying alone to me. But he seems to sleep through the night. He's founder and chairman of Tali and Company. He's also written a book, Acquisitional wealth. The fastest, most proven way to create life changing prosperity. And he's got all these other shows, so he's done quite a bit of this with a whole bunch of companies and he's become a guru on this subject. Josh, welcome to the show.

Hey, Bill, thanks for having me. Thanks for having me. I'm enjoying it so far.

I'll do some stand up next. So what. Where are you today?

Where am I? I'm in Houston.

Houston?

Yeah. Just escaped the eclipse moments ago.

Escaped it?

Escaped it. Oh, man, it almost got me. I knew where it was going. I'm just kidding, of course. No, we had cloud cover. Were you, huh?

Were you in the path of it much there?

We were, we were in what. What's called 90% totality or something. Oh, that's close. Yeah, we. We took the kids outside and let them see an eclipse, but then it got cloudy and it really just looked like a midday, you know, thunderstorm. It was just dark clouds and it was a little anti climactic. They were like, dad, this is boring. Ah, man. So. But it was a good day.

Nice. Nice. Yeah. One of my clients spent the day out looking at the eclipse and not far from where they live normally. And so they just drove and took the time off to go do it. I'm sure that there was a traffic jam right after the night. Well, this show is not airing live, but you will see it later. And of course you'll see the references to that. Of course, the eclipse has already happened. You saw it or you didn't? You saw the news coverage about it. I kind of wish I'd gone to see it personally, but.

Have you ever seen one?

I've seen partial. Not I. Not. I was more like you at the 90% line or whatever. Not in the full line. So I have it and I understand it's quite a bit different to see it in the chain, especially if there's no cloud cover. It's supposed to be pretty cool. So.

Yeah, Yeah, I saw the 2017 one in totality and it's. It's pretty slick. It's cool.

Yeah. Well, I forget when the next one is, but anyway, that's not the subject of our show today. We digress.

We're like talking about on Astronomy today. No, I'm just kidding. Yes.

So how do you get into this? Buying businesses? What made you think that was a good idea?

Yeah, so I became an entrepreneur at 12. In middle school, I already got that entrepreneurial bug. Started my first legal business three days after graduation. The only reason I waited three days.

Illegal one just before then.

Actually, it was results. It. I plead the fifth. Yeah, it was. It was less than legal, I'll tell you that. But. But better way to say would probably be legitimate. You know, got my llc, the whole thing. So started that right out of high school. I had a number of jobs as I was trying to build it my first business failed, my second business failed. By the time I got to the third one, I started figuring out how to do this and got pretty good at it. And I started helping some other people do it. And I remember I was sitting across the table from a couple in their 30s. I was 21, I think, at the time. And we got their business to the point where they could leave their jobs and just be full time entrepreneurs and parents. And they started crying and I said, what are you crying for? Because at the time, you know, you're 20, 21 years old, you're in business for girls and cars. And I'm like, what are you crying for? Like, man, we go to bed every night thinking, is this really all life is? And then we wake up every morning thinking, man, do I really have to do this again? And that was kind of when I started to think, okay, well, maybe I should figure out how to do this for some other people. So wrote a couple of books on the subject. Kept doing it myself, though. Kept, you know, getting into businesses. I've started businesses, bought businesses, sold businesses, flipped businesses, and it just kind of became what I did. And along the way, 2017 rolls around and I kind of get into the business brokerage profession and since then have just been kind of leading and guiding people in this path of buying and selling and most importantly, flipping businesses. I think that's extremely overlooked. Most businesses should never be owned longer than five to six years. So really got into that and they asked me to write a book on it, so I figured why not? And here we are. But a lot of bumps, scrapes, lessons along the way. I've realized quite quickly that if you take the shortcut, you're going to pay for it later. You might as well take the real path, develop your craft and know what you're talking about. Once there's grain in your beard.

Somehow I've avoided much gray on the top of the head.

Good for you, man.

Pretty good. And I still have some hair and I am 16. Hit here.

I wish I did, man, I wish I did. There are some days in the shower where I miss it. I'm not gonna lie. It's weird how your subconscious works. I'll take a shower and I'll still go like this. As if there's something to throwback. Not so much.

Do you ever reach for the shampoo?

Oh, once in a while. Once I got married, I did. And I'll, I'll like, oh, you know what? My wife has some, some shampoo in here. I'll shampoo my beard, and then I'll condition it just to give me that sense of, you know, worthiness.

Huh? Oh, these are important topics to acquiring a business. I. You know, as you share that, it's funny to think about how we do things and we go through all these failures. And I remember even recently, our son was feeling blue about his life and business success. And he'd raised money and started a few companies, and they hadn't really panned out, and they'd either spent or returned the investor's money in different cases, and he was feeling really blue. But along the way, and even the last one, like, he. He was really struggling with it, and he built something kind of interesting, and he was showing me and Vern and others what he built and that kind of thing on the deck of our house here in Northern California. And, like, it's really cool. And he was trying to get it better and trying to get customers behind it, and really, the team was struggling, and he didn't love being the team leader, but he approached this other guy about their tech, and he's like, listen, I could come help you make your tech better. So he came over as head of AI research for another company and started to build and what is now regarded as the leading AI company in the world in their category, it's a company called Midjourney. Lots of people know it now, but, like, he felt so blue and he was so wrecked about it, and then he just took everything he learned and he poured it into the way he works and what he works on and that kind of thing. Anyway, I obviously bragging as a dad, I look for every opportunity, but I think it's so on point to what we're talking about today. You could feel so down about the things, but you're learning something along there. And if instead of giving up on the whole thing, you apply that learning to the next business or the next one or like on that, there's a point to that, right?

Well, I'll take it one step further and say failure in employment leads to more failure, whereas failure and entrepreneurship leads to more success. If your first job is the cashier at McDonald's and you get fired from that and you have to go get another job, the odds of that job being lower in terms of pay and duties is extremely high because you just failed at the first one. So now you're on fries. And if you fail on fries at Burger King, you're gonna be sweeping floors at Wendy's, right? So failure begets failure. In entrepreneurship, the opposite is true. In entrepreneurship or in employment, the opposite is true in entrepreneurship. If you fail in business in your first business, the odds of success in your second one go up. And if you fail in your third, it goes up even higher. Your fourth goes up even higher. I remember I wrote a book called Evangelpreneur, and the guy who wrote the foreword for that book failed 17 times before he had a business that actually turned out and worked. And thank God it didn't take me 17. But can you imagine the conversations in bed with his wife after, like, business 14? And he's like, honey, I got an idea. But it was that ability to take what you learn and build upon it. Where now, if somebody comes to me and says, josh, invest in my company, I want to make sure they failed a few times. If you haven't failed yet, I'm not giving you my money because you don't know how to get back up after getting knocked down.

You know, the story is that Thomas Edison had 10,000 failed attempts before he made the light bulb. I don't know if that's true or not, but I'm certainly. There were a lot of them, right? A lot of versions. And most of us, you know, after a little while at something, get really discouraged and give up. But. But figuring out how to apply it and do the next a little different and how not to give up and how not to get shut down, right? Like, all right, so now I'm out of money. So what am I going to do? Where am I going to get a little more? What am I going to do? Or that one's over. But let's take the learning and apply it to the next business. Let's do a new version of something. I think that's profound, right?

Or even this idea that at some point you get to a level of success where you'll no longer fail. That's not true either. You know, if you look at Richard Branson, he still has some losers once in a while. I don't think they're doing virgin bridal anymore. Microsoft tried that Zune or Zoom thing to try to compete with the ipod. You don't hear about that anymore either. So failure is just part of life. And if you approach it well and you don't kind of let yourself be prideful or emotional about it, you know, give yourself a weekend to kind of, you know, feel bad, but after that, just realize, hey, this is part of what's going to make the next thing more successful anyway.

I've had some business successes, but I've had an Awful lot of business failures. I've made some multimillion dollar mistakes. Right. And I think those things are super valuable. As an entrepreneur and especially a coach, thinking about that, dealing with that is really, really powerful. Let's share some of the stories. You've got great stories about so many companies. You could probably tell stories all day long. But as we got ready, you shared about Bob the Millennial, Bob the Builder. Right. So talk about what's Bob's deal?

What about Bob? Yeah, so in, in acquisitional wealth, we kind of profile and his name wasn't Bob. You know, we change it to protect the innocent, so to speak. But this, this idea of, hey, I'm just going to work my way through, through life, I'm going to save up a bunch of money and that money is going to carry me through to retirement. And there's this idea that that's the preferred way to go about living and it's just not. The first problem Bob has is this realization that the closer he gets to retirement, whatever number it was that they told him he would need, he needs more. Yeah. So in Bob's case, Bob, when he started his career, they told him you would need a half a million dollars to retire. Nobody's ever going to need more than a half a million. He got it. He said, josh, once I got it, they told me I'm going to need a million. Once I got it, they told me I'm going to need a million five to two. And all I'm doing is chasing a carrot. And the first thing we covered with Bob is it's mathematically impossible to save your way to wealth. In order to create wealth, you have to have something that gets ahead of inflation and taxes that are going to consume it anyway. So step number one is to say, okay, Bob, what do you have? And let's say Bob has $200,000. If Bob has $200,000 and he's getting even 10% rate of return on some index fund or something, he's getting 20,000 bucks. Woo hoo. Woo hoo. Bob can take that $200,000 by, huh?

That's a great Vegas weekend.

$20,000. That's a great Vegas weekend. Absolutely true, absolutely true. But it's, it's not going to set the earth on fire in terms of building wealth. Right. Especially when you consider, well, inflation is somewhere between three and seven depending on who you're listening to. So you're not really getting net 20 in today's money anyway. So it's just kind of getting gobbled away. Whereas he can take that 200,000 by a $2 million business. That $2 million business could be profiting the owner 600,000 a year. So now he's making 600,000 on a $200,000 investment. And there's nothing Bob can put his money in when it comes to a certified financial planner that can provide that. And that knee jerk reaction is, oh, that's gotta be rare. Oh, it's gotta be risky. And oh, you know, it doesn't really work like that, but it does and it has. And what I love to point out to people is this idea of buying businesses for profit outdates real estate. Real estate's only about 500 years old. That's it. Prior to that, if you lived in a land where land was the mother earth than some indigenous, like people do, then nobody owned real estate. If you lived in Europe or Asia, a king or a warlord owned it, but you didn't. Private ownership of real estate is 500 years old. But I have a copy of like a 48-800-year-old block of stone and in it is etched a business transaction for ownership of a company. And it has been so powerful in creating wealth that it is the number one way to create wealth in the history of the world. It's just not talked about. And that's kind of the reasoning behind this business or this book. Because I wanted there to be a real resource people could use and not just one of these instagurus that don't really know what they're talking about and they're just putting it out there. So here we go. So that's Bob's case. So Bob's a very happy boy now.

Now, in your work, in your world and in the people that you work with, what are they doing? I assume that you're not recommending that everybody take a job in the company they buy, they buy the company and they do something on it. Like how do you have a thought about how far they work on it or don't work on it, in it, et cetera?

Yeah, yeah, absolutely. I think it was Jay Z that said it best. I'm not a businessman. I'm a businessman. You know, there's this idea that says if you're going to be an entrepreneur, and this is why I teach, there's such a huge distinction between small business owner and entrepreneur. A small business owner is somebody who starts a business doing something they know like or love, which is typically the three things you want to avoid anyway. They do something they know like or love and then they work that business to the bone and hopefully if they survive the terrible, you know, 9 out of 10 businesses fail conundrum, hopefully in 10 years they have something of positive impact and hopefully they're listening to smart people like yourself to get there. But it's still, it's, it's the failure rates. Atrocious. Whereas an entrepreneur, an entrepreneur says, I'm not going to get in a particular business because I like it, know it or want to be in it. I'm going to get into a particular business because there's profit there and that profit allows me to live the life that I want. So instead of say, developing my skills as a plumber in order to own a plumbing business, I'm going to develop my skills as an entrepreneur. So branding, marketing, marketing, advertising, deal making, strategy, capital management, all that non plumbing stuff. So that way when I see an opportunity, whether it's in plumbing or not, I can take a hold of that opportunity and expand and grow on what was already built before me.

Yeah, I think that's the real key is you're the owner of something. You're thinking about the running of it and how it's going. When you start the business, you're like doing every job. Uh, yeah.

Yeah.

And you don't sleep much.

No, you don't. And I've started businesses too. So it's not like I'm just saying, you know, there's only one way to go down that road. But I've started businesses too. And it's exactly what you're talking about. Even if you're successful, even if you're successful, you're wearing every hat. It's, it's kind of like Jeff Bezos, you know the story of they're in the garage packing everything on top of the Honda that he was driving. You know, holy cow. Whereas here comes Warren Buffett and just buys 10% of Amazon. And did he have to do it? Absolutely not. He just bought what was already there and said, okay, I'll take over from here. So it's that distinction. And unfortunately, unless you go to a really good business school, they're not teaching real quality M and A skills. They're teaching you how to be a mid level manager waiting for a liquidity event. So most people who start businesses or even, you know, go to school for business have no clue how it actually works. And then you start talking about, well, just buy one instead. And they look at you like, well, if this works, why isn't everybody doing it? Not realizing that everybody is literally doing it, like right down the street from me, you have Exxon, Shell, bp. Right, Because I'm in the Energy city. All of them have a floor in their building of people dedicated to do what? Go and buy other companies. There's no such thing as this sort of unicorn growth thing. Even Amazon. Amazon started buying companies they didn't grow organically. Apple came out with the MacIntosh in what, 1984. By 1988, they've already purchased a dozen companies. To date, it's over 120 companies. They didn't invent maps, they bought it. They didn't invent a Siri, they bought it. So you identify the growth you want and then say, hey, if I'm the scale, I'm going to buy the scale. Just go buy it. And when you figure out how the financial aspect of that purchase works, it's usually cheaper than starting one anyway.

So why trust yourself and buy a business then? If. If you don't know that inside and out, if you hadn't come from that background, working for somebody else, buying businesses and evaluating, understanding the finance of, why would you do that? Instead of just giving your money to a professional investor who, you know, a Buffett or somebody else, and then let them do that, choosing and buying and running it. Wouldn't that be more efficient, have a better chance of success.

Statistically? No, not really. Let's take Warren Buffett, for example. Right? Warren Buffett gets your money. And according to Warren Buffett, he invested $100 into forming a company, raised a bunch of other money, used that money to buy Berkshire. Berkshire then gave him access to the public markets. Now he gets a management and carry fee. He raised that money and then what does he do? He goes out and buys companies. And everybody loves to talk about, you know, oh, he owns 12% of Coca Cola, 8% of bank of America. Yep, that's what the public face really talks about. But he also owns 100% of See's candies, 100% of Oklahoma furniture, 100% of Dairy Queen, and he's owning all of these businesses. He's doing exactly what we're talking about. He says, I'm going to buy it, take it all, own it all. I know he's never served ice cream except for that publicity, something with Bill Gates, but did he need to? Absolutely not. He bought the company, put the managers in the right spot, made all the profit. And then to add insult to injury, does he give you the 300% profit that he made the year after he bought Dairy Queen? Absolutely stinking not. He doesn't even pay A dividend. All he tells you is, well, the value of your Berkshire shares went up. That's not how he's making money. And it's this bait and switch sort of thing. And it's not that he's doing it evilly. He discloses it, but people aren't paying attention. So yes, you could give it to a professional and have them do it. But when you're looking at these businesses and saying, oh man, I don't know how to read financials, then hire somebody who does. Oh man, I don't know how to serve ice cream, then hire somebody who does. And if you buy a business, let's say there's 15 employees there, it's been around for 20 years, they do $3 million in annual revenue. There's somebody there who knows how to run that business better than the current owner anyway. So you acquire that business, you take the, let's say the owner makes 800 grand a year, take home, you pay that, that lady or guy who knows how to run it better. You give them a hundred thousand dollar raise. What job ever gives you $100,000 raise? You give them $100,000 raise. You make them COO or VP or whatever you want to call them. They, they're running the business for you. You're now collecting the check. And it didn't cost you $3 million to buy it. It only cost you the down payment to buy it. And there's ways to get the down payment. So when you compare apples to oranges, most people will spend more money trying to make $200,000 a year in a startup than they would to clear $4 million a year. Or that's a little high, maybe a million a year with the down payment it would have taken to clear a million a year.

Tell another of the examples you, you shared about a woman who was working a hair salon and then bought a business. Yeah, Aisha. Yeah, talk to us.

Tell us about it. So here's a great example of why people should flip businesses, right? Unless there's some sort of legacy play, like if your great great grandfather started it or something, and you want to keep it in the family, that's yay, keep it. But unless that's the case, very rarely do you see 20 year unicorns. Very rarely does somebody start an Italian restaurant on Smith Street. It barely gets the family by for 10 years and then boom, it's a billion dollar company. Doesn't happen. Wherever you take a business in five to seven years is about where you're going to take it. That's just statistically true. So let's say you have a business that's worth a million dollars and Aisha's wasn't. But I don't want to get out a calculator, so let's just do the math. You have a business that's worth $1 million. You're clear. And take home 300 grand. If I come to you and you, and I say, what are you trying to accomplish this year? And you're like 20% growth. Well, that means your take home is only going to go up 60,000 bucks. So now you're making 360. Is that good? Absolutely. Absolutely. Better than most Americans. I get it. So nobody feel insulted by this. But what Aisha can do is sell the business for a million dollars, use the million as a 10% down payment on a $10 million business, and start making 2 to 3 million a year. So if 2 million a year is more than 360,000 a year, why the hell do you still own that business? And then you could get into, well, Josh, ain't I going to have to pay taxes on that million? Yeah, but you're not going to pay them. You're going to buy the other business first and then have that business pay them. So even with the capital gains tax, it's way smarter to start flipping businesses every five to seven years after owning them than it is to hold onto this thing and, you know, maybe someday, Mildred.

So is there an average time that you're thinking about holding? You said three to five years. Is that five to seven? Typically five to seven. And what's the reason?

Yeah, well, typically by then, even if you acquired it right, you have a lot of your debt paid off on the purchase. Especially if, you know, you either raise prices, increase sales, increase the profitability business, whatever, but you have a lot of equity paid off in the business. So you have that. That's going to go into the next flip. You've kind of taken it to wherever you can probably take it anyway. And unless you're going to acquire different entities to add onto it, which would be considered, you know, acquisitions also. But unless you're going to start buying other companies to add onto the one you have, it makes way more profitable sense to flip that and do it again from scratch with whatever equity you hold. So even if you put $100,000 down on a million dollar business five years into this, it's, you know, $500,000 in equity, and let's just say you increased it not a dime. You can only sell it for what you got. Right. Well, now you have $500,000 to go buy a $5 million business. And the other 500,000 that you got on the million dollar sale had to pay off the original purchase. Well, you just 500 percented growth like that, 90 days later you 500x. So there's this like, wait a second.

Yeah, but there is also the possibility you buy the business and you didn't understand what you were buying, you paid too much, there were hidden problems and the thing blows up in your face.

There is that possibility. Yeah. Statistically it's somewhere between 2 and 5%.

Because it's an existing business that's been running for a while.

Exactly. So. So when you start a business, what are you going off of? Hope. You're literally going off of hope. A little bit of maybe you have background in this, but there's no guarantee it's going to get you clients. Yeah, exactly. But even if you buy a house, how do you tell what it's worth? A, not a prospectus, an appraisal, typically by an appraiser one of the two agents knows. And the comps, well, that sucks. That's why according to bigger pockets, 95% of all real estate investors lose money. If you get a VC to back your startup, it's still a 78% failure rate. But when you buy a business that's been around for 15 years and you can look at five years of tax returns, five years of profit and loss, five years of employment records, five years of contracts, well, not only are you seeing that, but the owner who's selling it is verifying it. Their broker, their accountant to their attorney, you, your broker, your accountant to your attorney, the bank doing the loan, the third party valuation company that's going to look it over if it's under 7 million, the SBA and the IRS tax records that the IRS has agreed to. So 13 people have all went through this with a fine tooth comb and said, yeah, if you buy this, this is what you make. So you would have to throw a grenade in the stupid thing to make it go a different direction. Unless of course, you do this stuff that's being promoted on the Internet now, like, oh, just buy a laundromat or a car wash. Yeah, then you're gonna, good luck, Chuck. But if you're buying an established business that has that sort of track record, contracts in place, employees in place, sometimes even tax abatements in place. Yeah, you would, you would have to work hard to blow it up.

Why did you say, oh, don't buy a car wash or a laundromat because.

There is this phenomenon out there where everybody on Instagram's like, oh, buy a laundromat. There's nothing wrong with laundromats, right? Nothing wrong with it. But you're not really buying an operating business as much as you're buying income producing real estate. And what tends to happen is people who either a don't know any better or two are too afraid to buy a bigger business, see those sort of boring real estate income producing options as a way to do this. But then they buy it, realize, oh wait, I didn't do the due diligence because the Insta expert on Instagram isn't liable for anything. So I didn't know what due diligence I was supposed to do. Wait, I'm the one that actually has to go to the car wash when the 16 year old decides to call in sick. Well, wait a second. They're going to do construction outside my road. So now my laundromat's going to be shut down for a year and a half. Well, wait a second. I didn't understand that there had to be an EPA environmental impact study based on the water usage of my laundromat or car wash. That's the reason why it was for sale for such a high multiple. So there's a lot of like, be careful there.

I, I had a friend who had a laundromat and, and they said the machines, the coins get stuck, the whatever, you have to go fix them at all hours of the night. There's incidents that happen them, there's break ins there, the machines break down again and again. You have plumbing problems, you get an eviction, you can't rent the space anymore because you didn't own the building. Like, yep, they were like, this business is one headache after another. And then car washes. Most car washes are broken most of the time. I visit them.

Yes. Either that or it's one of those labor intensive ones with five people working it, but they're all under 20 and you got them at the local, you know, I need a job today center and you know, good luck. So if you're going to take that leap, you might as well do a bigger purchase but also more security. It's kind of like, you know those videos where kids swing out on a rope and they drop into like the river lake or whatever.

Yeah.

Who are the only kids who get hurt? The ones who are too afraid to let go. Think about it. The ones who are afraid to get hurt are the ones who get hurt. And I view what's happening right now in the insta world with all this, you know, buy laundromat stuff as a way for people to proverbially still hold onto that rope in case it's too scary to buy, you know, a 12 person operating business. And then wham, they get hit with something like you were just talking about.

Yeah. You also shared in getting ready a woman who missed a chance to sell the business. And I've missed a couple chances to sell a business and a couple chances to raise it.

And. And I tell that one, yeah, this one's heartbreaking. This one happened right here in Houston. I actually met her for. For a meeting. Oh, my God. So she owned check cashing places, right? You know those, you know, hey, I need money at 12 million percent interest or whatever. But she owned three locations around town, and I met her after she sold them. And she was getting into real estate, right? Because that was the. The sexy thing. And I'm like, well, you sold those businesses, right? And she's like, yeah, all three buildings sold. I'm like, whoa, whoa, whoa, whoa, whoa. I didn't say sold the building. I said, you sold the business, right? And she's like, what are you talking about? I said, oh, my gosh, you can sell the business, not just the building that it's in. And it cost her millions of dollars. Millions of dollars. And she's not the only one. We had another right across the street from my office, kind of kitty wampus. We had a baker. This baker sold 55,000 donuts a week. That's not counting cupcakes, cakes, pies. Just donuts. And one day we come in on a Monday morning and the bakery shut down. All the trucks are parked in the back and we're like, did they die? Are they okay? Like, what happened? Because they're busy. Busy, right. Well, it turns out him and his wife wanted to retire to North Carolina to be near the grandkids. And they didn't know that they could sell the business for $17 million. So they were just trying to sell the building for 800 grand. Oops. Like, man. But again, too many people who aren't familiar with this business think, well, I have a business. I should probably call a commercial realtor, right? No, no, they would sell the building. But they're not going to. I mean, it's not even in the test. They're not going to say, okay, this is how we're going to adjust your financials with add backs and clawbacks and royalties and all this other sort of structure you can put on a business deal, they're just gonna go, well, this is what the comps say. And if you said you made 100 grand a year last year, maybe we can multiply that by three and add it to the price of the real estate or some asinine thing like that. So you have all these business owners who are literally closing down every day. And I'm not even making this up in the industry. They come out with these stats. I just don't have it the top of my head. But every day, dozens and dozens and dozens and dozens of businesses just close down. They don't even try to sell because they didn't even know that was an option.

Yeah, there can be lots of reasons for that. And one of them that I know is if your name is on the door, and if you put your name on the business in the beginning, it can be very hard to sell it later because you're attack. You don't want somebody else running something with your name on it.

Right.

And. And not everybody wants to run a business with your name on it. Right. That can be a big problem. That can really complicate it for you and I. I definitely have had some friends and clients struggle with that. So, yeah, we're thinking about buying it, we're thinking about selling it. We're looking at both sides of that in. In this conversation. I think there's a lot to consider here, but. But planning on it being a business owner instead of just somebody working in, having a super job.

Right, right, right. Yeah. You think about.

If you're running a business right now, I would say the vast majority of our audience is running a business right now, and very many of them are founders of the business right now. But they are often the hardest working, least compensated person on that team, hoping that there'll be a big equity event in someday. And sometimes there is. But I can tell you, I've been associated with a lot of companies, necessarily create a big equity event.

Well. And even if there is, here's something that kind of blows people's minds. 50% of all businesses that go up for sale will never find a buyer. You know, we hear about, oh, Discover Card's gonna be purchased by Capital One or whatever. And we think, oh, yeah, well, I'll just list mine. Because it's like real estate. Somebody's gonna buy it. No, no, Actually, according to the International Business Brokers association, half of all businesses that go up for sale will never find a buyer. And you add to that that now most children do not want to take over for their parents. And that whole, what do we do next? When. Right out the stinking window. So when the, the time to plan for how to exit a business is the day before you legally start it. If you don't know how to get out of a business, don't get in it.

Yeah.

And I tell, I tell CEOs all the time. Like, man, if you're spending more than four hours a week in your office, you're losing money. Even if you're going to be the operator, you should be out there deal making, networking, branding, doing events. You shouldn't be sitting in the office if you're required to be on premises. You're costing yourself a fortune. Yeah.

You know the thing, when I think about it, and I don't know, maybe you'll add to this or correct this because you deal with a lot more than I do. But the first thing is the business isn't designed to be sold. We haven't done the work to make it a saleable business. The owners are. Founders are way too tied to the business and they haven't figured out and extricated themselves from the business. And they're thinking about it, they're working on it, they have a plan, but it's not at all in motion. So the business isn't really easy for anyone to take over. The second thing is there's all kinds of mess with the ownership. Intellectual property agreements, like the, the paperwork is in a mess. And the third one I think that goes along with it is the books are a mess. Right. They've got all sorts of personal stuff mingled around in there, and they're playing fast and loose with things, and so you have to make a bunch of notes, but that really slows and qualifies the sale. And then the last one is they're delusional about what the business is actually worth. Yeah, your business is worth a million bucks. Oh, I think, I'm pretty sure it's 15 or they, or it's worth 10, but they think it's worth a hundred. Right. Like, whatever. The thing is, you know, there's a factor off and it's multiple.

Yeah, you are, you are correct on all four of those. You are absolutely correct on all four of those. And again, it goes back to this idea that they're not really entrepreneurs, they're small business owners. They, they haven't set it up. So if they die, nothing misses a beat. And if you're watching this and you own A business and you die and the business goes to hell in a handbasket. That's on you because you didn't set up the business in a manner that it doesn't have to run with you. And then. Yeah, the books thing. Oh my God. If I called any of my agents right now and just randomly said, out of the past 20 businesses that we've looked at, what percentage of their books were messed up, you're going to hear somewhere between 19 and 20. The level of terrible accounting being done by a lot of these state licensed CPA firms is absolutely horrific. Not only that, most of them. To defend the CPAs that I just kicked in the face. Most of those CPAs are not given accurate information anyway, or there's no strategy behind it other than this is what we made, this is what we spent. Here you go. Yeah, it's, it's.

I don't think a lot of the CPAs aren't responsible for and accountable for that.

It's that, that's why I wanted to defend them. A lot of information. Yeah, that's why, that's why I wanted to defend them a little bit.

But you know the funny thing that stings so bad, right, Is that I have this coaching company, training, coaching workshops. I have this show. All of it requires me.

Yep, yep. Now, now compare that with, compare that with. Do you know who the current CEO of McKenzie is?

Yeah. No, I do not.

How about Bane and Go?

Don't. Yeah.

So a lot of coaches need to make this transition from coaching businesses to consulting businesses for that exact same reason. Because once, once you're out of the picture, then what? So, you know, it's. I don't know. But along with that, it's not just totally reliant. A lot of these entrepreneurs find their identity in what they do.

Yes.

Like they would be totally lost.

I am the coach. I am the whatever, the website guy, whatever gal. And your, your identity, now that's also a problem. Because when you have a business problem or it fails or you sell it or whatever, now you're like, who am I if I'm not this thing? Which is the same exact thing that a parent goes through when your kids go off to college, you're like, wait, what's the point? Who am I? Well, the last 18 years I've been mom or dad, and now, now I don't know who I am. People go through these profound idea. And it's not just a lightweight thing. Like, I had a friend who had a business problem and he was so identified with his career that he tried to end his life because he felt like a loser, right?

Like, well, yeah, that. Look at that Minecraft guy, the guy who invented Minecraft. Same thing, like, becomes a massively, insanely rich guy. I don't know how much, but multiple, multiple commas. And then next thing you know, he's on Twitter. Like, I'm so sad. I'm so depressed because they haven't developed themselves as a person beyond whatever it is they provided for their own business. Which is why one of the things we try to do when we get a seller ready to sell is start building that life beyond here. So it's not just a hard break because you don't sell a business in like a week, right? Like you have a roadmap, you know what's coming. So we try to build a life for them so they go from one life to another life and they're excited about where they're going instead of fearing what they're about to leave.

Well, this is fruitful and interesting, stimulating conversation. Hopefully it's got our folks thinking about not just growing the business business, but selling the business and moving on to the next part of life and all the things. And also like you might buy some things that go along with your business, right? The book is acquisitional wealth, the fastest, most proven way to create life changing prosperity. Acquisitional wealth is the book and you can find it wherever you get your books. And then of course, Josh's website is joshtolly.com joshtale.com if you're interested in our free course. The free course short mini course on the four stages of scaling up, how to navigate all stages, what to get the tools to use at each stage, and all of that, which includes getting out of the business someday and then the secrets that propel the ones that really scale. There's three common things that I think are so important and missed and they're fairly basic, but they're all that right there in that free course. You can get it down, download it, it's skip around running at your own pace, but video, worksheets, examples, all that kind of thing. Free course scalingcoach.com freecourse is where to go get that. Just give us your email and we'll send it to you. And we don't even have to keep marketing to you. You could just get off that list and immediately, if you don't want to, or get up forever, we'll send you a little updates every other week. So all that and more. I want to say thanks, Josh, for coming on the show. Thanks to the folks at Storeon for producing our show and getting it out and guest prepared and scheduled and promoted and all that. They're our partners in making the show hum. And to my friend and mentor, Verne Harnish, who created the whole scaling up framework in the first place. Thanks again everyone for watching, for listening. We'll see you next time. Come back. Talk to you soon. Keep scaling.