To Build or Buy a Business

Business brain, episode 485 for Wednesday, September 20, 2023. Greetings, folks, and welcome to Business Brain, the show where we take an idea or two, we dissect it, we analyze it in order to tune our business brains together to give us each a greater chance of living that charmed life. Sponsors for this episode include fast growingtrees.com businessbrain, where you can go to save 15% off your entire order through October 15th. We'll talk more in depth about how I've been using this and how great it is in a little bit. For now here in Durham, New Hampshire, I'm Dave Hamilton and I'm out here.

In sunny California still. This is Shannon Jean.

Hey, man, it's sunny today. It was. We got some rain the other day. Well, there was that hurricane that like was way out to sea, but we just got a pile of rain, so it's like fine. Yeah, you know, it's all good.

That's cool. Yeah, I've been up in the mountains a lot, working on a new project, preparing a new vacation rental in the rural area of the Sierras. And so I've been away from some. We've been getting some, a little bit of rain and heat lightning, they call it up there.

Yep.

It's kind of interesting. But I also got, I was going to chat with you. I also set up the Starlink Internet access for the first time, which was kind of an interesting experience.

All right, so, yeah, tell me about this. So this is low Earth orbit satellites, right?

Correct. Yep.

Because we've had, we've had satellite Internet for a long time.

That's terrible. And it was awful.

Yeah. I mean you could use it but maybe to like download something. But it would never have worked for a zoom call or really much of anything. You know, you'd have these two second delays, you know, when you requested something, when it started coming in. Yeah. But with these being low earth orbit, it actually makes a big difference. Yeah, it does.

So I get this thing, I hook it, I find it. Of course I have to find a deal.

Right.

Because I. Yeah, no way I'm going to pay retail because I called, they have a service provider up there that uses phone lines that'll connect you.

Yeah.

And there is a phone line to this place. And so. But it was kind of old technology, you know, a binded modem with some kind of DSL weird thing.

Oh yeah. Where, where you're using the satellite in like the down direction and then some sort of copper wire DSL whatever for the upper upstream yeah, yeah, yeah, yeah, yeah.

And so the, the throughput was really low and it, it was. I guess there's some law where the, if you buy the Internet access in this rural area, they all. Well, maybe it's not law, but they, they force you to also get landline phone service. So the, the cost of those two things was about 120 bucks a month. And, and coinc. Yeah, coincidentally, Starlink, the standard plans about is 120 bucks a month.

It's almost like they know it's almost.

Yeah. No contract, which is great. You know, if you buy the, the dish, the second generation one, it's like 5.99 retail. I found a, a sealed unit for, for 450 on eBay.

Okay.

With free shipping. So save some money there. And I got it. I set it up up there. I just kind of set it up on the deck for a while.

I was going to say, did you have to like, like, like how difficult was it to aim the satellite and all that?

Yeah, it aims by itself. You plug it in and it goes zing, zing, zing. Moves around, left, right, up, down.

Oh, it's got its own, like the motors in it and everything.

Yeah, it's got its own motors. Pretty cool. But in the beginning, you know, I, I could not get the, the connection between the modem and the dish was. Had some kind of problem. So I kept messing with it, plugging it in, trying different things. Trying different things. And believe it or not, I was so frustrated that I walked over to it and I gave it a little gentle. I wanted to kick it, but I gave it a couple of taps. Just a tap, tap. Kind of like maybe you did on an old tv.

Yeah, yeah, yeah.

That wasn't getting a signal.

Yeah.

And, and believe it or not, it instantly started working.

Oh, that's not so good. That's like that. But it worked after that? Yeah, yeah.

Yes.

Yes.

Yeah, after that. It worked perfect. It, it's, it's very fast. But the, the issue is that you need to find the least obstructed view of the sky as possible.

Of course.

And everything I've researched, it seems like anything over 5% obstruction is problematic. And you know, we're up in this place and there's trees, big, tall cedars, pine, spruce. It's very, very heavily obstructed. But I got up on the roof of this, this house and I was able to finagle it around and, and built a temporary wooden mount just so I could kind of move it.

Yeah.

And. But the best I was able to get was about 7% obstruction, so 93% view of the sky. And Starlink says you should probably find another place. But I, I really, that was the best I could find. Some. Wow. But I had it. Yeah, some of them were like 12%, some of them were nine. But I kept walking around and moving it up and down and so it's.

Like its app will tell you what, what you're saying. Okay.

So yeah, you, the app is amazing. You hit, you know, scan and you just hold your phone up and move it around and it vibrates as it's scanning the sky and it's, it's, I mean, anybody can do it. It's very, you know, easy. But that being said, at 7%, it's, it's very fast. You know, the download speeds are great.

Like what is great? Like what kind of download speeds are you getting?

I was getting like 90-150 Mbps, no problem.

And that's down. How about up? Do you remember?

Yeah, I think up was about 20 years.

Okay.

Like that.

So like that's, that's like.

Oh, bad.

A slow speed cable modem connection. Yeah, right, right. You know, but like that's fine. I, that, that's right. You, you can do, you can do Zoom calls, you can do Netflix. Like, you know, a, a good metric to keep in mind is that Netflix 4K. So the most that you could have to stream from Netflix requires about 25Mbps down. So you're getting 90 to 150. Yeah, like that. So you could stream a 4K movie.

Yeah, we were streaming. It was Great. At the 7% obstruction. A little over 7%. The Starlink app tells me you can expect an interruption every five minutes. Oh, but it's millisecond interruption.

Right.

Where. So when you're streaming, it's buffering.

Right.

So of course instructions are good. But I noticed it more when I was watching like, you know, I watched the 49er game and I don't think it was every five minutes, but once in a while it, you know, you'd get a little delay and I found that we were behind by, by halftime we were probably behind 30 to 45 seconds.

That's going to happen even at your house though, like you probably aren't paying as close attention. And I, I mean, I realize this is also your house. That's going to happen on, on like a wired connection. Even the, like the, the. I'm assuming you're using something like YouTube TV or FuboTV. Or something.

YouTube TV.

Yeah. So that also, like buffers, just like Netflix does now, it can't buffer as much because they don't see into the future. They can't have, you know, the next quarter of the football game to send you. Right. But they do sort of buffer it on their end and send it to you so that they can sort of preserve that viewing experience. So, yeah, that kind of thing happens. I've had two TVs in the house, quote unquote, live on the same service, and they're not in sync, you know, by any stretch. Whereas if you were going over the air, they would absolutely be in sync. Right. Yeah.

So, yeah, when I. Next week when I go back up, I'm gonna. I got a mount that's built for the roof. I got that and ordered it and they shipped it. And I'm going to move it up higher and see if I can get below that 5% threshold. But, you know, it works great. I mean, I saved 200 bucks by buying it on ebay. It was still sealed in the box because Starlink charges you 50 bucks for shipping. It's heavy and it's a big box. So definitely look for deals. Make sure you get this. At least the second generation, they have a pro version that has, I guess you get more priority access. It's the same dish.

Okay.

Pay more per month.

Got it.

And they have a mobile version which I guess has some other bells and whistles. Yeah, I thought it was great.

Did you do it? Did you do a zoom call or anything on it? Because that would be really the thing to test your outages.

I had, Yeah, I had some issues making a standard phone call.

Oh, yeah.

Of course, I used FaceTime audio and it worked great. I also had better luck when someone was calling me versus me calling out.

That doesn't make any sense. I mean, I. I believe you.

Non technical.

Yeah, yeah, yeah, yeah.

It could have been anecdotal or, you.

Know, whatever, but yeah, I'm curious to see what happens when you decide that we're going to use this to record a podcast and yeah, we're going to.

Have it because we can do it. And I thought the. I sent you a picture. You weren't impressed with the range, but I was. I mean, this is a 5 acre property and line of sight. I mean, I am a few thousand feet away from the house, down a hill on the river and I had excellent coverage and I was very impressed. So, yeah, WI Fi.

Line of sight is pretty good. Like, you know. Yeah.

And this is up High. I have it at the modem at the highest of the router at the highest point of the house, and it's flowing downhill, apparently, and it works. Terrific.

That's good.

I recommend it.

That's good. Yeah. I'm looking at your latency here. Like, the latency figures run between, like, 20 milliseconds and, like, spiking to 130, but mostly between, like, 20 and 40 milliseconds, which is like, that's fine. That's gonna. That's gonna. That. That dog will hunt.

Now we'll have to see. Yeah, when I start renting the place out, like, I'm very like, okay, no big deal. But we'll have to see the comments that our guests make when there's, like, five people on it all trying to watch something different and. Or, you know, use the Internet. So we'll see how it goes.

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And that'll be exciting, which is great.

It's the last of the three. We did two bathrooms and now the kitchen. We're going to be, it's going to be great. We had a dumpster for the whole thing last week. The guy who's 80 who runs the dumpster company calls us and says, I'm sorry, I have to come pick up my dumpster on Sunday because I can't find any drivers. I need to like have surgery that's going to lay me out for like three months. So I can't do it and I can't find somebody to sell to buy the business from me. And he's like, so I'm going to auction the stuff off, but I've got to come and I got to come and get it. And we're like, can you give us just like another week? And he's like, no, sorry. He's like, you want to buy the business? I'm like, well, no, like I think you're not offering enough for drivers and you're asking too much for the business. Because if you're having trouble on both sides, that's probably what that is.

But, well, think about that.

But that's an interesting thing. Yeah, yeah, yeah.

So that's a big topic of discussion on, on X within the business. Small, you know, medium sized business space is buying these older businesses and that this guy's been around for a long time and bringing new technology, new techniques to these businesses to, you know, see this big increase in, in productivity and yield. I mean, you know, somebody who's still doing handwritten quotes, if they do anything in writing, you know, that kind of stuff. And there's, you know, one of the common things you hear this Silver Tsunami. Seven to ten trillion dollars worth of US small businesses have owners, aging, ownership. I don't know exactly what age that is, but a lot of these businesses don't have anybody to buy. So I thought it'd be good to talk about, you know, if, if you're considering getting it and starting a business, is it, should you buy someone that's already in business or start on your own? And what are the pros and cons for that? I think it's be worth exploring.

I, it's. Yeah, it's an interesting Paradigm. There, there's the, from my standpoint, I've always found it that I have an easier time starting a business from scratch than I do making the leap to invest and buy an existing business. Right. Because you're, you're going to commit capital in one way shape or another. Right.

Like you're, is that a confidence? You're, you're confident in your confidence? It's a confidence skills.

Well, but it's, I have less to my belief, and I'm probably wrong, is that I have less to lose when I start it myself. Right. Because if I buy somebody else's business and it fails, I've invested all that capital upfront and, and I ran it into the ground. Right. You know. Yeah. And yeah. So.

Yeah, I think it's a tough question.

It is, it depends on the person. I'm not saying that I'm right, even about me. I don't, I'm not saying I'm right. It's just how I've always felt about it. But yeah, yeah.

And I think if, if, if someone's young and they have a business degree maybe or an MBA and they're looking at buying, well, I could buy that dumpster business and that's a passive income and you know, they're in for a shock about the amount of time and effort and like, you know, one of the, I think the big things people pitch to buy businesses like, well, you're going to accelerate instantly. You're going to be in business. Right. You're not going to have all the slow trials and tribulations couple years getting things off the ground.

Yeah. In theory, you've got cash flow already happening. Right. You know, I mean, yes, you got your initial investment to sort of pay down, but theoretically, you know, on day one, your cash flow positive if you're in business, if the prior business was cash flow positive. Right. So, yeah. And yeah.

And you're buying also someone's reputation.

Right.

And credibility, in theory. And that could be valuable. But I also had that in my cons column because you could be buying someone's bad reputation and well, or you.

Could be buying the reputation. You could think you're buying someone's reputation, but when you go and approach the now, your customers, they're not happy that it's you. They liked Bob when Bob ran the dumpster guy, right? Yes, exactly. You know what I mean? And it's like, oh, I trusted Bob. I, you know, I, I, Bob and I got done together 40 years ago. Yeah. But you know what I mean? Like that kind of but even when.

You build a business, that happens.

Right.

Because we've had it, we've discussed it on the show, especially as IT people. There comes a time when you're, if you're growing an IT or a tech business and you're doing a lot of the customer facing interactions, there comes a time when you have to hopefully step out of that role and start to manage the business. And, and they will be some customers you will lose because they want to talk to Dave.

That's right. That's right.

And that's a big step. So I think that one you probably face either way, maybe more in depth.

Well, and you buy, hopefully the, the person from whom you're buying the business has already started to do that. Right.

Hopefully. You think Bob the Dumpster dude is out there?

No. Hiring a. Yeah, no, that's the problem. Yeah, yeah, yeah.

Dumpster businesses are actually a topic of discussion.

Oh, I, I, yeah. When he told me about this when he dropped the dumpster off, you know, two months ago, I looked at it and he was asking a lot. Largely because a huge chunk of this business is cash and so it doesn't may or may not appear on the, on the tax returns and, and hard to justify. And so he's like, but you know, I need to charge you more because of this cash. Porcelain. I'm like, well if you can't prove it, I can't pay for it. Like, you know, I, I believe you. But you know, like, well, and that.

Brings up a good point. I, I would. If you are going to buy a business, I certainly would never recommend you buy one without some sort of seller financing. And not just because it helps you conserve your cash, which you are going to need to, you know, even though this business is up and running, you're going to need cash, of course.

Oh yeah.

But it also, you get this vote of confidence from the seller. They're, they're, they're buy in that. Okay. I believe in the business so much that I'm going to finance it over some term. Three years, five years. You know, you, perhaps you want the longest term you can with options to accelerate.

Yeah.

You know, with, with no penalties. And you want to try to, like I said, conserve your own cash. So you want to put the smallest amount down. If you're getting an SBA loan, there are some requirements how much you need to put in. But there's some new, some recent changes. Just this year I believe that the SBA has kind of loosened the way they count the seller financing. So I think The SBA may be more of an option for you. And you know, I think to me, one of the biggest cons about buying the business is you don't know what you don't know. And you know when you're being pitched the business and you're doing your due diligence. Yes. You're going to get some paperwork and maybe the more. What's the word I'm looking for, Established business or maybe technically savvy business owners, you're going to get lots of good data, right? Oh, yeah. I can just click a button and spit this out for you. But an older business, whether it's like a, An H VAC business, let's say service business, a dumpster business or whatever, I would bet that, you know, the dumpster dude was. Ha. Would have a hard time putting his hands on a lot of the due diligence paperwork you would like to see. So there is.

Yeah, right. Yeah, yeah. You're. And even the business that has all of that stuff, like the, the, the, the, the less savvy business. Right. That doesn't have that paperwork, there's going to be things that they don't tell you unless you ask them, of course. I mean, that's going to, that's going to happen with any business. But they're probably.

We did a whole show on that.

Yeah. But they're probably not going to actively hide these things from you. Whereas the more savvy business owner is going to give you all this wonderfully polished paperwork. But it's like, let's, let's move that out of the way. What, what's the unpolished stuff in here? Dig in. Right. You know, because they are now in the business of not running their business, but of selling a business. Right. And so it's a, it's a very different thing. You know, you're going to put it in its best light. It's not. I don't want to. Some business owners, business sellers, might lie to you. I think most of them probably won't because.

No, no, I would agree.

But, but they're going to give you the highlight reel, like highlights.

Yes, for sure.

It's, you're gonna, you know, it's. They're not gonna tell you. Well, you know, it's a really tough business. It kind of sucks. You know, that's not a good sales pitch. Yeah, yeah.

And I, I think, like, I can tell you from my experience selling businesses, I've had to do, you know, seller financing when maybe the numbers didn't look that great. And this person couldn't get financing and you're like, well, here's why I wanna sell it. I'm not as motivated with the business anymore. Yes, revenue has gone down, shifted my attention elsewhere. So here's what I'll do, you know, you give me, you know, whatever because as a seller you want to get as much down, of course, as possible. So like, you know, I think in, in that, this particular case, you know, I got 50 down and I financed it with interest over a two or three year period and that it worked out great because then you're kind of, you know, you're on the hook, they feel better and you got to just be, you know, sure you're selling it to the right person. That's probably a whole nother show, you know. Probably is.

Yeah, yeah, yeah, yeah. No, it's, it's fascinating. All right, so we're at 23 minutes. I have a question for you. All else being equal, and there's no world where that would actually be the case, but all else being equal, would you today start a business or buy a business that was doing exactly what you wanted to do with the business you were going to start? Which way would you go?

Start.

Yeah, same. That's it. Yeah.

I'm a builder, I enjoy it. You know, I don't. I'm not that kind of a hands off investor thinking I'm going to step in, so. But certainly we'd like to hear from you. Feedback at BusinessBrain show tell us about your experience buying a business, selling a business or anything and get entered to win a MacBook Air.

That's right. Yeah. We got what, another 15 episodes before we pull that drawing, so send it in. Feedback BusinessBrain show check out fast growingtrees.com businessbrain and keep living that charmed life. We'll see you on Friday.