Roland Frasier ┃ How Smart Entrepreneurs Build Wealth by Buying Businesses Instead of Starting Them

I would way rather start with all of that momentum and all of those advantages than the disadvantages. And very often it's a way better investment because you're gonna spend about the same amount in learning all the things you're doing wrong in a startup that you would've just bought a business that was where you wanna be 3 years from now, right?

What if you could grow your business faster, reduce your risk, and create more wealth without working more hours or raising millions of dollars? Today I sit down with legendary entrepreneur and acquisitions expert Roland Frasier to explore a strategy that most business owners never seriously consider. Roland reveals why buying existing businesses can be one of the fastest paths to growth, how creative deal structures allow entrepreneurs to make acquisitions with surprisingly little upfront capital, and why so many founders unintentionally build themselves into jobs instead of valuable assets. We also discuss what separates businesses that sell for a premium valuation from those that struggle to find buyers, and the mindset shift that allows entrepreneurs to create lasting freedom instead of simply becoming busier. If you're ready to think beyond traditional entrepreneurship, this conversation is guaranteed to challenge the way you've always looked at business. And I'm thrilled to be here today with my friend and colleague, Roland Frasier. Welcome, Roland.

Hey, Fleet, how you doing? Great to be here. Thanks for having me.

Oh, we're so happy to have you be part of this, and I'm going to share your bio and then we'll jump right into the conversation. Sound good?

Sounds good.

All right. Roland Frasier is a seasoned investor, mentor, and business strategist with a remarkable track record of completing over 1,000 acquisitions and exits for himself and his clients. His diverse portfolio includes companies generating $6.3 billion annually across 38 verticals ranging from real estate and hospitality to SaaS and e-learning. Roland has been a principal in 6 Inc. 5000 fastest-growing companies and serves on Stanford University's Advisory Board for Global Projects. His expertise extends to strategic roll-ups in industries such as business services, home services, franchising, where he identifies synergies to unlock growth. As a host of the award-winning Business Lunch podcast, Roland has interviewed luminaries including Sir Richard Branson, Sarah Blakely, and Martha Stewart, sharing insights into entrepreneurship and innovation. Featured in Business Insider, Fast Company, Forbes, and more, Roland is a trusted authority in business strategy and growth. His website is rolandfrasier.com. And I could have shortened all that up to just say that you are a freaking genius when it comes to business. Okay, so Roland, I know it's tough to ask you to do this in just a couple of minutes, but we got a lot to cover here. But I do want to get just a little bit of your your origin story, how you evolved from, you know, as a young person exploring music and real estate and then mastering the art of creative dealmaking and ended up being this serial entrepreneur and acquisitionpreneur expert. Give me just a little bit of the background so people can relate to Roland, the human being who got to where he is today. Sure.

Yeah, I, I was really fortunate to have, as I would say, my first mentor was my father. And I got really good advice from him early on. I liked, like, I would go to his office. My father was an attorney, still is an attorney to this day. And as a kid, you know, I'd visit his office, my mom would take me and I'd go by the office when I was very young. And I'd see all of these cool clients that he had and he'd introduce me to his clients. And, you know, one of them owned a chain of record stores and one of them owned a thoroughbred horse breeding farm, and one of them owned a gold mine. And I was like, these are cool people. And I noticed, you know, my dad was always in a suit and all the people in the offices were in the suits, but the people that were coming in were like, they were dressed kind of casual, comfortably. And I was like, this is really interesting. I want to be one of those people. And I didn't really know what I wanted to be. I was, interested in music early on, and I started playing out, you know, in the late 15, early 16-year-old phase. I started playing out in clubs, but I had been in band, you know, playing oboe and clarinet and stuff like that when I was younger, and chorus, so I— and in drama. So like, I wasn't afraid to be in front of people. I enjoyed performing. I've always enjoyed performing, even though I think I'm kind of an introvert. So, so that was my background, and I realized that I probably wasn't going to be able to live the lifestyle I wanted to live as a musician. So I decided musician should probably be the fun thing that I do. And the work thing that I do, that I want to do, I don't know what that is. But I did get good advice from my mentor father, which was, hey, I got a degree in accounting so that I would be able to understand financial statements. And if I understand financial statements, I know how business works from the thing that makes it go, which is the money. I'll also never be in a situation where I'm not understanding what's going on with my money in my business, he told me. And then he got the law degree because understanding the law, and he's a tax attorney, and particularly how taxes work can make the difference between having a deal happen or not happen. And the actual tax consequences of transactions can very often dictate how they're structured and a lot more. So, he said, even if you don't know what you want to do, young Roland, what you should do is be familiar with those things. So, since I couldn't decide what I wanted to do, I was like, okay, I'm going to go through high school. I'm going to get into college. I'm going to get a degree in accounting, and then I'm going to go to law school. because I'll have good skills that will serve me well. In the process of doing that, I also was exposed to lots of great books. So, from the back of my dad's car, I learned about Robert Allen and Nothing Down and investing in real estate. I learned about Denis Waitley and The Psychology of Winning and how people that set goals and write them down are X% more likely to achieve them than everybody else. Was absolutely fascinated by that stuff, absorbed it like a sponge, couldn't get enough of it. And gosh, it's so much easier to get now than it was back then when it was on cassette tapes. But those 2 things in particular lit me up about, okay, well, real estate, let me find out about real estate. I like this idea of this nothing down, build a real estate portfolio. I don't need money to do that. Wow. How could I get into that? I'm going to do it. By taking the real estate exam. I took the real estate exam when I was 18, started selling real estate, realized that I hated trying to go out and convince people to give me listings. If I could find people who had a bunch of houses to sell, that would be better. Ended up talking to developers as a result of that. And then being curious, found out that the way that they structured their deal is they didn't have a lot of money to do it. Most of the ones I talked to anyway, they went out and did these things called syndications where they raised money from other people limited partnerships, and then they shared the profits of that. And then they told me how they had to have key person insurance. So, I was like, okay, well, I'll get my insurance license. So, I was 19, I got my insurance license. When I was 20, I got my securities license so I could actually sell the partnership interests. And through that, I ended up meeting people in New York because my license was through a company my father connected me to in New York. I ultimately met the people at Prudential Securities. And had a person there, was probably my second mentor that took me kind of under his wing and showed me how investment banking, particularly leveraged buyouts, work. And I was like, so basically you can do with companies what you can do with real estate. And he said, absolutely, only 1,000 different ways more because there's so many more options. And so that had me hooked. I like puzzles and I feel like I feel like acquiring companies and figuring out how you're gonna fund them from what you've got to what it takes to make the deal go, then closing the deal and making all the pieces fit to integrate them, and then growing and scaling the company are 3 puzzles that are endlessly fascinating. And so it allowed me to sate my curiosity and my creative side, which I still have. I still play music, I still have a studio, I still write. But in a way that would be very productive to help me live the lifestyle that I wanted to live. So I could have fun, I could have the challenge and fulfillment that I wanted, and I could have the money. And that was a ding, ding, ding for me.

And knowing very well personally that you do all these things, including the music, I'm still amazed that you find the time and organize your life to do it because you're doing a lot of stuff. I know that. And you're so up to speed. With the AI revolution and everything.

Curiosity, right? I couldn't not know AI.

And we're gonna interview you separately about that. But, you know, before we get into acquiring businesses and doing roll-ups and that whole way of being an entrepreneur by acquiring businesses, I'd like to talk to, you know, our audience who have businesses or just starting businesses. And maybe right now the idea of even exiting that business seems very strange or foreign or even kind of disheartening or abhorrent. But, you know, if you read and study up, almost everybody's going to tell you if you're building a business, make it exitable from, you know, you want to build an exitable business even if you're not going to exit for 10, 20, 30 years. You want an exitable business to maximize value. So I wonder if you could talk about that pathway of building a business so it is exitable, so you're maximizing value, not only enjoying your passion of building this business and serving the world and adding value to the world, but you're building a business that is sound and exitable.

Yeah, so let's start with strategy. So in every situation, and one of the biggest places that strategy comes from initially is from conflict and from war. And generally, the people who have the most optionality, the people who have the greatest number of options, are typically the ones that win any war. And if you think about it, it It applies to negotiations and business as well, and even to your personal life. Like, if you're advising a child, you're probably going to say, why don't you go to college so that you have all of the options to do anything that you want to do? And your options are open until you make decisions. And one of the reasons we don't like to make decisions, including I'm going to exit my company, is because it tends to cut off our options, which inherently I think most of us feel is a bad thing. And so it's kind of about preserving your options and having the greatest number of them possible available to you for the longest period of time until you decide to exit. What that means is that there are steps that you could take to prepare yourself to exit before you make the decision to exit so that when you do, You will be able to do it in the best way possible. You'll have all sorts of different options. Now, here's the thing that most people don't think about: everyone exits eventually, one way or the other. If you work every single day of your life until the day you, you know, die, you have exited on the day that you die. And so what you're doing at that point is you're leaving your estate, your heirs, your kids, your spouses. With the business that you started to clean up or to operate or to lose the income of completely because the whole thing falls apart because you didn't build something that could survive you. So whatever you're doing, there is no one that is served by you saying, I'm just going to ignore the fact, the certainty That I'm going to exit at some point because it's off in the future, right? That's like you know should I stop smoking today? You know yes because the sooner you do that, the healthier you'll be for the longer, right? The more you do it, the worse you're going to be. The the more you put off planning for an exit, the worse off everyone your employees, your customers, your family, etc. is going to be. So that if we can get to that over like those hurdles, I go like to go after points of disbelief, right? I don't believe I'm ever going to exit. Okay, but you are. You know you are, right? Are you going to die at some point hundreds of years in the future? Yes. Okay, great. You're going to exit. Now what? What do we do to get ready for that? Well, it's a long ways off, but what if you got hit by a bus tomorrow? My aunt got 62 years old walking across the street in a crosswalk. Drunk driver in the morning on her morning walk comes by, takes her out, kills her. Gone, right? This can happen to any of us. I've watched it happen to lots and lots of people.

Okay.

So now we've got, we're going to exit for sure, but it might be way sooner than we think. So now at least even if you never want to sell, let's get ready for that.

Okay?

Now, if we do get ready for it, we just have to put things in place that will allow the business to run without us. Now, wouldn't it be nice if the business could run without us anyway? Because if it can't, Then we are bound to it as a servant to it. And should we be serving the business or should the business be serving us? So if you want the business to serve you, then you're gonna have to put in place the things that allow you to not have to be there. And that goes to a concept, and I'll shut up in a second.

Please.

That goes to the concept of don't work in the business, Don't work on the business, work above the business. In the business, on the business was Gerber's talk in The E-Myth Revisited, right? He's like, you know, don't sweep the floors and serve the customers, hire the managers and delegate. But going from doing to delegating is only the first step in the evolution of an entrepreneur. The next steps are really, I've gotta go from delegating to leading, to being a true CEO and having people that work for me. And then I've got to go from leading to governing so that I've got a CEO. And at that point, I'm much more of an investor in the company, which is what I call being above the business, where the product or the service that you're concerned about is the value of the business. The business becomes the product, not the product that the business sells. So I hope that answers your question. If not, you can ask me more details.

Oh, absolutely. And I love that distinction you made, that question, should we be serving the business or building a business that serves us and serves what we want to create with our life? That's such a I mean, that one thing can get us pointed in the right direction. So, you know, some, some of the folks in our audience, we may have some people just wanting to start a business. We have solopreneurs that would like to grow their business. We may have people with 6 figures that want to go to 7, 7 that want to go to 8. But thinking of a lot of the, you know, the solopreneurs that have some kind of practice, they could be a lawyer like, like yourself, like in your previous career. They could be an accountant. They could be Uh, they could be a therapist and, and, you know, essentially they're the product as a solopreneur. Um, but what are some of the steps they can take? I mean, they may love doing what they do so they could remain the product, but is there some way that they can move out of— because usually we're wearing all the hats, right? So at least, and not— maybe they can move away from being, uh, maybe they're still delivering the product, but could they move away from being the operator?

Right.

Could they move away from being the marketer? And eventually, could they have a way, design a way that if something happens to them, somebody else can come in and serve those clients? Or you can even have already somebody. I mean, people do sell their practices, solopreneurs sell their practice, but they usually have a colleague they've already been working with or something, right?

Yeah.

So, I wonder if you could talk about that.

Yeah. I mean, I think the first step there is that if you can have someone who handles the administrative side. So, let's say that you are a service provider and you love what you're doing. Great, you know, and or you're, you know, you have a retail store and you love, it's a hardware store and you love hardware and that's why you got into the business and so, you know, everything about every nut and bolt and, you know, saw and everything else that's in there and you love talking to the people about it. Great, then that's cool. How do I then basically, I call it a UU chart. So I basically will do an organizational chart and you find that you are in all the boxes. You, you, you, you, you, your marketing, your service, your customer, your everything. Okay, great. What are the things I don't actually— that don't bring me joy, that aren't in my areas of joy and genius? Those are the first things that you should get somebody else to do. So, if you're my hardware store owner example and you love talking to the customers, somebody's got to be doing the books, somebody's got to be doing the marketing, somebody's got to be doing all of the other stuff. In the business, ordering the supplies and managing the inventory and counting it and all that. Get other people so that the UU chart becomes fewer and fewer boxes with you in it. That's to me the first step, and that can be a single person. Like it starts with a single hire, right? Maybe you're doing well enough that you can hire a manager, and the manager then fills all those boxes. Like they—it's it's you and then manager, manager, manager, manager, manager, right? But eventually the manager will hire some people to fill that in. You get to continue doing what you're doing. Now, the next step would be, I need a shadow. I need a second that is going to be my apprentice or my foil or, you know, my partner. It's a good chance to partner. Or my employee that is able to do the other things that I do. They'll probably not be as good at you as you to start with because they don't have the experience that you have and they aren't you. And so you're a snowflake in your business, right? You are individual. And so they're not gonna come in and be you, but they will bring something. And if you can get them to be doing 80% as well as you do, you will have replaced 80% of you if you need to. And so now you've got your manager, you've got your second apprentice, lieutenant, whatever you wanna call it. and you're doing the things that you want to do. Now we get to, okay, I'm not going to be able to scale my business if everything is custom for everybody. So if every hardware advice is custom or every accountant's financial statement or every legal case is the same, I am always going to be short people. So the next thing would be, how do I productize that service? If you've got a product, you obviously don't have to do this. But if I'm looking at me as an accountant, attorney, baker, whatever, I need to figure out how do I deliver, or even a marketing agency owner, how do I take the thing that I deliver and turn it into a product? Because when I turn it into a product, then my second knows exactly how to sell it and the people that they hire do, and I'm no longer required even though I might want to do it. And you can. I'm not required to, which gives you optionality, which gives you a business that becomes exitable.

You know, you spoke to one of the, I think, major blockages for entrepreneurs. I know early in my career it certainly was, and I can still struggle with it from time to time, is feeling, well, nobody will do that the way I do it. Nobody will do it as well as I do it.

They won't. They won't.

And they won't. And that's what you have to come to grips with. And, you know, early in running a nonprofit for many years, I suffered from this model and I'm, I ran into a lot of other people who suffered from the same model, being an expert with many helpers. And I never brought in that person who was a smart person who could actually take things to the next level and really take a lot off my shoulders. Right. And the, the cool thing is, cuz there's a lot of fear in all this that we have to get over. But the cool thing is then you get to do more of what really brings you joy. You get, the more you replace yourself, the more you get to do what really brings you joy.

Your joy and areas of your joy and genius, right? And, and, you know, the funny thing I think is about this, Fleet, is that, that 2 things. One is that that person that you bring in that can't do it as well as you ultimately might be able to do it better than you. And if you coach them well enough, they probably will, because they'll have all of the things that you have, plus the things that caused you to bring them into your world as well. working for them. And that's magical but scary, as you mentioned, because the second thing is that you fear that you're replaceable. Like, there is a bias against being replaceable because then, am I relevant? And that's a tough question for us to wrestle with. And I know it's something you can help people with. So, that's like, that's a whole different discussion. But I do think that those are— 2 big areas that stop people from creating the environment that gives them the options to have an exitable company.

And there's another fear I think creeps in here, and that's the fear of losing control.

Yeah.

And, uh, and if we let that fear run our lives, we're gonna be stuck until we're buried, literally. So, uh, I wonder if you could talk about that, how we get over that hurdle of fear, the fear of losing control as we turn over responsibility to other people for making our business run.

I think you have to go to identify how much of that is real and how much of it is emotional. How much of it can you deal with empirically? Empirically losing control, I guess it comes to what do I want to be in control of? Because you can go out and raise a bunch of money and have investors and managers and everything and still be in control. In that you can make the decisions for everything in the company if you want to. So to me, that's what control means. So my definition of control is if I'm not the only person that can say what happens, or if I could be fired, then I'm not in control. I don't feel that I'm not in control when I delegate. I don't feel that I'm not in control when I have somebody else who can do other tasks. In the company that I can do. So if that's the area, like, where's the blockage? If the blockage starts with, I'm not in control if Mary Ann is doing that work. But if you control Mary Ann because Mary Ann reports to you, then you do control how Mary Ann does that work ultimately. And if Mary Ann doesn't do the work the way that you want, then you can have some say in that by letting, you know, liberating her to the workforce. Now you can get more in the weeds as to how she does it by creating standard operating procedures that Marianne is going to follow, or any other Marianne as a placeholder is going to follow to serve that customer and create feedback mechanisms so that the customer is giving you, uh, uh, assessments as to how happy they are throughout the process. which allows you to see, are the procedures being followed? Is my customer happy? If they are and you can still fire Marianne if you don't like her or you can change the SOPs, then why should you care unless your fear is emotional? You know, your control thing is emotional. When you get all the way up to the level of I'm raising money and I've got investors and multi-millions of dollars operation, you can still stay in control by having voting shares versus non-voting shares, the right to elect a certain number of people to the board. There's a lot of ways that you can continue to be in control so you don't get ousted like Steve Jobs did. You basically, or Chip Wilson at Lululemon, or the guy at Men's Warehouse. There's a lot of people that suffered that because they didn't have, I won't say they didn't have the good advice, because at some point, there was not either the information, advice, or ability to make a decision that caused them to think carefully about how do they want the company to look from a control standpoint as they grow. Warren Buffett, uh, Mark Zuckerberg, uh, those guys, uh, Phil Knight, those guys all have different control mechanisms that even though they own a minority interest in their company, they still get to make all the decisions. They can still get rid of the entire board, uh, or at least enough of them so that whatever they want goes. And if they wanted to climb all the— Phil wanted to climb all the way down to the sneaker sole shoemaker person who's doing that and change the way that person did that job, he could. I don't know why he would, but he could. So he can always feel comfortable he's still in control and you can too.

So you're really talking about scaling here. And just like you said, we can productize a service so it becomes scalable. We can also build ourselves into the structure of the company through SOPs or playbooks and systems and all these kind of structures. Yeah, absolutely.

Yep.

So let's say someone's, you know, maybe envisioning an exit at some point. And, you know, if they've followed your program from the beginning, they probably won't have this fear, but they still might have fear around the due diligence process. And if they haven't, you know, built it to exit from the get-go, there may be some skeletons and some various things. But even once they get into that exit process, the due diligence process can be, pretty brutal. I have a client that just went through it with a buyer that was actually controlled by a private equity firm.

Sure.

And it was brutal. And he found it bruising to deal with folks who were focused on what he'd been doing for 50 years. And they weren't thinking about anything but the quarters and dimes and nickels and numbers. And they were pretty brutal about it. And so, How do you prepare for that and how do you successfully go through the due diligence in an exit?

I think that the due diligence can be very, very, very easy if you are preparing the company in a way that a buyer of the company would want the company prepared. And so due diligence is tough If you're going into it cold turkey because you've decided to sell and you've never thought about that stuff before, there's gonna be a ton of work. There's gonna be a lot of disruption to how your managers and yourself and your company is is going to do through that process, and you're probably gonna get your feelings hurt because you're gonna be told about the things that you didn't do quote unquote right. The perspective that you have to have, that it's helpful to have as you think about that, is that your buyer is really only going to care about the risk of making the investment in your company. And so all of those due diligence, there's 3 of them generally, CDD, LDD, and FDD. CDD is commercial due diligence. LDD is legal due diligence. FDD is financial due diligence. So the job of the due diligence providers that are going to come in and examine everything under the microscope is to reduce as much as possible, or at least assess and report on the risk to the buyer. So if you can get your head around that, you can say it's not personal to you. It's not an indictment of how you ran the company. Actually, it's a pat on the back as to how you ran the company because you did it so well that somebody else wants to buy it. So be happy and celebrate that. Now that person is nervous. They're like, I don't know anything about these people, this company, etc., except it seems like they did pretty good. I need to know everything so that I don't come in and buy it and have a surprise. And so the due diligence teams that come into your company are the anti-surprise squad, right? They're designed to ferret out what did you maybe not think about, or what risk did you decide was acceptable to you that may or may not be acceptable to the buyer. And then the buyer gets to decide, is that gonna work for me, or do I need to go back to the table and say, because of the extra risk, because you had your software designed by people in the Ukraine and never had any contracts with them, so we don't really know who owns the code, because you didn't have written employment agreements with your employees and your customer list was out there for everybody because you didn't have any confidentiality procedures, are we at risk that that the key employees are going to leave, take the customers, and I'm going to own a shell of the business I thought I was going to buy? Am I afraid that the single customer that I have that's 62% of the business is going to leave because there's no contract and then the business is worth only 38% of what it was when I bought it, etc.? All of those risks, that's reasonable. So I think that the first thing is contextually understand that you're really just trying to de-risk the whole thing for the buyer as much as possible. Now, if you want to do that, you're gonna have to do stuff that you probably don't want to do as an entrepreneur. The things that we hate doing, like, what is my entity type? And did I do all the stuff right with that? Did I file all my minutes if I needed to do that? Am I up to date with the Secretary of State for the corporate renewal fees? Did I pay my taxes? Did I classify independent contractors as employees, you know, who should, you know, or vice versa, which happens much more, you know, uh, did I classify people who should have been employees as independent contractors, etc.? So like, if you do that stuff in advance, you'll have a better company because the risks to the buyer are the risks to you today. You are the investor in the business today. So all of these things that are a pain in the butt that you have procrastinated, didn't know about, didn't want to do, made a risk decision, whatever, are going to adversely impact the value of the company to you. And if you fix them in advance, you'll have a better performing company because it will have less risk, but you'll also have a company that gives you more optionality. Because you'll have the potential to sell it to somebody else where at the 9th hour you won't have somebody coming in and saying, I know we were going to pay $34 million. This is a real example, $34 million for the company. But because of these risks that we've surfaced, we're going to pay $14 million now. That could be the difference between you selling the company and not selling the company. So that's, to me, that's the way that I would look at it. I don't know if that helps answer that question.

The way you want it. Absolutely. And you shared there was another priceless distinction in there. The risks to the potential or eventual buyer are the risk to you today.

Right. You're the investor right now.

You're the investor right now. That's priceless. So I want to start talking about acquisition and being an acquisitionpreneur in a moment. But one last question on exiting. Is there any way to protect your legacy? of your company? You know, people build a company, it's their passion, it's very personal. You know, is there any way to protect that legacy or basically you just hope for the best and you got to kind of let go?

There are lots of ways to protect it. The thing is, is that the things that you will do to protect the legacy could and probably will impact the purchase price negatively for you. So from a valuation standpoint, because we have a thing in the law called the rule against perpetuities, and the rule against perpetuities is designed to keep, quote unquote, the hand from the grave ruling the living. And so it said basically that you generally can't have any contract, any contract that attempts to be enforceable more than 21 years of the, uh, after the death of any life and being at the time that it gets created is voidable. Okay, that doesn't apply to what we're talking about at all, but From a concept standpoint, this this does apply directly. So now here's what you're trying to do: you're trying to sell your company and be done with it, but kind of reach back in and say, "But I still want to run things this way," or "I still want things to be run this way." You can provide for that contractually. So you can say, "These employees must stay here until they retire. You must pay them always this percentage increase." You must have these service level agreements with your customers, etc., etc. It could be any of those and 1,000 more. But everything that you do there constrains the ability of the living, the people that are in the company living after you have left it, right, from being able to manage the company freely. And you probably will not foresee things that are gonna happen. Like Bitcoin, crypto, like AI, right? Like robotic process automation, like what might happen to those customers that you have in the business now and how they might evolve, what might happen to the employees and how they might evolve, what might happen to labor in general, right? What if there's a pandemic and you say the offices have to always maintain this, this, this, and this, and now we don't have one anymore because we can't even go to it. The more things that you do to try to rule from the grave, the worse you're going to create a situation of inability to adapt for the company, which increases the risk, which reduces the value. Now, you might say, I want to take care of these 4 people that helped me come along. And you could build in that they must have employment agreements if you want to. I would argue instead, you should give them some of the money. And let them make their decision. You should basically say, "Look, you guys helped me build this thing. We sold it for $100 million, $10 million, whatever. Sold it for $10 million. I'm gonna give 20% of that to you guys. And then, you know, if you want to stay with the company, I'll negotiate for you to help you do that. And we'll have conversations because they're gonna the buyer's gonna have conversations with management." But if you build into the contract that they have to stay there for 5 years each or something like that, it will absolutely impact the purchase price.

That makes a lot of sense. Yeah. So better to just appreciate that we did a great job. Now it's time to move on. Let somebody else have their chance. Yeah, it is. So let's talk. I've heard you and our other summit sponsor here, Ryan, your partner and friend Ryan Deiss, Talk about, you know, probably the first 5 years of a startup company is the toughest ride. And, you know, once it's established, then there's a whole nother journey. But it's that, you know, the failure rates are all in those first few years, right? That's where the failure rates are astronomical. So instead of starting businesses and going through all that again, why not acquire proven businesses with a proven concept and some momentum? And go from there. So talk about growing and building your business or your empire, if you will, as an acquisitionpreneur.

Yeah, I mean, you kind of said it. Like, it's the latest thing I've seen from the Small Business Administration in the United States is that 20% of businesses fail in their first year and 65% of all businesses fail within the first 5 years. So That, like, if I'm starting out with an 80% chance of success and ending with a 35% chance of success, I probably would take the 80% bet, but I don't think I would take the 35% bet. So if you are lucky enough to survive 5 years, you are among the 35%. You had that 35% chance. And I hope that nobody starts a business thinking I'm just going to be in it for a year because then I have an 80% chance of success. And if I stay in it longer, I have a higher chance of failure. Hopefully nobody's saying that, right? So I don't want to play that game. You come to me and say, let's play a game with your money and 35% of the time you'll win, but 65% of the time I'll win. It's why I don't gamble in Vegas. You know, it's like, look at the hotels, the billion-dollar hotels that are built there. Off of the odds. So, just being a smart human to play the odds, I would say, wouldn't you rather have a business that will do everything that causes you to want to start the business in the first place without the risk? Because risk to me is everything. So, then I say, okay, yeah, but I always wanted to start a pie shop because I love baking pies. Great, you can start one. And if you start one, you'll have to find the location, you'll have to market, you'll have to build a brand, you'll have to get a logo done, you'll have to hire people, you'll have to buy the machines to do the stuff, you'll have to figure out what's the processes for all of that and probably work like a dog for a long time before you even have any kind of brand recognition. What if instead you let somebody else do all of that? And let's say over that time, you're going to spend maybe $100 grand that you're going to invest in doing that. What if instead you took that $100 grand and you bought a business that was, let's say it's small, that was already making $50,000 in profit a year and you bought that business for 2 times its profit. You took the same $100 grand that you were going to roll the dice on with a 65% chance of failure and instead you went with a business that has a 65% chance of success because it's already been around for 5 years. It's already got the brand, the employees, the location, the recipes, everything. And now you're like, but yeah, but I really want to do my recipes and have, you know, this cool brand that I've got the idea for. Fantastic. Rebrand that company, put your recipes in, but start with the company that's already got the momentum. Rather than starting from stop, that inertia, that that actual momentum that's already there carrying that forward, carrying that business forward, that has suppliers that work, that has customers that like it, that has a location that works, that has employees that are already hired and proven because you got to go through a lot of employees to find good ones, right? That already maybe has SOPs, already has leased the equipment, and it's already suffered the depreciation on that. Like. All of that is just such a huge advantage that I can't conceive of why anybody would want to just start it from scratch. And I've started lots of businesses from scratch. You have too. I'm not here saying— I'm here saying, actually, I've done both of those things. I'm not a guy that's only bought businesses. I've started a lot of them. It's freaking hard. I would way rather start with all of that momentum and all of those advantages than the disadvantages. Very often it's a way better investment because you're gonna spend about the same amount in learning all the things you're doing wrong in a startup that you would have just to, to bought a business that was where you wanna be 3 years from now, right?

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Well, that makes a lot of sense, and especially if you can, you know, if you can find the right business and buy it right. Um, but you know, we were talking about the whole due diligence process before, maybe from the seller's perspective. Now, from the buyer's perspective, I mean, it's a pretty scary thing. I mean, it seems like I've never bought a business. I don't know anything about buying a business. I don't know. I might buy a business and it might turn out to be a total loser. Or maybe, you know, the seller pulled one over on me or, you know, it seems kind of daunting just to get into that.

Yeah, it's why you have professionals that do due diligence for you. So where are the risks? The risks are, number one, They have legal stuff they didn't do right. So you have an attorney do legal due diligence. Another risk is that they have been unprofitable, but they doctored the books to show that they're profitable. That's probably one of the biggest concerns. Or they're like, I get a lot of business in cash and I don't deposit that. And, and so, you know, I need to get paid on that. You don't pay on that. You just say no, because that's illegal anyway, right? If they're not reporting it. The person that ferrets all that stuff out is your accounting person that does financial due diligence. And then the commercial due diligence people are the people that come in and say, let me look at the employees, let me look at the way the business runs. Is all that up to snuff? So if you do that, and in a smaller deal, that's probably just an attorney and accountant. In a bigger deal, it's going to be an attorney, accountant, and a commercial due diligence firm. But there are firms that specialize in doing that in these types of transactions, and they're the professionals you're counting on to de-risk the deal for you to your end, right? It's the other side of what we were talking about before. And they are professionals who, if they are wrong, are liable to you for the damages that you had in getting the wool pulled over your eyes. So you're really hedging your bet very well when you're making an investment in a company that has had due diligence properly performed by the people who do that. Now, how you can further reduce your risk as a buyer is typically there is an escrow and a thing called a basket or a holdback. And usually that's going to be somewhere between 10% and 40% of the purchase price is going to be held back in case things come up that were unexpected. And it's typically going to be for a couple of years. Usually it'll be 3 years, right? So let's say that you pay $200,000 to buy a business. Now, we might hold $80,000 of the purchase price back in escrow, assuming you were paying cash, which we'll talk about in a minute. And that $80,000, if you found out, oh, there's this $10,000 thing that we didn't know about, you just take it from the $80,000. It's there. Like, literally, the cash is there to take. You get to take it back effectively. Purchase price is reduced by the amount of things that you find out in the future. If they're going to exceed that, then you have the ability to sue. But nobody wants to do that. But if you had good due diligence, I've never seen in all of my deals something where it wouldn't be covered by that. Now, here's the other thing that you do, though, is that the 2 best ways to shift the risk to the seller from the buyer would be seller financing, where the seller agrees to take some, some portion of the purchase price over a period of time, maybe with interest, maybe without. That period of time might be 90 days. It might be 10 years. I like to start at 10 years. So the entire time during that time that you own, that you owe the seller on the seller-financed portion, if bad things happen, you generally build a right of offset. Into your agreement and say, hey, if you lied, cheated, or stole on me, or if these events happen, then I get to offset and I don't have to pay you that amount. The other thing would be what's called an earnout. An earnout is usually not used, uh, the way that we just talked about. It's more that there are certain conditions that I as a buyer want to continue to be the case, and if they are not the case, I'm not willing to give you the purchase price. And so, the earnout is the way to bridge the gap between what the seller feels the business is worth and what the buyer feels he or she is willing to pay for the business because of the risk. So, maybe the seller says, look, my projections are hockey stick shocking. I've never seen ones that aren't. This year we did this, but next year we're going to do this. And then the year after that, oh my gosh, I can't even believe I'm selling this to you. And you as the buyer are like, I mean, you've had the business for 5 years and it didn't do that. So what makes you think it's going to do that? Oh, AI and, and, and work from home. Okay. Tell you what, if the business does hit those 2 milestones that you said it's going to hit over the next couple of years, then I will pay you for that. But right now, I'm just willing to pay you for what it's actually doing and done. So let's take that growth and say that's going to go in an earnout. And in the event that it hits that, I will at that time when it has hit that, agree to pay you that additional money. I'm going to agree now that if it hits that in the future, and that's typically 1 to 4 years, and again, 10 to 40% of the value of the company that can be shifted to earnout. So think about this. If you have 40% earnout and 40% seller financing and you put 20% down, and you've got a 20% holdback, you actually have zero out of pocket. That's an extreme example, but the hyperbole is to show you that the risk can be adjusted based on your appetite for it.

Well, let's step back a minute. So clearly you're going to be able to negotiate the best price and these kinds of possible structures to ameliorate your risk, things like earnout and and that holdback and these kind of things, the more motivated the seller is.

Yep.

And if you have somebody that thinks they have the tiger by the tail and it's— and they're ready to go public with it and they want to maximize their profit, they're probably not going to be all that amenable to all the things you want to do, right?

Yep.

So what are the steps in— if somebody wants to, you know, they want to do this, they want— maybe they have a particular niche they're interested in, or they just want to get in business, of really identifying the the criteria, the candidates, how to find these businesses and how to find the deals that where there's at least enough motivation so that you can work out a reasonable deal or a good deal for the seller and for you.

So it's a— there's a lot to unpack there as far as within the time that we've got. So let me try. I'd say that the first thing is Is there a seller? And how, I guess, how much work do you want to do to find the deal is the question you have to ask. If you don't really want to do any work, then there are lots and lots and lots of businesses for sale through business brokers and through online sites like bizbuysell.com. And what you have as an advantage for you there is that you know that you have someone who wants to sell their business. So they are motivated in a way that someone who hasn't even thought about it is not. So I would argue that the people that have listed their business for sale are generally more motivated than the people who have not. Generally, the people who have not listed their business for sale who are motivated probably don't know how to do it. Or it's just overwhelming for them. They're kind of caught in the weeds and the whirlwind of the business. So, I would say if you're looking to buy a business fast, then look at business brokers and online sites. Now, the cool thing about that is that much like people who are trying to sell real estate, there's an expectation curve that has a pretty steep fall-off. The day that you list your house for sale, your car for sale, anything you've ever tried to sell, your, uh, or your business, that's the day that you expect that you're going to get everything that you want for it because it's your baby and it's worth this much. And by gosh, if I'm going to sell it, they're going to pay every penny for it. And then the offers come or the offers don't come. If the offers don't come at all, you start to get a little bit disheartened and your expectation of what you're going to be able to get for this becomes more realistic, certainly becomes less than it was when you started. If the offers come and they come low, then you also, you're like, well, I can't believe they said that's insulting, that offer. But then the other one comes and another one comes and another one comes and then no more come. You're like, ooh, I guess, I mean, I think it's worth that, but do other people? And then they, you have to have, you know, the seller has to have a conversation with themselves and figure that out. The longer that the business has been listed without selling and getting offers that are below the expectation, the lower the expectation becomes, and that person can become actually reasonable and flexible. And the business broker can be on your side at that point because they realize that they're not going to get anything for all the work they've done unless the thing actually sells. So they may become an ally and an advocate for your creative financing strategy. Now, if you want to get— but, but the challenge with that is, is that the, the job of the business broker is to create an environment where there are multiple sellers bidding against each other to pay the highest price. And so you're at a disadvantage if that's actually happening, uh, when you go that route. So another route would be talk to friends, talk to family, talk to people in the industry, talk to for sure advisors, attorneys, accountants, appraisers, you business consultants, all of those people in the industry that you're interested in buying in are fantastic resources to refer their clients who are interested in selling their business to you. And they're motivated to have the client sell because they'll get the work. They'll get the legal work, the accounting work, the consulting fee, whatever. So that's the place to start out. But I will say too, Is if you get somebody that's at the high point of their expectation, they've just listed the business for sale and you've got to have it. It's perfect for you. It's in the place you want. You love the employees. You love the business. It's what you always wanted. It's still financeable because generally up to 90% of it can be financed through, in the United States, the Small Business Administration. And you have to come up with 10% of the equity, which probably if you are buying a business, you've got money in a in your house or, you know, your investments or your crypto or some other asset that you've got that you can tap either on a loan basis through a HELOC, home equity line of credit, or you could borrow from your 401 or something like that. Or if not, you can go and get a partner or a friend or even a bank loan to cover that 10%. And then you've got the business. It takes a little bit longer, but you bought it and you're still going to do great. Because you wouldn't buy the business that wasn't cash flowing. You're going to hire your attorney and accountant to do the due diligence, and now you got a great business. So like, I think, I think that's the thing, Fleet, is that like you can do it any way you want. And, and typically, I want to say you can buy 100% of the businesses by paying cash, okay? And most people will be able to pay 100% in cash if they want to through an SBA loan and a HELOC or some other asset they've got, or tapping into friends. Okay? 60% of the transactions about in the United States, and I have the numbers for Europe, I just don't have them off top of my head. It's lower, but it's not that much lower. 60% of the transactions in the United States are done using some form of seller financing or earnout. So that means that if you're willing to talk a little bit and the seller's a little bit motivated, You can transfer some of that risk to the seller and the ROI on your money is going to be higher because seller financing rates are much lower interest rate-wise typically than, say, SBA. And earnouts generally have no interest rate at all. Right. And you might not even ever have to pay that. And then about 40% of the transactions, probably between 30 and 40, can be done creatively to where you wouldn't have to come out of pocket At all. So, like, you can absolutely buy a business at any structure the seller wants. 100% of them are available for cash, and there's probably a way to get that done. 60% of the time, you can probably get seller financing and earnouts that make you very comfortable, maybe for most of the purchase price, right? And I don't generally want to pay cash, all cash for a deal. So I generally fall in that 60% zone. And then there's the, I don't want to have a penny out of my pocket at all, and I want to do the business, and I need to have a super motivated seller, but it also has to be a good business. And that's probably 30 to 40% of the time. But I'll tell you what, if 3 out of 10 people I talk to will sell me the business without me having to come out of pocket at all, I'm pretty excited about that.

And just give a, a sense of what's Possibly. And just say you have a lot of frameworks and we're going to talk about a free gift, wonderful free gift you're offering in a moment. You have a lot of frameworks for creating these, the creative strategies for creating these deals. And a typical no money down deal might include 6, 7, 8 different strategies. But you offer, I think in your book, in your training programs, you talk about over 100 or maybe over 200 different mechanisms and strategies for structuring these deals. But I remember in doing some of your trainings, If I have the numbers right, something like 40,000 businesses are for sale at any given time in the US and another 10,000 in Canada. Is that right? Something like that?

No, it's, it's a— I want to say it's in the neighborhood of 3.5 million in the United States, Canada, and English-speaking world that you're looking at.

That are for sale?

That are, that are available for sale. Yeah. Not maybe that are listed on, you know, but, but at any given time about that.

So it's a much bigger number. And is it also true that Roughly 80% of them actually end up closing their doors without—

80% of that? No, no, almost 80% of them that list for sale do not sell. So that's why I think that, like, I kind of changed my approach on that, mostly because people wouldn't listen to me and they're always going to the business brokers because it's easy. Because I would say generally, I used to say, look, the best deals aren't— the best deals are off market. They're not with business brokers, right? But it's kind of like the best jobs, right? The best jobs go before they get listed. So, so if you're out there looking, using some of the things we talked about here today, then you'll probably find better deals. But, but of the people who actually list the business for sale, 80% of them do not sell because their expectations are too high. So if you can hit business brokers or online sites where the business has been for sale for some period of time, especially if it'll show the list date and you see that it's 6 months or a year or longer ago, then that's probably a motivated seller right now. It could indicate either. It could indicate that they're like, "I'm sticking to my price no matter what. I don't need to sell. I'm never going to sell unless I get my price." Okay, but I'd say more often than not, you're going to get somebody that's been beaten down a bit. And they're going to be a little more flexible. And when they get flexible, we move over into the more creative, de-risked deals that I like. And so I think there's a lot of opportunity there.

And you mentioned before, so in terms of finding the off-market deals, you're, you know, being connected with accountants and lawyers, your strategic partnerships, your network, because if somebody is thinking about exiting, who are they going to talk to? They're going to talk to their tax attorney. They're going to talk to their Right.

Financial planners as well. Yeah.

Yeah. Developing those kind of networks and strategic partnerships could be a great place to find those deals before they do end up with a broker.

Correct. And if you don't like doing that, because I don't, then partner with people who do. I partner with people who love to do all the things that I don't like to do, so I can only do the things that I do like to do.

Well, I know that you're going to offer a free gift for our audience here, and it has to do with your approach to being able to purchase companies really with no money out of pocket, no personal money out of pocket. It's called Zero Down. Could you talk about that a little bit? And then we're going to have— there's a link right below. People will be able to access that free gift.

Yeah. And I'm going to try to— we are just— I just rewrote everything in there because what I found was that people don't understand that it's zero down is not what I teach. The book got titled by the people that title books, not by me first. What I really wanted it to be was Zero Out of Pocket because zero down is hard. But there are lots of places— there's, you know, close to 300 now. I think I've documented 216 of them, different strategies to not have to come out of pocket. Cash exchanges hands. Sellers get cash because they need it and want it. But it doesn't come from you. It comes from all these other places to fill the gap between what you would like to be out of pocket and not. So what I did was the new book, which is completely rewritten and has a lot of new stuff in it, and that's the one that we're gonna make available, is The Art of Profitable Acquisition. And that still gives plenty of those strategies, but it doesn't It doesn't subject the people who are watching or listening to this to, I don't believe you can buy something with no money down. It gets past that, you know, that guy's full of crap because I'm not, because I've done it. But I understand that it can be hard to believe and it actually allows them to say, what if I just want to buy a business and I'm willing to pay for it? So it kind of covers everything.

You know, I wonder if that covers where we're literally just about out of time here. But I wonder if that also covers— I've watched some of your presentations. Now, somebody who's buying a business, they may buy that pie shop because they just want to run a pie shop for the next 30 years.

Yeah.

But somebody, you know, may, may be getting into growing through acquisition to build businesses and more businesses and so forth. So they may be flipping, they may be buying a business, improving it, making it more marketable, selling it, making a profit. They may be doing what you call roll-ups. And, and there's a thing of the multiples that businesses sell for, right? So if you're still running the business as the founder, the operator, it's going to have a limited multiple. If you've gotten yourself at a higher multiple and it goes up to scale. And I've watched your presentations where those multiples get really interesting when you buy a bunch of small businesses, improve them, roll them up into something else, make that more marketable, a higher price point, maybe private equity, even further on to IPOs. Those multiples get pretty interesting.

Yeah, they, they start typically for an owner-operated business where you actually have a person that has to be there. You have to be there for your business. You're generally going to be between 2 and 3x. The average, I think, is about 2.4 right now. Uh, if you get professional managers so that you don't have to be there, you've de-risked it and also made it appealing to investors as opposed to somebody that wants to buy a job. Because if you're selling an owner-operated business, you're selling it to somebody who wants to buy a job. Uh, they're not as many of those people, and they don't have as much money and can't pay as much as investors. So since there are fewer companies that are professionalized and have professional operators, those are typically selling right now in the 4.8 range. So like, that's a pretty big jump in the multiple of profit. And then private equity's in the neighborhood of 14x right now, so they're paying 14 times. Now, it's, you know, that's across all industries and big deals and small deals. So if you're a smaller company, they're probably going to come at you with 6 to 8, but 6 to 8 is a whole lot better than 2 to 3. And 6 to 8 can very often, in my experience negotiating, become 11 to 17. And, um, then if they're going public You know, they're in the 40s. You know, the multiples are in the 40s. So, you know, to buy it, to sell it, you know, 40, I like that. Buy it, to sell it 5, I still like, right? Buy it, to sell it 8, 4x on my money. I'm pretty happy with that.

Yeah. An extra $100,000, extra million never hurts, right?

Every million helps. I've said it since, you know, for the longest time now.

Thank you so much, Roland. Apart from this wonderful ebook that people have access to right now, you can click on it and get it downloaded. Where else can people go to find out more about your work?

The best places would be epicnetwork.com. Epic Network is— I'm on all the socials, by the way, /RolandFrazier. And I do, you know, I do read my stuff. But epicnetwork.com is where kind of all of the acquisition stuff lives. Scalable.co, not .com, is where how we run businesses, our business operating systems and exits live. Those are probably the 2 best places to find me. And, you know, other than my socials, and I have a YouTube channel and the Business Lunch podcast and all that where we talk about all this kind of stuff and interview smart people like you. We gotta get you on there. Um, that's, uh, you know, so those are good places too.

Wonderful. Well, Roland, thank you so much along with your partner Ryan Deiss for being the co-sponsors of this summit along with myself and HeartMind Institute. And thank you so much for your presentation today. Fascinating conversation as always.

Yeah, thanks for the great questions.

Be well.

Thank you for joining me on the Radical Responsibility Podcast. Remember, real change happens when we commit to our growth, face our challenges with compassion, and stay open to transformation. If you found this episode helpful, I encourage you to subscribe and help us spread the message of healing and personal empowerment. Until next time, stay grounded, stay present, and stay true to yourself. Take care.